On 7 December 2023, a re-worked Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, which introduces federal criminal offences for intentional wage underpayment and industrial manslaughter, passed both houses of Parliament. Here we outline the main points.
In addition to the criminalisation of wage theft and industrial manslaughter, the bill also legislates “same job-same pay” requirements, despite significant push-back from industry peak bodies. The government passed the bill notwithstanding an ongoing Senate Education and Employment Committee Inquiry, which has yet to report.
In order to secure passage of the Closing Loopholes Bill, the government agreed to the Greens’ proposal that the wage underpayment offence also cover superannuation underpayments.
Other industrial reform measures, including gig-economy worker rights, road transport industry reforms and casual employee rights, have been split into a separate bill (New IR Bill) which will be deliberated on by Parliament in 2024.
What was passed?
In relation to wage theft, the Bill:
- Introduces a criminal offence for intentional wage underpayment, which includes the underpayment of superannuation.
- Lowers the civil liability threshold for a “serious contravention,” which includes wage underpayment, from a “systematic pattern of conduct” to recklessness.
- Substantially (i.e. five-fold) increases civil penalties for “serious contraventions”, which includes wage theft, with a maximum penalty up to three time the value of any associated underpayment.
- Introduces a “Cooperation Agreement” regime which provides for a narrow immunity from criminal prosecution where an entity self-reports and enters into a Cooperation Agreement with the Fair Work Ombudsman (FWO). Under the regime, the FWO is prohibited from referring conduct involving a party to a Cooperation Agreement to the Director of Public Prosecutions (DPP) or Australian Federal Police (AFR). However, there is no prohibition against third parties referring proceedings, or from the DPP or AFR commencing proceedings of their own volition. There is also no immunity from civil suit.
- Legislates a ‘Voluntary Small Business Wage Compliance Code’ for businesses with fewer than 15 employees, and prohibits the FWO from referring conduct to the DPP or AFR where the FWO is satisfied that the code has been complied with.
The bill also introduces an industrial manslaughter offence, where a corporation or officer intentionally engages in conduct that breaches its health and safety duty and causes the death of an individual where the corporation/officer was reckless or grossly negligent as to whether the conduct would cause the death of an individual.
The offence was introduced to align Commonwealth WHS law with amendments to the model work health and safety legislation proposed under the Boland Review in 2018. However, this new offence will not apply to most entities, which will continue to be subject to state-based WHS laws to the exclusion of Commonwealth law, with all states other than NSW and Tasmania having existing industrial manslaughter offences (NSW is in the process of introducing one). We are advised that the only companies that will be subject to this new Commonwealth offence are a small cohort of entities that have previously applied to be subject to the federal regime.
Outside of wage theft and industrial manslaughter offences, the bill also enhances workplace discrimination protection for workers facing family and domestic violence and tightens the small business insolvency exemption aimed at reducing the number of businesses relying on the exemption to avoid redundancy payments.
As part of its negotiations with independent Senators Lambie and Pocock, the government also committed to increased funding for the small business advisory service within FWO, an independent review of the Comcare scheme to enhance outcomes for injured workers, and the introduction of new independent medical assessment guidelines for workers.
What is the AICD’s position?
In relation to wage theft, the AICD is pleased to see that the government is criminalising only intentional wage theft, having advocated strongly for this in our submission to the Department of Employment and Workplace Relations’ consultation on wage theft, and in our submission to the Senate’s Inquiry.
However, as raised in our inquiry submission, we are concerned that the bill focuses excessively on punishment and deterrence, rather than on addressing the root causes of unintentional wage underpayment. These include the complexity of the industrial relations system and the support of timely rectification. More specifically:
- We consider that the immunity from criminal prosecution under the cooperation agreement regime is too narrow and fails to incentivise self-reporting.
- We opposed the proposed articulation of the civil liability “recklessness” test, which replicates the criminal code and imposes liability for a “serious contravention” where the person/corporation is aware of a substantial risk that underpayment would occur, and proceeds to take that risk notwithstanding that it is unjustifiable to take the risk. We are concerned that, given the complexity of the industrial relations system, there is often a substantial risk of an organisation coming to an honest, though ultimately incorrect, view as to the amount payable. As such, we do not consider it a good policy outcome that these occurrences be termed “serious contraventions” and subject to the significant and increased penalties proposed.
- We consider that the current drafting of the wage theft offence, which splits the fault elements into absolute liability (to which civil liability applies) and intention, is confusing. Furthermore, it is not clear whether the defence of mistake of fact is available for the civil wage theft offence.
- We recommend that supporting guidance sets out more clearly how the principles of attribution of corporate criminal responsibility, set out in Part 2.5 of the Criminal Code, will apply in the wage theft context. We noted that this should include discussion of the level of involvement that would trigger individual accessorial liability.
In relation to industrial manslaughter, we support the fault threshold being set at gross negligence, consistent with the Boland Review recommendations. Given there are existing, differing industrial manslaughter offences in all state jurisdictions other than NSW and Tasmania (with the NSW Government seeking to introduce legislation to this effect shortly), there is a need for harmonisation across jurisdictions.
What happens next?
The AICD will provide members with expert analysis on the broader aspects of the recently passed legislation, such as same work same pay, in upcoming articles.
More broadly, Parliament is expected to debate the remaining elements of the government’s industrial relations package, in early 2024, with the reforms likely to remain contentious.
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