Unlawful Deductions: Why You Can't Dock Workers for Dropped Fruit

01

What Sections 324, 325 & 326 of the Fair Work Act Say

The Fair Work Act 2009 contains three interlocking provisions that tightly control when and how an employer can make deductions from an employee's wages. Together, they create a near-absolute prohibition on employers docking pay for breakage, wastage, or damage to produce.

Section 324 — Permitted Deductions Only

An employer may only deduct from an employee's wages if the employee has agreed in writing AND the deduction is principally for the employee's benefit; or the deduction is authorised by or under a law, a court order, or an order of the Fair Work Commission; or the deduction is authorised under the terms of an enterprise agreement or modern award.

Section 325 — No Unreasonable Requirements to Spend

An employer must not directly or indirectly require an employee to spend or pay an amount of their money if the requirement is unreasonable in the circumstances. Requiring workers to "pay for" dropped or damaged fruit falls squarely within this prohibition.

Section 326 — Unreasonable Terms Have No Effect

Even if an employee has signed an agreement allowing deductions, that term has no legal effect if the deduction is directly or indirectly for the benefit of the employer (or a related party) AND the deduction is unreasonable in the circumstances. This is the critical safety net — a signed consent form cannot override the law.

02

Why Deducting for Dropped Fruit Is Unlawful on Every Test

Some employers believe they can dock workers' pay for fruit that is dropped, bruised, or otherwise damaged during picking. This practice fails every legal test under the Fair Work Act. There is no pathway that makes it lawful.

Not Principally for the Employee's Benefit

A deduction for damaged produce benefits the employer or grower — it shifts the cost of wastage from the business onto the worker. Under Section 324, a deduction is only permitted if it is principally for the employee's benefit. Reducing an employer's losses is the opposite of that.

The Horticulture Award Does Not Authorise It

The Horticulture Award 2020 does not contain any provision authorising deductions for breakage, damage, or wastage. Without express authorisation in the applicable modern award, there is no award-based pathway for the deduction.

A Signed Agreement Has No Legal Effect

Even if an employer gets a worker to sign a document agreeing to deductions for dropped fruit, Section 326 renders that term void. The deduction benefits the employer and is unreasonable — so the signed agreement has no legal effect whatsoever.

Requiring Payment Is Unreasonable

Requiring workers to "pay for" dropped or damaged fruit — whether through a direct deduction, a cash payment, or a reduction in piece rate earnings — is an unreasonable requirement to spend money under Section 325. Workers should not bear the commercial risk of produce damage.

03

The Correct Approach to Quality Issues

If workers are regularly dropping, bruising, or damaging fruit, the solution is not to dock their pay. The law requires employers to address quality issues through proper management, not through unlawful deductions. Here is what compliant employers do instead.

Train Workers Properly in Handling Techniques

Provide clear, practical training on how to pick, handle, and transport produce without causing damage. Use demonstrations, visual guides in workers' languages, and supervised practice sessions. Most damage occurs because workers were never shown the right technique.

Provide Appropriate Equipment

Ensure picking bags, bins, ladders, and transport equipment are in good condition and suitable for the produce type. Worn-out equipment or poorly designed containers cause more damage than worker error. This is an employer responsibility, not a cost to pass onto workers.

Supervise and Address Through Performance Management

If a worker is consistently causing damage despite adequate training and equipment, address it through normal performance management. Have a conversation, provide additional coaching, and document the issue. This is standard workplace management.

Use the Disciplinary Process for Serious or Repeated Negligence

For serious or repeated negligence, use your disciplinary process — verbal warnings, written warnings, and ultimately termination if the behaviour does not improve. The Fair Work Act allows you to manage performance and conduct. It does not allow you to fine workers by docking their pay.

04

Net Output vs Unlawful Deductions: The Critical Difference

There is an important distinction between not counting rejected units in a pieceworker's output and actively deducting money from a worker's wages for the cost of damaged produce. One is lawful. The other is not.

LAWFUL: Not Counting Rejected Units

A pieceworker picks 30 bins of fruit. Quality inspection finds 3 bins do not meet the required standard. The worker is paid for 27 bins. This is not a deduction — the worker is being paid for the output they actually produced to the required standard. The 3 rejected bins were never part of their payable output.

UNLAWFUL: Deducting the Cost of Rejected Fruit

A worker picks 30 bins and is paid for 30 bins, but the employer then deducts $150 from the worker's wages to cover the "cost" of the 3 rejected bins. This is an unlawful deduction. The employer is taking money out of wages the worker has already earned to cover a business cost.

Why the Distinction Matters

The first approach is part of the piece rate payment system — you pay for acceptable output. The second approach is the employer using the worker's wages to subsidise their own commercial losses. The Fair Work Act prohibits the second approach regardless of what the worker has signed.

Minimum Wage Guarantee Still Applies

Even under the net output approach, the daily minimum wage guarantee still applies. If a pieceworker's earnings for the day fall below their hourly rate multiplied by hours worked, they must be topped up to the minimum. You cannot use quality rejections to push a worker below the award floor.

Tractor operating in green agricultural field

05

The McCrystal Agricultural Services Case: A $43,000 Warning

In 2025, the Federal Circuit and Family Court handed down penalties in the McCrystal Agricultural Services case that serve as a clear warning to every employer in the horticulture industry about the consequences of unlawful deductions.

66 Workers Affected

The Fair Work Ombudsman found that McCrystal Agricultural Services had made unlawful deductions from the wages of 66 workers. The deductions were systematic and affected a large number of employees across the business.

$43,000 Penalty Against the Company

The court ordered McCrystal Agricultural Services to pay $43,000 in penalties for the unlawful deductions. This is in addition to any back-payment of the deducted amounts to the affected workers.

$5,500 Against the Director Personally

The company director was held personally liable and ordered to pay $5,500 in penalties. This demonstrates that individuals cannot hide behind the corporate structure — directors who authorise or allow unlawful deductions face personal consequences.

The Lesson for Industry

This case confirms that the Fair Work Ombudsman is actively investigating and prosecuting unlawful deduction practices in horticulture. The penalties, while significant, could have been far higher — the maximum penalties for repeated contraventions across 66 workers would run into millions of dollars.

06

From 1 January 2025: Intentional Wage Theft Is a Crime

The stakes for unlawful deductions have increased dramatically. From 1 January 2025, intentional underpayment of wages — including through unlawful deductions — is a criminal offence under the Fair Work Act. The consequences now go far beyond civil penalties.

Up to 10 Years Imprisonment

An individual convicted of intentional wage theft faces up to 10 years imprisonment. Systematically deducting money from workers' wages for dropped fruit, knowing the deduction is not lawful, could meet the threshold for intentional underpayment.

Fines Up to $1.5 Million for Individuals

In addition to or instead of imprisonment, individuals convicted of wage theft face fines of up to $1.5 million. For corporations, fines can reach $7.8 million or three times the underpayment amount, whichever is greater.

Criminal Referrals by the FWO

The Fair Work Ombudsman now has the power to refer intentional wage theft cases to the Commonwealth Director of Public Prosecutions or the Australian Federal Police. Cases involving systematic unlawful deductions across large numbers of workers are precisely the type of conduct likely to attract criminal attention.

Ignorance Is Not a Defence

Employers who continue to make unlawful deductions after being put on notice — whether through industry guidance, FWO publications, or cases like McCrystal — will find it very difficult to argue the conduct was not intentional. The law is clear, and the information is freely available.

Get Compliant

Stop Unlawful Deductions Before They Cost You Everything

We help growers and labour hire companies review their pay practices, remove unlawful deduction clauses, and implement compliant quality management systems. We come to your site, work with your team, and fix the issues before the Fair Work Ombudsman finds them.

Get In Touch

← Back to Resources