Vulnerable workers legislation passes Senate: What your business needs to know about the tough new penalties

After fierce debate, the federal government has finally secured changes to the Fair Work Act designed to hit “dodgy bosses” harder, complete with tougher penalties and some new powers for the Fair Work Ombudsman.

The Fair Work Amendment (Protecting Vulnerable Workers) Bill was introduced into the House of Representatives in March, with Employment Minister Michaelia Cash pledging at the time to weed out employers that fail to comply with minimum payment standards, or turn a blind eye to lack of compliance in their franchise networks.

Franchising experts have been outspoken in opposition to the bill, telling SmartCompany it would be a disincentive to operators starting new businesses because of the increased levels of liability franchise owners and operators could face under the new rules.

However, the government has continued to insist vulnerable workers are an area of focus after high-profile cases of employees being underpaid, including as part of the 7-Eleven scandal that was exposed in 2015. 

The package of legislation, which amends the Fair Work Act and gives the Fair Work Ombudsman some new investigative powers and $20 million in additional funding, was approved by the Senate last night with amendments from Labor.

The Bill will now return to the House of Representatives so Labor’s amendments can be signed off on, before the Royal Assent is given for the act to officially come into law.

Here’s what business owners need to know about the new landscape.

The areas it covers

The legislation makes changes to the following elements of workplace law by:

• Making so-called “cash-bank” arrangements explicitly illegal, prohibiting an employer from delivering a wage to a worker and then asking for part of this to be repaid;

• Placing a focus on higher penalties for a category of non-compliance known as “serious contraventions” of workplace law;

• Introducing new provisions that mean holding companies and franchise entities can be held responsible for non-compliance from franchisees if it is found the holding company should have reasonably known about the breaches;

• Extending the powers of the Fair Work Ombudsman to gather evidence; and

• Changing the way companies are held responsible when there are record-keeping contraventions.

What it means for penalties

The legislation creates new standards for maximum civil penalties where an failure to abide by workplace laws amounts to a “serious contravention”. This is defined as situations where an employer is found to be engaged in a systematic and deliberate pattern of behaviour that undermines the Fair Work Act.

The scale of penalties means individuals and businesses can be fined up to 10 times higher for breaches than previously, up to $126,000 for individuals and $630,000 for a corporation.

Liability of franchise operators and holding companies

One of the areas of contention for the franchising sector has been the government’s proposal to increase the level of liability franchisors have for ensuring the individual operators in their franchise network abide by the law.

The legislation extends the Fair Work Act to make a franchise entity or holding company also liable for things like underpayments if it is found they “knew or could reasonably be expected to have known” that a contravention of a workplace law had occurred or was likely to occur.

The Fair Work Ombudsman’s new powers

The Ombudsman had been promised new powers to investigate potential breaches and gather evidence, but an amendment to the legislation from Labor has limited these somewhat.

The Bill was designed to extend investigative powers “even if no documents had been produced” about a company’s actions. The Labor amendment places some limits on when the Ombudsman can use these powers, placing the focus on underpayments cases and cases involving vulnerable workers.

What Labor’s amendments mean for record keeping

Labor also successfully secured an amendment to sections of the legislation that relate to record keeping, which senior employment relations adviser at Employsure, Harry Hilliar says will change what employers have to do in the event they are confronted with an underpayments allegation by the Ombudsman.

This change deals with what happens in cases where a claim has been made about a potential breach to workplace law, but the employer hasn’t kept detailed records that would prove they have done the correct thing.

Businesses will now be forced to come up with another way to show compliance.

“If an employer does not keep or provide correct payslips or accurate employee records, and an employee makes an underpayment claim, the onus is on the employer to prove they have paid the employee correctly,” Hilliar says.

“Failure to keep compliant records may incur newly increased fines in addition to exposing a business to significant back payments.”

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* This article was updated at 1:40pm on September 5 to amend maximum penalty figures for individuals and businesses.