David Marin-Guzman
March 1, 2017
AFR
The Turnbull government has introduced tough new laws that make franchisors liable for underpayments of workers by their franchisees and dramatically raise maximum fines for businesses to more than half a million dollars.
The potentially game-changing laws will bring franchise head offices, including major companies facing underpayment allegations such as 7-Eleven, Domino’s, Baker’s Delight and Pizza Hut, directly under the Fair Work Act for the first time.
Franchisors and holding companies could face fines of $54,000 for their franchisees’ underpayment offences where “they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them”.
“The new responsibilities will only apply where franchisors and holding companies have a significant degree of influence or control over their business networks,” the bill’s explanatory memorandum said.
Franchisees and other corporations will in turn face a ten-fold increase in the maximum penalty for deliberate and systematic underpayments, rising from $54,000 to $540,000 per offence. Fines for individuals will also jump from $10,800 to $100,800.
For the first time, it will be an offence to engage in “cashbacks”, a phenomenon seen in the 7-Eleven scandal where managers would force workers to withdraw money and pay back portions of their wages while paying them the “correct” amounts on the books.
The government said the bill address concerns penalties are too low to deter unscrupulous employers because “the costs associated with being caught are seen as an acceptable cost of doing business”.
Employment Minister Michaelia Cash said exploitation of workers was “un-Australian” and would not be tolerated.
“The Turnbull government’s message is very clear –the overwhelming majority of employers do the right thing and will not be impacted by this legislation. However those who are found to have exploited workers can expect to face tough new penalties.”
The laws could better enable the Fair Work Ombudsman to take action against franchise head offices after it failed to pursue the 7-Eleven head office over systemic underpayments after citing the Fair Work Act’s high threshold to establish accessorial liability.
The FWO will also be given new investigative powers, similar to the construction industry watchdog, in which it can compel employers or employees to answer questions or produce information. Interviewees cannot refuse to answer questions on grounds of self-incrimination.
“Today’s legislation will ensure our workplace regulator has the necessary powers and resourcing so that those who underpay or exploit workers are targeted, investigated and penalised appropriately,” Senator Cash said.
Opposition employment spokesman Brendan O’Connor said the government had not acted fast enough to deal with “systemic worker exploitation”.
“Labor has been constantly demanding the Government brings forward legislation and will scrutinise this proposed bill to make sure it genuinely protects all workers not just employees of franchises.”
Last year, Labor proposed penalties of up to $1 million for a corporation and two years jail for individuals who deliberately or recklessly underpay workers.
End to ‘strict’ approach to EBAs
The government also introduced a separate bill to stop the Fair Work Commission’s scheduled reviews of minimum award conditions on grounds they “represent a significant regulatory burden” and predicting it would save unions and employer groups $87 million over the next ten years.
The bill will allow the current award review to continue, which recently saw cuts to Sunday penalty rates, but will prevent the next review scheduled for later this year. The reform is expected to have bi-partisan support, with unions and employers formally requesting the change.
The government will also change the Fair Work Act to prevent an “overly strict approach” to approving enterprise agreements that has seen employers’ negotiations invalidated because they included an incorrect phone number or stapled the wrong pages together in bargaining.
It will also set up a formal mechanism to investigate and inform parliament about misconduct of Fair Work commission members after gaps in the law were exposed in the saga involving former vice president Michael Lawler.
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