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Escalating Consequences for Wage Theft: Government Considers Jail Time for Directors and HR Managers

The Albanese government is contemplating comprehensive wage theft reforms. If enacted, underpaying employers might face penalties exceeding $4 million or triple the involved sum. Moreover, individuals such as directors and HR managers could face imprisonment and up to $825,000 in fines for each breach.

This potential legislation follows a series of consultation papers put forth for public feedback, one of which proposes significant changes to the Fair Work Act 2009. The paper outlines multiple alternatives, one of which involves a five-fold increase in maximum penalties for 19 current civil remedy provisions. These heightened penalties could also apply to breaches like violating a National Employment Standard, an award or agreement term, or a minimum wage order.

More stringent penalties are also proposed for sham contracting, unreasonable wage deductions, breaching record-keeping and payslip requirements, failing to deliver on annual earnings guarantees, and providing false or misleading information to the Fair Work Ombudsman (FWO).

One crucial aspect of these reforms is that individuals, such as directors and HR managers, could face substantial personal penalties. The maximum penalty for an individual would be $82,500 or $825,000 for a severe violation. There are ongoing discussions around the precise penalties, including the possibility of jail time for conscious and reckless wage underpayment offences.

While these reforms aim to enhance the deterrent impact of penalties, they also seek to maintain clarity in the application of penalties in individual cases. The new measures could potentially increase the penalties for violations that do not involve underpayment if they are litigated.

An alternate proposal, dubbed Option B, aims to increase the penalty for any violation that involves underpayment, irrespective of the specifics of the breach. This proposal would add an additional step for courts and applicants in determining the applicable maximum penalty in a case. It would necessitate producing evidence during litigation to help the court decide if the higher penalty should apply.

The consultation paper also probes the possibility of imposing penalties based on knowledge or recklessness in wage underpayments. This could potentially mean that employers who either knowingly underpay or take an unjustifiable risk could face severe consequences.

This crucial move towards criminalising wage theft would represent a significant shift in holding businesses accountable for fair wages. The paper invites views on the introduction of criminal offences for wage underpayment and record-keeping misconduct. A potential due diligence defence is also being considered.

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