Wage theft: law changes, compliance and prevention in health care

New wage theft federal laws came into force this year. A lawyer sets out the changes, how compliance can be ensured and best practice prevention procedures.

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In short

• From 1 January 2025, an employer that intentionally underpays wages or entitlements owed to an employee may be committing a criminal offence.
• The Fair Work Ombudsman can now investigate suspected underpayment offences and refer matters for prosecution.
• Businesses and individuals can also face significant monetary penalties.
• To avoid unintentional underpayments, employers should implement robust payroll systems, conduct regular audits, seek legal advice and maintain accurate records of employee entitlements.
   

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Wage theft is becoming increasingly prevalent in Australia. To address this issue, the Australian Government has introduced new laws. It is essential that healthcare providers understand their legal obligations, as failure to do so can result in criminal charges and penalties.

This article will cover the meaning of wage theft, changes to the law criminalising wage theft across Australia, enforcement and penalties for non-compliance, and best practice for avoiding underpayments in the healthcare sector.

What is wage theft?

The term ‘wage theft’ refers to employers underpaying their employees, therefore stealing from them. Wage theft, however, is not always malicious and can happen by mistake. In this sense, wage theft can take two forms: deliberate theft and accidental theft. Australian law now clearly distinguishes between deliberate and accidental wage theft, with the former amounting to a criminal offence and attracting significant penalties.

Closing Loopholes changes

The Closing Loopholes amendments to the Fair Work Act 2009 (Cth) made it a criminal offence to intentionally underpay employees’ wages and certain entitlements. Under the new laws, which commenced on 1 January 2025, a healthcare employer may commit a criminal offence where:

• an amount was owed to an employee under the Fair Work Act, a modern award, enterprise agreement or other relevant legislation (eg, wages, allowances, paid leave or superannuation); and
• the employer intentionally failed to pay, or neglected to pay, the amounts when they were due.
   

An employer can be a company or an individual. Third parties who participate in or assist with violating wage theft laws can also face criminal prosecution.

Honest mistakes and unintentional miscalculations will not amount to a criminal offence under the new laws. However, healthcare employers must be able to prove that their conduct was not intentional.

Enforcement and penalties

The Fair Work Ombudsman (FWO) has powers to investigate alleged wage theft and may refer matters to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for prosecution where there is sufficient evidence of intentional non-compliance.

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Healthcare employers prosecuted for wage theft offences may face:

• a maximum of 10 years’ imprisonment; and/or
• a maximum monetary fine, being the greater of:
  • three times the underpayment amount (if this can be determined); or
  • $1.585 million for an individual and $7.825 million for a company.
     

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While penalties for non-compliance are severe, the new laws also provide a ‘safe haven’ to encourage business owners to come forward and report possible wage theft.

One option allows business owners (or individuals responsible for wage theft) to work with the FWO through a cooperation agreement. Small businesses with fewer than 15 employees may avoid prosecution if they can show they are following the new Small Business Wage Compliance Code.

Even with the new laws in place, the FWO can still issue compliance notices, orders or take civil action if businesses do not comply.

An experienced employment lawyer can help determine the best course of action if you believe you, or anyone else in your healthcare business, has engaged in wage theft (either intentionally or as an honest mistake).

How to avoid wage theft in health care

As a healthcare employer, one of your main priorities should be correctly paying your employees their owed wages and entitlements. Before hiring staff, you should carefully consider your minimum pay obligations and ensure you and your business can meet these.

Before hiring a healthcare employee, you should:

• familiarise yourself with the National Employment Standards under the Fair Work Act 2009;
• research and seek advice on whether your employees are covered under a modern award or an enterprise agreement; and
• implement efficient and accurate timekeeping processes and maintain records of time worked and entitlements accrued.

Healthcare awards

Modern awards set out the standard terms and conditions of employment across various industries and occupations. Many healthcare workers employed by private sector employers are covered by the Health Professionals and Support Services (HPSS) Award on an industry basis.

However, some occupational awards may cover employees who cannot be classified under the HPSS Award (or another industry award), such as the:

• Nurses Award 2020;
• Medical Practitioners Award 2020;
• Ambulance Award 2020; and
• Clerks Award 2020.
   

Public sector healthcare employees are generally covered by a State reference public sector award.

Each modern award sets out minimum entitlements for various roles within the healthcare sector and contains sophisticated classification systems where employees’ qualifications, experience and responsibilities directly impact pay rates.

Mitigating award risks

To mitigate the risk of engaging in wage theft, it is crucial, as an initial hiring step, to:

• identify which employees are covered by the HPSS Award, or other industry or occupational awards;
• familiarise yourself with the classification levels within the applicable award; and
• ensure compliance with award provisions regarding pay rates, allowances and working conditions.
   

Also, health care often involves shiftwork and irregular hours, making it crucial to understand and comply with:

• minimum wage rates, including any applicable loadings for shift work, weekends or public holidays;
• overtime provisions; and
• industry-specific allowances, such as on-call and uniform allowances.

Key takeaways

To avoid criminal wage theft and severe penalties, you should take proactive steps to prevent and remedy any accidental or mistaken underpayment of your healthcare staff. This will mitigate your risk exposure to penalties, develop a culture of trust and transparency in your healthcare business, and protect your reputation as an employer.

Avoid complacency, as the FWO or an individual employee may take other civil action against you and your healthcare business for underpayments. If you believe you may be underpaying your healthcare staff, facing prosecution or need help paying your employees the correct amount, contact your lawyer and accountant for advice.

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Preventing wage theft: recommendations

To avoid intentional wage theft, we recommend that you:

• ensure that payroll systems and processes are established correctly (including by incorporating the correct modern award so that employee entitlements are correctly paid and accrued);
• obtain legal advice quarterly/annually to ensure you are paying your healthcare employees correctly;
• maintain accurate records of your employees’ qualifications, training and experience in the industry, and review these at the point of promotion or advancement;
• ensure you are paying your employees relevant overtime, allowances and penalty rates in line with any modern award or enterprise agreement that applies to them;
• familiarise yourself with complex on-call provisions requiring different rates for availability versus active work periods and industry-specific allowances;
• conduct regular and systematic audits;
• ensure you keep accurate employee entitlement records; and
• implement salary review initiatives.
   

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*Emma Bucholtz is a Senior Lawyer at LegalVision.

Top image credit: iStock.com/SDI Productions