13 September, 2017
Fair Work Amendment (Protecting Vulnerable Workers) Act 2017
What you need to know
The Australian Parliament this week passed the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017.
The Act:
Introduces higher penalties for certain serious contraventions
Makes franchisors and holding companies liable for certain contraventions of the FW Act by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable preventative steps
Enhances the evidence-gathering powers of the Fair Work Ombudsman; and
Introduces a reverse onus of proof where an employer has failed to comply with its record-keeping requirements.
What you need to do
Conduct due diligence to assess compliance by any franchisees and subsidiaries over which you have significant control; and
Conduct supply chain audits to assess where you may be exposed to claims of exploitation of temporary visa holders and other vulnerable workers by any franchisees and subsidiaries over which you have significant control.
Background
This week the Federal Parliament passed the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017.
The Act was introduced following significant media attention in 2016 into the exploitation of temporary work visa holders and other vulnerable workers, especially in relation to the issue of underpayments and sham contracting.
The Act targets franchisors and holding companies as part of the increased focus on enforcing employment standards, and gives the Fair Work Ombudsman enhanced investigation powers.
The Act is expected to commence when the legislation receives Royal Assent in the near future.
Key features of the Act
The key features of the Act are to amend the Fair Work Act 2009 (Cth) (FW Act) to:
Include a higher scale of civil penalties for certain serious contraventions, that are ten times the current maximum civil penalty amounts (up to $630,000 for a corporation)
Ensure franchisors and holding companies can be held liable for certain contraventions of the FW Act by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable preventative steps
Strengthen the evidence-gathering powers of the FWO; and
Introduce a reverse onus of proof where an employer has failed to comply with its record-keeping obligations.
Serious contraventions — "knowingly contravened" provisions constituted by a "systematic pattern of conduct"
The increased penalties that can be imposed by a Court will apply to "serious contraventions", where a person "knowingly contravened" a civil remedy provision and that conduct was part of a "systematic pattern of conduct".
A systematic pattern of conduct may be demonstrated by contraventions that are either concurrent, occur over a prolonged period, affect multiple employees or demonstrate deficient record keeping. Whether the person responded to complaints raised about the contravention and how they responded is also relevant.
The maximum penalties for serious contraventions is increased tenfold to $630,000 for body corporates and $126,000 for individuals.
More than an accessory — liability of responsible franchisors and holding companies
The reforms under this Act supplement the existing accessorial liability provisions in the FW Act, under which a person may be held liable for being knowingly involved in a contravention in circumstances where they are not the direct employer.
The new provisions will make responsible franchisors and holding companies liable for the contraventions of the FW Act by their franchisees and subsidiaries, where they knew or could reasonably be expected to have known that at the time of a contravention, that the contravention (or one of the same or a similar character) by the franchisee or subsidiary was likely to occur.
Franchisors and holding companies will not contravene if they have taken "reasonable steps" to prevent the contravention. What is reasonable will depend upon the circumstances — it is not a "one size fits all" approach. Factors taken into account include:
- the size and resources of the franchise or body corporate;
- the ability to influence or control the contravening employer;
- any steps taken to educate;
- arrangements for assessing compliance, and for receiving and addressing complaints; and
- the extent to which any arrangements encourage or require compliance with the FW Act.
A person may also be involved in a serious contravention of a civil remedy provision engaged in by another person if that contravention itself was a serious contravention, and the person knew that was the case.
Increased FWO evidence-gathering powers
The Act strengthens the investigatory powers of the FWO, providing compulsory evidence gathering powers similar to the powers of the ACCC and ASIC.
There is an ability for the FWO to apply to a presidential member of the Administrative Appeals Tribunal to issue a new "FWO notice" to any person the FWO believes may have information relating to an investigation or is capable of giving evidence relevant to the investigation.
Under the notice, a person may be required to give information, produce documents, or attend before the FWO to answer questions. The FWO is then required to report to the Commonwealth Ombudsman about the examination undertaken.
The Act removes an individual's privilege against self-incrimination, so that an individual is not excused from giving information, producing a document, or answering a question on the ground that to do so would incriminate the person or expose them to a penalty.
There are penalties associated with a failure to comply with a notice.
Reverse onus of proof relating to record-keeping requirements
The Act introduces a reverse onus of proof for contraventions concerning a failure to maintain records.
If an employer has failed to comply with its existing obligations under the FW Act to keep records or issue payslips, the employer will have the burden of disproving the allegation.
Scrutiny on supply chains and business networks
The reforms are a significant plank in a platform of potential regulatory reforms dealing with supply chains and business networks. Employers should monitor the progress of the Joint Standing Committee Inquiry into establishing a Modern Slavery Act in Australia which is considering whether Australia should adopt legislation similar to the United Kingdom's Modern Slavery Act 2015.
Employers should also closely monitor the reviews being undertaken by the South Australian, Victorian and Queensland governments into labour hire workers, and the introduction in Queensland of the Labour Hire Licensing Bill 2017 to establish a licensing system for the labour hire industry. The NSW Opposition have also announced a policy concerning franchise arrangement and labour hire licensing that it will take to the 2019 election.
Labour hire and supply chain arrangements have also come under increased scrutiny by FWO.
With this in mind, employers should consider taking steps to:
- review their tender processes
- review their procurement processes, policies and procedures
- review Franchise Agreements
- provide training to those involved in procurement processes about Australian employment laws
- conduct audits of supplier compliance with undertakings and employment statutory obligations; and
- review their record-keeping processes.
Making the case: Insights from Geoff Giudice
This legislation seeks to increase the observance of industrial laws by increasing the responsibility of holding companies and franchisors, giving them an incentive to encourage subsidiaries and franchisees to ensure their employees receive their entitlements. The legislation responds to a number of high profile cases of systematic exploitation of vulnerable workers by relatively small businesses by tackling the problem at a higher level of organisation. This kind of innovation in the enforcement of labour standards is likely to continue. For example, in the UK the Modern Slavery Act 2015 uses supply chains to deal with more drastic types of exploitation, requiring companies to report on steps to eliminate slavery and human trafficking in their supply chains both within the UK and internationally.
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