Vulnerable workers bill to become law

Vulnerable workers bill to become law: Fines of up to $630,000 for serious compliance breaches, amongst other significant changes

Following on from the 7Eleven underpaid wage scandal, and other similar scandals that have played out in the media recently, the Turnbull Government has now passed the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth) (Vulnerable Workers Bill) through the Parliament. The Vulnerable Workers Bill involves significant changes to the Fair Work Act 2009 (Cth) (FW Act) that further change the compliance landscape, and increase risk, for business.

The key changes

The key changes that the Vulnerable Workers Bill will bring about, include:

• The introduction of a new category of ‘serious contraventions’ of the FW Act for some breaches (including for breaches of the National Employment Standards, awards, enterprise agreements and other provisions of the FW Act), with maximum penalties increasing tenfold to $630,000 and $126,000 for corporations and individuals respectively, where:
  • the person knowingly contravened the FW Act, and
  • the person’s conduct was part of a systematic pattern of conduct.

• Employers who do not meet record keeping or pay slip obligations without reasonable excuse, will be subject to a reverse onus of proof under which they need to disprove wage claims made in a court (rather than employees, unions or the Fair Work Ombudsman (FWO) being required to prove their entitlement).
• The FWO’s evidence-gathering powers have been significantly strengthened, such that it can now require employers to be interviewed by the FWO and answer questions on oath or affirmation that relate to underpayment of workers, as well as to provide information or documents. Employers will be unable to refuse to participate.
• Many franchisors and holding companies will automatically be liable for underpayments by their franchisees or subsidiaries where they knew, or reasonably ought to have known, about the contraventions and failed to take reasonable steps to prevent them.
• Higher penalties for providing FWO inspectors with false or misleading information or records will apply, as will new prohibitions for hindering or obstructing them.
• Existing laws prohibiting unreasonably requiring employees to make payments, commonly seen as cashback arrangements, have been strengthened and extended to prospective employees.
• Maximum penalties for record-keeping and pay slip breaches have doubled, and the maximum penalty for false or misleading employment records has been tripled. New penalties apply for giving false or misleading pay slips.

How will this affect employers?

While touted by the Government as ‘vital in tackling worker exploitation in important cases like that of 7-Eleven’, the changes will significantly increase risks for small to medium enterprises. This includes by the significant increase in fines that can apply (up to $630,000) which could bring down many or most SME employers. Increased serious contravention fines for individuals (to $126,000) will further increase the asset protection risk that workplace laws now create due to accessory liability laws. It will be more important than ever for employers to ensure their wage arrangements, contracts and workplace practices generally, are compliant.

Franchisors and holding companies will need to address their current agreements and practices with franchisees, in order to take ‘reasonable steps’ to prevent contraventions, and thus give themselves a defence to liability. Such as by greater franchisee training, auditing, employee complaint hotlines, and other involvement in assessing whether franchisees are meeting their workplace obligations.

Franchisees can in turn expect greater involvement by franchisors in their employment arrangements, including greater scrutiny of their rates of pay and related arrangements.

SMEs who fail to maintain required employee records and issue payslips will face great difficulty in defending under paid wage claims as a result of the shift of the onus to the employer to disprove wage claims, and higher fines. Employers investigated by the FWO will face greater exposures, with the requirement to participate in interviews.

The Vulnerable Workers Bill awaits royal assent before commencement, with new franchisor and holding company liability law to start six weeks later.

What should employers do?

Employers need to take steps to avoid liability, as well as the liability of directors and employees within their business. Such steps include:

• for all employers:
  • reviewing their minimum rates of pay, and particularly ensuring that all penalties, loadings and allowances are being paid correctly;
  • reviewing their employment contracts, award flexibility agreements and enterprise agreements to ensure they are compliant;
  • ensuring they are meeting all employee record and payslip obligations; and
  • seeking advice before putting in place deductions from employee wage payments;
• for franchisors and holding companies – seeking advice about taking ‘reasonable steps’ to prevent contraventions occurring and thus enable them to defend liability for their franchisees’ sins; and
• for employers being investigated by the FWO – seeking specialist legal advice at the outset, before being required to participate in interviews and before the progression of the investigation.

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.  It should not be relied upon and specific legal advice always be sought before taking any action.

This article was written by Sarah Moran, Senior Lawyer, and Denise O’Reilly, Director.

Image credit: SBS