Information, education, regulation and compliance
This chapter pulls together the remaining education, information,
regulation and compliance issues that have arisen during the inquiry.
The separate consideration of information and education activities from
the role of monitoring and compliance in this chapter is somewhat arbitrary.
For example, the Harvest Trail inquiry conducted by the Fair Work Ombudsman
(FWO) involved an education and awareness raising campaign with a range of
stakeholders across the country. This was followed up later by compliance
The chapter begins with an overview of the role and activities of the
FWO and the Department of Immigration and Border Protection (DIBP) with respect
to employment and migration law. The provision of information and educational materials
is then covered, followed by a section that looks at how the FWO seeks to build
a culture of compliance, including down supply chains. The remainder of the
chapter considers the resources and powers of the FWO, the challenges that it
faces in enforcing compliance, and a range of proposals to improve various
Background to the role and activities of the government agencies
The FWO was established by the Fair Work Act 2009 (FW Act) on 1
July 2009. The role of the FWO is to 'provide education, assistance and advice
about the Commonwealth workplace relations system and impartially enforce
compliance with workplace laws'.
The provision of information to temporary visa holders and the monitoring and
enforcement of compliance with workplace laws with respect to temporary visa
holders therefore falls within the remit of the FWO.
However, the provision of information to temporary visa holders and the
monitoring of compliance with various aspects of immigration law with respect
to temporary visa holders and their employers are also carried out by the DIBP.
The respective roles of the FWO and the DIBP could be viewed as
relatively discrete. Mr Michael Campbell, Deputy Fair Work Ombudsman, explained
that the DIBP has primary jurisdiction for ensuring that 457 visa workers are
paid according to the sponsorship obligations. The FWO's role is to make sure
the FW Act is a safety net for all workers in Australia and its jurisdiction is
enlivened when wages fall below the safety net (for example, below-award wages).
Where an entitlement is above the safety net but below the sponsorship
obligations, the DIBP has the power to enforce an outcome.
However, there is now some overlap in the roles of the FWO and the DIBP
following the signing of a memorandum of understanding (MoU) between the two
agencies. The MoU formalises operational arrangements around the FWO's role in
monitoring 457 visa sponsorship obligations. Since 1 July 2013, the FWO has
been responsible for checking, on behalf of the DIBP, that 457 visa holders
receive their nominated salary and perform the functions of their nominated
Between 1 July 2013 and 31 December 2014, the FWO monitored 3076 subclass
457 visa holders and identified concerns in about 18 per cent of cases. The FWO
refers potential breaches of the sponsorship obligations to the DIBP. The MoU
also provides a framework for the regular exchange of operational information.
The FWO is involved in inter-agency taskforces such as Taskforce Cadena
(see below), and the Inter Agency Phoenix Forum comprising the FWO, DIBP, the
Australian Securities and Investment Commission (ASIC), and the Australian
Taxation Office (ATO). The impact of illegal phoenix behaviour on the
enforcement activity of the FWO is discussed later in the chapter.
Taskforce Cadena and Operation
Taskforce Cadena was established as a specific joint agency taskforce by
the FWO and the DIBP to coordinate a whole of government effort to reduce the
exploitation of foreign workers. Taskforce Cadena works, as required, with
other relevant agencies including the Australian Federal Police, ASIC, the ATO,
and State and Territory law enforcement agencies.
The Australian Border Force is also undertaking additional supporting
enforcement activities—such as Operation Cloudburst in May 2015—which target
exploitative behaviour. Operation Cloudburst involved approximately 120
officers from the DIBP working with inspectors from the FWO and State and
Federal police, to undertake 11 operations in all states.
In terms of inter-agency cooperation and approaches, Ms Heather Moore,
Advocacy Coordinator for the Freedom Partnership to End Modern Slavery at the
Salvation Army (the Freedom Partnership) noted that 'official data on worker
exploitation is virtually non-existent'. She maintained that Task Force Cadena
offered 'an opportunity to draw on the information various agencies have and
move from a risk management approach to an intelligence approach and a
comprehensive approach that addresses all elements of the crime'.
However, Ms Moore expressed serious reservations about the current
practices and culture of compliance that leads to undocumented workers being 'quickly
interviewed and swiftly detained and deported'. The Freedom Partnership had
therefore proposed that the agencies involved in Taskforce Cadena adopt a
That is why we are pushing for Taskforce Cadena to take a
different approach, a more victim centred approach, not just in rhetoric but
actually in practice, and that requires a paradigm shift in the space around
worker exploitation. We are very concerned that we are deporting potential
trafficking victims and, even if we are not, that we are depriving a large
group of people of access to justice that they should be entitled to.
Concerns about joint agency
The FWO recognised that a visa worker's concerns about their ongoing
visa status can operate as a barrier to them approaching the FWO for help. The
FWO therefore emphasised the vital importance of government communicating 'to visa
workers, employers and their advisers that the FWO can and does enforce Fair
Work laws with respect to all workers, including migrant workers, irrespective
of their visa conditions'.
In addition, Ms Natalie James, the Fair Work Ombudsman, emphasised that
Fair Work inspectors make it really clear to visa holders that the FWO is not
interested in their visa status, but is only concerned with building a
relationship with the aim of rectifying matters such as underpayment.
However, several submitters raised serious concerns about the
relationship between the FWO and the DIBP, and in particular, how that
relationship might be seen (and possibly misconstrued) by temporary visa
Dr Stephen Clibborn warned that 'if the FWO is to be a practically
effective enforcer of the FW Act for undocumented immigrant workers it must be,
and be seen to be, independent of the DIBP'. He held grave concerns that the
current arrangements under the MoU would create mistrust amongst temporary visa
workers and therefore discourage the reporting of breaches of the FW Act.
Instead, he recommended a new MoU that would establish the independence of the
FWO and DIBP and confirm that the two agencies would not share information
about the visa status of migrant workers.
The Shop, Distributive & Allied Employees' Association (SDA) noted
that the Commonwealth Ombudsman's Better Practice Guide to Complaints Handling
(the guide) recognised the importance of protecting the identity of a
complainant. Similarly, the guide also recognised that an underlying principle
of whistleblower policy 'is that a whistleblower should not be subject to
reprisals because they have made an allegation'.
Australian immigration law does not accord this special
protection to temporary migrant workers who are whistleblowers: a 457 visa
holder who reports to the FWO that they have received wages in breach of their
sponsorship does this knowing that this information and their identity can be
passed onto the DIBP.
In light of the above, the SDA recommended that the FWO not be allowed
to share the identities of temporary visa workers involved in its
investigations with the DIBP'.
Furthermore, the SDA emphasised that the impression amongst temporary
visa workers, however inaccurate it may be, was that the FWO passed information
on to the DIBP concerning all breaches of work entitlements under visas and not
just those relating to breaches of 457 visas. The SDA therefore argued that visa
holders with work rights such as international students and Working Holiday Makers
(WHMs) 'will be less likely to complain because of the perception that the FWO's
role is compromised'.
Provision of information and education
Many submitters and witnesses emphasised the need to not only provide
relevant information to temporary visa holders about their workplace rights,
entitlements and obligations, but also to convey that information in ways that
temporary visa workers could readily access and understand.
However, other submitters and witnesses also pointed to the critical importance
of employers having reliable access to up-to-date expert information on
This was of particular concern to a number of witnesses from regional and rural
Provision of information to
temporary visa workers
The FWO noted that employers have to give every new employee a copy of
the Fair Work Information Statement (the Statement) before, or as soon as
possible after, they start their new job.
The Statement provides new employees with information about their conditions of
employment and has information on:
the National Employment Standards;
the right to request flexible working arrangements;
making agreements under the FW Act;
individual flexibility arrangements;
freedom of association and workplace rights (general protections);
termination of employment;
right of entry; and
the role of the FWO and the Fair Work Commission.
Mr Tom O'Shea, Executive Director of Policy, Media and Communications at
the FWO, noted that the FWO website had free fact sheets on working in
Australia in 27 different languages, as well as YouTube videos in 14 different
languages, and a free interpreter service.
In May 2015, the FWO ran a digital communication campaign using
Facebook, Twitter and social media to guide international students to material
on the FWO website in order to help visa holders understand their rights and
Mr Michael Fraser stated that the initial point of contact on the FWO
website could be improved by having a 'lodge a complaint' button and a
'translate' button on the homepage. Mr Fraser also suggested the complaints
process could be simplified by providing for the digital submission of
[The] Lodge A Complaint button takes you to a super simple
Complaint Wizard. If the FWO still want the complainant to sign the documents,
they could first complete the wizard, then print and sign off on a one page
authorisation. The wizard could register the complainant in the system, create
a case number and digitally submit the complaint. This would greatly reduce the
labour currently required to manually process the paperwork, so the FWO can be
doing the work the matters the most.
The DIBP noted that, in cooperation with the FWO, it had reviewed and
strengthened the information provided to WHMs and international students. The
DIBP sends a visa grant letter to all WHM and international student visa holders
to help them find out about their workplace rights and the role of the FWO. The
letter includes information on workplace rights and entitlements, links to the
FWO website, links to YouTube videos and a link to the Statement.
Mr Ullat Thodi, a former 7-Eleven employee, pointed out that when
international students first arrive in Australia, their primary focus is on
settling into their studies and surviving financially. He suggested another way
to reach international students with information about their workplace rights
would be through the provision of that information by universities.
Mr George Robertson of the National Union of Workers (NUW) argued that,
in addition to temporary visa workers being provided information about their
working rights in Australia in their own language, these workers should also
receive information about their right to join a union.
Public funding to assist the
collective organisation of migrant workers
Based on his experience convening the Migrant Workers Campaign Steering
Associate Professor Tham argued the need for public organisations like local
councils and educational institutions to provide spaces where temporary migrant
workers can meet safely to discuss their workplace concerns, overcome cultural
and language barriers, and devise strategies to protect their rights.
Associate Professor Tham observed that the Victorian government had
recently launched the $4 million International Student Welfare Grants program in
order to support organisations that work with international students. Noting work
in this area is fragmented and disjointed, Associate Professor Tham recommended
a Commonwealth fund be established 'aimed specifically at improving the
protection of the workplace rights of temporary migrant workers' in Australia.
Information for employers: Industry
Employers have a duty to understand their obligations to their employees
and ensure compliance with workplace laws. Associate Professor Tham noted that
these employer obligations were set out by Judge Riley of the Federal Circuit
It is incumbent upon employers to make all necessary enquiries
to ascertain their employees' proper entitlements and pay their employees at the
Given the obligations placed on employers, several submitters were
critical of the decision to abolish the industry outreach officers that worked
with employers on various aspects of migration law as it related to the
employment of temporary visa workers. Eventus argued that the withdrawal of
industry outreach officers had reduced the diffusion of information on labour
market testing and other aspects of the 457 visa program. Observing that
regional outreach officers 'were recognised by employers as providing a
valuable contribution to public understanding of the skilled immigration
program', Eventus recommended re-instituting public relations staff such as the
regional outreach officers.
Likewise, Consult Australia stated that industry outreach officers had proven
successful in informing and communicating with industry on all aspects
immigration and visa processing and policy:
The expert assistance provided through the IOOs [industry outreach
officers] supported a clear flow of information between employers and the department,
ensuring up-to-date information regarding changes to policy and legislation was
communicated to firms in a timely easy-to-understand format.
In the case of our industry, the professional relationship
built between the IOOs and Consult Australia was a big factor in the enhanced
level of understanding of the industry and government on the needs of each in
the skilled migration and temporary migration arena.
For our member firms, who have increased reliance on
specialist engineers and other technical professions, a detailed understanding
by the department of the particular issues they face, helped ensure that their
skilled migration needs were efficiently met.
Consult Australia recommended the reintroduction of industry outreach officers
with a specific focus on industries whose substantial economic contribution is
hindered by ongoing skills shortages:
This more tailored approach to the reintroduction of the IOO
program recognises the need to apply fiscal discipline, but also the benefits
of the program in supporting access to skills in those areas of the economy
Building a culture of compliance with workplace law
As noted earlier, both the FWO and DIBP monitor various aspects of
migration and workplace law. The following sections outline the work of both
agencies beginning with the DIBP monitoring of the 457 and 417 visa programs,
followed by the work of the FWO in both education and awareness raising as well
as trying to build a culture of compliance in supply chains (the FWO's
enforcement activity is covered later in the chapter).
DIBP compliance monitoring of visa
The DIBP runs Visa Entitlement Verification Online (VEVO), an online
service for visa holders to check their visa details and work entitlements.
Employers can also use VEVO to check if a visa holder is able to work or
undertake other activities in Australia, such as study. VEVO is accessible from
the DIBP website or through a new mobile application.
The DIBP has a range of mechanisms in place for the reporting of
compliance issues by phone, fax, letter, email or online report. These include
a public dob-in line for reporting matters of concern, and call centres for
enquiries and reports from visa holders, employers and members of the public.
The DIBP uses a targeted risk-based approach to monitor the 36 491
registered active 457 visa sponsors (as at 31 May 2015). The indicators
considered for the purposes of targeted monitoring include:
allegations from visa holders, community members and other third
information obtained through other areas of the department such
as 457 processing areas or compliance activity;
trends of concern and emerging risks;
referrals from the FWO;
analysis of data within departmental systems, for example
industry group of sponsor, number of nominations, annual turnover of company,
classification level of occupation and salary level; and
identified links between non-compliant sponsors and other
The DIBP then assesses whether the identified breaches of a
sponsors' obligations were
intentional or unintentional. Of the unsatisfactory cases, 609 were sanctioned
by cancelling the visa or barring the sponsor from using the 457 program.
Following the recently announced collaboration between the DIBP and the
Australian Tax Office (ATO), the Migration Council of Australia (Migration
Council) recommended that the DIBP and the ATO should match individual tax
records to ensure that 457 visa holders were being paid the same income as
their Australian counterparts.
The Migration Council also recommended further integrity measures including:
'spot surveys' to match the income records of 457 visa workers
with their original nomination forms;
an analysis of 457 visa nominations that are at the Temporary
Skilled Migration Income Threshold (TSMIT). Given the market salary rate should
determine the income of migrants, not the TSMIT, the Migration Council was of
the view that an above-average proportion of nominations at the TSMIT indicated
possible risk; and
matching nominated incomes by occupation and industry with the
ABS survey of hours and earnings. This exercise would allow an overview of the
457 visa program and identify problematic occupations and industries where
segments of the 457 visa population appear underpaid.
The Migration Council emphasised that, in the interests of greater
transparency, the findings of all analysis should be made public in anonymised
Changes made to the WHM visa program from 31 August 2015 required pay slip
evidence to ensure that
participants who undertook 'specified work' (see chapter 2 for further details) in order to
qualify for the second year 417 visa were being appropriately remunerated.
The DIBP operated a targeted audit process of second WHM (subclass 417) visa applications to verify 'specified work' employment claims.
The FWO welcomed the changes to ensure that proper employment records were
Fair Work Ombudsman campaigns and
The FWO viewed its role as building a culture of compliance with
workplace law. This necessarily involved a recognition that the reasons for
noncompliance varied and so did the tools for building compliance. The FWO
noted that most employers wanted to comply with the law and there was,
therefore, an important distinction between inadvertent and deliberate
...there is a difference between well-intentioned businesses that
make mistakes which result in inadvertent non-compliance with workplace laws,
and unscrupulous businesses that have put in place deliberate structures
designed to gain a competitive advantage through calculated exploitation of
In light of the above differences, the FWO observed that it worked
co-operatively with employers that had inadvertently breached workplace law in
an effort 'to educate and empower them to address the factors which have led to
noncompliance in their workplaces and to achieve voluntary rectification of underpayments'.
With recalcitrant employers, the FWO was of the view that a sustainable
change in outcomes and behaviour required collaboration between the regulator
and a range of stakeholders to eliminate 'deliberate and structural' labour exploitation.
The FWO worked with the lead companies who are the 'final beneficiaries of
labour', such as supermarkets, franchisors and industry organisations because,
as the 'price maker', lead companies were 'in a powerful position to influence
behaviour and drive change'.
To this end, the FWO had commenced several longer term strategic
inquiries designed to understand the systemic issues behind noncompliance and
liability and to lay the foundations for driving supply chain compliance. The
the Harvest Trail Inquiry;
the 417 Working Holiday Visa Inquiry;
the Baiada Inquiry; and
the 7-Eleven Inquiry.
These inquiries are covered in subsequent sections. But first, there is
a brief overview of the FWO's overseas workers team.
Overseas workers team
The FWO prioritised temporary visa workers because of their
vulnerability to exploitation and the barriers (such as language, culture, and
concerns about visa status) that temporary visa holders face in understanding
and enforcing their workplace rights.
The overseas workers team was 'active in industries known to employ high
numbers of visa workers, such as hospitality, horticulture, poultry processing,
cleaning, convenience stores and trolley collectors'.
The FWO overseas workers team had 17 full-time inspectors based in
Sydney, Adelaide, Melbourne and Brisbane. However, the Harvest Trail and the
417 campaign also utilised some of the 250 inspectors from the regional network
based at 24 locations around the country.
The number of complaints to the FWO from 417 visa holders has risen over
the last three years and is now larger than the number of complaints from 457
Working directly with community groups, the FWO had tailored resources
and communications campaigns, including social media campaigns, targeting
specific groups of visa holders to alert them to their workplace rights.
The FWO also cooperated with unions in terms of receiving information
about areas of concern. Ms James noted that the FWO had positive relationships
with several unions including MoUs with the NUW and SDA:
Unions are often our source of information about conduct
going on at sites that we do want to be aware of. They do share information
with us, and we do work with them. We do keep them up to date on matters where
they are representing members in relationship to a particular matter.
Ms James explained that the FWO pursued its own processes and procedures
in those cases that it took on, but in cases where the union was taking action
under the FW Act, the FWO would step aside.
Harvest Trail inquiry
The FWO launched the three-year Harvest Trail inquiry in August 2013 in
response to ongoing requests for assistance from employees in the horticulture
sector, and the FWO's observations of confusion among growers and labour-hire
contractors about their workplace obligations.
As noted in chapter 7, the committee received evidence about the close
working relationship between the FWO and employer organisations. Ms James
stated that through the Harvest Trail program for example, the FWO had talked
to about 60 different entities including the National Farmers' Federation (NFF)
and various growers associations. This process was still at the fact-finding
and community engagement stage, with a particular focus on the questions that
growers should be asking of labour hire contractors to ensure compliance with
The FWO observed that, in their experience, the majority of employers
comply with workplace law. For example, as part of the Harvest Trail campaign,
the FWO identified far more employers and producers complying with workplace
laws than employers and producers who were noncompliant:
We have certainly had a really good response to our harvest
trail campaign from growers associations and farmers. They do not want to be
associated with this kind of conduct. Certainly, in Mildura, we saw local
identities and perhaps even local members saying, 'We don't want our town
associated with these kinds of stories.' It is that kind of engagement and
awareness-raising that we feel actually will begin to change the behaviour,
because it means that the people who are unaware of the behaviour that is going
on and perhaps unknowingly benefiting from it will start to look down the
supply chain and will start to say, 'This is unacceptable; we don't want it
going on in our communities and our towns and we're going to do something about
The FWO noted the fruit and vegetable growing sector attracts a large
number of 417 visa holders (as well as other types of visa holders). The Harvest
Trail inquiry aimed to ensure pickers received their minimum employment
entitlements. The FWO was also keen to understand the drivers of noncompliance
with workplace laws in the sector including labour hire arrangements.
The FWO met growers, labour-hire contractors, hostel operators, harvest
workers, industry bodies, local councils, and unions during field trips across Australia.
Table 9.1 below indicates the states and territories in which the FWO had visited
Table 9.1: states, territories and growers visited by the
Fair Work Ombudsman in the Harvest Trail inquiry
Apples and pears
Source: Fair Work Ombudsman,
answer to question on notice, 18 May 2015 (received 24 June 2015).
After the education and awareness-raising aspect of the Harvest Trail inquiry
was completed, the FWO followed up with compliance checks. As a result of
compliance checking, the FWO recovered $232 785 for 470 employees from 37
employers. The FWO also issued:
37 formal Letters of Caution warning employers of contraventions;
24 Infringement Notices (on-the-spot fines) totalling $14 250;
one Compliance Notice requiring contraventions to be rectified;
commenced proceedings against one employer in the courts.
Furthermore, as at 31 March 2015, the FWO had conducted 160 Harvest
Trail audits with a 66 per cent compliance rate. The FWO noted that a final report
will be published upon completion of the inquiry.
National inquiry into the wages and
conditions of 417 visa workers
The FWO launched the national inquiry into the wages and conditions of
417 visa workers in August 2014 to investigate allegations that workers
attempting to qualify for a second year visa by undertaking the necessary 88
days' work in a regional area were being exploited.
(A similar inquiry into the poultry sector launched in November 2013 resulted
in the Baiada report in June 2015 and the Proactive Compliance Deed with
Baiada: see chapter 7).
Compliance in the supermarket
The issue of ensuring compliance with workplace laws down the supply
chain was a vexed issue. The committee received evidence on these matters from
the FWO, the major supermarkets, and the unions.
These matters were further complicated by evidence (see earlier
chapters) indicating that intensive discounting by the major supermarkets had
placed downward pressure on suppliers and producers to cut their costs.
Ms James stated that the FWO engaged with end users such as supermarkets
about their supply chain responsibilities, and advised them that it is in their
interests—both legal and reputational—to pay attention to what is occurring in
their supply chain. In a speech given in August 2014, Ms James focussed on companies
at the head of the supply chain:
The point I made in that speech is that where you have
industries where you have labour intensive, low-skilled work, low profit
margins, a high degree of outsourcing and multiple layers in the supply chain,
there is a high likelihood there that, unless you put arrangements in place to
satisfy yourself that workers are being paid properly, you might be profiting
or benefitting from labour that is not being paid lawful rates of pay.
Mr Campbell argued it was important to place pressure on major retailers
to take responsibility for what occurs in the supply chain:
...the more work we are doing in the horticultural sector the
more I see part of the solution being pressure put on employers at the top of
the supply chain to take responsibility for what is occurring down the lines....
If Coles, Woolworths and others intend to sell the produce, I think they need
to care about how it got to their stores.
For example, on 19 June 2015, Ms James, wrote to the following companies
(as major customers of Baiada Group) to provide them with the FWO's Baiada report
and to invite the companies to meet with FWO to discuss supply chain integrity:
ALDI Australia—Mr Stephen Kopp, Group Managing Director;
Coles Supermarkets Australia Pty Ltd—Mr John Durkan, Managing
KFC Australia—Mr Tony Lowings, Managing Director; and
Woolworths Limited—Mr Grant O'Brien, Chief Executive Director.
Ms Vicki Bon, Government and Industry Relations Manager at Coles, noted
that Coles was meeting the FWO in July 2015 to discuss the above matters and to
develop a joint response.
In light of the FWO's view that, given their market share and
significant purchasing power, the major retailers should look down the supply
chain, the committee was keen to ascertain the extent to which the major
supermarkets believed they had responsibility for breaches of workplace law
that occurred lower down the supply chain.
In general terms, the major retailers argued that the contracts they had
with their suppliers specified that all suppliers were expected to comply with
all relevant workplace laws. The supermarkets also argued that the FWO had responsibility
for ensuring compliance with workplace law and that those individuals and
organisations that had evidence of a breach of workplace law should take that
evidence to the FWO, or where appropriate, the police.
Ms Armineh Mardirossian, Group Manager of Corporate Responsibility,
Community and Sustainability at Woolworths Limited, noted Woolworths had a
longstanding relationship with many of its 350 to 400 produce suppliers in
Australia and that its trading terms explicitly stipulated the requirement for its
suppliers to comply with all relevant laws in the country.
Woolworths operates a website, telephone service and Facebook site that
members of the public can use to contact Woolworths. Woolworths directs any concerns
to the relevant area. When alerted to a possible breach of the law, Ms
Mardirossian indicated that Woolworths may advise the party making the claim to
take the matter to the authorities (such as the FWO). Woolworths might also advise
the authorities, and may also consider investigating the matter to determine if
there had been a breach of a supplier's code of conduct.
Mr Ian Dunn, the head of trade relations at Woolworths, noted that
Woolworths had signed mutually agreed trading terms with 97.5 per cent of its
suppliers. The Trading Terms require all suppliers to provide Woolworths with warranties
and indemnities stating that the supplier will abide by all laws, regulations
and community standards in Australia. The Trading Terms also mention Woolworths'
ethical standards policy.
Ms Mardirossian explained that Woolworths introduced their ethical
sourcing policy in December 2008 and applied the ethical sourcing policy and
audit program based on a risk assessment of the source country:
There are a number of analytics that we would look at which
are all independent and credible sources, such as cost risk analytics, the
World Bank risk analytics, the Corruption Perceptions Index and a number of
other tools that we have. The countries get graded in that process according to
their risk, whether they are high risk, moderate risk or low risk. Australia is
graded low risk, which means that, in our assessment and from the data that is
available publicly and some that is proprietary risk analytics, it shows that
Australia has a strong rule of law, an independent judiciary, a good human
rights track record and very good and independent enforcement agencies, and the
law is enforced.
Noting that Woolworths graded Australia low risk, Ms Mardirossian advised
that, since 2010, Woolworths had not conducted audits of ethical sourcing from
Similarly, Coles also regarded Australia as low risk because of its robust
Both Ms Mardirossian and Mr Dunn stated that the allegations aired on Four
Corners were insufficient at this stage to cause Woolworths to reclassify
Australia's risk profile and that Australia's risk level would only be
reassessed on the basis of proven evidence. Mr Dunn further noted that, in
addition to 350 produce suppliers, Woolworths dealt with 4300 suppliers overall
in Australia and that an ethical sourcing audit would impose an additional cost
Following the Four Corners program in June (that highlighted
concerns about breaches of workplace law in both the horticulture and chicken processing
sectors), Woolworths wrote to all of its suppliers to remind them of their obligations
under the Trading Terms.
Woolworths also noted that it had not ceased doing business with
suppliers due to allegations made in the Four Corners program or raised
by the NUW, and that Woolworths would ordinarily 'seek to resolve any issues
with our suppliers, rather than unilaterally cease a contract'.
However, Ms Mardirossian observed that, in the week prior to the Four
Corners program, one of Woolworths' suppliers, Perfection Fresh, had ceased
using a labour hire company following an audit of all of their labour hire
companies. In the same week, Covino ceased supplying produce to Woolworths
because they were unable to meet the compliance terms stipulated in the
contract. Covino had also investigated their own labour hire firms and had stopped
using one labour hire firm.
Ms Bon noted that Coles has an ethical sourcing policy that required
suppliers to ensure they complied with all relevant workplace laws and in 2014,
Coles had introduced the Coles supply charter. Ms Andrea Currie, Policy and
Brand Standards Manager at Coles, noted that the ethical sourcing policy had
been in place since about 2005 and had been reviewed in 2010 and 2013.
Ms Bon outlined the action Coles had undertaken since the Four
Each supplier has been asked to confirm that it has a process
in place to ensure contracted workers are legally entitled to work, contracts
with labour hire companies comply with award rates and suppliers pay labour
hire companies enough money to allow workers' pay and entitlements to comply
with the relevant award. In addition to the suppliers named in the program we
have written to all of our direct fresh product and meat suppliers to reinforce
with them the importance of meeting their obligations in relation to
immigration laws, wages, entitlements, working hours and other benefits.
Ms Currie noted that Coles had spoken directly to Baiada, D'VineRipe (part
of Perfection Fresh), Akers, and Covino. In relation to Baiada, Ms Currie
stated that prior to the release of the FWO report into Baiada, Coles had
commissioned PricewaterhouseCoopers to conduct a confidential audit of all the
work practices at Baiada including the use of labour hire companies, with the
report due by 31 July 2015. Ms Currie explained that any audits of a
supplier were confidential because the first step, if any issues arose, would
be to work with the supplier to correct the issues.
Mr Robertson of the NUW was of the view that the role of major buyers, and
in particular the supermarkets, was 'fundamentally important' in preventing worker
exploitation down the supply chain. Mr Robertson contended that the
supermarkets should work with the NUW to ensure that all the produce sold by
the major supermarkets was ethically produced. He maintained that an ongoing
relationship between the union, producers and the supermarkets would enable the
supermarkets to ensure that their ethical standards were met in practice.
In light of the above, Mr Robertson said the NUW had offered to meet
with Coles to discuss supply chain matters in an effort to ensure that produce
supplied to Coles is produced in compliance with Australian workplace laws. Ms
Bon confirmed that Coles had since met with the NUW. Mr Robertson indicated
that Woolworths had declined to meet the NUW.
Coles stated it had met with the NFF to discuss the NFF's proposal for a
Best Practice Scheme for Agricultural Employment and how Coles could support
practical proposals from growers, farm groups and relevant government agencies
to help guard against any abuse of workers' rights in the food supply chain. Ms
Bon said it was her understanding that the NFF had invited the NUW to be part
of the industry discussion.
The 7-Eleven inquiry
Ms James explained that 7-Eleven first came to the attention of the FWO
from 1 July 2009. The FWO conducted two separate audit activities between 2009
and 2011 that resulted in the recovery of around $140 000 of underpaid
wages and the Bosen litigation (the Bosen litigation is covered in more detail
in the later section on enforcement activity).
In 2014, as it became obvious to the FWO that 7-Eleven had not improved
its compliance with workplace laws and that visa workers across the 7-Eleven
network were still being exploited, the FWO began a broader inquiry into
7-Eleven. As part of the inquiry, the FWO conducted site visits at 20 stores
and identified serious concerns at a number of them. As at 5 February 2016, the FWO had commenced
seven court proceedings (five of which were ongoing) against 7-Eleven
franchisees, secured one enforceable undertaking, and recovered over $200 000
for 30 employees.
The FWO inquiry into 7-Eleven will investigate various matters including
the underlying causes of noncompliance, the business model used by 7-Eleven,
and whether liability for noncompliance extends beyond the franchisee to the
The FWO inquiry will involve proactive compliance work and will conclude
in early 2016 with a publicly available report. The FWO envisaged that the
report would 'contain recommendations that are designed to achieve real
sustainable change in the 7-Eleven network to ensure the franchise is both
accountable and compliant'.
Ms James noted the commonalities between the 7-Eleven inquiry and those
into Baiada and the Harvest Trail inquiry:
This matter, like the Baiada matter and like our work on the
Harvest Trail, has a number of features in common. It involves a network or
chain of entities, where there is an entity or person at the centre or at the
top who benefits from the labour of workers for which it is not legally or
directly responsible. They often involve low-skill work, vulnerable workers and
tight profit margins.
Ms James was strongly of the view that achieving sustainable outcomes in
sectors where deliberately exploitative conduct is occurring required
collaborative efforts between regulators and stakeholders including information
sharing and joint activities.
Prior to the screening on 31 August 2015 of the Four Corners
7-Eleven, the FWO advised that they had met twice with 7-Eleven executives from
Head Office including the then National Operations Manager, Ms Natalie Dalbo,
as set out below:
We met with 7-Eleven shortly after the commencement of our
Inquiry, on 13 October 2014. At this meeting we:
explained the Inquiry we had
recently commenced and why;
explained that in complaints
received from across states and locations there were very similar allegations
around false recording of hours worked and wages paid;
advised that the conduct we had
seen in complaints was similar to that observed in Bosen, and that it was too
similar to be a coincidence; and
explained that the FWO was seeking
to look into this further to try to work out why this was happening and where
the behaviour was originating.
7-Eleven mentioned that community and cultural groups may be
sharing information, and that Head Office were looking at how many payroll
hours were worked per store and questioning stores that did not have enough
hours to cover their operation.
We met with 7-Eleven again on 5 May 2015. At this
meeting we presented 7-Eleven with the preliminary findings of our Inquiry. We
explained that the Inquiry commenced
after FWO received intelligence both from requests for assistance and from
various anonymous sources;
advised the intelligence suggested
non-compliance with minimum entitlements and false record keeping practices
within the 7-Eleven network. Moreover on the back of that intelligence, in
September 2014, we undertook unannounced Saturday night visits to 20 city
stores to gather evidence;
advised that out of the 20 stores
visited, the majority had provided information in response to notices to
produce documents which was inconsistent with what our Inspectors had gathered
on the night of the visits; and
explained the FWO could not be
100% confident in the compliance of any of the stores. The level of
non-compliance with record keeping practices, and in particular false record
keeping practices, was particularly disappointing. Some stores had provided
fraudulent records and/or information to the FWO which was a serious offence.
The FWO noted that after its audit activities in 2009–2010, 7-Eleven
Head Office had assured the FWO that they took the matters seriously and would investigate
Mr Campbell also confirmed that at the meeting on 5 May 2015, the FWO advised
7-Eleven that enforcement actions against franchisees were likely, and 7-Eleven
would therefore have been well aware that franchisees were being targeted by
Given that Mr Fraser had spoken to workers at 7-Eleven stores across the
country, and yet the FWO had only raided 20 stores, Ms James addressed the
question of results in the context of agency resourcing. Ms James stressed that
the FWO was focussed on achieving sustainable outcomes in the future and not on
7-Eleven store across the country:
A central focus of our inquiry is about the future. It is
about making recommendations that will achieve real and sustainable change and
bring about accountability within the franchise operations. In other words,
what we are hoping is that through the engagement we have with 7-Eleven we will
be able to assist them to put in place systems and processes that will ensure
that this will not happen in future. We feel that the work we are doing with
the information and the evidence that we have so far will form the basis of
recommendations that will enable us to have that conversation with head office.
Working with the entity at the top of the chain to achieve ongoing
compliance is similar to the approach that the FWO adopted in the Baiada
inquiry. With respect to 7-Eleven, Ms James pointed out that:
...ongoing monitoring by the franchise, with the assistance of
third parties such as auditors, with some accountability back to us—which other
franchises and businesses we have worked with have put in place—might bring
about a sustainable change in the 7-Eleven network
However, Mr Campbell conceded that after the actions taken by the FWO in
2009 and 2014, the engagement of 7-Eleven Head Office did not have a lasting
impact and did not lead to a reduction in noncompliance with workplace laws.
Likewise Ms James expressed frustration that despite engagement and
discussions with 7-Eleven, the pattern of systemic and deliberate falsification
of records had continued for several years:
In the first set of audits, we had some pretty bad results.
We recovered over $160 000 for about 170 workers in Sydney and Melbourne.
Then head office came to us and said they wanted to do something about it, so
we carried out a second round of audits in Melbourne and Geelong. We did find
underpayments there but they were less. We thought that there were improvements
going on. We thought that the work we had done with them, and the education,
gave them the opportunity to work with their franchisees to make sure that they
understood their obligations. So it is disappointing that we invested so much
at that point in time to find, in moving forward into 2014, that we are seeing
the same kind of conduct—and perhaps even on a larger scale.
As noted earlier, a key focus of the FWO is to work with lead businesses
in building a culture of compliance in supply chains. The FWO has pursued
various strategies to achieve this including compliance partnerships,
enforceable undertakings, as well as litigation.
The FWO noted that compliance partnerships are 'increasingly popular
with businesses who wish to make a strong and public commitment to their
employees, franchisees, contractors, customers and the broader community about
compliance with workplace laws'. The FWO currently has 13 compliance partnerships
with businesses including Baiada and McDonalds.
As detailed in chapter 7, Baiada accepted as part of the Proactive
Compliance Deed that it had an 'ethical and moral responsibility to stamp out
exploitation and implement sustainable changes to its business practices to
ensure future compliance'. The measures promulgated by the FWO as part of a
compliance partnership such as that conducted with Baiada include:
robust, transparent and verifiable electronic time-keeping,
payroll and worker identification systems;
regular independent audits and assessments of compliance, both of
the business and of the contractors within the network;
implementation of workplace relations training, including
training 'in-language' for employees from non-English speaking backgrounds;
providing greater access, information and co-operation to FWO
inspectors and advisors;
establishing clear procurement policies and conducting regular
reviews of procurement and outsourcing arrangements to ensure ongoing ethical
properly formalised written contracts with suppliers and
contractors, with clear requirements for compliance with workplace laws.
The enforceable undertaking between the FWO and Coles in 2014 also saw
Coles become 'the first major supermarket chain to publicly declare that it has
an ethical and moral responsibility to join with the FWO to stamp out
The following sections consider the advantages and disadvantages of the
various enforcement activities pursued by the FWO.
The FWO noted that it puts between 40 and 50 matters into court each
year. Court action typically takes more than a year to resolve and in more
complex cases, much longer. The FWO therefore uses court action as a last
resort, usually when an employer has deliberately exploited vulnerable workers
and refuses to cooperate with the FWO. The FWO pointed out that it actively
promotes its litigation program through the media to deter other employers from
breaching the law.
While temporary visa holders made up about 10 per cent of all requests
for assistance to the FWO, since July 2009, temporary visa holders represented
around 20 per cent of the FWO's legal activity for that period. During that
period, the FWO commenced 62 legal matters involving temporary visa holders and
recovered almost $6 million.
The serious nature of the matters involving temporary visa holders saw
an increase in the proportion of cases involving visa holders that the FWO
escalated to court action:
While currently 1 in 10 of the people making a complaint to
our organisation is a visa holder, a visa holder is involved in 1 in 3 of the
matters we have taken to court in the last 18 months.
This is illustrative of the fact that matters involving visa
holders often involve serious and wilful non-compliance, warranting the most
serious of enforcement responses.
In the 2014–15 financial year, the FWO:
commenced 21 court proceedings involving temporary visa workers out
of a total of 50 court proceedings commenced; and
recovered over $1.6 million in unpaid entitlements for temporary
visa workers out of a total of over $22.3 million.
Perhaps the most frustrating aspect (for both the FWO and underpaid
employees) of pursuing court action under the current regulatory and penalty provisions
of the FW Act is the tendency for employers that have engaged in deliberate
underpayment and illegal activity to avoid the full consequences of a court finding.
Unscrupulous employers typically avoided paying the full penalty imposed by a
court through clever corporate restructuring, asset shifting, and corporate
liquidation. The following two cases illustrate how this occurs in practice.
The case against Bosen was the first litigation the FWO took against a
7-Eleven franchisee. The Bosen matter arose as a result of Mr Mohamed Ullat
Thodi approaching the FWO about underpayments during his employment at 7-Eleven
stores in Geelong and South Yarra (see chapter 8). The FWO achieved penalties
of $120 000 against the company, and penalties of $20 000 and
$10 000 against the two directors. However, the company was wound up and
the company penalty was not paid. Although the two directors paid their penalties
of $20 000 and $10 000 respectively, when those penalties were
distributed amongst the six employees that were party to the case, the amount
fell well short of the $85 000 of underpaid wages owed to the workers.
A similar outcome occurred in another court case against a multi-store
7-Eleven franchisee in Brisbane, Mr Mubin Ul Haider. Mr Haider liquidated his
company, with the result that his personal fine as a director was a fraction of
the underpaid wages owed to his employee:
For example, in FWO v Haider Enterprises Pty Ltd (in
liquidation) & Anor, Haider Enterprises had owned and operated several
7-Eleven franchises in Brisbane, and was placed into liquidation shortly after
the FWO commenced court action to enforce a compliance noticed issued by the
FWO that required the company to pay $21 298 in back-pay to a former
migrant worker. In this matter, the Federal Circuit Court ordered the second respondent,
Mr Haider, to pay a penalty of $6120 for his admitted involvement in failing to
comply with the Notice to Produce issued by the FWO, and a penalty of $850 for
his admitted involvement in the failure to comply with the Compliance Notice.
The FWO obtained orders that the penalties be paid to the employee.
The maximum penalty that can be awarded against an individual is
one-fifth of the maximum penalty that can be awarded against a corporation. As
seen in the examples above, the result is that under the current FW Act, the
penalties ordered against a director are often less than the underpayments owed
to a worker(s). In this context, the FWO reiterated their frustration that
corporate employers liquidated their companies after the FWO filed a matter in
court in order to avoid some of the penalties and payments of underpaid wages ordered
The committee also notes that, as detailed in chapter 7, the FWO report
into Baiada found that the web of sub-contracting labour hire companies in the
Baiada labour supply chain also liquidated or de-registered their companies
upon investigation by the FWO in order to avoid potential penalties.
A key impediment to pursuing court action has been the lack of accurate
employment records kept by employers. Ms James noted that in the last financial
year, the FWO had found more 'extreme conduct where there are no records or
fabricated records'. Given the critical importance of accurate record-keeping
in verifying compliance with workplace laws, the FWO noted that unless an
employee had kept quite detailed diary notes, it was very difficult to provide
evidence that was acceptable in a court to establish with certainty the hours of
work and the amounts of underpayment:
The courts have confirmed that employment records are not
merely technical or procedural requirements. Provision of false or misleading
records can have the effect of preventing any action to remedy significant
underpayments of wages, and non-payment of annual leave and superannuation for
those workers who may have been entitled to these employment benefits.
As at 5 February 2016, the FWO had commenced seven court proceedings (five
of which were ongoing) against 7-Eleven franchisees, and had secured one
The visa status of temporary visa workers can also arise as an obstacle
to court proceedings. For example, in the Bosen litigation, Mr Ullat Thodi had
breached his visa conditions with respect to the work hours restriction. He
informed the FWO that he and his fellow 7-Eleven employees would only provide
paperwork about the underpayment if the FWO could guarantee they would not be
deported. Following consultation between the FWO and the DIBP, the DIBP
confirmed an exemption for Mr Ullat Thodi and his fellow employees to enable
the FWO to pursue the case against Bosen Pty Ltd and its co-owners and
directors. The FWO stated that it worked cooperatively with the DIBP to ensure
that visa holders had the right visa status to be able to give evidence in
An enforceable undertaking is an alternative to court proceedings in
cases where a person is willing to admit to contraventions. Enforceable
undertakings are specifically provided for and legally enforceable under the FW
Act and can be accepted if the FWO 'reasonably believes that a person has contravened
a civil remedy provision'.
The FWO uses enforceable undertakings where an employer acknowledges
they have breached the law, and has accepted responsibility for the breach, and
agreed to cooperate with the FWO to remedy the matter. In this respect:
The enforceable undertaking is a company's written commitment
to address contraventions, often through back-payment, and to prevent future
breaches through initiatives such as training sessions for senior managers and
a requirement for companies to perform self-audits and report on compliance at
The FWO executed 42 enforceable undertakings against an employer during
2014–15, a 180 per cent increase on 2013–14. Temporary visa holders were
over-represented in these cases, with 20 out of 42 enforceable undertakings in
2014–15 being executed on behalf of temporary visa holders. The FWO actively
monitors all the enforceable undertakings that it enters into with another
The FWO recovered more than $3.7 million in underpayments through
enforceable undertakings. The majority (93 per cent) related to wages and
conditions breaches, and 48 per cent involved matters relating to overseas
The FWO noted that enforceable undertakings have several benefits
including that they:
minimise costs for all parties;
enable employees to receive unpaid entitlements promptly;
facilitate long-term behavioural change; and
enable legally binding commitments that are different from what a
court would typically order such as donating money to community groups and
registering for the FWO's My Account service.
With respect to the second dot point above, Ms James noted that in the
case of PSP International Trading Pty Ltd involving a 7-Eleven franchisee, the
FWO achieved an enforceable undertaking with the store owner (the employer). It
was Ms James' understanding that the employer had paid the $30 000 that he
owed his workers.
With respect to the final point above, Ms James explained that the FWO
is able to be creative with its enforceable undertakings and extract
undertakings from an employer beyond those that would be applicable under the
FW Act, and therefore beyond what the FWO would be able to achieve through
court action. For example, the enforceable undertaking with Benara Nurseries
imposed obligations on the company to take steps to ensure that the
accommodation used by its workers was 'fit for purpose going forward'.
Proactive compliance deeds
A proactive compliance deed differs from an enforceable undertaking in
several ways. First, it is not enforceable under the FW Act, but is made and
enforced under the general law. Second, a proactive compliance deed does not
require a Fair Work inspector 'to hold any belief that contraventions of civil
remedy provisions are occurring or have occurred'. And third, a proactive
compliance deed is a 'formal agreement between the FWO and an entity, under
general law, to take certain steps aimed at ensuring compliance in that
business and, in some cases, in that business's supply chain'.
In sum, therefore, a proactive compliance deed enables an employer to make
a commitment to comply with workplace laws as well as work with the FWO to
ensure their business and, potentially, other businesses the employer deals
with, comply with workplace laws.
The proactive compliance deed between the FWO and Baiada (see chapter 7)
accomplished this aim by allowing Baiada to make certain commitments to
compliance with workplace laws with respect to the labour hire companies it
used to source labour for its processing sites.
A freezing order is an asset preservation order made by a court,
normally without notice to the respondent party. The aim is to prevent a respondent
circumventing a pending or proposed court process by stripping assets out of a
The FWO explained that the advantage of a freezing order is that it
typically restrains a person from removing, disposing of, or diminishing the value
of any assets up to the anticipated value of the substantive claim. A
limitation is that it does not provide any rights over the assets that are
frozen, meaning there is no priority or guarantee of recovering the value of
any judgment ultimately awarded.
The FWO does not have the power to freeze assets. Instead, the FWO must
apply to a court for a freezing order. In order to secure a freezing order, the
FWO must present sufficiently persuasive evidence.
For example, in FWO v Trek North & Anor, the FWO secured freezing
orders against Trek North's owner and director Mr Leigh Alan Jorgensen. In this
case, the FWO was concerned that Mr Jorgensen would strip company assets or
place the company in liquidation to avoid paying over $95 000 in
court-ordered penalties and back-pay orders.
Similarly, in the ongoing matter of FWO v Grouped Property Services
& Ors, the FWO obtained freezing orders against Group Property
Services' operators to prevent them from dispersing the company's assets up to
the value of alleged underpayments (which were in excess of $300 000).
Resourcing of the FWO
The committee received evidence from several submitters expressing
concern about a lack of resources to enable the FWO to monitor and enforce
compliance across a range of temporary visa programs.
Ms Mogg from Queensland Fruit and Vegetable Growers Ltd (trading as Growcom),
noted that Growcom was working with the FWO to implement the Harvest Trail
campaign in Queensland. However, Ms Mogg expressed concern at what Growcom saw
as a manifest lack of resources available to the FWO given the extent to which
the law was being broken:
For example, in a meeting with the Fair Work Ombudsman this
week on farm, we realised that in an area from Mackay south, down to the New
South Wales border, which is some 1200 kilometres, there are five inspectors in
Fair Work available to this industry. This is not the only industry those five
inspectors cover. And some of those five inspectors are in fact part time. I
think this just demonstrates that the resourcing in this area is woefully
inadequate to address the urgent requirements and breaches that are currently
Similarly, the SDA noted the huge challenge presented to the FWO by
Australia's geography and the large number of temporary visa workers:
It seems unlikely that the FWO's current resourcing is
sufficient, a point which has been highlighted by recent media investigations
into exploitation of temporary migrant workers. The FWO currently has 300
inspectors divided into teams: compliance, early intervention, alternative
dispute resolution and campaigns. Its inspectorate is required to serve up to
11.6 million workers, over 10 per cent of which are temporary migrants with
work rights in the domestic economy.
Eventus argued that 'despite significant increases in visa charges and
associated costs in recent years', the current numbers of Fair Work Inspectors represented
'only a fraction of the resources' required to monitor and enforce compliance
with the 457 visa program.
Eventus stressed the need to target high-risk industries and occupations
with unannounced site visits and warned that 'a lack of compliance activities
puts the integrity of the program at risk' because it increases the chance that
unscrupulous operators will be able to 'operate with impunity'.
By contrast, the Ai Group suggested that the FWO and the DIBP were
working effectively to enforce the law and take action against employers
breaching the law. The Ai Group also noted that the Migration Act 1958 (Migration
Act) was further amended in 2013 by the Migration Amendment (Reform of
Employer Sanctions) Act 2013 that:
...increased the sanctions, including implementing no-fault
civil penalties and increasing criminal penalties, against employers who allow
unlawful non-citizens to work or lawful non-citizens to work in breach of a
visa condition that restricts or prohibits work.
Proposed changes to the powers of the regulator and regulatory regimes
A recurring theme in this inquiry has been the extent to which lead
firms see themselves as responsible for their supply chain, and the extent to
which the law holds leads firms responsible for certain employment
relationships. These issues are particularly relevant where the traditional
direct relationship between employer and employee has given way to various
forms of employment relationships such as labour hire contracting and franchise
Dr Tess Hardy from the Centre for Employment and Labour Relations Law at
Melbourne Law School noted that a growing body of evidence indicated that the
compliance behaviour of employers was 'often shaped by industry dynamics'. Dr
Hardy pointed out certain features common to horticulture, food processing, and
convenience stores (three sectors covered in detail in this report), namely
that each of these sectors appears to be characterised by:
intense price pressures;
a concentration of market power in a limited number of lead firms
(either at the top of the supply chain or at the apex of the franchise network);
small and geographically dispersed employers, including labour
hire providers and franchisees.
The potential for lead firms to accumulate a substantial amount of power
without a concomitant degree of responsibility is perhaps best expressed by a
quote from Dr David Weil, a United States (US) labour academic and current
Administrator of the Wage and Hour Division of the US Department of Labour,
cited in the submission from Dr Hardy:
The failure of public policy makers to fully appreciate the
implications of how major sectors of the society organize the production and
delivery of services and products means that lead businesses are allowed to
have it both ways. Companies can embrace and institute standards and exert
enormous control over the activities of subsidiary bodies. But they can also
eschew any responsibility for the consequences of that control.
Dr Hardy observed that the direct relationship between employer and
employee had been fractured by business strategies such as franchising and
labour hire. Furthermore, the combination of a fragmentation in corporate
structures, 'the doctrine of limited liability, clever corporate structuring
and/or deliberate asset-shifting', meant that the traditional forms of
enforcement litigation may no longer be effective in achieving compliance,
deterrence and compensation. Dr Hardy therefore suggested that punishing an
employer further down the supply chain may not address the root causes of noncompliance
because it fails to take heed of the power exercised by lead firms:
...it is no longer apparent that punishment of the putative
employer will be effective in addressing some of the key drivers of compliance
behaviour, which may be determined by more powerful firms positioned higher in
the supply chain or at the apex of the franchise network.
Nevertheless, Dr Hardy noted that reputational-based sanctions could
prompt significant changes in compliance behaviour in both the lead firm and throughout
a supply chain or franchise network. However, Dr Hardy inserted an important
caveat. She warned that the success of 'the influential model of responsive
regulation is premised on the regulator having a suite of enforcement tools,
including sufficiently strong deterrents, at their disposal'. In other words,
the ability to encourage or compel lead firms to accede to voluntary measures,
such as a Proactive Compliance Deed, could be undermined if lead firms formed
the view that the regulator did not possess a sufficient range of sanctions
that it could bring to bear in any given case.
Further, Dr Hardy warned that without effective sanctions, the
commitment to support ongoing monitoring regimes made by lead firms and
franchisors under voluntary mechanisms such as a Proactive Compliance Deed
could recede over time.
Given the responsibility of the lead firm is no longer so clear in
situations where the employment relationship is fragmented, the remainder of
this chapter examines a range of submitter observations in order to ascertain
whether the compliance and enforcement regime under the FW Act is sufficiently
robust to protect workers from exploitation.
As context to the discussions on the powers of the FWO, penalty regimes,
accessory liability and joint employment legislation, this section begins with
a brief outline of the challenges posed to the FWO's enforcement activity by
illegal phoenix behaviour.
Illegal phoenix activity
The FWO noted that illegal phoenix activity (as opposed to legal phoenix
activity) generally 'describes the situation that arises where companies are
deregistered or liquidated with the intention of avoiding liabilities and
continuing the operation of the business'.
In a letter to Mr Peter Harris AO, Chairman of the Productivity Commission,
the FWO described how the manifestation of illegal phoenix behaviour at the
intersection between the FW Act and the Corporations Act 2001 hindered
the enforcement work of the FWO.
Ms James noted that when an employer is an incorporated entity (as opposed
to a sole trader or partnership), the company bears legal responsibility for
providing the correct employee entitlements. However, the FWO is unable to
pursue enforcement action against a company that has been liquidated or
Section 471B of the Corporations Act 2001 (Cth)
provides that, while a company is being wound up in insolvency or by the Court,
or a provisional liquidator of a company is acting, a person cannot begin or
proceed with a proceeding in court against the company or in relation to the
property of a company, or enforcement process in relation to such property, except
with the leave of the Court and in accordance with the terms imposed by the
Court. Similarly, section 440D provides that, during the administration of a
company, a proceeding in a court (other than a criminal proceeding or a
prescribed proceeding) against the company or in relation to any of its
property cannot be begun or proceeded with except with the administrator's
written consent or with the leave of the Court.
While the FWO cannot pursue enforcement action against a company that
has liquidated or deregistered, the FWO can pursue enforcement action against
the director of a deregistered or liquidated company.
However, the penalties that are able to be imposed on an individual director
are much lower than those able to be imposed on a company. In practice, this
has usually meant that the penalties imposed by the courts on a director are
insufficient to even cover the underpaid wages of temporary visa workers (see,
for example, the Bosen and Haider cases cited earlier).
The FWO pointed out that illegal phoenix activity undermined the FWO's
compliance work by restricting the FWO's ability to recover back-payments owed
to workers from the company. The ability to get around court-imposed sanctions
also significantly reduced the deterrent effect of litigation pursued by the
FWO. The FWO therefore argued that effective deterrents against directors were
needed to combat illegal phoenix activity.
In addition to the current regulatory framework being insufficient to
deter employers from deliberately breaching employment laws, the committee
received evidence that the inability of the FWO to recover the underpaid wages
of employees is having a detrimental impact on the willingness of workers to
come forward with allegations of underpayment and exploitation. For example, as
noted in chapter 8, Mr Ullat Thodi stated that exploited international
students will not bring a claim against their employer because, not only do
they fear deportation, but they point out that despite winning a court case, Mr
Ullat Thodi lost his job, his mental health, and the FWO only recovered a
fraction of his underpaid wages.
Powers of the FWO
Over the course of several hearings, the FWO outlined the extent of
their powers and the extent of civil penalty provisions that apply to a failure
to comply with the lawful requests of a Fair Work Inspector.
Ms James noted that FWO inspectors had the power to enter premises
without force and require records to be handed over, but many times the records
were non-existent. In these circumstances, the FWO did not have the capacity to
compel people to speak with the FWO, to participate in an interview, or to give
evidence to the FWO. Ms James further noted there were 'strong disincentives
for people to talk to us voluntarily' and therefore the FWO experienced real
barriers in getting the evidence to put certain matters into court including,
for example, evidence of hours worked.
The FWO pointed out that it was 'relatively common' for persons to
decline to participate in records of interview with Fair Work Inspectors, and
some also refused or failed to comply with Notices to Produce Records and
Documents issued pursuant to section 712(1) of the FW Act, or produced false
records. Civil penalty provisions only applied to a person who failed to
provide a Fair Work Inspector with their name and address under section 711 of
the FW Act or to a person who failed to comply with a notice to produce records
or documents issued under section 712.
The FWO had no power to compel individuals to co-operate with Fair Work
Inspectors and there was no positive obligation on persons to provide
reasonable assistance to an Inspector who was exercising a power while conducting
an inspection under section 709 of the FW Act. There was no civil penalty for a
person who refused to grant access to a Fair Work Inspector, nor for a failure
or refusal to comply with a request to do any of the things an Inspector can
lawfully require when conducting an inspection as contained in section 709.
According to the FWO, conferring further compulsive powers including
compulsory examination powers on the FWO 'would assist our Inspectors to
address some of the egregious, deliberate, systematic and exploitative examples
of non-compliance encountered in our work'.
In this regard, the FWO noted that 'numerous Commonwealth regulators and
agencies have greater compulsive powers than the FWO and that these powers take
different forms. Examples include:
Fair Work Building and Construction, Chapter 7, Part 1, Division
3 of the Fair Work (Building Industry) Act 2012—power to compel persons
to provide information and/or documents and/or attend for examination to answer
Comcare, Part 9, Division 3, Subdivision 4 of the Work Health
and Safety Act 2011—power to compel production of documents and that a
person answer questions, as well as a power to seize documents and things;
Australian Securities and Investments Commission, ss 19, 35 and
40 to 47 of the Australian Securities and Investments Commission Act 2001—power
to compel a person to provide information and/or reasonable assistance and/or
to attend an examination to answer questions, as well as a power to seize books
(subject to issuing of a warrant);
Australian Consumer and Competition Commission, ss 135 to 135C
and 155 of the Competition and Consumer Act 2010—power to compel persons
to provide information and/or provide documents and/or attend for examination
to answer questions. In addition, there is a power to enter premises in the
absence of consent, where the entry is authorised by a warrant or where
immediate exercise of search related powers is required to protect life or
public safety. Materials may be seized and force may be used executing a
Australian Skills Quality Authority, ss 62 to 71 and 140 of the National
Vocational Education and Training Regulator Act 2011—power to require a
person to produce information, documents or things or to give all reasonable
assistance in connection with an application for a civil penalty order. In
addition, there is power to enter premises in the absence of consent, where
entry is authorised by a warrant. Materials may be seized and force may be used
executing a warrant;
the Secretary of the Department of Immigration and Border
Protection, ss 268CA to 268CZH, 486Y and Part E of the Migration Act—power to
require a person to provide information and/or documents and/or give all
reasonable assistance in connection with an application for a civil penalty
order. In addition, warrants for entry and seizure may be issued in relation to
some matters and force may be used in executing some warrants; and
the Secretary of the Department of Social Services, s 156 of the Paid
Parental Leave Act 2010—power to require a person to give all reasonable
assistance in connection with an application for a civil penalty order.
With regard to the above powers, the FWO noted that various protections were
in place 'including checks and balances to ensure that the power is used
appropriately, proportionately and only where necessary'.
The FWO also noted that, with respect to the above regulators and
agencies, noncompliance or the giving of false evidence could result in fines
Penalty regime under the Fair Work
During the course of the inquiry, the committee received evidence that
pointed to the limited penalty regime under the FW Act in terms of the low
nature of the civil penalties, the apparent impunity with which unscrupulous
operators managed to avoid the full consequences of the existing penalty
regime, and the lack of criminal penalties for serious breaches of the law.
Both Dr Hardy and the FWO pointed out that the FW Act contains only
civil penalty provisions (other than some limited offences relating to the
conduct of proceedings in the Fair Work Commission). The current maximum civil penalties
under the FW Act are $54 000 for a corporation or $10 800 for an
By comparison, the FWO observed that many other Commonwealth statutes
contained either specific criminal offence provisions, or prescribed much
higher maximum civil penalties for contraventions:
the Corporations Act 2001 contains a range of criminal
offences which may attract sanctions including a term of imprisonment or a
pecuniary penalty as well as a range of civil penalty provisions which may
attract relief including pecuniary penalties and compensation orders. A breach
of some obligations, such as a breach of section 208 of the Corporations Act
2001, may constitute either a civil remedy contravention or a criminal
offence depending on whether the contravenor's involvement was dishonest;
civil penalties under the Corporations Act 2001 vary
greatly and can be as much as $1 million for a corporation or $200 000 for
an individual, depending on what provision is contravened. The maximum criminal
penalties are $360 000 or 5 years' imprisonment for an individual and up
to $5 million for a corporation; and
the maximum civil penalty under the Competition and Consumer
Act 2010 is in the region of $500 000 for an individual and $10
million (or a higher amount calculated on the value of benefits for the breach)
for a corporation. The maximum criminal penalties are $360 000 or 10 years'
The FWO noted that the civil remedy provision regime under the FW Act
enabled the FWO to 'seek orders for damages (for example, to recover unpaid
money owed to employees), declarations that contraventions have occurred, and
pecuniary penalties which are subject to legislated maximums'. The FWO further
noted that 'the court is able to make other orders as it sees fit, including,
for example, an order that an employer audit the wages of all of its employees
and provide this information to the FWO'. The FWO stated that the above orders
provided, in many cases, 'sufficient specific and general deterrence against
However, the situation was very different when the FWO had to deal with
parties who deliberately set out to avoid their legislative obligations, for
refusing to comply with notices to produce documents;
keeping or providing false employment records;
dissolving corporate employing entities for improper purposes in
response to our investigations and/or litigations; or
transferring assets out of those corporate employing entities to
avoid the recovery of unpaid employee entitlements.
For example, the absence of records or false records was central to the
exploitation of temporary visa workers at 7-Eleven. Yet the maximum penalty
under the FW Act for knowingly making false or misleading records is 20 penalty
units ($3600) for an individual. By contrast, the maximum penalty under the Migration
Act for providing false or misleading information relating to a non-citizen is
1000 penalty units ($180 000) for an individual, or up to 10 years
The FWO was of the view that the existing legal framework did not
effectively deter unscrupulous employers who deliberately set out to avoid
their legislative obligations. The FWO therefore suggested that:
Having the option of criminal penalties that can result in a
court ordering a term of imprisonment or a significant pecuniary penalty
against an individual may provide a stronger disincentive when dealing with a
party who is prepared to deliberately ignore the operation of the Fair Work Act
The Franchise Council of Australia (FCA) was strongly of the view that 'the
current level of fines in the FW Act should be increased'. The FCA also
strongly supported 'additional provisions to ensure directors of an employer
entity are personally liable in the event of the entity being liquidated
without satisfying debts to employees and penalties to Fair Work Australia'.
Professor Allan Fels, the former head of the Australian Competition and
Consumer Commission (ACCC), was firmly of the view that the penalties and
enforcement arrangements under the FW Act were 'obviously weak'.
Likewise, Professor David Cousins, a former ACCC Commissioner, stated
that compared to consumer law, the penalty provisions under the FW Act were
'totally anomalous' and hindered the FWO in deterring noncompliance with
Sham contracting provisions
Sham contracting is a way in which an employer seeks to avoid the
protective provisions afforded to an employee under employment legislation such
as the FW Act. The FW Act prohibits an employer from 'misrepresenting an actual
or proposed employment relationship as an independent contracting arrangement'.
In other words, sham contracting is illegal.
Section 357(1) of the FW Act states:
(1) A person (the employer)
that employs, or proposes to employ, an individual must not represent to the
individual that the contract of employment under which the individual is, or
would be, employed by the employer is a contract for services under which the
individual performs, or would perform, work as an independent contractor.
However, section 357(2) provides a defence against 'sham' misrepresentations
of the employment relationship 'if the employer proves that, when the
representation was made, the employer did not know and was not reckless as to
whether the contract was a contract of employment rather than a contract for
Section 358 prohibits an employer from dismissing, or threatening to
dismiss, an employee in order to engage the individual as an independent
contractor to perform the same, or substantially the same, work under a
contract for services.
Section 359 prohibits an employer from making a statement that the
employer knows is false in order to persuade or influence an employee or former
employee to enter into a contract for services under which the individual will
perform, as an independent contractor, the same, or substantially the same,
work for the employer.
Unlike a genuine labour hire arrangement, sham contracting occurs when:
...one or more parties seek to disguise (either deliberately or
recklessly) the reality of the relationship between the worker and either that
entity, or other entities. For example, a company may claim wrongly that a
worker is an independent contractor when they are in fact an employee, or that
the worker does not have an employment relationship with another company when
The FWO noted that sham contracting is more prevalent in situations
where 'there are multiple levels of contracting between the business receiving
the benefit of the labour and the people working in the business'.
The FWO also noted that companies engage in sham contracting for a
variety of reasons including:
to avoid the responsibilities associated with having employees,
such as paying annual and personal leave; or
to ensure that the business is unable to meet debts owed to
employees when they are claimed, because the employing entity is
Since the inception of the FW Act, the FWO had commenced 21 proceedings
pursuant to section 357 and/or section 358 of the FW Act in respect of alleged
sham contracting arrangements. The outcomes of those proceedings are as
in 7 proceedings liability was established or admitted;
in 2 proceedings liability was not established;
in 1 proceeding liability was established in part;
11 proceedings are ongoing, or are appeal proceedings.
In terms of the defences available under section 357(2), Dr Hardy noted
that employers have successfully pleaded 'that at the time they made the
representation they did not know, and were not reckless to, the true nature of
the working relationship'. Dr Hardy concurred with various previous inquiries that
recommended section 357(2) of the FW Act be amended to replace the 'recklessness'
defence with a 'reasonableness' defence such that:
...the defence to a sham contracting action under s 357(1)
would only be available where the employer is able to prove that at the time
the representation was made, the employer believed that the contract was a
contract for services rather than a contract of employment, and 'could not
reasonably have been expected to know otherwise'.
As noted earlier, Ms James noted it was up to companies at the top of
the supply chain (such as supermarkets and head franchisors) to assess risk,
responsibility, liability, and reputation in terms of informing themselves and acting
on what is occurring down the supply chain, especially in light of community
debate and media coverage of particular issues.
The accessorial liability provisions are set out at section 550 of the
- A person who is
involved in a contravention of a civil remedy provision is taken to have
contravened that provision.
- A person is involved
in a contravention of a civil remedy provision if, and only if, the
has aided, abetted, counselled or
procured the contravention; or
has induced the contravention,
whether by threats or promises or otherwise; or
has been in any way, by act or
omission, directly or indirectly, knowingly concerned in or party to the
- has conspired with others to
effect the contravention.
The accessory liability provisions mean that a person or entity may be liable
even if they were not the direct employer of the worker whose workplace rights
had been breached. However, that person or entity must be 'knowingly involved'
in a contravention of the FW Act in order to satisfy a charge of accessory
To succeed against an accessory under section 550 of the FW
Act, the Fair Work Ombudsman must firstly prove the contraventions against the
primary contravenor (e.g. the employer). Then, the Fair Work Ombudsman must
prove accessorial liability.
The legal test for accessorial liability requires the FWO to
have sufficient evidence to prove that an alleged accessory:
had actual knowledge of the
essential facts that make up the elements of the particular contravention of
the Act alleged to have been breached (which encapsulates the concept of being
'wilfully blind', that is they deliberately shut their eyes to those facts); and
they were an intentional
participant in the alleged conduct.
In this regard, the FWO pointed out that negligence or recklessness is
not enough to prove accessorial liability:
To bring a successful section 550 action, an applicant must
present sufficient probative evidence to sustain an allegation to the standard
required to prove that a person or corporate entity had 'actual knowledge' of particular
facts at a point in time.
In 72 per cent of the 50 matters the FWO put into court in 2014–15, the
FWO involved an accessory in the matter as well as the employer.
The vast majority of accessories joined to FWO proceedings were directors and
By contrast, Dr Hardy noted that the FWO had brought few cases against a
separate corporation said to be 'involved in' a contravention by the direct
employer. A major exception occurred when the FWO relied on section 550 of the
FW Act to allege that Coles was liable in relation to contraventions (underpayments)
committed by trolley-collecting labour hire companies engaged by the
supermarket chain to provide workers to collect trolleys.
However, the court proceedings were discontinued before the final
hearing when the FWO entered an enforceable undertaking with Coles (under which
Coles ensured that the underpayments were rectified). As a result of the court
case being discontinued, Dr Hardy argued that the scope of the accessorial
liability provisions and their application to labour hire, outsourcing and
franchising arrangements is not entirely certain. In particular, she noted that
the criteria necessary to satisfy accessory liability have not been
authoritatively determined including:
the requisite level of knowledge the accessory needs to have
about the essential matters constituting the contravention;
whether 'wilful blindness' is sufficient to meet this knowledge
whether, in respect of corporate accessories, it is possible to
aggregate the knowledge of various employees and thereby prove that the
corporation itself had requisite knowledge of the contravention.
For example, with respect to a lead firm sourcing labour through a
labour hire company or companies, the FWO noted some of the conditions under
which an individual or entity might be accessorily liable:
A company or individual who is part of the supply chain can
be accessorily liable where it is determined that the company or individual is
aware or at the very least turns a blind eye to the fact that sums paid by the
principal contractor to companies within the supply chain are not sufficient to
meet the lawful labour costs of performing the work.
Dr Hardy noted that the lead firm tended to be better-resourced than
labour hire contractors. This meant that the lead firm was 'less likely to wind
up the relevant corporate entity in order to avoid the consequences of any
relevant court orders', and would be 'in a much more secure financial position
to rectify any relevant underpayment and pay any pecuniary penalties which are
There are no specific penalties for accessorial liability under section
550 of the FW Act. The FWO noted that the maximum penalty depends on the
penalty applicable to the underlying contravention. For example, the maximum
penalties that can be imposed by a court for a breach of a term of a modern
award under the FW Act 2009 are:
60 penalty units per contravention for an individual (60 x the
current value of a penalty unit ($180) = $10 800); and
300 penalty units per contravention for a body corporate (300 x
the current value of a penalty unit ($180) = $54 000).
The issue of seeking compensation orders against an accessory was also
raised. Dr Hardy observed that, historically, the FWO had 'not applied to have
compensation orders awarded against third party accessories' as it appeared to
have considered that such orders were only available against the relevant
Ms James explained that, previously, the FWO had a position that, in
taking action against an accessory under section 550, the FWO sought penalties
against the accessory, but did not seek to directly recover the underpayments
against the accessory:
So what that might mean, for example, is that if we took
action against a company that had gone into liquidation, and we took action
also against the director as an individual, who was knowingly involved in that
breach, then we would seek a penalty against that director, but we would not
seek the underpayments be paid back by the director.
Ms James noted that the FWO would, as a matter of course, ask the court that
the penalty be paid to the employee. However, Ms James pointed out that the
penalty was frequently far less than the underpayment that the employee was
In light of the above, Ms James stated it was her view that the FWO should
be using all means to secure unpaid wages for workers, and that it was in the
public interest that the FWO sought 'to test the boundaries of the law'. More
recently, therefore, the FWO has sought orders from the court for an accessory
to pay the unpaid amount of wages. These cases are currently before the courts.
Ms James further suggested that, in the case of an individual director, a successful
court order for a director to repay a very large underpayment might be a particularly
'Hot goods' provisions
Dr Hardy provided evidence on the 'hot cargo' or 'hot goods' provisions
which apply in the United States of America (US). These particular statutory
provisions have enabled the regulator in the US to enjoin or embargo the
transportation or sale of goods, in the production of which, any employee was
employed in violation of US labour laws.
Although injunctions under the 'hot goods' provisions are not designed
to compensate underpaid employees, Dr Hardy remarked that they often have this
effect in practice because an enjoined party can seek relief by remedying any
past violation of labour laws.
Dr Hardy explained that a crucial aspect of the 'hot goods' provisions
was the way the relevant legislative exemptions have transformed the 'compliance
calculus' of firms throughout the supply chain:
In addition to excluding consumers and common carriers from its
coverage, the hot goods provision also exempts purchasers of goods (including a
retailer, distributor or other intermediary) where they obtained the relevant
goods 'in good faith in reliance on written assurances from the producer' that
they were produced in compliance with the Act, and 'without notice of any such
violation'. The underlying regulations relating to the hot goods provision
further explain that in order to rely on this exclusion, each purchaser has an
'affirmative duty' to assure themselves that the goods were produced in
compliance with the Act. This generally requires the purchaser to show that
they have done all that a 'reasonable, prudent man [sic], acting with due
diligence, would have done in the circumstances'.
Dr Hardy pointed to the benefits that the hot goods provisions have
afforded both workers and the regulator:
The hot goods provision in the FLSA [Fair Labor Standards Act]
have proved useful not only in obtaining quick remedial relief for vulnerable
employees, they have enabled the regulator to bypass the direct employer and
enrol companies higher in the supply chain which have a much stronger incentive
to establish private monitoring arrangements in relation to subcontractors in
order to show that they have fulfilled their relevant statutory duty.
Despite certain limitations, Dr Hardy suggested that two of the
characteristics of the horticulture, food processing and franchising industries
in Australia listed below would make an embargo-like sanction very powerful:
the time between production and sale of the goods is of the
there are large, highly concentrated business entities that have
greater market power than the large set of smaller organisations with which
In light of these characteristics, Dr Hardy noted that a hot goods
provision would provide lead firms, supermarkets, and fast food franchisors with
'a strong commercial incentive to rectify any relevant underpayments as quickly
as possible in order to enable the supply' of products to continue without
Labour hire licensing
Dr Howe argued the need for a regulatory framework that would address
some of the structural vulnerabilities faced by, for example, 417 visa workers
in the horticulture sector. She proposed a combined set of measures that would
an enforceable code of conduct that all the major retailers sign
up to and which growers would also need to sign up to sell produce to a major
labour hire licensing; and
a regular auditing process.
Dr Howe described how this comprehensive system operated in the US:
In Florida there is something called the Coalition of
Immokalee Workers. What the regulatory framework looks like there, very
briefly, is that there is a code of conduct that all the big retailers have signed
up to. If you are a tomato grower, you need to have signed up to that code of
conduct or you cannot sell your produce through the big retailers. What that
code of conduct has—it is not just some airy fairy document, it is
enforceable—is mandatory collective organisation, so those workers are
collectivised because it is recognised that that gives them some security.
Secondly, all labour hire companies are licensed through that process. They
have to be registered. Thirdly, there is a comprehensive auditing process, so
tomato growers are audited for their employment practices, not just through
paper but through someone visiting them.
Various unions recommended a licensing system for labour hire firms that
use temporary visa workers.
Mr Robertson stated that the NUW had been advocating for a system of labour
hire licensing for many years.
Mr Robertson also made the point that while many domestic workers had a
better understanding of their workplace rights than migrant workers, labour
hire operators also engage many local workers. In his view, the problem of
exploitation by labour hire companies therefore went deeper than just visa
issues. Consequently, the NUW favoured a licensing regime for labour hire
operators that would put some protections in place for all workers, and also
make it easier for unions and the FWO to identify the labour hire company.
As noted in chapter 7, research by Dr Elsa Underhill confirmed evidence
received during the inquiry that the exploitation of WHM visa holders was
intensified when WHMs were employed by contractors rather than growers. Dr
Underhill reiterated the substantial difficulties that WHM visa holders faced
in trying to locate a labour hire contractor that only communicated by text
message. With no legal requirement for the contractor to have an official
address, Dr Underhill argued that 'the absence of a licensing system for
contractors and labour hire agencies increased the risks of low and non-payment
of wages experienced by WHMs'.
The committee received evidence about the licensing of labour hire
contractors in other jurisdictions. Dr Hardy noted that the licensing of labour
hire contractors had been introduced in the United Kingdom (UK) in 2006
following a spate of cases involving the severe exploitation of migrant
Known as 'gangmasters' in the UK, labour hire contractors and the
licensing scheme are overseen by the Gangmasters Licensing Authority (GLA)
located in the UK government Home Office. According to its website, the GLA
protects workers from exploitation and its licensing scheme regulates
businesses that provide workers to agriculture, horticulture, forestry,
shellfish gathering and food and drink processing and packaging.
Dr Hardy described various components of the UK labour hire licensing
gangmasters must demonstrate compliance with workplace laws in
order both to receive and maintain their licenses;
the GLA keeps a public register of all licensed gangmasters,
which provides useful information for growers who are obliged to use only licensed
labour providers, as well as trade unions who may be seeking to locate a
particular gangmaster or determine whether a particular gangmaster is licensed
and operating lawfully;
all workers engaged by gangmasters are covered by the scheme,
regardless of whether they are considered employees or independent contractors;
gangmasters must demonstrate that they provide adequate
accommodation to workers;
gangmasters must demonstrate that they comply with employment,
tax and national insurance requirements;
gangmasters are required to maintain status as a 'fit and proper'
provider, which takes into account whether the gangmaster has tried to obstruct
the GLA in the exercise of its functions, any relevant criminal convictions
against the gangmaster and any connection with any person or entity deemed to
not be fit and proper in the previous two years;
gangmasters must not only pay the relevant minimum wage, they
must keep adequate records to demonstrate payment of such wages;
gangmasters that use other gangmasters or subcontractors to
supply workers are obliged to ensure that these subcontractors hold a GLA
where gangmasters are located outside of the UK, they must obtain
a GLA licence in order to supply workers into the UK.
Dr Hardy also pointed out that 'the regulatory regime is supported by a
range of substantial sanctions'. This includes the power of the GLA 'to refuse
or revoke a license or grant a license only on specific conditions' as well as
custodial penalties for certain offences.
The combination of meaningful sanctions, consumer pressure and the
reputational concerns of major firms has led to a collaborative approach
between the GLA, supermarkets, unions and suppliers (including growers) to
develop various guides and protocols to 'ensure the relevant licensing
standards are applied throughout the food produce supply chain'.
Dr Hardy also noted that various stakeholders had pointed out that
reputable labour hire contractors might even benefit from a licensing regime
because it would help eliminate unscrupulous contractors that undercut the
The FWO had a different perspective on the regulation of labour hire
companies. From the FWO's perspective, the key element in the supply chain was
the lead company. Mr Campbell argued that if a lead company had appropriate
systems in place (for example, electronic timekeeping) to assure themselves and
the regulator that the workers on-site were being employed in compliance with
workplace laws, then a lack of record-keeping by the labour hire contractors 'becomes
irrelevant at that point'.
Joint employment legislation
The committee received some evidence from submitters regarding the
concept of joint employment legislation. Dr Hardy noted that 'the concept of
joint employment was originally developed in the context of US employment-based
In general terms, the doctrine of joint employment is a legal
device which allows the court to ascribe liability and responsibility to two
separate legal entities where both entities are found to exercise a requisite
degree of control over the worker or otherwise share employer-like functions
The Australasian Meat Industry Employees' Union (AMIEU) argued that
joint employment legislation was necessary to combat the illegal phoenix
behaviour that had been prevalent in the Baiada labour supply chain.
The Australian Council of Trade Unions (ACTU) supported the introduction
of joint employment legislation as part of a broader suite of measures to
address illegal phoenix activity. The ACTU noted that 'in circumstances where a
labour hire company went into liquidation but was a joint employer with the
host company, the workers could still have recourse to the host for any unmet entitlements'.
Stewart Levitt of Levitt Robinson Solicitors argued that:
The law should be amended to make it a rebuttable presumption
that a master franchisee or the ultimate franchisor is deemed to be a 'joint
employer' for the purposes of establishing civil liability at common law and
also under the Fair Work Act 2009. The burden of proof should shift to
the master franchisee or franchisor, to prove at least on the balance of
probabilities, that they were not aware that wages fraud was being committed by
Dr Hardy was more circumspect. She noted that introducing joint
legislation into the Australian workplace context would be complex, and might
introduce uncertainty and lead to unintended consequences. Her view was that it
would be 'simpler and more straightforward to address key compliance and
enforcement issues through expansion of some of the existing mechanisms under
the FW Act' (such as the penalty regime and amendments to the sham contracting
In light of the above, Dr Hardy outlined ways in which a degree of
responsibility could be placed on the host firm. She cited the 2011 labour law
reforms in Israel where direct responsibility for breaches of minimum
employment standards in sectors such as cleaning and security was placed on the
host firm, not as an employer, but as a guarantor. The Act specified three
factors used to determine whether the host firm would bear responsibility for
the breaches of workplace law:
First, whether the client has taken 'reasonable steps' to
prevent any infringement of workers' rights by the contractor (i.e. labour hire
provider), including by establishing a procedure whereby workers can bring
complaints about the contractor directly to the client.
Second, the client may avoid liability under the Act if they
can show that they hired a 'certified wage-checker' to perform periodical
checks of pay and made sure that any identified underpayments were promptly
Third, the client will be automatically liable for any
relevant underpayments of the agency worker where the client is found to have
paid the contractor a contract price which falls below the minimum required by
The third point above is relatively self-explanatory. That is, a host
firm must put enough money into the labour supply chain to fulfil the minimum
requirements. With respect to the FWO investigation into Baiada, it appeared
that Baiada was putting enough money into the labour supply chain to meet these
requirements. However, as noted in chapter 7, the FWO had serious concerns that
Baiada had not taken 'reasonable steps' to ensure that the labour hire
contractors supplying workers to the Baiada sites in NSW were in fact complying
with the relevant workplace laws. In this regard, Dr Hardy suggested that the
first point could be quite powerful because it provides an incentive for the host
firm to care about the employment conditions of the workers at its sites.
International Convention on Protection of the Rights of All Migrant Workers
and their Families
The committee received evidence on the United Nations International
Convention on Protection of the Rights of All Migrant Workers and their
Families (the convention).
The Human Rights Council of Australia (HRCA) recommended that the
Australian government ratify the convention. The HRCA noted that while the
convention 'does not create any new substantive rights', it advances human
rights for migrant workers domestically and globally 'by reinforcing a trend to
a shared minimum international standard':
Australia is already a party to, or has ratified, all of
those major human rights treaties which contain the rights that are reflected
in the convention. The value of the convention is that it recognises that
migrant workers are a vulnerable population who are at special risk of not
having their human rights observed and protected.
Mr Andrew Naylor, Chairperson of the HRCA noted that ratification of the
convention does not necessarily provide temporary migrant workers with access to
all sectors of the economy because the convention contains provisions for the
government to impose restrictions on the extent to which temporary migrant
workers are permitted to work in Australia. Furthermore, it is open for a
government, when signing and ratifying a convention, 'to opt out or to reserve
their position in respect of particular articles'.
Ms Angela Chan, National President of the Migration Institute of
Australia argued that, based on the nature of its economy and its position in
the region, Australia should ratify the convention:
I think that, as a country in South-East Asia and a leading
country, we should meet as many international obligations as possible, and this
convention looks at protecting the rights of migrant workers and their families
in the host country. I do not think that is a big thing to expect of Australia,
who is an advanced economy. We are very proud of saying we are an advanced,
First World economy, so I do not see that costs and compliance should be an
While several organisations argued that ratifying the convention would
encourage a greater policy focus on migrant workers, Dr Joanna Howe and Professor
Alexander Reilly pointed out that international students are excluded from
protection under the convention.
Evidence to the inquiry noted that labour hire can be a valuable way to
fill temporary labour gaps, particularly in seasonal industries like
horticulture that require workers for short, intensive periods. Likewise, the
committee heard that franchising had given many small-business owners the
opportunity to become part of a successful brand. The committee therefore
states at the outset that it is concerned to ensure that lawful and legitimate
business practices continue to prosper.
However, it has also become apparent through this inquiry that certain
parts of the labour hire industry and the franchise sector have been a breeding
ground for the widespread and egregious exploitation of temporary visa workers Both
these sectors reflect a trend where lead firms have increasingly moved away
from the traditional direct employment of labour to a system of indirect
employment. Numerous submitters and witnesses remarked on the highly
competitive nature of various supply chains, the squeeze on profit margins, and
the consequent downward pressure on the wages and conditions of workers.
Provision of information and
The committee received evidence that many temporary visa workers have a
minimal or non-existent understanding of Australian minimum wages, and
workplace laws and customs. Furthermore, temporary visa workers have few
connections to support networks that could assist them in finding out about and
securing their workplace rights.
The committee is of the view that there needs to be a preventative approach
to the exploitation of temporary visa workers that includes the provision of
information and educational materials, plus due attention to the structural
design of the temporary visa programs, complemented by an adequately resourced
regulator and appropriate penalties under the FW Act.
The DIBP provided the Grant Notification and Visa Grant Notice that the
department provides upon the grant of a temporary visa. The Visa Grant Notice
provides advice on workplace rights including links to the Fair Work
Information Statement, links to videos at the FWO website, and links to
information on finding out about the relevant minimum wage.
However, the committee understands that the key focus of many temporary
visa workers on arrival in Australia is survival. It is therefore important
that there are other sources of information as well as other avenues for
support once temporary visa workers have begun to settle into the country.
Many submitters pointed to the enormous benefit that international
students bring to both the university sector and the broader economy. The
committee is firmly of the view that universities have a duty of care to their
international students. There should be a greater onus on universities to take
better care of international students through a proactive information campaign
around workplace rights.
The committee recommends that universities consider how best they might
develop proactive information campaigns for temporary visa workers around
The committee also received evidence about the valuable work done by
temporary migrant support networks where temporary migrant workers can meet
safely to discuss workplace concerns, overcome cultural and language barriers,
and devise strategies to protect their rights.
The committee notes the International Student Welfare Grants program
recently launched by the Victorian state government. The committee is of the
view that funding should be available on a national basis to help improve the
protection of the workplace rights of temporary visa workers. This funding
should be made available to non-governmental organisations, registered
organisations, employer associations, and advocates on a submission-only basis.
The committee recommends that the Department of Immigration and
Border Protection provide funding on a submission basis for non-governmental
organisations, registered employer organisations, trade unions, and advocates
to provide information and education aimed specifically at improving the
protection of the workplace rights of temporary migrant workers.
Monitoring and enforcing compliance
The committee also heard about the difficulties that the regulator and
the unions face in trying to monitor compliance with workplace law and gather
sufficient documentary evidence about the exploitation of temporary visa
workers. The difficulty in monitoring compliance and securing evidence can be
traced to a range of factors.
First, visa workers are understandably wary of the risks in speaking out
about their exploitation given the tenuous nature of their residency in the
country. This fear is compounded in many instances by employers coercing their
employees into breaching a condition of their visa in order to gain leverage
over them. The committee is of the view that the recommendations 23, 24 and 25
made in chapter 8 will help to address these matters.
However, given the fear that amongst so many temporary visa holders
about their precarious visa status and the potential for deportation over
minor, inadvertent or coerced breaches of their visa conditions, the committee
is also concerned about the perceptions that temporary visa workers have of the
relationship between the FWO and the DIBP.
The committee received conflicting evidence on the relationship between
the FWO and the DIBP. The committee acknowledges the FWO has told the committee
in evidence that Fair Work inspectors make it clear to visa holders that the
FWO is not interested in their visa status, but is only concerned with building
a relationship with the aim of rectifying matters such as underpayment.
Furthermore, the committee recognises the FWO has secured agreement from
the DIBP in the past (in the Bosen case, for example) to not pursue temporary
visa holders for a breach of their visa conditions in order to allow the FWO to
pursue litigation on behalf of exploited temporary visa workers. The DIBP has
also given a similar commitment not to pursue visa matters against temporary
visa workers who come forward to make a claim for underpayment to the Fels Wage
Fairness Panel with respect to their employment at 7-Eleven.
It is unlikely that the perceptions of temporary visa workers about the
relationship between the FWO and the DIBP, however misconstrued, can be
reversed in the short term. Indeed, greater confidence in the powers and
independence of the FWO may only come about over time as the FWO is able to
achieve greater success in litigation outcomes that recover the full sum of
underpayments for exploited temporary visa workers. The recommendations on the
powers of the FWO and changes to the penalty should assist in this regard.
However, the committee is concerned to reinforce what appears to already
be the operating procedure for the FWO with regard to the DIBP. The committee
therefore is of the view that the memorandum of understanding between the FWO
and the DIBP should prohibit the FWO from providing the DIBP with the identities
of temporary visa workers who have reported instances of exploitation.
The committee recommends that the identities of migrant workers who
report instances of exploitation to the Fair Work Ombudsman or to any other
body should not be provided to the Department of Immigration and Border
Protection. The committee further recommends that this prohibition should be
written into the Memorandum of Understanding between the Fair Work Ombudsman and
the Department of Immigration and Border Protection.
The second reason for the difficulties faced by the FWO in monitoring
compliance with workplace laws is the fact that unscrupulous employers who
deliberately break workplace laws and exploit their employees either do not
keep records, or else deliberately falsify or destroy them.
In light of these illegal practices, the inability of the FWO to obtain
evidence from those suspected of breaching workplace laws, and from those
suspected of being an accessory to such a breach, raises questions about the
appropriateness of the powers available to the regulator and its ability to
carry out its designated tasks, including the protection of vulnerable workers
and the pursuit of enforcement litigation that seeks to impose civil penalties.
When confronted by the falsification of evidence, or a pre-determined
decision by an unscrupulous employer not to keep records precisely to avoid
presenting the regulator with documentary evidence, or indeed a lead firm or
head franchisor that denies it had any knowledge of underpayments in its supply
chain or franchise network, the FWO struggles to proceed further. In such circumstances,
the FWO risks being seen as a toothless tiger.
Moreover, even when the FWO has pursued successful court action, the
derisory penalties currently available under the FW Act often do not cover the
underpayments due to the workers, and are manifestly insufficient to act as a deterrent
to illegal behaviour.
This was clearly evident during the inquiry where it became apparent
that certain employers built the potential for a minimal penalty into their
Furthermore, it was also apparent from the evidence provided by the FWO
that certain employers were able to avoid the major part of any penalties by
simply indulging in various forms of corporate restructuring such as asset
shifting and illegal phoenix behaviour including liquidating or deregistering
their companies upon investigation by the FWO.
Given the price pressures operating throughout a supply chain, often
driven by the market power of a major retailer such as a supermarket or
franchisor, it was pointed out to the committee that the thrust of the
regulatory regime should be directed to shifting the behaviour of employers at
the level of the market as a whole, rather than just at the level of the
In this respect, the committee notes that the FWO has sought to harness
the power and resources of lead firms to commit, albeit on a voluntary basis,
through measures such as a Proactive Compliance Deed, to take actions to secure
compliance with workplace law from the companies in the relevant supply chain.
The committee therefore recognises that the FWO has attempted to
leverage its limited resources by shifting part of the enforcement burden onto
lead firms such as Baiada that are in a position to absorb some of those costs
and that responsibility.
Nevertheless, various submitters and witnesses drew attention to the
limitations of a voluntary approach. In particular, the committee heard that
voluntary approaches may only be effective if, and only if, the regulatory
regime contains sufficient incentives and sanctions to induce or compel a lead
firm to actively participate driving structural change.
For example, the committee notes that Baiada suggested that the steps it
had taken as a company to ensure compliance with workplace laws through its
labour hire supply chain could provide a model for others across various
The committee does not necessarily disagree with this view. However, the
committee is concerned that, in the absence of consumer pressure on the readily
identifiable brand of a lead firm, there is currently little incentive for lead
firms to engage in this sort of compliance monitoring because the powers of the
regulator appear inadequate in certain instances, and, in many cases, there is
no credible threat of liability or sanction.
These considerations bring the committee to the issue of the resourcing
of the FWO, the powers of the FWO, and the various measures currently available
under the FW Act including the penalty regime, the accessory liability provisions,
and the sham contracting provisions.
Resourcing of the Fair Work
One of the key themes that became apparent through this inquiry is that,
until recently, the widespread and appalling treatment of temporary visa
workers in Australia largely went unnoticed for years.
The committee was particularly struck by the scale of the underpayments
uncovered by the FWO and the fact that cases involving temporary visa workers
accounted for a disproportionate amount of the total cases pursued by the FWO.
The size of the problem was made plain during the inquiry as the
committee received evidence from:
457 visa workers in the construction industry and the nursing
417 visa holders recruited by labour hire companies to work in
the meat processing and horticulture sector sectors; and
international student visa holders working in 7-Eleven stores
around the country.
Yet, growers, employer organisations, and unions remarked on the small
network of FWO field officers covering a vast array of industry sectors with a
wide geographical spread across Australia. The committee was left in no doubt
that many groups viewed the FWO as woefully under-resourced.
The committee understands that the FWO has leveraged its resources to
achieve compliance outcomes with lead firms as well as pursuing some litigation
outcomes against companies and persons that have breached workplace law.
The committee is of the view that it is absolutely vital the FWO be
adequately resourced to do its job effectively. However, in a period of budget
constraints, the committee recognises that the budget and resources of the FWO is
the proper subject of an independent review (the committee makes a
recommendation on this matter below).
Powers of the Fair Work Ombudsman
The FWO gave evidence to the inquiry that it is constrained in its
evidence gathering capacity by its inability to obtain evidence from persons who
have chosen to deliberately contravene workplace laws, including those who may
be an accessory to illegal activity.
The FWO noted that it is a relatively common occurrence for persons to
decline to participate in records of interview with Fair Work Inspectors, and
some also refuse or fail to comply with Notices to Produce Records and
Documents issued pursuant to section 712(1) of the FW Act 2009 or produce false
The FWO pointed out that in such circumstances, it becomes a challenging
task for a Fair Work Inspector to assemble the necessary evidence required to
prove a contravention of the FW Act, including for example evidence of hours
The FWO observed that it does not have any power to compel individuals
to co-operate with Fair Work Inspectors and there is no positive obligation on
persons to provide reasonable assistance to an Inspector who is exercising a
power while conducting an inspection under section 709 of the Act.
Furthermore, civil penalty provisions only apply to a person who fails
to provide a Fair Work Inspector with their name and address under section 711
of the FW Act or to a person who fails to comply with a notice to produce
records or documents issued under section 712.
An inspector may only enter certain premises for inspection purposes
without force and no civil penalty applies for a refusal to grant access, nor
for a failure or refusal to comply with a request to do any of the things an
Inspector can lawfully require when conducting an inspection as contained in
section 709, leaving criminal offences under the Criminal Code as the only
The FWO noted that numerous Commonwealth regulators and agencies have
greater compulsive powers than the FWO and that these powers take different
forms. For example:
Fair Work Building and Construction (FWBC) has the power to
compel persons to provide information and/or documents and/or attend for
examination to answer questions;
Comcare has the power to compel production of documents and that
a person answer questions, as well as a power to seize documents and things;
ASIC has the power to compel a person to provide information
and/or reasonable assistance and/or to attend an examination to answer questions,
as well as a power to seize books (subject to issuing of a warrant);
the ACCC has the power to compel persons to provide information
and/or provide documents and/or attend for examination to answer questions. In
addition, there is a power to enter premises in the absence of consent, where
the entry is authorised by a warrant or where immediate exercise of
search-related powers is required to protect life or public safety. Materials
may be seized and force may be used executing a warrant; and
the Australian Skills Quality Authority (ASQA) has the power to
require a person to produce information, documents or things or to give all
reasonable assistance in connection with an application for a civil penalty
order. In addition, there is power to enter premises in the absence of consent,
where entry is authorised by a warrant. Materials may be seized and force may
be used executing a warrant.
The FWO noted that the provisions set out above contain a range of
protections for those who are the subject of an exercise of the relevant power,
including checks and balances to ensure that the power is used appropriately,
proportionately and only where necessary. In all cases, fines and/or
imprisonment may result in cases of non-compliance or the giving of false evidence.
Court orders may also be sought in some cases to compel a person to comply.
The FWO was of the view that conferring further compulsive powers,
including compulsory examination powers, on the FWO would assist its Inspectors
to address some of the egregious, deliberate, systematic and exploitative
examples of non-compliance encountered in its work.
In addition, it appears to the committee that the power to compel
evidence may be relevant to the ability of the FWO to make full use of the accessory
liability provisions under the FW Act, particularly with reference to obtaining
evidence from lead firms such as a head franchisor or the head of a supply
For example, evidence to this inquiry challenged the notion put forward
7-Eleven that it was unaware of the racket that its franchisees were running. The
committee shares the view of many submitters and witnesses, that the
protestations by the former chairman of 7-Eleven and other senior executives
that they were simply unaware of the mass underpayment of employees defy
The committee is strongly of the view that it would be in the public
interest to get to the bottom of these matters. The committee is mindful of the
frustration expressed by several witnesses that the FWO appears unable to
obtain evidence from key executives and board members at 7-Eleven that would
allow it to ascertain whether or not 7-Eleven was wilfully blind, or perhaps,
complicit in what was occurring throughout its franchise network.
The committee is therefore persuaded by the evidence from this inquiry
that the powers of the FWO require careful review in order to assess their
appropriateness (the committee makes a recommendation on this matter below).
Evidence from a broad range of submitters drew attention to the fact
that the current penalty regime under the FW Act does not deter deliberate
contraventions of workplace law. Professor Allan Fels, for example, the former
chairman of the ACCC, noted that the penalties and enforcement arrangements
under the FW Act are 'obviously weak'.
The current maximum civil penalties under the FW Act are $54 000
for a corporation or $10 800 for an individual. By contrast, the penalties
under other Commonwealth legislation such as the Corporations Act 2001 and
the Competition and Consumer Act 2010 are an order of magnitude higher.
The maximum civil penalty under the Competition and Consumer Act 2010 is
in the region of $500 000 for an individual and $10 million for a
Furthermore, the maximum penalty under the FW Act for knowingly making
false or misleading records is 20 penalty units ($3600) for an individual. By
contrast, the maximum penalty under the Migration Act 1954 for providing
false or misleading information relating to a non-citizen is 1000 penalty units
($180 000) for an individual, or up to 10 years imprisonment.
This is of vital concern given that the absence and deliberate
falsification of employment records played a crucial part in the exploitation
of temporary visa workers at 7-Eleven, and of 417 visa workers supplied by
labour hire contractors to work in the meat processing and horticulture sectors.
Indeed, the current penalty regime under the FW Act almost invites unscrupulous
employers to treat the law with impunity. The current penalties on company
directors under the FW Act operate as the equivalent of a parking fine for some
of the unscrupulous 7-Eleven franchisees, and directors of labour hire
companies, who have built the systematic exploitation of visa workers into
their business models.
Furthermore, even when the FWO has secured a conviction, employers that
deliberately set out to avoid their legislative obligations have evaded the
full consequences of the existing penalty regime through various forms of
corporate restructuring, asset shifting, and liquidating the company.
The derisory penalties under the FW Act therefore undermine the enforcement
activity of the FWO by sending the wrong signal to unscrupulous employers.
Furthermore, they offer no comfort to legitimate businesses whose operations
are undercut by dodgy operators. In addition, because the penalties obtained
from directors are insufficient to cover the total amount of underpayments,
vulnerable employees who have been ripped off, and have taken their case to the
authorities, are left out-of-pocket. This further discourages other employees
from coming forward with evidence of unlawful activity.
As many submitters have pointed out, there is a clear need to increase
the penalty for directors in order to send the right signal and to help combat
the pernicious effects of illegal phoenix activity. Furthermore, the penalties
for the deliberate falsification of employment records or the failure to keep
adequate employment records need to be increased.
It is therefore clear to the committee that the penalty regime under the
FW Act and the resources and powers of the FWO are in need of urgent review.
Accessory liability provisions
The FWO advised the committee that the accessory liability provisions
under the FW Act mean that a person or entity may be liable even if they were
not the direct employer of the worker whose workplace rights had been breached.
However, that person or entity must be 'knowingly involved' in a contravention
of the FW Act in order to satisfy a charge of accessory liability. Negligence
or recklessness is not enough to prove accessorial liability.
The committee notes the view of some submitters that because the FWO has
brought few cases against a separate corporation said to be 'involved in' a
contravention by the direct employer, the scope of the accessorial liability
provisions and their application to labour hire, outsourcing and franchising
arrangements has not yet been conclusively determined by the courts.
This legal uncertainty includes the criteria necessary to satisfy
accessory liability, including the requisite level of knowledge the accessory
needs to have about the essential matters constituting the contravention. This
uncertainty extends to whether 'wilful blindness' is sufficient to meet this
knowledge requirement, and whether, in respect of corporate accessories, it is
possible to aggregate the knowledge of various employees and thereby prove that
the corporation itself had requisite knowledge of the contravention.
Some submitters also expressed the view that, depending on the decisions
made by the courts, the accessory liability provisions may not be sufficiently
flexible to deal with some of the cases uncovered during the course of this
inquiry. As noted in the section on the powers of the FWO, these questions are
particularly relevant to the question of whether 7-Eleven Head Office may be
liable as an accessory to what was occurring in its franchise chain.
The committee also notes the FWO has cases before the courts seeking to
directly recover underpayments against an accessory (as well as seeking
penalties). The committee is pleased the FWO is testing the boundaries of the
law in this area in an effort to put unpaid wages back into the hands of
The committee concurs with the FWO that, in the case of an individual
director, a successful court order for a director to repay a very large underpayment
might be a more effective deterrent than the woefully inadequate penalties
currently applicable under the FW Act.
Given the FWO inquiry into 7-Eleven is still underway, and other cases
are before the courts, the limits of the accessory liability provisions and the
ability of the FWO to make full use of them is not entirely certain.
At the same time, the committee recognises the accessory liability
provisions need to be seen as a credible threat before they can play an
effective role in changing the compliance calculus of lead firms in Australia.
The committee is therefore of the view that the utility of the accessory
liability provisions, and the ability of the FWO to make full and effective use
of them, should also form a part of the independent review.
Sham contracting provisions
Evidence to the inquiry suggested that the sham contracting provisions
in the FW Act may not be working as originally intended. This is because, in
part, the defences available to a sham representation are relatively generous
and somewhat ambiguous.
It was suggested to the committee that the FW Act be amended to replace
the 'recklessness' defence with a 'reasonableness' defence such that the
defence to a sham contracting action under s 357(1) would only be available
where the employer was able to prove that at the time the representation was
made, the employer believed that the contract was a contract for services
rather than a contract of employment, and could not reasonably have been
expected to know otherwise.
Given the seriousness of sham contracting and its implication in many
instances of worker exploitation, the committee is persuaded that tightening up
the defences to the sham contracting provisions will improve worker protection
by helping ensure that employers take all reasonable steps to assure themselves
that the relationship in question is not an employment relationship.
The committee also received evidence that previous inquiries had already
recommended the 'recklessness' defence be replaced with a 'reasonableness'
defence. The committee further notes that the Productivity Commission Inquiry
Report on the Workplace Relations Framework (30 November 2015) found that:
It is too easy under the current test for an employer to
escape prosecution for sham contracting. Recalibrating the test from one of 'recklessness'
to 'reasonableness' is justified.
The committee is strongly of the view that the government should act
promptly on the Productivity Commission finding, and therefore recommends that the
'recklessness' defence in section 357(2) of the FW Act be replaced with a
The Committee recommends that the 'recklessness' defence in section
357(2) of the Fair Work Act 2009 be replaced with a 'reasonableness'
However, the committee notes that the FWO has a case on appeal in the
High Court. This follows a decision by the Full Court of the Federal Court that
adopted a narrow interpretation of the sham contracting provisions.
The committee received evidence that unless this narrow interpretation
is reversed on appeal, it may mean that the sham contracting provisions can be
readily circumvented by certain types of third party contracting arrangements.
Depending on the High Court decision, the sham contracting provisions
may, therefore, be in need of further review to the extent that they can be
readily circumvented by certain types of third party contracting arrangements.
The committee recommends that the government commit to undertake an
independent review of the resources and powers of the Fair Work Ombudsman, and
the penalty, accessory liability, and sham contracting provisions under the Fair
Work Act 2009. The government should appoint, by 30 June 2016, an independent
tripartite panel to conduct the review.
The review should make recommendations on the adequacy of the resources
of the Fair Work Ombudsman; the appropriateness of the powers of the Fair Work
Ombudsman; the appropriateness of the penalty provisions under the Fair Work
Act 2009; the utility of the accessory liability provisions under the Fair
Work Act 2009; and the utility of the sham contracting provisions under the
Fair Work Act 2009.
The committee further recommends that the review report be provided to
the Minister of Employment by 30 October 2016, and that the report be tabled in
both Houses of Parliament by 30 November 2016. The committee provides Terms of
Reference for the review in Appendix 3.
Labour hire licensing
The committee received harrowing evidence from temporary visa holders
who had been exploited by unethical labour hire contractors. It is clear from
the evidence, that some of the worst exploitation of temporary visa workers
occurred at the hands of labour hire companies.
One of the proposals put to the committee by several submitters (to deal
with rogue operators) was the introduction of a licensing regime for all labour
hire contractors. The committee was pointed to the example of the Gangmasters
Licensing Authority in the UK that licenses and regulates labour hire
Evidence to the committee set out the various components of the UK labour
hire licensing scheme including that:
labour hire contractors must demonstrate compliance with
there is a public register of all labour hire contractors;
all workers engaged by labour hire contractors are covered by the
scheme, regardless of whether they are considered employees or independent
labour hire contractors must demonstrate that they provide
adequate accommodation to workers;
labour hire contractors must demonstrate that they comply with
employment, tax and national insurance requirements;
labour hire contractors are required to maintain status as a 'fit
and proper' provider;
labour hire contractors must pay the relevant minimum wage and
keep adequate records;
labour hire contractors that use other labour hire contractors or
subcontractors to supply workers are obliged to ensure the subcontractors hold
a licence; and
where labour hire contractors are located overseas, they must
obtain a licence in order to supply workers into the UK.
A significant benefit of labour hire licensing is the creation of a
level playing field for legitimate labour hire companies and for businesses that
use labour hire contractors to source labour. A public register of licensed
labour hire contractors would also help supermarkets and other lead firms
assure themselves that their supply chains are free of worker exploitation.
Labour hire licensing would also allow the FWO and trade unions to easily
locate a particular labour hire contractor and verify whether that contractor is
licensed and operating lawfully.
In budgetary terms, the licensing regime would be self-funding because
the cost of administering the scheme would be covered by the license fee. The
licensing regime could also incorporate sanctions in that the licensing
authority could be given the power to refuse or revoke a license based on
specified breaches of the licensing regime.
The committee is of the view that a licensing regime for labour hire
contractors is vital to disrupt the current business model of unscrupulous
labour hire contractors in Australia (who use their connections with labour
hire agencies located overseas) to supply vulnerable temporary visa workers to
pre-allocated jobs in Australia. In this context, labour hire licensing can be
seen as an essential element in restoring Australia's global reputation as a
The committee recommends that a licensing regime for labour hire
contractors be established with a requirement that a business can only use a
licensed labour hire contractor to procure labour. There should be a public
register of all labour hire contractors. Labour hire contractors must meet and be
able to demonstrate compliance with all workplace, employment, tax, and
superannuation laws in order to gain a license. In addition, labour hire
contractors that use other labour hire contractors, including those located
overseas, should be obliged to ensure that those subcontractors also hold a
'Hot goods' provision
The committee received evidence that the hot goods provisions in the
United States have transformed the compliance calculus of firms throughout the
supply chain. Noting the potency of embargo-like sanctions when the time
between production and sale of a good is of the essence, the committee can see
the potential value of the regulator having recourse to such a power in the
horticulture and food processing sectors.
The committee deems the hot goods provisions to be worthy of further
consideration should the other measures proposed in this chapter fail to
adequately reset the compliance calculus. However, the committee is of the view
that reviewing the resources and powers of the FWO and increasing the penalty
regime under the FW Act are the first order of business.
Many submitters and witnesses noted that lead firms at the head of
supply chains should shoulder more responsibility for ensuring compliance with
Many also suggested that legislative amendments should be considered
that might have the effect of apportioning some degree of liability to, for
example, a head franchisor. The committee made recommendations on this matter
in chapter 8.
The committee received conflicting evidence on the desirability and
effectiveness of joint employment legislation. While there were calls from some
stakeholders to introduce joint employment legislation modelled on that used in
other jurisdictions, the committee was also cautioned about the potential for
unintended consequences and the potentially counterproductive impacts for
workers if a lead firm sought to further distance itself from the employment
The committee is of the view that the recommendations it has made
regarding changes to certain provisions under the FW Act and changes to the
powers available to the FWO are the logical first step to changing the
In light of the relatively modest but potentially powerful changes that
can be effected to alter the sham contracting provisions and the penalty
regime, the committee is not persuaded that joint employment legislation is
either desirable or necessary at this juncture.
It is the committee's view that the recommendations it has put forward
should be implemented first and carefully monitored to assess their impact,
before further changes such as joint legislation are considered. In this
regard, the committee therefore expresses its confidence that the
recommendations it has made in this report are sufficient to change the
compliance calculus in Australia.
International Convention on
Protection of the Rights of All Migrant Workers and their Families
Evidence to the committee noted that ratification of the United Nations International
Convention on Protection of the Rights of All Migrant Workers and their
Families would not create any new substantive rights, and that provisions
under the convention would still allow the government to impose restrictions on
the extent to which temporary migrant workers are permitted to work in
However, ratification would signal that Australia recognises migrant
workers and their families to be a particularly vulnerable group. Given the
scale of the exploitation of temporary visa workers revealed during this
inquiry, the committee is persuaded that ratification of the convention would be
a positive step towards encouraging a greater policy focus on Australia's
system of temporary visa programs and the protection of temporary migrant workers
The committee recommends that Australia ratify the International
Convention on Protection of the Rights of All Migrant Workers and their
The reality of Australia's geography, the increasing use of temporary visa
workers, and financial constraints around adequately resourcing the FWO, mean
that compliance monitoring and enforcement by the regulator is only one aspect
of the equation.
It is for this reason that the committee has also recommended a range of
measures in this report. These include further efforts to improve the
dissemination of information to temporary visa holders, and proper attention to
the structural design of the various temporary visa programs including the
establishment of a genuinely tripartite body to oversee matters relating to
skills shortages, training, and labour migration.
At the end of the day, unless the suite of measures outlined in this
report is implemented, the unfettered exploitation of temporary visa workers
will continue. This will have serious consequences for the temporary visa
workers themselves, and will place further downward pressure on the wages and
conditions of local workers.
Further media exposés
of exploitation also risks eroding public confidence in the system of temporary
migration. Given the vital role played by temporary labour migration in many
sectors of the economy, particularly rural and regional Australia, this is a major
Finally, Australia's reputation as a fair wage country risks being
irreparably damaged, particularly in countries in south-east Asia and on the
Indian subcontinent. The committee is confident that the measures proposed in
this report will help ensure that Australia's temporary visa programs benefit temporary
visa workers as well as bring benefits to Australian society and the Australian
Senator Sue Lines
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