The first 90 days after an underpayment surfaces. What separates a contained issue from a crisis

A single payroll query from one employee. That's how some of Australia's largest remediation projects have started. The question for every organisation isn't whether an underpayment issue will surface, but what happens in the weeks that follow when it does.

In a Yellow Canary webinar, "When an employee speaks up: the first 90 days of an underpayment issue," employment lawyer Grace Brunton-Makeham (Partner, Makeham Flaherty), David Morgan (Managing Director of Whistleblower Technologies, Veremark), and facilitator Marcus Zeltzer (Founder, Yellow Canary) worked through the decisions, missteps, and legal dynamics that define those critical early weeks.

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How underpayment issues surface

There is no single pathway. Grace Brunton-Makeham has seen enterprise-wide remediation projects triggered by a single complaint, union activity on a tangential issue, employee class actions, or a direct complaint to the Fair Work Ombudsman. Due diligence processes and proactive audits also catch problems, though fewer organisations conduct them regularly.

David Morgan pointed to third-party speak-up channels as another route. In the retail and franchise sectors, employees who don't feel safe raising concerns internally will use an independent reporting mechanism instead. "What we know from this wage underpayment area is that the issues are often not dealt with holistically," Morgan said. "They're dealt with in isolation."

That pattern of isolated handling is where many organisations come unstuck.

The mistake that compounds everything

The most common error, according to both speakers, is treating an individual payroll complaint as a one-off without asking whether the same problem affects others.

Brunton-Makeham described a pattern she encounters regularly: complaints reach payroll or HR and get resolved individually, on an ad hoc basis, with no central record. "The board thinks, we don't have any payroll complaints, let me look at the risk register, we don't have anything like that," she said. "But actually, you've had hundreds over a few years. They've just been disparate."

The consequence is a gap between what the organisation knows and what the regulator can see. Under the Closing the Loopholes legislation, reckless underpayment now carries penalties of up to $4.95 million per contravention. The bar for "reckless" is lower than most people assume: Brunton-Makeham defined it as "more around omissions rather than actions," including turning a blind eye to patterns that are well known internally.

Where whistleblowing law intersects with wage theft

Since 1 January 2025, intentional underpayment is a criminal offence under the Fair Work Act. That change creates a new connection to whistleblower legislation. Under the Corporations Act, one of the criteria for a whistleblower complaint is that it concerns criminal conduct. An underpayment complaint that rises to the level of intentional wage theft could therefore trigger whistleblower protections, including confidentiality requirements and prohibitions on adverse action.

Morgan also highlighted the "improper state of affairs" limb of whistleblower law, which sits between a simple payroll error and provable criminal conduct. "If there is a number of individuals being underpaid and there doesn't seem to be any remediation plan being put in place, even though people are speaking up about it, then I think you are moving into that improper state of affairs definition," he said.

For organisations, the practical implication is that a payroll complaint may carry legal protections beyond the Fair Work Act's existing adverse action provisions, particularly around confidentiality and anonymity. Platforms like Veremark's whistleblowing solution are built to handle these requirements, with guaranteed anonymity, end-to-end encryption, and two-way secure messaging that supports ongoing investigation without compromising the reporter's identity.

The judgment calls that shape the first 90 days

Brunton-Makeham outlined a sequence of decisions that organisations need to make quickly once an issue surfaces.

1. First: identify a decision-maker. Payroll complaints can sit with HR, legal, or the payroll team, and without a clear owner, responses stall. For larger issues, a steering committee and governance structure may be needed.
2. Second: determine whether the issue is isolated or systemic. A system misconfiguration will affect every employee paid under that rule. A one-off HR practice might not. The distinction determines the scale of the response.
3. Third: assess what else you don't know. "Simply saying we haven't received any other complaints, that's not sufficient," Brunton-Makeham said. "What proactive things have you done to make sure there are no other issues?"
4. Fourth: decide when to notify the regulator. The general advice is to go early, but with a plan. "You want to be able to go to the regulator with: we've identified this issue, we're fixing it, and this is what we're going to do," Brunton-Makeham said. Going without a plan can do more harm than going late.

And the risk of going too late is severe. "As soon as the media gets hold of a problem, we've lost control," Morgan said. "We've lost control of the narrative."

What organisations should do now

Morgan's first recommendation: get reporting channels set up properly. A balanced reporting framework, one that includes internal pathways, regulator pathways, and an independent third-party channel, gives leadership visibility over problems while they're still small. The second priority is centralised complaint data, categorised by type and subcategory, with open matters tracked by duration and outcome.

Brunton-Makeham's key takeaway was practical. When an issue looks like it could be broader than a single complaint, engage a lawyer before investigating further. Legal professional privilege means that communications with a lawyer and documents prepared in that context don't have to be disclosed to the Fair Work Ombudsman or to courts. "It gives you the confidence to investigate issues fully and have frank conversations," she said.

Read more about Veremark's whistleblowing solution

The full webinar recording covers the intersection of whistleblowing and wage theft law, the penalty framework under the Closing the Loopholes legislation, and worked examples of how recklessness is assessed. Watch it on demand.

If you'd like to discuss how a speak-up channel fits into your organisation's payroll compliance framework, book a consultation with our experts today.

^{This article is based on a webinar featuring David Morgan (Veremark), Grace Brunton-Makeham (Makeham Flaherty), and Marcus Zeltzer (Yellow Canary). It is intended as general information, not legal advice.}

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