Employers beware: New crime to be introduced for intentionally withholding wages

20/03/2025·4 mins to read

Employers beware: New crime to be introduced for intentionally withholding wages

On 13 March 2025 the Crimes (Theft by Employer) Amendment Act 2025 (Act) was passed into law. The Act has amended the Crimes Act 1961 (Crimes Act) to clarify that failing to pay employees their wages is theft.

Read Employment Partner, Rachael Judge’s opinion column published in today’s BusinessDesk here about why it’s vital that all employers are aware of this law change [paywall].

Section 220AA of the Crimes Act now makes it a criminal offence where an employer intentionally fails, without reasonable excuse, to pay their employees’ wages, salaries, and other monetary entitlements within an employment relationship. In our view, this new law might have wider implications for employers than they may have anticipated.

The Act reflects the position in several other jurisdictions and furthers the previous Government’s pledge to do more to prevent employee exploitation.

Key takeaways

Employers will now be criminally liable where they intentionally withhold an employee’s wages or other monetary entitlements without reasonable excuse;
Company directors, or other employees responsible for payment of wages, may also be criminally liable as a party to the offence where they actively and intentionally influence the decision to withhold wages;
Where convicted, employers who are individuals will be liable for up to one year in prison and/or a $5,000 fine. All other employers will be liable for a fine of up to $30,000;
We consider the implications for our clients will be limited given the amendment only creates criminal liability where an employer intentionally withholds wages, as opposed to where a genuine payroll mistake is made; and
There will be limited implications for insolvent companies, due to the existing criminal penalties for reckless trading and the failure to pay PAYE and GST.

Party liability

While aimed at 'employers', in our view the Act will nonetheless create potential criminal liability for directors and/or other employees of an employer who are directly involved in the failure to pay employees their wages and/or other entitlements.

Under section 66 of the Crimes Act, a person can be a party to, and guilty of an offence, if they commit the offence, but also if they aid, abet, incite, counsel or procure an offence.

This means that if a director of a company that is an employer, or any member of an employer's staff (eg a CFO or a payroll manager) responsible for payment of wages, takes part in activities or decisions that leads the employer not to pay employee wages in breach of the Crimes Act, they could be held liable alongside the employer as a party to the non-payment offence.

Because the criminal standard of proof is “beyond a reasonable doubt”, the evidence required to support such charges would need to be strong and, we expect, directly connect the non-payment to a deliberate act or omission of the individual concerned.

Employment implications

Currently, when an employer withholds wages, or fails to correctly pay an employee, the employee can pursue a civil claim in the Employment Relations Authority or Employment Court to recover what is owed to them. This could be brought as a breach of employment agreement claim under the Employment Relations Act 2000 (ERA), or as a recovery of wages claim under section 11 of the Minimum Wage Act 1983, or as an unlawful deduction under the Wages Protection Act 1983. However, civil wage claims have been critiqued as difficult to initiate, time-consuming and expensive. Now, employees will be able to make complaints directly to the police, allowing the matter to be dealt with in the criminal justice system.

The new offence is intended to capture employers who owe wages and intentionally do not pay these to an employee without reasonable excuse, including withholding wages, salaries and other monetary entitlements (including minimum statutory entitlements) under an employee’s terms and conditions of employment (as defined in the ERA). The amendment is not intended to criminalise employers acting in good faith, for example where there is a genuine mistake with payroll processes.

Where an employer is found guilty of wage theft, they will be liable to punishment of up to:

one year’s imprisonment and/or a fine of $5,000, if the employer is an individual; or
for all other employers, a fine of $30,000.

In our view, this amendment would likely apply to circumstances where employers intentionally “offset” wages against debts owed to them by an employee without the employee’s consent. This would constitute intentional withholding under the Crimes Act, despite the fact that employers may think they have a reasonable basis for taking this approach. In our experience, it is common for employers to take an ‘offsetting’ approach when debts are owed. Therefore, employers will need to be particularly careful when taking this approach in future. For example, by ensuring employee consent is obtained and clearly documented at the time.

Even where an employer intentionally withholds pay, they will not be liable if there is a ‘reasonable excuse’ for this. It is still unclear as to how this would be implemented in practice.

Insolvency implications

While the Act will create criminal liability on employers, it may have limited application on insolvent companies. This is because failing to account for PAYE and GST is already a criminal offence under the Tax Administration Act, and imposing criminal liability on an employer is unlikely to increase returns for its creditors.

Any potential offence would, however, need to be reported by an insolvency practitioner as it would be a “serious problem” under the Insolvency Practitioners Regulation Act 2019.