Wage Theft Laws: What Employers Need to Know

Introduction

Effective from 1 January 2025, Section 327A of the Fair Work Act 2009 (Cth) introduces new legal consequences for the intentional underpayment of wages and other entitlements. This provision is designed to enhance protections for employees while holding employers accountable for wage theft. Understanding the scope and implications of this legislative change is critical for employers to ensure compliance and mitigate the risk of substantial penalties.

Key Provisions of Section 327A

Section 327A establishes clear criteria for liability, focusing on the following elements:

1. Employer’s Obligation – An employer is legally required to pay an employee a specified amount under the Fair Work Act 2009 (Cth), a fair work instrument, or a transitional instrument.
2. ‍Excluded  Amounts – Certain entitlements, such as superannuation contributions or specific types of leave, may be excluded from the scope of this provision.
3. Failure to Pay in Full and On Time – The employer engages in conduct that results in a failure to pay the required amount in full by the due date.
4. Intentional Conduct – The employer must have knowingly and deliberately engaged in the conduct described above.

Penalties for Breaches Before 1 January 2025

Before the introduction of Section 327A, wage under payment was primarily addressed through civil penalties. Employers found in breach of their payment obligations could face significant fines, but there was no provision for criminal liability. The emphasis was on remediation—ensuring underpaid employees received their entitlements and encouraging compliance with industrial laws.

Differentiation Between Corporate and Individual Liability

A key aspect of Section 327A is the distinction in penalties between corporate entities and individuals:

1. Corporations - Businesses found guilty of intentional underpayment face substantial financial penalties. These sanctions can significantly impact operational stability and brand reputation.
2. ‍Individuals – Directors, managers, and shareholders who are complicit in wage theft may face personal liability, including fines and potential imprisonment.

In a significant development Section 327A broadens liability beyond the corporate entity, imposing direct accountability on key individuals within a company. This prevents company executives from avoiding consequences by attributing underpayment to administrative errors or corporate policies. The legislation reinforces the importance of corporate governance and ethical business practices by holding directors, managers and shareholders responsible.

Conclusion

The introduction of Section 327A signifies a significant shift in Australia’s employment law framework, reflecting the increasing seriousness with which wage underpayment is treated. By criminalising intentional wage theft and imposing severe penalties on both companies and individuals, the provision serves as a strong deterrent against non-compliance. Employers must take proactive steps to review payroll practices, strengthen internal compliance measures, and foster a workplace culture that prioritises fair remuneration to avoid the substantial risks associated with this new legal obligation.

How Can Sharrock Pitman Legal Can Help?

Navigating the complexities of employment law can be challenging, and compliance with Section 327A is essential to avoid significant legal consequences. Sharrock Pitman Legal can assist employers in reviewing payroll processes, implementing compliance frameworks, and providing legal representation in alleged wage underpayment cases. Our experienced employment law team is dedicated to helping businesses understand their obligations and develop strategies to mitigate risks.

Contact a member of our Employment Law team today for tailored legal advice and support. Email sp@sharrockpitman.com.au or call 1300 205 506.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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