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Update on Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017

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By Brenton Allen, Lawyer, MST Lawyers

On 16 March 2017, MST Lawyers published an article summarising the salient aspects of the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (‘Bill‘). The Bill purports to address recent scrutiny surrounding alleged employee underpayments in large franchise networks.

Unsurprisingly, the Bill has received a raft of criticism, including the following statement by the Australian Chamber of Commerce:

The significant scope for liability pursuant to the bill’s terms does create… risk that businesses will restructure their affairs in such a way that they are not captured by the provisions. For franchisors, this may see a withdrawal of support of the nature that could give rise to a finding of influence and control. Other organisations may elect to conduct their operations completely outside Australia.

Franchisors may receive some comfort from a report tabled by the Senate Education and Employment Legislation Committee (‘Committee‘) which recommends changes to the Bill that, if implemented, could address previously expressed concerns about ambiguity, legislative overreach and additional compliance costs.

Two noteworthy features of the Report include the following:

  • At present, the expanded accessorial liability provisions contained in the Bill apply to responsible franchisor entities which have a significant degree of influence or control over the relevant franchisee’s “affairs”.

The Committee has recommended that the term “affairs” be specifically restricted to workplace relations matters, taking into account submissions that the term is unnecessarily broad and creates a connection beyond the “stated intent of the bill”. 

  • Additionally, the Bill proposes to amend the Fair Work Act by making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought to have reasonably known of the contraventions and failed to take reasonable steps to prevent them.

The Report identifies that the current wording of the ‘reasonable steps’ test could lead to illogical conclusions. For example, the Report, at paragraph 3.44, provides:

The word ‘prevent’ suggests that the franchisor need only take pre-emptive action in advance of the contravention, and will not be in breach of the provision if they fail to address a contravention once it has occurred or is occurring. This is an obvious flaw because a franchisor could, in essence, do nothing after becoming aware of a contravention and escape liability if it otherwise meets the ‘prevention test’.

While the proposed Bill may still impact many franchisor businesses, the Report provides a useful platform for further insight and discussion into its current drafting.

The further debate of the Bill is expected in the Senate during the second week of June.

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