Key Takeouts
The amendments significantly raise the maximum penalties for civil contraventions, with standard penalties now up to $469,500 and serious penalties reaching $4,695,000 for non-small business employers.
The changes particularly target civil remedy provisions related to wage underpayments, encouraging stricter adherence to minimum pay rates and employment conditions established by awards and enterprise agreements.
Employers must strengthen payroll and HR practices, and corporate boards should foster a culture of regulatory compliance and implement effective risk management practices.
In what has been a busy year for industrial relations (IR) reform for national system employers, important changes have been made to the civil enforcement provisions in the Fair Work Act 2009 (Cth). These reforms mostly took effect earlier this year, potentially affect most private sector employers, and have largely gone unnoticed.
Overview of changes
The amendments to the Fair Work Act increase the maximum penalties for standard and serious contraventions of certain civil remedy provisions, for bodies corporate that are not small business employers (who employ less than 15 people).
They apply to those parts of the Fair Work Act which provide a safety net of minimum terms of conditions of employment, particularly in relation to rates of pay set by awards and other industrial instruments.
For civil remedy provisions related to wage underpayments, the maximum penalties for bodies corporate will increase in relation to both standard and serious contraventions, essentially by five times.
Civil penalty increases
Maximum penalties for standard contraventions are or will be the greater of:
- $469,500 per contravention (up from $93,900); or
- three times the wage underpayment amount, if the applicant seeks this alternate kind of penalty (yet to take effect).
Maximum penalties for serious contraventions are or will be the greater of:
- $4,695,000 per contravention (up from $939,000);
- three times the wage underpayment amount, if the applicant seeks this alternate kind of penalty (yet to take effect).
For individuals and incorporated small business employers, maximum penalties will not change from what is currently provided in the Fair Work Act, including for serious contraventions. Those penalties are as follows:
- $18,780 (individuals) and $93,900 (incorporated small business employers) for a standard contravention; and
- $93,900 (individuals) and $469,500 (incorporated small business employers) for a serious contravention.
Commencement of the reforms
The new penalties regime largely took effect from 27 February 2024 and only applies to contraventions which occur after the commencement date (they do not have retrospective effect).
The alternate penalty options (three times the wage underpayment amount) for both standard and serious contraventions will take effect simultaneously with the introduction of the IR reforms still pending in relation the criminalisation of intentional wage underpayments, which will take effect not before 1 January 2025.
Implications for employers
More than ever, it is essential that all employers ensure that their payroll and human resources departments are fully aligned in terms of ensuring front end compliance with their industrial obligations. The board of directors of incorporated employers should take a proactive role in ensuring that their corporate culture is fully orientated with achieving regulatory compliance and that appropriate risk management structures are in place informed by expert advice and assistance, as necessary.