Getting Ahead in Federal Wage Theft Laws: Employers’ Preventative Steps
Changes in wage theft legislation
The impending changes in wage theft legislation, known as Closing Loopholes No. 1 and No. 2, signal a significant shift in addressing employee entitlement underpayment.
Closing Loopholes No. 1 introduces a new criminal offense for wage theft, effective no earlier than January 1, 2025, or when the Fair Work Commission (FWC)’s Voluntary Small Business Wage Compliance Code begins.
Closing Loopholes No. 2 grants unions the ability to obtain an exemption certificate from the FWC, waiving the 24-hour notice for entry if underpayment is suspected. Recent amendments include an additional ‘guardrail’ – the FWC must ensure that giving advance notice would hinder effective investigations into underpayments before issuing a certificate.
These reforms substantially increase penalties for underpayment, marking the first time proportional penalties are introduced. Employers intentionally underpaying may face up to 10 years in prison and a maximum fine of $7.825 million or three times the underpaid amount (if it exceeds the cap).
What does it mean to Employers?
To successfully navigate these changes, proactive measures are crucial.
Employers should:
- Ensure timely identification and resolution of errors and conduct regular pay audits to closely monitor compliance.
- Establish a comprehensive procedure outlining roles, entitlements, rate calculations, procedures for ongoing audits, and a framework for rectification.
- Ensure accurate determination of entitlements by implementing a systematic process to identify the most appropriate Award or Agreement for each role and ensuring the correct Classification for every position is applied.
- Verify that annualised salaries cover minimum entitlements, including overtime, weekend work and public holiday work and conduct frequent reconciliations to ensure adherence to obligations.
- Regularly review and update payroll data and pay rules to capture regular changes to rates or benefits and to ensure accurate representation of employee entitlements.
Harsher penalties
The introduction of criminal penalties for wage theft is a landmark development in safeguarding workers’ rights. However, the real-world implications and how to navigate these changes remains the key challenge for Employers. The Closing Loopholes bill aims to address issues surrounding deliberate wage underpayments, but the effectiveness of these amendments is still a subject of speculation.
While these laws may not take effect until 2025, the true impacts of these legislative changes are yet to be fully realised, as employers grapple with interpretation and implementation. Initiating these steps now is imperative for creating and sustaining a culture of wage compliance. Proactive measures will not only ensure legal adherence but also foster a positive working environment and provide Employers the foundation on which to build their business with integrity.
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You may also like to read our recent article, for more information on the closing loopholes act