I, too, am pleased to be able to contribute to the debate on the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017. I’m going to make a very boring contribution following the media superstar, Senator Rhiannon, but I’ll do my best!
A lot has been said over the last couple of months since this bill was brought on for consideration by this parliament, highlighting a great many examples of abuse of vulnerable workers and business enterprises taking advantage of those who may not be able to stand up for themselves. So I too am willing to commend the government for bringing on this legislation and for putting in place some protections and setting up a regime, or attempting to set up a regime, that will actually do something to provide some protections for workers who, as I say, may not be able to stand up for themselves.
We have seen companies such as 7-Eleven, Muffin Break, Gloria Jean’s and Caltex—to name a few household brands—implicated in the allegations made about underpayment of vulnerable workers. Not having as much air time are the widespread ramifications flowing from underpayment of workers. These people have families. They have bills to pay. If they are underpaid, meeting those obligations is very, very difficult. It also has an impact on other businesses that are doing the right thing. Those who are paying the right amount—and, in some cases, more than the award rate—have an increased cost to doing business compared to those who are flouting the law and taking advantage of vulnerable workers. That’s why this legislation is so incredibly important. It is why I am going to commend it to the Senate.
The Fair Work Ombudsman in its submission to the Senate inquiry on this legislation gave a great many accounts of the breaches that it had investigated and that were reported to it and the impacts that this has had on individual companies and individual human beings who were caught up in these cases. We heard stories of migrant workers being paid as little as $14.12 or $10 an hour, well below the federal minimum wage, which is something none of us should stand by and condone. That’s exactly what we’re getting at here—trying to crack down on this sort of behaviour. There were also stories of young people being forced to accept non-cash payments of pizza and soft drink rather than being paid the money that they were entitled to be paid. It’s just unconscionable that any business proprietor or senior manager in any business entity would seek to take away from someone what they are entitled to be given in return for the work that they are contributing. So, when you hear of people doing this sort of thing, providing in-kind payment, as they would probably refer to it, in the form of sugary drinks and fast food, rather than the money they need to pay for whatever it is they need to pay for—the power bill, rent and food—it’s just not good enough.
The Fair Work Ombudsman’s submission to the inquiry looked at what action has been taken by business operators to evade compliance efforts. There were some startling things—for example, phoenixing, where companies liquidate and then set up a new business to avoid any liabilities that have accrued against that business in not paying what employees are due; the failure to keep records or falsifying the records that do exist, making it difficult to verify the hours that have been worked and what workers have been paid for the hours they are supposed to have worked; engaging in the cashback schemes, which I will touch on later; and targeting vulnerable workers who are less aware of their rights and less likely to report problems for a whole range of reasons, such as language barriers, a lack of familiarity around the mechanisms that are available to vulnerable workers and the protections that might be available. There are all sorts of problems. Then, of course, as we’ve heard before, workers have been threatened with their visa or their job—’If you don’t take what I’m giving you, I’m going to send you home and seek that your visa be cancelled, or I’ll terminate your employment and you won’t have any money.’
I want to quote from a couple of parts of the Fair Work Ombudsman’s submission because I think it’s important to look at some of the things that it said. This entity works at the coalface. This is the entity that receives the complaints. This is the entity that deals with the allegations and gets to the bottom of what’s going on and tries to do the right thing by the people who are purportedly being ripped off. The Fair Work Ombudsman’s submission says on page 7, paragraph 17:
In some of these cases, the existing framework has not been sufficient to deter ongoing and systemic conduct across sectors, industries and regions, and usually with respect to these workers. Some unscrupulous employers view non-compliance as a business model and do not fear being caught out for their behaviours, or consider penalties associated with their breaches of the law an acceptable cost of doing business. These employers often do not keep proper records or payslips and are unwilling to engage with the FWO in an investigation.
That gives you an insight into what the Fair Work Ombudsman is dealing with in trying to get to the bottom of these things. The fact that the Fair Work Ombudsman acknowledges in its submission that there are business operators who see this as a way of doing business—a worthwhile risk; something that they are willing to sort of take a chance on in the event that they get caught out and may have to pay a fine—is just unbelievable. How these people can sleep at night, thinking, ‘It is worth it in the end,’ all the while inflicting some sort of misery on individuals who have been underpaid is certainly not something that is at all Australian. Again, that’s why I’m so pleased that we are considering this legislation today.
Moving to paragraph 23, the submission goes on to say:
The package of measures outlined in the Bill together would make a significant difference to FWO’s capacity to address this conduct where it occurs. In particular, providing higher penalties that reflect the gravity of serious contraventions of the law and ensuring there are real deterrents against not keeping records or falsifying records for the purpose of disguising underpayments. Ensuring Fair Work inspectors are taken seriously and cannot simply be ignored will make a significant difference when tackling the worst sort of conduct.
The FWO refers to, in the broad, the amendments proposed in this piece of legislation, saying that these will help them do their job—to deal with those dodgy operators who falsify, destroy, don’t keep records and who think they can get away with ignoring the FWO when they come knocking, saying: ‘Hey, we have examples or complaints against your business suggesting that you’re engaging in this sort of conduct. We want you to provide evidence that this is not the case.’ I think the fact that they’re going to be able to clamp down on that is an excellent thing and something I look forward to seeing the results of as we move forward.
Moving to the conclusion of the Fair Work Ombudsman’s submission to the inquiry, paragraph 113, they conclude by saying:
As the FWO has noted, the regulatory framework is fit for purpose in most circumstances but is not sufficient to deal with the most egregious behaviour in matters involving the exploitation of vulnerable workers. The proposed amendments would enhance the FWO’s ability to deal with serious and concerning conduct within the jurisdiction of the FW Act and contribute to efforts across government and within communities to address the drivers of workplace exploitation.
As I say, this is from the people who are at the coalface of dealing with this issue, of dealing with the complaints from vulnerable workers, their family, their friends and other employee-representative organisations who become aware of this stuff. To hear them make those comments about what this bill will do—the people who have to go out and apply it—is encouraging.
Fundamentally, when we do see this abuse of power—be it the employer, a senior manager or someone from any other representative organisation exploiting vulnerable workers—it is incumbent upon us to take action. This legislation does exactly that. Under the amendments contained in the bill, as has been stated in previous contributions, the franchisor will, in certain circumstances, become liable where a franchisee or one of the franchisor’s subsidiaries violates specific sections of the act, such as the National Employment Standards, any modern awards, methods and frequency of payments, or record-keeping obligations. Most of those are very straightforward and, I think, speak for themselves.
Much has been made in the debate about the transfer or liability to the franchisor, so it’s important to set out exactly what the amendments will establish and in what circumstances they’d be applied. The amendments introduced the notion of serious contraventions to apply deliberate and systematic breaches. They strengthen the liability and responsibility of franchisors for the business conduct in the franchises under their direction. It’s important, though, to point out that the breaches targeted through these amendments differ greatly from the genuine mistakes—and they occur. I’m aware of one in Hobart, which attracted a great deal of media attention which was a genuine mistake. It was a business that had engaged the services of a third party to do its bookkeeping, a reputable firm. Clearly, this reputable firm and the individual they sent along to do this business’s books didn’t know what they were doing. As a result, the staff were underpaid a significant amount and this business was dealt with under the law. As with many of these cases, a significant amount of public attention was given to this business, somewhat unfairly. All the same, it will be nice to see these genuine mistakes, if they can be properly demonstrated, taken out of the basket that some of these more dodgy operators should be kept in and dealt with. In doing that, there is the three-stage test, to determine whether or not this is a genuine mistake, that must be satisfied before the franchisor can be held responsible. That test is as follows:
… the franchisor:
had significant control or influence over the franchisee,
knew or should have known about the underpayments, or
failed to take reasonable steps to prevent the violations.
Those three steps do establish a bit of a mental intent test, for want of a better expression, to ensure that the entity against whom the complaint is being made was seeking to actually do what has been done and that is the subject of the complaint.
The bill also seeks to define a ‘serious contravention’ as one that is intentional and is part of a systematic pattern relating to one or more individuals. Again it points to it being something that’s planned or deliberate and is happening to a number of employees, rather than just one out of 30 or 10. Further, the bill notes elements that the court may give regard to when assessing whether a systematic pattern exists. So there are going to be strict tests under the law that the courts will adhere to when assessing these things.
A ‘responsible franchisor’ is one who has a significant degree of influence or control over the franchisee entity’s affairs. The bill aims to ensure that franchisees and franchisors are held responsible for a series of contraventions, including underpayments and sham contracting, which we’ve heard a lot about in the debate over the last day or two. The bill also extends accessorial liability to franchisors where they knew or should have known that contraventions were occurring in one of their franchises. This liability means that an individual or company involved in the breach would also be potentially responsible in situations where they were not directly participating in the breach itself. So the amendments will apply to both franchisors and master franchisors if they exercise a significant level of influence or control over the franchisee’s activities. The amendments do provide exemptions for franchisors in circumstances where they can demonstrate that they took reasonable steps to prevent contraventions and there were no reasonable steps they could have taken to prevent such a contravention from taking place.
Other provisions include increasing penalties tenfold for serious contraventions of specific parts of the act and for failure to maintain proper records. Individuals who engage in serious contraventions face a maximum penalty of 600 penalty units, which is $108,000, and companies could face a penalty of $540,000. That is, as stated, a tenfold increase on the current penalties and represents the government’s resolve to deter these sorts of practices. I think it’s important to note that, in the submissions to the inquiry, a number of entities said that the penalties didn’t go far enough and others said that they went too far. To my mind, when you see those sorts of comments being made, it often means that you’ve got the balance right. Certain entities with certain interests believe that we’re going a bit hard and others would like to see us go harder.
Further amendments outlaw the cashback and other coercive behaviour by employers where employees may be paid correctly but then forced by their employer to repay pa