Underpayment Class Actions in Australia, What Employees and Plaintiffs Need to Know in 2026

Underpayment class actions in Australia are accelerating at a pace not seen in the country’s employment law history, driven by a convergence of stricter legislation, high-profile corporate self-disclosures, and an increasingly sophisticated plaintiff bar. Since 1 January 2025, intentional wage underpayment has been a criminal offence under changes introduced by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024, fundamentally raising the stakes for employers and the leverage available to claimants. Incoming Payday Super obligations, tighter record-keeping scrutiny, and a growing list of ASX-listed companies facing collective claims mean that 2026 is a decisive year for employees weighing whether to join, or initiate, a representative proceeding.

This guide provides the practical, plaintiff-side roadmap that employees, union representatives, and litigation lawyers need to assess eligibility, gather evidence, understand remedies, and navigate the procedural mechanics of a wage underpayment class action.

TL;DR, Should You Join or Start an Underpayment Class Action?

Key takeaway: If you suspect systematic underpayment affecting you and your colleagues, a class action may be the most efficient route to collective redress, but timing, evidence, and group size matter.

Use this six-point decision checklist before taking the next step:

1. Eligibility. Were you employed under the same award, enterprise agreement, or contract as other affected workers? You need at least seven people with claims arising from the same or similar circumstances.
2. Common issue. Is there a substantial legal or factual question common to the group, for example, a misclassification of roles under a modern award, or a systematic failure to pay overtime, penalty rates, or superannuation?
3. Evidence. Can you access pay slips, rosters, timesheets, or payroll records that demonstrate the shortfall? The stronger the documentary trail, the stronger the case.
4. Likely remedies. Underpayment claims can recover unpaid wages, superannuation shortfalls, interest, and civil penalties. In larger matters, settlements have run into the hundreds of millions of dollars.
5. Costs. Most plaintiff firms run employment class actions on a “no-win, no-fee” basis or with litigation funding. Understand the fee structure and any common fund order that the court may make.
6. Timing. Limitation periods apply. For most Fair Work Act claims the limitation period is six years from the date of the contravention. Do not delay, evidence degrades and records are destroyed.

If you can answer “yes” to the first three points, you should speak with an employee class action lawyer as soon as possible to evaluate next steps.

What Is an Underpayment Class Action in Australia?

Key takeaway: A class action, formally a “representative proceeding”, allows one lead plaintiff to bring a case on behalf of a group of employees who share a common underpayment issue, without every member needing to file individually.

In Australia, class actions are governed by Part IVA of the Federal Court of Australia Act 1976 (Cth). A representative proceeding can be commenced in the Federal Court when three threshold requirements are met:

• Seven or more persons. At least seven people must have claims against the same respondent (employer).
• Same, similar, or related circumstances. The claims must arise out of the same, similar, or related circumstances, for example, working under the same modern award or enterprise agreement.
• Substantial common issue. There must be at least one substantial question of law or fact common to all group members, such as whether the employer’s payroll system correctly applied penalty rates.

The Federal Court maintains a publicly available list of current class actions, including employment underpayment proceedings, which provides a useful reference for employees investigating whether a claim is already on foot.

Who Can Be a Representative Plaintiff?

Any group member can serve as the representative (or “lead”) plaintiff, but courts look for someone whose claim is typical of the group, who can withstand cross-examination, and who has the capacity to instruct solicitors throughout what may be a multi-year proceeding. The representative plaintiff does not need to be the highest-value claimant, rather, they need to illustrate the systemic nature of the underpayment. Plaintiff law firms often conduct preliminary interviews with multiple potential leads before selecting the most suitable candidate.

Individual Claim vs Class Action: Pros and Cons

Not every underpayment dispute requires a class action. Suing an employer for unpaid wages as an individual statutory claim under the Fair Work Act can be faster and simpler when the underpayment is isolated or unique to one employee’s circumstances. However, where the shortfall is systemic, affecting dozens, hundreds, or thousands of employees, the class action mechanism pools resources, shares costs, and creates litigation pressure that is difficult for even the largest employers to ignore. The table in the procedure section below compares the three main resolution pathways side by side.

2026 Reforms That Matter to Claimants

Key takeaway: Fair Work reforms enacted in 2024–2025 have criminalised intentional wage theft and tightened employer obligations. These changes strengthen the hand of employees pursuing underpayment class actions in Australia.

Several legislative changes are reshaping the underpayment landscape in 2026. The most significant are summarised in the timeline below.

Are Underpayments Criminal?

Yes. From 1 January 2025, intentional underpayment of employees’ wages, superannuation, or other entitlements is a criminal offence under Australian law. The word “intentional” is critical: accidental payroll errors remain civil contraventions. However, the criminal dimension adds a powerful overlay for claimants. Where an employer’s conduct may be characterised as deliberate, for instance, knowingly applying the wrong award classification, the threat of criminal referral to the Commonwealth Director of Public Prosecutions significantly strengthens the plaintiff’s negotiating position.

Interaction with FWO Investigations

The Fair Work Ombudsman retains its own investigation and enforcement powers, which can run in parallel with private class actions. As Norton Rose Fulbright has observed, the interplay between FWO-led proceedings, union-initiated claims, and private plaintiff law firm actions is becoming increasingly complex. Employees do not need to choose one pathway over the other at the outset, an FWO investigation can surface evidence that supports a subsequent or concurrent civil class action, and vice versa. However, coordination matters: overlapping proceedings can create case management complications, and courts may stay one proceeding in favour of another if the issues substantially overlap.

Evidence and Audit: What Employees and Plaintiff Lawyers Must Preserve

Key takeaway: Evidence is the foundation of every underpayment claim. Start preserving documents immediately, do not wait for legal advice before safeguarding records.

An underpayment claim in Australia lives or dies on the quality of the payroll evidence. Employees should begin collecting and securing the following documents as soon as they suspect a shortfall.

How to Request Payroll Records

Under section 535 of the Fair Work Act 2009, employers must make and keep employee records for seven years. Section 536 requires employers to provide pay slips within one working day of paying the employee. If an employer refuses to provide records, employees and their lawyers can seek access through formal discovery processes once litigation is commenced, or request the FWO to exercise its investigative powers. A failure to maintain proper records can give rise to a reverse onus, the employer bears the burden of disproving the claimed underpayment.

Preservation Notice and Sample Wording

Once a class action is contemplated, plaintiff lawyers should issue a preservation notice (also known as a litigation hold letter) to the employer requiring it to retain all relevant payroll, rostering, and HR records. The notice should be sent early, ideally before the originating application is filed, to prevent inadvertent or deliberate destruction of evidence. A well-drafted notice identifies the categories of documents, the relevant time period, the custodians, and the electronic systems in which records are stored.

Working with Forensic Payroll Experts

Large underpayment class actions invariably require forensic accountants or payroll specialists who can model the shortfall across hundreds or thousands of employees by comparing actual pay against the applicable award or agreement. These experts produce reports that quantify total underpayment, broken down by group member, period, and entitlement category. Instructing a forensic payroll expert early in the process, even before proceedings are filed, helps plaintiff lawyers assess the viability and quantum of the claim, and strengthens the position in any mediation or settlement conference.

Procedure and Strategy for Bringing or Joining an Underpayment Class Action in Australia

Key takeaway: Underpayment class actions in Australia follow a structured procedural pathway from investigation to settlement or trial. Understanding each stage helps employees make informed decisions about participation.

The typical lifecycle of a wage underpayment class action unfolds in the following stages:

1. Preliminary investigation. Plaintiff lawyers review sample evidence, assess the legal basis (award misclassification, unpaid overtime, super shortfalls), and identify the scope of the potential group.
2. Test claims or demand letters. In some cases, the plaintiff firm lodges individual test claims or sends a letter of demand to gauge the employer’s response and refine the legal theory.
3. Filing the representative proceeding. An originating application and statement of claim are filed in the Federal Court (or, less commonly, a state Supreme Court) on behalf of the representative plaintiff and defined group members.
4. Group definition and opt-out notice. The court approves a group definition and orders the distribution of opt-out notices. In Australia’s federal regime, class actions operate on an “opt-out” basis, all persons who fall within the group definition are automatically included unless they actively opt out.
5. Discovery and evidence. Both parties exchange documents. This is where employer payroll data, rostering records, and internal communications are produced.
6. Mediation and settlement. Many underpayment class actions settle at mediation. Settlement requires court approval to ensure it is fair and reasonable to group members.
7. Trial (if no settlement). If the matter does not settle, it proceeds to a hearing on common issues, followed by individual assessments if needed.
8. Distribution. Approved settlement funds are distributed to group members according to a court-approved scheme, often administered by a third-party claims administrator.

Costs Risk and Funding: How Plaintiff Firms Structure Fees

Most employment class actions are run on a “no-win, no-fee” (conditional costs) basis, or are supported by litigation funders who finance the proceeding in exchange for a percentage of any recovery. Courts may make common fund orders, which means the legal costs or funder’s commission is deducted from the total settlement before distribution, spreading the cost across all group members rather than burdening the representative plaintiff alone. Employees should ask prospective lawyers to explain the funding model, the likely percentage deduction, and whether any adverse costs risk exists.

When the FWO or Unions Lead vs Law Firms

The resolution pathway chosen depends on the circumstances. The comparison table below outlines the three main options available to employees with an underpayment claim in Australia.

Industry observers expect that as wage theft in Australia attracts more criminal scrutiny, union-led actions and FWO enforcement will increasingly complement, rather than replace, private plaintiff firm class actions, giving employees multiple avenues to pursue remediation.

Remedies, Damages and How Settlements Work

Key takeaway: Successful claimants in an underpayment class action can recover unpaid wages, superannuation shortfalls, interest, and civil penalties, with settlements in major matters reaching hundreds of millions of dollars.

The remedies available in an Australian wage underpayment class action include:

• Unpaid wages and entitlements. The core recovery, the difference between what was paid and what should have been paid under the applicable award, agreement, or contract.
• Superannuation shortfalls. Where SG contributions were underpaid or missed entirely, employees can recover the shortfall plus any nominal interest equivalent to the SG charge.
• Interest. Pre-judgment interest compensates employees for the time value of money between the date of underpayment and the date of judgment or settlement.
• Civil penalties. The Fair Work Act prescribes maximum civil penalties for contravention of National Employment Standards, modern awards, and enterprise agreements. Penalties are payable to the Commonwealth but can be sought in the same proceeding.
• Compensation for non-economic loss. In limited cases, additional compensation may be available where the underpayment involved misleading conduct or adverse action.

Settlement Mechanics: Distribution and Group Member Notices

When an underpayment class action settles, the settlement must be approved by the Federal Court. The court assesses whether the settlement is fair, reasonable, and in the interests of group members as a whole. Once approved, a claims administrator distributes funds according to a settlement scheme, typically requiring group members to submit a registration form with supporting documents (such as proof of employment and period of service). Group members who did not opt out receive notice of the settlement and the registration process.

Tax Treatment and Reporting of Payments

Settlement payments that represent unpaid wages are generally assessable income in the year they are received, subject to PAYG withholding. Superannuation components are paid directly into the member’s fund. Interest and penalty components may receive different tax treatment. Group members should seek individual tax advice, as the ATO’s treatment depends on the characterisation of each component in the court-approved settlement deed.

Case Studies and Precedent: Practical Lessons from Recent Wage Underpayment Class Actions

Key takeaway: Recent ASX underpayment cases illustrate both the scale of potential recovery and the litigation strategies that succeed.

Woolworths and Big W

One of the most prominent underpayment class actions in Australian history involves Woolworths Group and its Big W subsidiary. As documented by Adero Law, the proceeding alleges that salaried store managers were systematically underpaid relative to the entitlements they would have received under the applicable General Retail Industry Award. The case centres on a common issue: whether annualised salary arrangements adequately compensated employees for overtime, penalty rates, and other award entitlements. The scale of the claim, spanning thousands of current and former managers, demonstrates how a single payroll design flaw can generate a class action worth hundreds of millions of dollars. The case has become a reference point for plaintiff lawyers assessing similar claims across the retail sector.

Kmart Store Managers (2026)

In April 2026, ABC News reported the filing of a class action against Kmart alleging wage underpayment of store managers, mirroring the legal theory in the Woolworths litigation. The claim highlights a recurring pattern across Australian retail: annualised salary arrangements that fail to meet the “better off overall” test when actual hours, overtime, and penalty rates are properly calculated. Early indications suggest the Kmart proceeding will be closely watched as a bellwether for how courts assess employer liability under similar salary absorption clauses.

Junior Doctors

The healthcare sector has produced some of the largest underpayment settlements in Australian class action history. As analysed by the Law Society Journal, class actions brought on behalf of junior doctors across multiple state health systems have exposed systematic failures to pay for overtime, on-call work, and missed breaks. These proceedings illustrate how even public-sector employers with sophisticated HR functions can harbour deep-rooted payroll compliance failures, and how forensic timesheet analysis, combined with electronic rostering data, can prove the shortfall across large cohorts.

Lessons for Plaintiffs and Employers

Across these ASX underpayment cases and public-sector proceedings, several common threads emerge. First, annualised salary arrangements are the single largest source of underpayment class action risk, employers must ensure the annualised amount exceeds what the employee would receive if paid strictly under the award. Second, payroll data is everything: claims succeed where forensic experts can map actual hours to award entitlements at scale. Third, employer self-disclosure, while it may reduce criminal exposure under the new compliance pathway, does not prevent a civil class action. As Clayton Utz has noted, the class action pipeline for underpayment claims is growing, and employers who delay remediation face compounding risk.

Employer Perspective, How Companies Should Respond When Underpayment Is Suspected

Key takeaway: Rapid, transparent remediation is the most effective defence, delay and concealment exponentially increase both civil and criminal exposure.

When a potential underpayment is identified, employers should follow a structured remediation playbook:

1. Immediate internal audit. Engage an independent forensic payroll firm to quantify the scope and quantum of the underpayment. Do not rely on the same team that designed the payroll system.
2. Voluntary disclosure to the FWO. Under the cooperation and compliance framework, early self-disclosure may enable access to a pathway that can preclude criminal prosecution, though civil liability to employees remains.
3. Remediation agreement. Develop a remediation plan with clear timelines, back-payment calculations, and superannuation rectification. Communicate the plan to affected employees and, where applicable, their union representatives.
4. Public communications. For ASX-listed companies, continuous disclosure obligations may require market announcements. Proactive, transparent communication reduces reputational damage.
5. Ongoing compliance review. Implement systemic changes, award interpretation reviews, payroll system reconfiguration, regular auditing cycles, to prevent recurrence.

The likely practical effect of the 2025 criminalisation reforms is that employers will move more quickly to self-disclose and remediate. However, as Allens’ 2024 employment class actions review makes clear, voluntary remediation programs do not immunise employers from private class actions, employees retain the right to pursue collective claims for compensation regardless of the employer’s engagement with the regulator.

How to Find and Instruct an Employee Class Action Lawyer

Key takeaway: Choosing the right firm is a critical early decision, look for demonstrated experience in employment class actions, transparent funding models, and forensic payroll capability.

When evaluating a prospective employee class action lawyer, ask the following questions:

• How many employment underpayment class actions has the firm run or settled?
• What is the fee structure, conditional (no-win, no-fee), funded, or hybrid?
• Does the firm have access to forensic payroll experts who can model shortfalls at scale?
• What is the firm’s strategy for test claims and lead plaintiff selection?
• How does the firm communicate with group members throughout the proceeding?

Employees in Australia can search for experienced employment litigation practitioners through the Global Law Experts Australia employment practice area.

Conclusion and Next Steps

Underpayment class actions in Australia are no longer a niche area of employment litigation, they are a mainstream enforcement mechanism reshaping workplace compliance across every sector. The criminalisation of intentional wage theft, the arrival of Payday Super obligations, and a growing body of precedent from retail and healthcare proceedings mean that 2026 is a pivotal year for both employees and employers.

If you suspect you have been underpaid, take these immediate steps:

1. Preserve all evidence, pay slips, contracts, rosters, super statements, and any communications about hours or pay.
2. Check whether a class action is already on foot, consult the Federal Court’s class actions list.
3. Seek specialist legal advice, speak with an experienced employment litigation practitioner who can assess your claim and advise on the most effective pathway to recovery.

Employees across Australia can find qualified employment law specialists through the Global Law Experts Australia employment practice area to discuss their options and begin the process of recovering what they are owed.

Sources

1. Fair Work, Criminalising wage underpayments and other issues
2. Federal Court, List of current class actions
3. Clayton Utz, Wage underpayment class actions (2025 insight)
4. Allens, Employment class actions: 2024 review
5. Norton Rose Fulbright, The future of underpayment proceedings
6. ABC News, Kmart class action (April 2026)
7. Adero Law, Woolworths & Big W class action
8. LSJ (Law Society Journal), What underpayment of junior doctors reveals about employment class actions