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Wage theft

Information about offences for employers who deliberately underpay workers or who withhold benefits from their staff.

A new Victorian Act creates offences of wage theft and falsifying employee entitlement records. It is designed to prosecute employers and individuals who deliberately:

  • withhold entitlements and benefits from their employees
  • allow others to withhold these benefits, or
  • falsify records about entitlements of their employees, or allow others to do so.

The law is not designed to prosecute employers who have made an honest mistake, rather those who deliberately or recklessly and dishonestly fail to properly pay their employees. An accused will be dishonest if they fail to reach the standard of the reasonable person.

What is wage theft?

Wage theft means the deliberate withholding of an employees entitlements.

Withholding is defined in the Act to mean 'failing to pay, distribute, attribute or otherwise deprive, either directly or indirectly. The definition is broad and designed to capture a broad range of circumstances. The failure to pay or distribute includes a failure to pay a 3rd party, making an unlawful deduction or requiring a person to pay an unlawful fee. Examples of withholding include:

  • an employee who is required to pay back a portion of their wages to their employer (cash back)
  • an employer who refuses to pay annual leave that has accrued following a request in accordance with the terms of the employment contract
  • an employer who pays an employee the base rate but does not pay overtime when employee has worked this additional time
  • an employer who misrepresents an employment relationship as an independent contractor to avoid paying the entitlements owed (sham contracting)

Employee entitlements

Employee entitlements include any amount payable by an employer to an employee according to the relevant law, contract or agreement. So this includes wages, allowances, gratuities, superannuation and other entitlements such as leave.

See s. 3—Wage Theft Act 2020 (Vic)(opens in a new window).

Withholding must happen after 30 June 2021

The Act commenced operation on 1 July 2021. An employee's entitlement can accrue before this date, however the withholding of the entitlement has to occur after the 30 June 2021. An example, might be that an employee had accrued an entitlement to take holidays in 2020, but holiday pay was refused after 1 July, 2021.

See ss. 3, 5—Wage Theft Act 2020 (Vic)(opens in a new window).

Penalty

The maximum penalty is:

  • 6000 penalty units for a body corporate
  • 1200 penalty units for an individual

The maximum penalty for an officer who dishonestly withholds an entitlement or benefit or authorises a third party to do so faces a maximum prison term of 10 years.

These penalties are the same as those for theft under the Crimes Act 1958.

See s. 6—Wage Theft Act 2020 (Vic)(opens in a new window).

Who can be liable?

Both individuals and organisations are captured under this Act.

In organisations, both an employer and an officer can be liable. An officer for a corporation includes a director or secretary. An officer for a body corporate (which includes the crown) includes a member of the board of directors. In partnership situations, this includes a partner. If the entity is not incorporated it includes an office holder of that association. So generally an officer includes anyone who makes or participates in making decisions that affect the whole or a substantial part of the business, or someone who has the capacity to significantly affect the financial standing of the entity.

See s. 3—Wage Theft Act 2020 (Vic)(opens in a new window).

An employee's consent is not relevant when deciding whether an entitlement was reduced. So an employer's conduct is still dishonest in circumstances where the employee was induced to accept less than the minimum amount or benefit that is required to be paid. An example of this might be where an employee agreed to be paid less than the minimum wage for their work.

See s. 6(2)—Wage Theft Act 2020 (Vic)(opens in a new window).

Authorising or permitting others to withhold

It is an offence for an employer (or an officer) to dishonestly authorise or permit others to withhold an employee's entitlements. This authorisation or permission could be implied. This can be established by proving that a corporate culture existed that directed, encouraged, tolerated or led to the relevant conduct being carried out.

An employer may defend an allegation of authorising or permitting others to withhold entitlements if they can prove that they exercised due diligence to prevent authorisation or permission being given.

See s. 6—Wage Theft Act 2020 (Vic)(opens in a new window).

Falsifying records offences

Employers and officers engaging in wage theft commonly falsify employee entitlement records as part of their offending or covering it up. The falsification of entitlement records offence includes producing, making or copying a record that is misleading, false or deceptive. It also includes altering a record or providing information that causes the record to be misleading or false.

The prosecution will be required to prove the falsification was done dishonestly with a view to obtaining a financial advantage or preventing a financial advantage from being exposed. The definition of ‘falsify’ will not capture people who accidentally mis-record details and rectify payroll errors in an appropriate and honest manner.

The offence of failing to keep an employee entitlement record will make employers and officers criminally liable if they dishonestly fail to keep employment records with an intention to gain a financial advantage or prevent a financial advantage from being exposed. The offence will not capture employers or officers who fail to keep a record because of an honest oversight.

As with the wage theft offences:

  • an employee cannot consent to this
  • an accused can defend a charge if they can demonstrate that they practised due diligence.

See s. 7—Wage Theft Act 2020 (Vic)(opens in a new window).

Penalty

The maximum penalty for this offence for an employer is:

  • 6000 penalty units (body corporate)
  • 10 years jail for a natural person.

See s. 7—Wage Theft Act 2020 (Vic)(opens in a new window).

Failure to keep a record of entitlements

It is an offence to fail to keep (or to allow others to fail to keep) an employee entitlement record for an employee with a view to dishonestly:

  • obtaining a financial advantage by deception (for the employer or another)
  • preventing exposure of a financial advantage obtained by the employer or another.

See s. 8—Wage Theft Act 2020 (Vic)(opens in a new window).

Penalty

The maximum penalty for this offence for an employer or an officer is:

  • 6000 penalty units (body corporate)
  • 10 years jail for a natural person.

See s. 8—Wage Theft Act 2020 (Vic)(opens in a new window).

Jurisdiction

There must be some connection with Victoria. This means that at least one party or circumstance is in Victoria. It applies to an employee who has performed services wholly in Victoria. If the employee has performed services in multiple states, they can be included as long as:

  • the employee is based in Victoria
  • the employer is based in Victoria
  • the entitlements are paid, payable of attributable in Victoria, or
  • the employments are paid, payable or attributable in an Australian state or territory for services performed mainly in Victoria.

Prosecution

The Victorian Wage Inspectorate has broad powers to investigate and prosecute summary offences. Where the matter is an indictable offence, they will hand over to the Office of Public Prosecutions after the accused is committed to stand trial.

Indictable offence that can be heard summarily

An offence of dishonestly withholding employee entitlements may be heard and determined summarily in the Magistrates' Court if the value of the entitlement that is alleged to have been withheld does not exceed $100,000. The court is to make a judgment about this.

See:

What a worker can do

If an employee believes that their employer has dishonestly withheld pay or entitlements from them, they may make a report to the Wage Inspectorate. They can make an anonymous report.

See Wage Inspectorate Victoria—Make an anonymous report(opens in a new window).

The employee may also contact the Fair Work Ombudsman or their union. The ombudsman may be able to help recover lost wages. The Wage Inspectorate cannot do this. An employee can also contact their union for assistance with recovery.

They may need to make a small claim application to recover the money from the Magistrates' Court.

The tax office may be able to assist if the employer has not been paying superannuation.

See:

More information

Legislation

Wage Theft Act 2020 (Vic)

  • s. 3—defines 'withhold', 'officer',
  • s. 4—crown is bound by this Act and is defied as a body corporate for the purposes of this Act.
  • s. 5—jurisdiction
  • s. 6—dishonest withholding of employee entitlements
  • s. 7—falsification of employee entitlement record
  • s. 8—failure to keep employee entitlement record
  • s. 9—complicity in commission of offence
  • s. 10—body corporate liability for offence by officer
  • s. 11—attribution to body corporate of conduct, knowledge, intention and belief of officers and associates
  • s. 12—factors relevant to corporate culture in body corporate
  • s. 13—officer's liability for employee entitlement offence
  • s. 14—offences by partnerships and partners
  • s. 15—offences by unincorporated associations
  • s. 16—responsible agency for the Crown
  • s. 17—proceedings against successors to public bodies
  • s. 18—maximum fine for body corporate for indictable offence heard and determined summarily
  • s. 32—Wage Inspectorate Victoria may investigate possible employee entitlement offences
  • s. 48—power to require production of documents and answer questions
  • s. 49—privilege against self-incrimination abrogated in respect of production of documents
  • s. 71—referral to the office of public prosecutions

See Wage Theft Act 2020 (Vic)(opens in a new window).

Criminal Procedure Act 2009 (Vic)

See Criminal Procedure Act 2009 (Vic)(opens in a new window)(opens in a new window)Schedule 2(opens in a new window)(opens in a new window)Indictable offences that can be heard and determined summarily(opens in a new window).

References

Wage Inspectorate Victoria

This independent statutory body investigates and prosecutes allegations of theft of an employees wages or entitlements. Their site has information and fact sheets for employees and employers, which includes a list of FAQs. An employer may choose to repay the money owed as a result of the investigation, however the inspectorate does not directly try to recover money owed unless the employer has been found guilty of an offence.

See Wage Inspectorate Victoria(opens in a new window).

Fair Work Ombudsman

An employee who believes they have been deliberately underpaid by their employer may contact the ombudsman to get advice about recovering money owed.

See Fair Work Ombudsman—Workplace problems(opens in a new window).

Australian Taxation Office

See Australian Taxation Office—Super(opens in a new window).

Australian Council of Trade Unions (ACTU)

See Australian Council of Trade Unions (ACTU)(opens in a new window).

Updated