Australia's employment system is complex, with over 120 Modern Awards covering different industries and roles. Even large corporations with dedicated payroll teams have discovered they've been systematically underpaying staff—sometimes for years. The consequences have never been more severe: from 1 January 2025, intentional wage underpayment is a criminal offence carrying up to 10 years imprisonment for individuals and $8.25 million in fines for companies.
The Fair Work Ombudsman has recovered $1.5 billion in underpayments for workers in the past three years alone. This article examines Australia's most significant underpayment cases—from 7-Eleven to the record-breaking Sushi Bay penalties in 2024. Understanding how these failures occurred, and the scale of their consequences, provides essential lessons for every employer in 2026 and beyond.
Quick summary
- Major Australian companies have underpaid workers by hundreds of millions of dollars
- Common causes: salaried employee overtime, complex award interpretation, and inadequate payroll systems
- Consequences include back-payment, penalties, prosecution, and reputational damage
- Automated award interpretation tools help prevent underpayment before it occurs
Criminal wage theft laws from 2025
From 1 January 2025, intentional underpayment of wages became a criminal offence under amendments to the Fair Work Act 2009 (Cth), introduced through the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. This represents the most significant change to Australian workplace law in decades.
Company penalties
$8.25 million
Or 3× the underpayment amount, whichever is greater. Plus increased civil penalties for non-small business employers.
Individual penalties
10 years prison
And/or up to $1.65 million or 3× the underpayment amount. Directors and managers can face personal liability.
The law provides a safe harbour for small businesses (fewer than 15 employees) that comply with the Voluntary Small Business Wage Compliance Code. The Fair Work Ombudsman won't refer compliant small businesses for criminal prosecution. Larger employers can avoid criminal liability by self-reporting underpayments to the Fair Work Ombudsman and entering a Cooperation Agreement.
Important: The criminal offence targets intentional underpayment. However, "intention" includes recklessness—meaning employers who fail to implement proper compliance systems may still face prosecution if underpayment occurs and they ought reasonably to have known.
Who is the Fair Work Commission?
Before examining the cases, it's important to understand the regulatory framework. The Fair Work Commission is Australia's national workplace relations tribunal. Its responsibilities include:
- Setting minimum wages: The Commission conducts the Annual Wage Review and adjusts the national minimum wage
- Resolving disputes: It helps employers and employees resolve workplace disagreements through conciliation and arbitration
- Approving agreements: Enterprise agreements must be approved by the Commission to take effect
- Addressing unfair dismissals: Employees can apply to the Commission if they believe they were unfairly terminated
- Education: The Commission provides information about workplace rights and obligations
The Fair Work Ombudsman is a separate body that investigates complaints, enforces compliance, and can prosecute employers for breaches. Together, these bodies form the regulatory framework that all employers must navigate.
Australia's major underpayment cases
These six cases demonstrate how underpayment can occur at any scale—and the significant consequences that follow:
Case 1: 7-Eleven (2015)
A joint Fairfax Media and Four Corners investigation in 2015 exposed systematic underpayment across 7-Eleven franchises nationwide. The investigation revealed that many franchise owners were paying workers—often international students on visas—as little as $10 per hour, far below the minimum wage.
The scandal exposed fundamental problems with the franchise model, where head office profited while franchisees cut corners on wages to remain viable. 7-Eleven agreed to pay $44 million in back pay to affected workers and implemented significant compliance reforms.
Key failure:
Inadequate oversight of franchisee employment practices. Head office business model made compliance economically difficult for franchisees, creating systemic incentives for underpayment.
Case 2: Woolworths (2018)
Australia's largest private employer discovered it had underpaid approximately 5,700 salaried store managers by $300 million over eight years. The underpayment occurred because managers' salaries did not adequately compensate for the overtime hours they were actually working.
Under Australian law, salaried employees must still receive at least the equivalent of award entitlements. When long hours pushed the effective hourly rate below the award minimum, Woolworths was in breach—despite paying what appeared to be generous salaries.
Key failure:
Salaried employees' actual hours worked were not being tracked against award minimums. The "Better Off Overall Test" was failing because salaries didn't compensate for actual overtime.
Case 3: Coles (2019)
Coles discovered it had underpaid thousands of workers by approximately $20 million over a six-year period. Similar to Woolworths, the issue centred on salaried employees whose effective hourly rates fell below award minimums when their actual hours worked were considered.
The case highlighted that even companies with sophisticated payroll systems can miss fundamental compliance requirements if they don't properly track hours for salaried staff.
Key failure:
Same salaried employee oversight as Woolworths—demonstrating this was an industry-wide blind spot in retail management compensation structures.
Case 4: Domino's Pizza (2018)
A Fair Work Ombudsman investigation discovered Domino's Pizza had underpaid workers by nearly $8 million. Like 7-Eleven, the franchise model created challenges in ensuring consistent compliance across independently operated stores.
The case resulted in significant reforms to Domino's franchisee oversight and compliance monitoring systems.
Key failure:
Insufficient franchisor oversight of franchisee payroll practices. Fast food industry complexity with penalty rates and young workers created compliance gaps.
Case 5: George Calombaris (2019)
Celebrity chef George Calombaris admitted to underpaying 162 workers at his Melbourne restaurant group by $7.8 million. The MasterChef judge's high public profile intensified scrutiny and demonstrated that underpayment scandals can destroy personal and business reputations.
Despite the back-payment and a $200,000 "contrition payment" to a registered charity, the reputational damage contributed to the eventual collapse of his restaurant group.
Key failure:
Hospitality award complexity, rapid business expansion without corresponding payroll system upgrades, and inadequate compliance oversight as the group grew.
Case 6: BHP (2023)
Mining giant BHP acknowledged in 2023 that it had underpaid approximately 30,000 workers since 2010, requiring $400 million for remediation. This case demonstrated that even the largest, most well-resourced companies can have systemic payroll compliance failures.
The scale of the underpayment—both in dollar terms and number of affected workers—made it one of the largest wage remediation exercises in Australian corporate history.
Key failure:
Complex enterprise agreement interpretation across multiple sites and employment types. Even with dedicated payroll resources, systemic errors compounded over years.
Case 7: Sushi Bay (2024) — Record Penalty
In 2024, the Federal Court imposed the highest penalties ever in a Fair Work Ombudsman case against Sushi Bay Pty Ltd, Sushi Bay ACT Pty Ltd, Auskobay Pty Ltd, and Auskoja Pty Ltd. The companies were found to have falsified records to conceal their underpayment of workers, with individual underpayments reaching nearly $84,000.
This case surpassed the previous record penalty of $10.3 million imposed against Commonwealth Bank and CommSec earlier in 2024. The severity of the penalty reflects both the deliberate nature of the underpayment and the falsification of records—conduct that would now attract criminal prosecution under the 2025 wage theft laws.
Key failure:
Deliberate underpayment combined with falsified records to conceal the conduct. This represents the most serious category of wage theft—intentional and concealed—which now carries criminal penalties.
Underpayment summary
| Company | Year | Amount | Workers | Key Issue |
|---|---|---|---|---|
| 7-Eleven | 2015 | $44 million | Thousands | Franchise oversight |
| Woolworths | 2018 | $300 million | 5,700 | Salaried overtime |
| Coles | 2019 | $20 million | Thousands | Salaried overtime |
| Domino's Pizza | 2018 | $8 million | Unknown | Franchise compliance |
| George Calombaris | 2019 | $7.8 million | 162 | Award complexity |
| BHP | 2023 | $400 million | 30,000 | EA interpretation |
| Sushi Bay | 2024 | Record penalty | Multiple | Falsified records |
Key lessons for Australian employers
These cases reveal common themes that every employer should address:
Track salaried employee hours
Woolworths and Coles both failed because they didn't verify that salaried managers' actual hours resulted in at least award-equivalent pay. Track hours even for salaried staff.
Award complexity requires systems
Australian awards are complex. Manual calculations create errors. Automated award interpretation tools prevent mistakes before they become expensive problems.
Franchise oversight matters
7-Eleven and Domino's showed that franchisors can't ignore franchisee employment practices. Head office must actively monitor and support compliance across the network.
Growth requires system upgrades
George Calombaris's restaurant group outgrew its payroll systems. As businesses expand, compliance infrastructure must scale accordingly.
Size doesn't guarantee compliance
BHP's $400 million remediation proves that massive resources don't prevent systemic errors. Every organisation needs robust compliance processes.
Self-disclosure is safer
Companies that proactively identified and remediated underpayment generally fared better than those caught by investigations. Regular compliance audits are essential.
How to support payroll compliance
The Australian award system is complex—even large corporations with dedicated payroll teams struggle to maintain compliance. For small and medium businesses without equivalent resources, the challenge is even greater. The solution is implementing robust systems that automate compliance checks.
Use award interpretation software
Award interpretation systems calculate correct pay rates, penalties, overtime, and allowances based on the specific award applying to each employee. This eliminates manual calculation errors that cause underpayment.
Track all hours worked
Implement time and attendance systems for all staff—including salaried employees. This creates the records needed to verify award compliance.
Conduct regular compliance audits
Schedule annual reviews of pay rates against current awards, verify salaried employee calculations, and check that all entitlements are being correctly applied. Use our free tool to assess underpayment risk or calculate back-payment exposure. Catching issues early prevents years of accumulated underpayment.
Stay current with award changes
Awards change annually (often July 1). Subscribe to Fair Work updates and ensure your payroll settings reflect current rates. Continuing to pay old rates after increases creates immediate underpayment.
Keep comprehensive records
Maintain records for 7 years as required by law. Complete records demonstrate compliance if questioned and enable accurate back-payment calculations if issues are discovered.
Frequently asked questions
What are the criminal penalties for wage theft in Australia from 2025?
From 1 January 2025, intentional wage underpayment is a criminal offence. Companies face maximum penalties of $8.25 million or 3× the underpayment amount (whichever is greater). Individuals face up to 10 years imprisonment and/or $1.65 million or 3× the underpayment. Small businesses complying with the Voluntary Small Business Wage Compliance Code have safe harbour protections.
What was the largest Fair Work Ombudsman penalty in 2024?
The Sushi Bay case in 2024 resulted in the highest penalties ever imposed in a Fair Work Ombudsman case. The companies falsified records to conceal underpayments, with individual workers underpaid by up to $84,000. This surpassed the previous record $10.3 million penalty against Commonwealth Bank and CommSec.
How can employers avoid criminal prosecution for wage theft?
Employers can avoid criminal liability by self-reporting underpayments to the Fair Work Ombudsman and entering a Cooperation Agreement. Small businesses (under 15 employees) have safe harbour if they comply with the Voluntary Small Business Wage Compliance Code. Implementing robust payroll systems with award interpretation is essential.
How does software like RosterElf help with payroll compliance?
RosterElf includes built-in award interpretation for Modern Awards. It automatically calculates correct pay rates including penalties and overtime, tracks hours worked, and integrates with payroll systems to support Fair Work compliance.
How much has the Fair Work Ombudsman recovered for workers?
The Fair Work Ombudsman has recovered $1.5 billion in underpayments for workers in the past three years. Large organisations and multinationals—including those with sophisticated payroll systems—have been the source of some of the largest wage theft scandals in Australian history.
Why do large companies still have underpayment issues?
Award complexity, salaried employee overtime tracking gaps, legacy payroll systems, and enterprise agreement interpretation challenges cause issues even for well-resourced companies. Regular compliance audits and modern award interpretation tools are essential regardless of company size.
Related RosterElf features
Protect your business from underpayment risk
RosterElf's built-in award interpretation ensures you pay staff correctly—every shift, every pay run.
- Built-in award interpretation
- Automatic penalty and overtime calculations
- Integrates with Xero and MYOB
Disclaimer: This article provides general information about underpayment cases and compliance practices. It does not constitute legal or financial advice. Always verify current requirements using official Fair Work Ombudsman resources and seek qualified professional advice for specific situations.
