Vulnerable Workers Legislation Update

Key takeaways

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Vulnerable Workers Act) came into effect on 15 September 2017. The Vulnerable Workers Act amends the Fair Work Act 2009 (FW Act) to increase the penalties available for breaches of workplace laws and to strengthen the powers of the Fair Work Ombudsman (FWO). The amendments:

• make franchise and holding companies potentially liable for underpayments by their franchisees or subsidiaries
• strengthen the evidence gathering powers of the FWO
• introduce a higher scale of penalties for ‘serious contraventions’ of prescribed workplace laws
• increase penalties for failures to keep proper employee records and reverse the onus of proof
• prohibit employers from unreasonably requiring their employees to make payments (for example, cashback arrangements).

Accessorial liability

Under the new provisions, franchisors and holding companies will liable for contraventions of the FW Act in circumstances where they knew, or ought reasonably to have known, of contraventions by franchisees and subsidiaries, and failed to take reasonable steps to prevent those contraventions. However, the franchisor or holding company will only be liable if it had a significant degree of control over their business networks.

Determining whether a company has a significant degree of control over their business networks will involve assessing the level of influence and involvement the company has in the financial, operational and corporate affairs of the business network. “Control” relates to the affairs of the franchisee or subsidiary broadly, not only as to minor matters that would not have any impact on the management and operational decisions of the business.

Enhanced powers of the FWO

The FW Act provides the FWO additional coercive powers to gather evidence of breaches. The FWO will now be able to:

• issue an “FWO notice” if the FWO reasonably believes that a person has information or documents relevant to an investigation, or is capable of giving evidence that is relevant to such an investigation
• require the production of documents
• enforce powers of questioning, which will be particularly important in cases where no relevant documents appear to be available and the investigation has stalled.

The FWO’s exercise of its new powers will be overseen by the Administrative Appeals Tribunal. The amendments also expressly prohibit anyone from hindering or obstructing an investigator, or giving the FWO false or misleading information or documents.

‘Serious Contraventions’

The amendments introduce a new “serious contraventions” regime, which increases the maximum penalty for existing civil penalty provisions where the contravention is deliberate conduct forming part of a systematic pattern. Under the new regime, serious contraventions can attract 10 times the current maximum penalties, with a new maximum of $630,000 for corporations and up to $126,000 for individuals. The regime will apply to serious contraventions of the following civil penalty provisions:

• contraventions of the NES (s 44(1))
• contravening a modern award (s 45)
• contravening an enterprise agreement (s 50)
• contravening a workplace determination (s 280)
• contravening a national minimum wage order (s 293)
• contravening an equal remuneration order (s 305)
• contravention of payment of wages provisions, including method and frequency of payment, unreasonable requirements to spend amount and employer obligations in relation to guarantee of annual earnings (ss 323, 325 and 328)
• failure to uphold obligations in relation to employee records and pay slips (ss 535 and 536).

A contravention of these provisions will be a “serious contravention” if it was engaged in knowingly, and the contravention was part of a systematic pattern of conduct relating to one or more employees or workers. In determining whether the contravention was part of a “systematic pattern”, a Court may consider the number of contraventions and the number of persons affected, the period over which the contraventions occurred, the response or failure to respond to any complaints about the contraventions, and any other relevant matter.

‘Cash back’ arrangements

The amendments also contain an express prohibition on employers requesting payments from their employees in circumstances where it is unreasonable to do so. This prohibition makes it clear that it is unlawful for employers to coerce employees into paying a proportion of their wages back in cash.

Clients should be aware that these amendments will likely increase FWO’s use of the accessorial liability provisions, particularly in the context of related entities, franchisees and supply chain compliance. Clients should ensure that they are taking steps to proactively manage their potential liability for their role in the terms and conditions of employment of employees within their networks, and seek specific advice about whether such measures will be considered sufficient to meet the accessorial liability requirements.

Reversed onus of proof on employers for record keeping

Under the FW Act, employers are required to keep certain records for seven years regarding their employees, which include records of:

• remuneration paid to employees, including taxation and other deductions, incentive based payments, overtime hours, averaging arrangements, loading, rates, penalty rates and allowances;
• leave taken and outstanding leave balances; and
• whether the employment was terminated by consent, notice, summarily or in some other manner, and the name of the person who acted to terminate the employment.

The amendments to the FW Act reverse the onus of proof in proceedings which involve an allegation relating to a contravention of provisions dealing with the National Employment Standards, modern awards, enterprise agreements, workplace determinations, minimum wage orders, method and frequency of payment, unreasonable requirements to pay amounts and any other matter specified by the regulations.  

Employers will have the burden of disproving such allegations in circumstances where they were required by the FW Act, and failed to:

• make and keep a record, or keep it in a specified form
• provide records for inspection
• provide a payslip.

There is a defence available to employers in respect of a claim for breach of the record keeping obligations set out above, which requires the employer to demonstrate that they had a “reasonable excuse” as to why there has not been compliance. The FW Act provides no guidance on what may constitute a reasonable excuse in the circumstances.

The higher penalties for ‘serious contraventions’ referred to above apply to the employee record keeping obligations. 

These provisions have been designed to improve and support the FWO's investigative powers, particularly in cases of systematic and deliberate contraventions of workplace laws.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).