Prime Minister Malcolm Turnbull has claimed victory in the federal election, as the Coalition achieved the slim majority in Australia’s federal parliament.

We briefly outline the likely key amendments to the Fair Work Act, as promised by the Coalition Government prior to the election, and other possible amendments to the workplace relations legislative framework.

Context

Over the last 12 to 18 months, there has been significant media coverage and parliamentary scrutiny largely focussed on negative stories with particular and targeted focus on the franchising and labour-hire sectors relating to the exploitation of migrant workers.

On Thursday, 19 May 2016, in response to extreme public pressure, the Turnbull Coalition Government released their Policy, which will significantly change the landscape of the franchising sector and other similar business models for years to come.

Turnbull’s Policy – To Protect Vulnerable Workers

The Government will amend the Fair Work Act to make franchisors and parent entities responsible for their franchisees”  and subsidiaries’ exploitation of vulnerable workers, while increasing penalties tenfold for employers that underpay workers and fail to keep proper records.

The purpose of the proposed amendments is to strengthen the enforcement provisions of the Fair Work Act to more effectively deal with employers who intentionally exploit workers.

The Government propose to do this by introducing:

  • higher penalties up to $510,000 based on current rate for employers who deliberately and systemically underpay workers and fail to keep proper records;
  • a new offence to cover behaviour in which an employer pays the correct wages to employees, but then forces them to repay a proportion of their wages in cash; and
  • new provisions that will apply to franchisors and parent companies who fail to deal with exploitation by their franchisees. More specifically, the Fair Work Act will be amended to make franchisors and parent companies liable for breaches by their franchisees or subsidiaries in situations where they should reasonably have been aware of the breaches and could reasonably have taken action to prevent them from occurring – in real terms the equivalent of deemed accessorial liability.

There is one exception – franchisors or parent companies who have taken reasonable steps to educate their franchisees or subsidiaries, which are separate and independent businesses, about their workplace obligations and have assurance processes in place, will not be captured by these new provisions.

The Government will also seek to increase the powers of the Fair Work Ombudsman to give it some real teeth.  The Government proposes to do this by:

  • giving compulsory evidence gathering powers to the Fair Work Ombudsman (similar to those powers currently held by ASIC, the ACCC and the ATO). The purpose is to enhance the Ombudsman’s powers to gather evidence where proper records do not exist;
  • surveillance and formal investigation powers which will authorise the production and inspection of documents, compulsory examination of individuals and search warrants in more serious circumstances; and
  • introducing new penalty provisions relating to the obstruction of Fair Work Inspectors and / or provision of false and misleading information.

In addition to the proposed amendments to the Fair Work Act, the Government will establish a Migrant Workers Taskforce within the Ombudsman that will target employers who exploit migrant workers.  This Taskforce is designed to ensure that franchisors and employers take responsibility in addressing any failure to provide minimum entitlements to franchisee employees and employees generally.

Labour-Hire Industry

In Victoria, South Australia and Queensland, inquiries are currently on foot in relation to the practices of the labour-hire industry and other forms of insecure work.  These inquiries will consider options including a licensing system enabling accredited labour hire agencies to provide third party labour.

It is our view that such a licensing system will be introduced, as both sides of politics have broadly supported this approach in an attempt to avoid the exploitation of migrant workers and those who engage in insecure forms of work.

Employer Takeaways

1. In anticipation of the proposed Coalition Government amendments, franchisors and businesses with lower paid workers in their supply chains will need to take a balanced approach in promoting wage compliance so as to not fall within the ambit of the current (and future) accessorial liability provisions.

2. Franchisors and employers will need to implement effective government arrangements to ensure compliance with all relevant workplace laws specifically addressing:

(1)           Management accountabilities;

(2)           Mechanisms for identifying, escalating and addressing potential non-compliance;

(3)           Development of transparent verifiable payroll systems;

(4)           Business and financial training of franchisees; and

(5)           Workplace relations training of franchisees including accessorial liability.

3. Contact Norton Rose Fulbright Australia to enquire about our advice product relating to the hierarchy of Interventions to Maximise Franchisee/Supply-Chain/Employer HR Legal and Legal Compliance.

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