Employers on notice: You will be held to account

On 2 May 2016 in an address to the Australian Industry Group PIR Conference, Fair Work Ombudsman (FWO) Natalie James noted that ‘this year, 94% of the matters we have filed in court seek to hold someone other than the employer to account.’

As reported in our previous update, as part of a recent policy push, the FWO has been relying more heavily on the ‘accessorial liability’ provisions of the Fair Work Act 2009 (Cth) (Act) to prosecute directors, human resources professionals and accountants for being ‘involved in’ contraventions of the Act.

Many of the FWO’s prosecutions have involved the exploitation of migrant workers. Although only just over 5% of Australian workers are visa holders, they account for 73% of the FWO’s prosecutions in the last year1.

The recent 7-Eleven store underpayment saga, which resulted in the establishment and then de-commissioning of the Fels Wage Fairness Panel (Wage Panel), demonstrates the disruptive and damaging effect that prosecutions can have on businesses and industries, as well as in that case, the franchise model itself.

While previously a franchisor has only been liable under the Act for actions of a franchisee where the franchisor has been intimately involved in the decision making process of the franchisee, the 7-Eleven case has brought increased attention to the franchise model and pressure for reform.

Last Tuesday, Professor Allan Fels called for political parties to ‘consider changing the law to impose some liability in certain circumstances on franchisors when there is underpayment.2

Late last week the Coalition launched ‘The Coalition’s Policy to Protect Vulnerable Workers’ (Policy) in which it made a series of promises to protect vulnerable workers from systemic exploitation. The Policy proposes various reforms, including:

  • An increase in penalties under the Act to 10 times current penalties of $10,800 for individuals and $54,000 for companies where employers deliberately underpay workers and fail to keep proper records
  • Amending the Act to make franchisors and parent companies liable for breaches of the Act by franchisees or subsidiaries where they should have reasonably been aware of the breaches and could have taken reasonable action to prevent the breaches occurring
  • the contribution of $20 million to clamp down on wage fraud across the country
  • the appointment of Professor Fells as the head of a Migrant Worker Taskforce3
  • the introduction of compulsory evidence-gathering powers to the FWO, similar to those of ASIC and the ATO.[4]

The FWO’s statements and the Coalition’s policy puts all key decision makers and employers on notice – if your organisation breaches the Act and you are involved in those contraventions you will be held to account.

1Natalie James ‘The good’, ‘the bad’ and ‘the ugly’ – navigating the road to compliance (Address at the Australian Industry Group PIR Conference, 2 May 2016)
2Fels, Allan ‘7-Eleven board has questions to answer’, The Age (online), 17 May 2016, < http://www.theage.com.au/comment/7-eleven-board-has-questions-to-answer-20160517-gox2w6.html#ixzz48xO7lyDJ>
3Ferguson, Adele and Danckert, Sarah ‘Coalition targets 7-Eleven new policy package, The Age (online), 19 May 2016, < http://www.theage.com.au/business/workplace-relations/coalition-targets-7eleven-in-new-policy-package-20160518-goxxaf.html
4The Liberal and National Parties, The Coalition’s Policy to Protect Vulnerable Workers, 19 May 2016

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