Governments crack down on worker exploitation

A Senate Committee has recommended the passing (with minor amendments) of the Turnbull Government’s Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (‘the Bill’). At the same time, Queensland is proposing to introduce labour hire licencing legislation, New South Wales is urging the other States to introduce new laws against wage theft and the Federal Labor party has shown support for the introduction of legislation similar to the UK’s Modern Slavery Act.

The Bill is intended to combat the exploitation of vulnerable workers and address concerns which were brought to light last year in the Fair Work Ombudsman’s (‘the FWO’) 7-Eleven Report. The 7-Eleven report revealed that some employers would pay their employees the minimum legal rate, but then coerce them to repay some of their wages in cash. The effect of this was that on the surface, the employer appears to be complying with legislative requirements, but is taking advantage of their employees.

The Bill proposes a number of amendments to the Fair Work Act, notably the following:

  • the introduction of a higher scale of penalties in circumstances of ‘serious contraventions’ of prescribed workplace laws;
  • increased penalties for record-keeping failures;
  • making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them;
  • expressly prohibiting employers from unreasonably requiring their employees to make payments (e.g. demanding a proportion of their wages be paid back in cash; and
  • strengthening the evidence-gathering powers of the FWO to ensure that the exploitation of vulnerable workers can be effectively investigated.

In regard to the third point, the new responsibilities will only apply where franchisors and holding companies have a significant degree of influence or control over their business networks.

Increased penalties

Maximum penalties for serious contraventions will be  ten times higher than standard breaches ($108,000 for individuals and $540,000 for bodies corporate).  Penalties have also doubled for  contraventions relating to employee records or payslips, and tripled for employers who knowingly deal with false or misleading employee records and payslips.

The wine and farming industries objected to these measures due to concerns about accidental non-compliance.  However, serious contraventions under the Bill must involve a deliberate, systematic pattern of conduct.

Franchisor Entities and Holding Companies

The Bill also includes proposed changes to the responsibilities of franchisor entities and holding companies for breaches of the Act by entities in their business network. The changes are intended to supplement, rather than overwrite, existing provisions.

Section 550 of the Act will remain in place.  This law makes accessories to a person’s breaches of Fair Work laws liable to penalties and compensation claims.  The proposed changes under the Bill extend accessorial liability to franchisor and holding companies with significant control over their network. The effect is to prevent these entities from essentially ‘turning a blind eye’ to unlawful behaviour. However, the liability does not extend in circumstances where the franchisor entity or holding company has taken reasonable steps to prevent the contravention.

Unreasonable repayments

The proposed amendments under the Bill expressly prohibit any unreasonable requirement, direct or indirect, by an employer that their employees repay their income. This does not extend to circumstances where to do so would not be ‘unreasonable’, for example, in cases where a repayment is mutually agreed upon to correct an accidental overpayment.

The Fair Work Ombudsman

The Bill would provide the FWO with new powers to require the provision of information, disclosure of documents, and attendance before the FWO to answer questions. The hope of the Government is that this will provide avenues for the FWO to pursue the most serious cases, such as when employee records are not kept at all and/or destroyed.

Finally, the Bill would prohibit the hindering and obstructing of the FWO and her inspectors. This amendment is a civil remedy intended to supplement the existing criminal remedy which carries a penalty of 2 years’ imprisonment.

In summary

This Bill has been supported by both major political parties; clearly, additional protection for workers creates a more even playing field for business.  However, businesses already struggling to make a profit will be taking more of a risk than ever by cutting corners on wages in order to stay afloat.

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