Everything To Know About Cooperation Agreements
All businesses with 15 or more employees should know about the recent Fair Work Act amendments for wage theft and the primary remedy available for employers: cooperation agreements.
Below, we explain what cooperation agreements are in the context of the changes to the Fair Work Act 2009 (Cth) on wage theft, how they help employers to comply, the role of the Fair Work Ombudsman, and the risks of ignoring compliance.
Quick summary of the changes
From 1 January 2025, intentional wage underpayment is now a criminal offence in Australia.
Employers who deliberately underpay employees can face fines up to $8.25 million, while individuals, including directors and HR managers, can face up to 10 years’ imprisonment or fines of up to $1.65 million. The scope of underpayments is broad, covering wages, penalty rates, allowances, superannuation and leave entitlements.
This reform follows years of widespread wage underpayment cases, with high-profile companies facing significant back-payment liabilities, such as Melbourne University ($22 million), Super Retail Group ($43 million) and Woolworths (up to $300 million).
What is a cooperation agreement?
A cooperation agreement is a formal arrangement between the Fair Work Ombudsman (FWO) and an employer who has admitted to intentionally underpaying employees. They typically arise when a business has been found to have underpaid workers, but instead of proceeding directly to litigation or prosecution, the FWO allows the employer to cooperate in rectifying the problem. The aim of cooperation agreements is to ensure employees are repaid in full and to encourage businesses to improve their systems so underpayments do not happen again.
By entering into one, an employer may receive protection from criminal prosecution for wage theft, provided they meet the agreement’s obligations. Cooperation agreements aim to encourage early reporting, full remediation of underpayments and stronger compliance systems. While civil enforcement (such as penalties or enforceable undertakings) may still occur, an agreement can protect an employer from referral to the Director of Public Prosecutions (DPP) for criminal charges.
Cooperation agreements are a proactive way for businesses to engage with regulators and demonstrate good faith. They are particularly valuable in light of criminal liability for wage theft. If a business discovers an underpayment issue and self-reports, entering into a cooperation agreement can:
Reduce the likelihood of criminal prosecution and avoid harsher penalties by showing intent to rectify.
Provide structured timelines for repaying employees.
Require regular compliance audits to prevent recurrence.
Allow the business to access regulator guidance and best practice tools.
In other words, these agreements create a pathway for businesses to avoid reputational damage and severe penalties while ensuring employees receive their full entitlements.
What does a cooperation agreement protect you from?
Under a cooperation agreement, businesses can avoid the recording of a criminal conviction, the imposition of fines or imprisonment and the reputational damage associated with being prosecuted for wage theft.
While a cooperation agreement is in force, the FWO cannot refer the conduct covered by the agreement to the DPP or the Australian Federal Police for consideration of criminal prosecution.
Cooperation agreements also reduce exposure to the substantial legal and financial costs that can accompany a criminal trial. By working positively with the FWO and showing willingness to remedy the impact of underpayments, employers can safeguard their operations, protect their brand and move forward with improved compliance confidence.
What does a cooperation agreement not protect you from?
Employers under cooperation agreements may still face civil action under the Fair Work Act 2009 (Cth) from parties such as the FWO itself, affected employees or unions.
While cooperation agreements offer an essential shield against criminal referrals or prosecution for intentional wage underpayments, they do not provide complete immunity from other forms of enforcement. The FWO retains its full suite of civil enforcement tools. It may commence civil penalty proceedings, issue compliance notices or accept an enforceable undertaking, even in cases where a cooperation agreement is already in place, so long as those actions are not inconsistent with the terms of the cooperation agreement.
Importantly, any information voluntarily provided during the cooperation process (particularly in the second stage where detailed disclosures are requested) may still be used in relation to civil or even criminal proceedings, if the agreement is later terminated or withdrawn.
That said, having a cooperation agreement in place can still act as a mitigating factor if civil proceedings are initiated. Courts or regulators may take into account the employer’s willingness to cooperate and rectify underpayments when determining the appropriate penalty.
Who can enter into a cooperation agreement?
Whether you are covered depends on both your business structure and your workforce.
Small businesses with fewer than 15 employees cannot enter into cooperation agreements but instead can access the protections of the Voluntary Small Business Wage Compliance Code (Code), provided the underpayment was not intentional.
Larger employers must rely on cooperation agreements if they intentionally underpaid staff and wish to avoid criminal referral.
How do I enter into a cooperation agreement?
To enter into a cooperation agreement with the FWO, an employer must first self-report the underpayment and lodging a cooperation agreement eligibility form. Eligibility is not automatic. Only cases of intentional underpayment that meet certain criteria will be considered. Any information that you provide in the eligibility form will not be directly used as evidence against you in any civil proceedings.
When determining your eligibility, the FWO may request further information on the underpayments including the amounts, their causes, the employees affected and other information. Any information or documents you supply at this stage may be used in an investigation, civil proceeding or criminal proceeding against you if you refuse to enter into a cooperation agreement.
Once accepted, the terms of the cooperation agreement are negotiated. These terms often include a commitment to:
repay underpaid wages in full;
update payroll and record-keeping systems;
provide regular compliance reports; and
implement training for HR or payroll staff.
To summarise,
Submit Cooperation Agreement Eligibility Form.
If requested by the FWO, supply additional information on the underpayments for consideration. You will only be required to do so if you are eligible to enter into a cooperation agreement.
Negotiate the terms of the cooperation agreement with the FWO.
Formally enter into the cooperation agreement.
While the agreement is in force, you are protected from any criminal proceedings against you for the underpayments.
What factors does the FWO consider when determining eligibility for cooperation agreements?
The FWO assesses several factors before agreeing to a cooperation arrangement. These include, but are not limited to: the seriousness and scale of the underpayment, whether the employer self-reported or attempted to conceal the issue, the number and vulnerability of affected employees and the employer’s history of compliance.
Nature of the conduct: how serious and deliberate the underpayment was.
Level of cooperation: whether the employer self-reported and was transparent about the extent of the underpayment.
Remedial action: how quickly employees were back-paid and whether systems were changed to prevent recurrence.
Vulnerability of employees: underpayments involving young, migrant, or casual workers (already disproportionately affected by wage theft) are treated as particularly serious.
Employer behaviour: whether the employer self-reported, promptly rectified errors, or attempted to conceal underpayments will heavily influence the FWO’s decision.
Compliance history: repeat offenders or businesses with previous Fair Work contraventions are less likely to benefit from cooperative arrangements.
A business that uncovers payroll errors, immediately back-pays staff and demonstrates genuine commitment to compliance will usually be viewed favourably. By contrast, a company that only cooperates after being investigated may find itself excluded from such agreements and instead facing court action or criminal referral, particularly if the evidence suggests the underpayment was intentional.
What are the terms of a cooperation agreement?
Although tailored to individual circumstances, cooperation agreements typically follow a common structure. Standard terms include a requirement to repay all outstanding entitlements within an agreed timeframe (often staggered to account for a business’s financial position). They also usually require independent audits of payroll systems, regular reporting to the FWO and implementation of updated HR or payroll processes.
Another common feature is staff training, ensuring that managers, payroll officers and HR personnel understand modern award obligations and Fair Work requirements.
A cooperation agreement sets out obligations that an employer must meet to retain protection from criminal referral. These typically include:
Back-pay obligations: all employees must be repaid the full amount of wages, superannuation, and entitlements owed. Interest may also need to be added, depending on the circumstances.
System improvements: payroll and record-keeping processes must be upgraded to prevent repeat breaches.
Training and education: HR and payroll staff may need to undertake compliance training.
Reporting duties: employers may be required to provide regular compliance reports or audits to the FWO.
Ongoing compliance: continued adherence to workplace laws is expected.
By committing to these measures, employers can demonstrate genuine remorse and a forward-looking approach. While civil penalties may still apply, the business avoids the reputational and legal damage of a criminal prosecution.
However, you’re not locked in forever! After entering into the cooperation agreement, businesses can also seek to vary some of the terms. To do so, businesses must provide a written notice containing reasons for the variation request,and receive the FWO’s consent to the requested change.
What happens if I do not comply with the cooperation agreement?
Non-compliance with a cooperation agreement can have serious and immediate consequences. If a business contravenes the terms of the agreement, such as by failing to meet repayment deadlines, neglecting to implement agreed compliance measures or providing false or misleading information, the FWO may terminate the agreement. Once terminated, the protections it provided are lost and the FWO can refer the case to the DPP or the Australian Federal Police for prosecution.
In addition to termination, the FWO can seek court orders requiring compliance with the agreement, directing the production of accurate information or awarding compensation to affected employees. Where termination is being considered, the FWO will generally provide the business with notice and an opportunity to respond before making its final decision.
It is also important to note that a cooperation agreement may be terminated if the FWO later discovers evidence of additional criminal conduct that the employer knew about at the time of entering the agreement. Similarly, withdrawal from an agreement requires the FWO’s consent and any variation must be made in writing with mutual agreement.
Put simply, failure to comply with a cooperation agreement places a business in a worse position than if it had never entered one. Termination not only strips away protection from criminal referral but also leaves the business vulnerable to significant financial penalties, reputational damage and director liability. Employers should therefore treat their obligations under a cooperation agreement with the utmost seriousness and seek legal advice immediately if compliance becomes difficult.
Key Takeaway
Cooperation agreements offer businesses a constructive path to compliance under the newly amended Fair Work Act. By voluntarily engaging with the regulator, businesses can address wage underpayments, avoid harsher penalties and build systems that prevent future breaches.
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If your business is facing underpayment issues or if you’ve been offered a cooperation agreement by the FWO, contact Empirical Legal today. We will review the agreement, advise on your obligations, negotiate terms and implement compliance systems to protect your business under the new laws.
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