Summary of the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017

By James Sanders, Associate, MST Lawyers

On 1 March 2017, the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (‘Bill‘) had its first reading in Parliament.  The Bill proposes to amend the Fair Work Act 2009 (‘Act‘) in an attempt to tackle the issue of employee underpayment in large franchise systems, brought into the spotlight through the media’s 2015 investigation into 7-Eleven.

This article summarises salient aspects of the Bill.

Amendment #1: Increasing maximum penalties for contraventions of certain civil remedy provisions

The Bill introduces new civil penalties for ‘serious contraventions’ which are ten times higher than those currently set out in the Act.

Under the Bill, a serious contravention will be found if a person’s conduct constituting the contravention was:

• deliberate; and
• part of a systematic pattern of conduct relating to one or more others persons.

In determining whether the person’s conduct was part of a systematic pattern, a Court may have regard to:

• the number of contraventions committed by the person;
• the period over which the contraventions occurred;
• the number of persons affected by the contravention;
• whether the person failed to keep employment records in accordance with the Act; and
• whether the person failed to provide a payslip in accordance with the act.

Amendment #2: Liability of responsible franchisor entities and holding companies

The Bill introduces a new civil penalty liability for franchisors.

A responsible franchisor will contravene the Act if one of its franchisees contravenes a civil remedy provision in the Act (see below) and either:

• the franchisor or an officer of the franchisor knew or could reasonably be expected to have known that the contravention by the franchisee would occur; or
• at the time of the contravention by the franchisee, the franchisor or an officer of the franchisor knew or could reasonably be expected to have known that a contravention by the franchisee of the same or a similar character was likely to occur.

The Bill defines “responsible franchisor” as a franchisor that has a significant degree of influence or control over the franchisees’ affairs.

The various civil remedy provisions under the Act which can be contravened by a franchisee and which can expose a franchisor to the newly proposed statutory liability includes:

• subsection 44(1) (contraventions of the National Employment Standards);
• section 45 (contraventions of modern awards);
• section 50 (contraventions of enterprise agreements);
• section 280 (contraventions of workplace determinations);
• section 293 (contraventions of national minimum wage orders);
• section 305 (contraventions of equal remuneration orders);
• subsection 323(1) (methods and frequency of payment);
• subsection 323(3) (methods of payment specified in awards or enterprise agreements);
• subsection 325(1) (unreasonable requirements to spend or pay amounts);
• subsection 328(1), (2) or (3) (employer obligations in relation to guarantees of earnings);
• subsection 357(1) (misrepresenting employment as independent contracting );
• section 358 (dismissing an employee to engage as an independent contractor);
• section 359 (misrepresentations to engage an individual as an independent contractor);
• subsection 535(1), (2) or (4) (employer obligations in relation to employee records);
• subsection 536(1), (2) or (3) (employer obligations in relation to pay slips).

The Bill appropriately limits the franchisor’s exposure to liability if, at the time of, or prior to, the franchisee’s contravention, the franchisor had taken reasonable steps to prevent the contravention.

In determining whether a franchisor took reasonable steps to prevent a contravention, a Court may have regard to all relevant matters, including:

• the size and resources of the franchise;
• the extent to which the franchisor had the ability to influence or control the contravening franchisees’ conduct in relation to the contravention;
• any action the franchisor took to ensure the franchisee had reasonable knowledge and understanding of the requirements under the applicable provisions of the Act;
• the franchisor’s arrangements for assessing the franchisee’s compliance with the applicable provisions of the Act;
• the franchisor’s arrangements for receiving and addressing complaints about alleged contraventions within the franchise; and
• the extent to which the franchisor’s arrangements with the franchisee encourage or require franchisee to comply with the Act or other workplace law.

Restitution from the franchisee

The Bill provides that where a franchisor has paid to, or on behalf of, an employee, an amount pursuant to an order relating to a contravention by a franchisee, and the franchisor has not been able to recover that amount from the franchisee, the franchisor may commence proceedings against the franchisee.

Holding Companies

The Bill provides similar provisions in relation to holding companies and their subsidiaries.

 Amendment #3:  Unreasonable deductions or requirements to spend or pay an amount

The Bill states that a term of a modern award or an enterprise agreement has no effect if that term permits or has the effect of permitting an employer to deduct from an amount that is payable to an employee if the deduction is:

• directly or indirectly for the benefit of the employer, or a party related to the employer; and
• unreasonable in the circumstances.

A similar section is included in the Bill in relation to unreasonable requirements to spend money, or pay an amount, in relation to the performance of the employee’s work.

This variation may have the effect of nullifying certain deduction clauses currently included in previously approved enterprise agreements.

Amendment #4: Powers of the Fair Work Ombudsman

The Bill proposes to extend the Fair Work Ombudsman’s (‘FWO‘) ability to require a person to provide information, where the FWO reasonably believes that that person:

• has information or documents relevant to an investigation into a suspected contravention of the Act; or
• is capable of giving evidence that is relevant to such an investigation.

This extends the FWO’s current power to serve a ‘Notice to Produce’ on employers demanding the production of certain employment records or documents.

These increased powers are a direct result of the FWO’s investigation into the ‘7-Eleven scandal’. A report published by the FWO in relation to that incident, indicated that it did not have sufficient power to require a person to provide evidence, restricting their ability to obtain information that may have allowed further prosecutions under section 550 of the Act.

Amendment #5: Hindering and obstructing the FWO and inspectors

The Bill provides that a person must not intentionally hinder or obstruct the FWO in the performance of their functions.  A new civil penalty provision will be included that provides for a penalty of 60 penalty units (equating to $10,800) where a person obstructs a Fair Work Inspector.

Amendment #6: False or misleading information or documents

The Bill also provides that an employer must not make or keep a record that the employer knows is false or misleading, and must not give a payslip that the employer knows to be false or misleading.

A new civil penalty provision will be inserted for employers who produce a document or provide information to the FWO, that the employer knows, or is reckless as to whether the information or the document is:

• false or misleading; or
• for information – omits any matter or thing without which the information is misleading.

Conclusion

Whilst the Bill is not yet enshrined in legislation, it is expected to pass through the Senate without too much impediment. Franchisors and holding companies should be taking proactive steps now to limit liability for the actions of their franchisees and subsidiaries, such as having an employment lawyer undertake audits of your franchisees and subsidiaries.

For more information, please contact our Employment Law team by email or by telephone Ph: +61 3 8540 0200.