Inquiry into the New Bill for Protecting Vulnerable Employees

Thursday 13 April 2017 @ 12.02 p.m. | Industrial Law | Legal Research

An inquiry into the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth) (the Bill) was presented to the Senate Education and Employment Legislation Committee (the Committee) on 12 April 2017. The Fair Work Ombudsman - Ms Natalie James made the opening statement to the Committee.

Submissions for the inquiry were closed on 6 April 2017.

Background to the Bill

The Bill was first introduced at the House of Representatives on 1 March 2017 by the Minister for Immigration and Border Protection, Mr Peter Dutton. According to the Second Reading Speech, the Bill was introduced mainly as a result of the Fair Work Ombudsman (FWO)'s inquiry into the 7-Eleven franchise network.

For detailed changes that the Bill will cover, please see previous TimeBase article: Fair Work Legislation to Protect Vulnerable Workers Introduced in Commonwealth Parliament.

An article written by the Corrs Chambers Westgarth summarised the FWO's findings into the 7-Eleven Inquiry. From the 7-Eleven Inquiry, FWO found that a number of 7-Eleven franchisees had been paying their employees below the minimum award rate and falsifying their time sheets to create the impression that employees were working less time for higher pay. Besides that, employees who were paid above the minimum award rate were required to pay a portion of their wage back in an unrecorded cash transaction, which is called the 'cash-back scheme'. Most of the 7-Eleven franchisees deliberately contravened their obligations in the Fair Work Act 2009 (Cth) (the Act)

Issue with the Bill

As outlined in the article by Legal Vision Pty Ltd, one of the effects that the Bill will bring is that franchisors may be liable for the conduct of its franchisees if the franchisors knew (or could reasonably be expected to have known) that its franchisees would breach the provisions of the Act or violations of a similar nature would occur.

The issue is that the actual knowledge of the franchisees' wrongdoing is not required to raise the franchisors' liability, as identified by Lexology. This is because the requirement “could reasonably be expected to have known” signifies an objective test and the franchisors' liability will increase significantly. Factors to take into account "reasonableness" will include the size and resources of the franchisor, the extent of the franchisor’s influence to its franchisees and arrangements for assessing franchisee’s compliance with the Act.

Submissions made to the Inquiry

The report by the FWO states that the FWO supports the changes that are being made by the Bill. The FWO's ability to deal with serious misconduct within the Act will be enhanced as the Bill increases the FWO's power to carry out investigations. The FWO believes that education and advice will be essential for business organisations to comply with the Bill and the FWO will ensure business organisations that will be impacted by the changes in the Bill are notified.

The report by the Franchise Council of Australia (FCA) states there are some sections in the Bill that require improvements. Such improvements include:

a need to clarify the meaning of "reasonable steps";
requirement for Courts and regulators to take into account a system's size and resources; and
focus on underpayment instead of paperwork and technical judgements.

The FCA supports the increased power of FWO to collect evidence and the increased penalties for breaching the Act.

The National Retail Association (NRA) supports the decision to impose heavy penalties on business organisations that exploit vulnerable employees. However, the NRA believes that the Bill is unnecessarily holding to account the entire franchising industry for the unscrupulous acts of a minority of business organisations where adequate protections are already in place in the Act.

Detail submissions made to the Inquiry by various other bodies can be found on the Parliament of Australia website.

Overall, there is a strong support for the Bill to be implemented to protect vulnerable employees, especially migrant workers, who are mostly the victims of wage underpayment.

Other Business Organisations accused of Underpaying Their Employees

A report by The Sydney Morning Herald states that one franchisee of Domino's Pizza had underpaid its employees by $200,000 and those employees had not been contacted to repay them. A former Domino's Pizza's franchisee stated that this is a widespread practice among Domino's Pizza's franchisees.

Additionally, as reported in The Sydney Morning Herald, celebrity chef George Calombaris' restaurants had underpaid $ 2.6 million due to the "poor process in classifying employees". George Calombaris' restaurants underpaid his staff in 162 of his 430 restaurants including The Press Club, Gazi and Hellenic Republic, which form part of his Made Establishment Group.

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