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Get it right or pay the penalties – employers put on notice with changes to the Fair Work Act 2009

Libby Pallot, Anthony Massaro, Ben Tallboys, Abbey Burns, Caitlin Walsh

In the aftermath of the 7-Eleven underpayments scandal, the Fair Work Act 2009 has been amended to better protect workers.

The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 was introduced by the Turnbull Government in an effort to increase accountability for franchisors and holding companies responsible for contraventions of the Fair Work Act, with the aim of curtailing the exploitation of vulnerable workers.  

The following key changes came into effect in September 2017:

Increased penalties for “serious contraventions” of workplace laws

A new category of “serious contraventions” has been introduced to apply to deliberate contraventions which are part of a systematic pattern of conduct.  A serious contravention will attract a penalty of up to $126,000 for an individual and up to $630,000 for a corporation, which is a significant increase on the previous maximum penalties ($12,600 for individuals and $63,000 for a corporation).

Strengthening the evidence gathering powers of the Fair Work Ombudsman

 If the Fair Work Ombudsman reasonably believes that a person has information or documents relevant to an investigation, it can now apply to the Administrative Appeals Tribunal for a notice compelling that person to give information, produce documents or answer questions.  Failure to comply is a serious contravention of the Act.

Extending the liability for franchisors and holding companies

The new provisions make it easier for franchisors and holding companies to be penalised for the failures of their franchisees or subsidiaries to adhere to workplace laws. 

Under the previous laws, a franchisor could only be liable in circumstances where it was involved in the contravention by the franchisee, for example by directing the franchisee to contravene the Act or by assisting the franchisee in the contravention. 

Under the new laws, a franchisor or holding company contravenes the Act if it knows or could reasonably be expected to know that the contravention, or a similar contravention, would occur.  A franchisor will not be held liable under this new provision if it has taken reasonable steps to prevent the contravention by the franchisee.

A prohibition on “cashback” arrangements for both employers and prospective employees

The new provisions expand the scope of the existing prohibitions on unreasonably requiring employees to spend any part of their wages, to expressly prohibit unreasonable payments which are for the benefit of the employer or a related party.  The new provisions also apply to prospective employees. These changes reflect the cashback arrangements uncovered in the 7-Eleven investigation.

Changes to penalties for breaches of record-keeping and pay slip obligations

There is now a clear provision that makes it an offence for an employer to knowingly make false or misleading employment records or payslips.  In addition, the maximum penalty for failing to keep records or to issue pay slips has doubled.  There are also new penalties for providing misleading information or documents to the Fair Work Ombudsman.

A reverse onus of proof on employers

If an employer is accused of contravening a workplace law, and the employer has failed to keep employee records or payslip which might evidence that contravention, it is now up to the employer to disprove the allegations unless it has a reasonable excuse for the absence of the records.  This change will make it easier for employees to assert their rights in situations where there are inadequate records.

What these changes mean for employers

These changes were brought in under an election promise of the Turnbull government due to increasing community concern about the exploitation of vulnerable workers after a series of well-publicised cases involving exploitation of franchise workers and more specifically migrant workers.  However, the changes do not just target large scale franchises and high profile businesses.

Many small to medium businesses do not keep adequate employment records.  If you fall into that category, or you are not sure what your record-keeping obligations might be, you should move quickly to develop and implement a system.

If you are a franchisor, you need to consider taking a more active role in ensuring that your franchisees comply with workplace laws.  Rather than simply relying on a contractual provision that franchisees comply with their legal obligations, you should consider conducting periodic audits to ensure that employees are paid in accordance with their statutory and award entitlements, and that appropriate records are maintained.

The Fair Work Ombudsman can and does act on complaints from workers.  It also provides an online tool to assist employees who wish to make anonymous reports, including reporting in a range of foreign languages.

Please contact the Workplace Relations, Employment and Safety Team if you would like advice on how these changes might affect your organisation.

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