Wage Theft

Why wage theft matters for your practice

Since 1 January 2025, intentionally underpaying a worker is no longer just a civil matter that ends in back-pay. It is a criminal offence under the Fair Work Act 2009, added by the Closing Loopholes reforms, and it can put a company and the individuals behind it in front of a criminal court. For a medical or allied health practice, the point is not that most underpayments are criminal, because they are not: the offence turns on intent, and honest configuration errors are not caught. The point is that the line between a recoverable mistake and a criminal offence is drawn by how a practice behaves once a problem is known.

That is why ignoring a Fair Work compliance notice, sitting on a self-identified shortfall, or waving away a staff or union query is dangerous. Those are exactly the facts a court uses to infer that an underpayment was deliberate rather than accidental. A practice that runs an award, a roster and a payroll system carries ordinary underpayment risk; a practice that knows about a shortfall and does nothing moves itself toward the criminal end of that spectrum.

What counts as wage theft, and what does not

The offence applies where an employer intentionally engages in conduct that results in a failure to pay an employee an amount they are required to be paid, on or before the day it is due, under the Fair Work Act or a fair work instrument such as a modern award or enterprise agreement. Covered amounts include wages, and other entitlements like paid leave, leave loading, overtime, penalty rates and allowances.

Two boundaries matter:

• Intent is the essential element. Underpayments caused by an honest mistake, a miscalculation, or a genuinely misconfigured payroll system are not the criminal offence. They remain fully recoverable as a civil underpayment, but they are not wage theft unless the conduct was intentional.
• Some amounts sit outside it. The offence is built around entitlements under the Fair Work Act and fair work instruments. Superannuation guarantee shortfalls are pursued through their own regime (the ATO), and amounts owed only under other laws are dealt with separately.

Intent does not require a signed confession. A court can infer it from the surrounding conduct: continuing to pay a rate you have been told is wrong, ignoring a compliance notice, or concealing the shortfall. In the February 2026 Well Health Medical Hub penalty, a Merrylands medical centre and its director were penalised precisely because the court found their failure to act on a Fair Work compliance notice was deliberate.

The maximum penalties are severe. For an individual, up to 10 years imprisonment and/or a fine of the greater of three times the underpayment or 5,000 penalty units (currently $1.565 million). For a company, a fine of the greater of three times the underpayment or 25,000 penalty units (currently $7.825 million).

What the Fair Work Ombudsman expects

The Fair Work Ombudsman is the body that investigates and refers suspected wage theft for prosecution, and it has built two off-ramps for employers who act in good faith. A practice is expected to use them rather than hope the problem is never found.

• The Voluntary Small Business Wage Compliance Code. A small business employer (fewer than 15 employees) that has complied with this Code in relation to an underpayment cannot be referred for criminal prosecution for it. The Code is about taking reasonable steps: checking the correct award and pay rates, using Fair Work tools and resources, asking for advice, and fixing any shortfall you find. Following it is the clearest evidence that an underpayment was not intentional.
• Cooperation agreements. An employer that self-reports a suspected wage-theft offence can seek a written cooperation agreement with the Fair Work Ombudsman. While the agreement is in place, the Ombudsman will not refer the conduct for criminal prosecution, although civil action to recover the money can still follow.

Underneath both, the regulator expects the ordinary controls: correct award mapping for every role, current position descriptions that tie duties to the right classification, a payroll system kept up to date with penalties, overtime and allowances, and a documented response the moment a shortfall or a compliance notice appears. An enforceable undertaking remains the civil resolution for employers who cooperate; wage theft is the criminal exposure for those who do not.

Common mistakes

• Assuming "we did not mean to" is an automatic defence. Intent can be inferred from conduct. Ignoring a known underpayment or a compliance notice is how an accidental shortfall becomes a deliberate one in the eyes of a court.
• Confusing wage theft with ordinary underpayment. Most underpayments are civil, not criminal. The criminal offence needs intent; treating every payroll error as "wage theft", or dismissing a real shortfall as "just a mistake" without fixing it, both misread the law.
• Small businesses assuming they are automatically protected. The protection comes from actually following the Voluntary Small Business Wage Compliance Code, not from headcount alone. If you have not taken the reasonable steps the Code sets out, the safe harbour does not apply.
• Forgetting the individual exposure. The offence reaches individuals involved in the conduct, not just the company. A director or practice principal can be penalised in their own name.
• Thinking enforcement only targets large employers. A single-site practice underpaying one nurse is squarely within scope, as the 2026 medical-centre penalty shows.

Frequently Asked Questions

When did wage theft become a crime in Australia?

Intentional underpayment became a federal criminal offence under the Fair Work Act 2009 on 1 January 2025, as part of the Closing Loopholes reforms. Before that date, underpayment was a civil matter (recoverable back-pay plus civil penalties), and some states had their own wage-theft laws. The federal criminal offence now applies nationally to intentional underpayments.

Is every underpayment wage theft?

No. Wage theft is the criminal offence of intentionally underpaying. An underpayment caused by an honest mistake, a miscalculation, or a misconfigured payroll system is not the criminal offence, although it is still fully recoverable as a civil underpayment. Intent is what separates the two.

What are the penalties for wage theft?

For a company, the maximum fine is the greater of three times the underpayment or 25,000 penalty units (currently about $7.825 million). For an individual, it is up to 10 years imprisonment and/or a fine of the greater of three times the underpayment or 5,000 penalty units (currently about $1.565 million). Civil penalties for underpayment can also apply separately.

How can a small practice avoid criminal liability?

A small business employer (fewer than 15 employees) that complies with the Voluntary Small Business Wage Compliance Code in relation to an underpayment cannot be referred for criminal prosecution over it. In practice that means checking the correct award and rates, using Fair Work resources, seeking advice where needed, and rectifying any shortfall you find. Any employer can also seek a cooperation agreement with the Fair Work Ombudsman after self-reporting.

Can a director be personally liable for wage theft?

Yes. The offence and the associated penalties can reach individuals who are knowingly involved in the conduct, not only the employing company. In the February 2026 Well Health Medical Hub matter, the sole director was penalised personally alongside the company after the court found the failure to comply with a Fair Work notice was deliberate.

Last reviewed 22 July 2026