Australia: Migrant Workers Taskforce and Franchise Sector Reports: further crackdown on worker exploitation imminent

Last Updated: 1 April 2019
Article by Nicholas Ellery and Anthony Forsyth

MIGRANT WORKERS TASKFORCE AND FRANCHISE SECTOR REPORTS: FURTHER CRACKDOWN ON WORKER EXPLOITATION IMMINENT

Two significant reports have been released recently, further highlighting the extent of worker exploitation in Australia;

In this article we explore the key findings of the MWT Report and its reform proposals, which have already been accepted (in principle) by the Federal Government. We also briefly consider the employment-related aspects of the 'Fairness in Franchising' Report.

MIGRANT WORKERS TASKFORCE REPORT

The MWT was established by the Coalition Government in the wake of the 7-Eleven underpayments scandal and reports of other instances of worker exploitation in 2016. The Taskforce included representatives from a large number of federal departments and agencies including the Fair Work Ombudsman, Department of Home Affairs, Australian Border Force and Australian Taxation Office.

The Final Report of the MWT was released on 7 March 2019, along with the Government's response to the MWT's recommendations.

The MWT found that worker exploitation takes many forms, including wage underpayment and 'cash-back' arrangements; pressure on migrant workers to work outside visa restrictions; non-provision of leave and superannuation entitlements; tax avoidance through cash payments; misclassification of employees as contractors; and unsafe working conditions (MWT Report, page 33).

According to the MWT, while most Australian employers comply with workplace laws: 'the incidences of underpayment of temporary migrant workers indicate that there are unscrupulous employers in some industries who blatantly breach the law', and there is 'a culture of underpayment in some areas of the economy' (page 14). In addition, certain business models (eg franchising) can 'foster exploitative behaviours and severely hinder the pursuit of the wrong doer' (page 37).

The MWT noted that the Federal Government had responded to many of these problems through the amendments introduced by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) (Vulnerable Workers Act). However, it considered that there is a 'further opportunity to do more to deter unscrupulous businesses that profit by underpaying migrant workers, and to improve avenues for migrant workers to recover underpayments' (page 83).

Most importantly, the MWT found that Australia's current regulatory model (primarily based on civil liability for workplace law breaches) 'is unable to tackle serious and systemic underpayments of workers'. Therefore, criminal sanctions now need to be included as part of the 'suite of enforcement tools available to address migrant worker exploitation' (pages 86-87). This proposal and the MWT's other key recommendations are summarised below alongside the Australian Government's Response to the MWT Report.

Key MWT Recommendations Government Response
Introduction of criminal sanctions for the most serious forms of exploitative conduct (eg clear, deliberate and systemic), through the most appropriate legislative vehicle (Recommendation 6).

Adding criminal sanctions will send a strong message to employers who think they can get away with exploitation of vulnerable employees.

The Government will consider the circumstances and vehicle for applying criminal penalties to serious and deliberate exploitation.

Increase the general level of penalties for underpayment-related provisions of the Fair Work Act 2009 (Cth), more in line with other business laws (especially consumer laws) (Recommendation 5).

Give the courts specific powers to make additional enforcement orders, including adverse publicity orders and banning orders (Recommendation 7).

The increased penalties in the Vulnerable Workers Act should be reviewed once they have had time to take effect.

If they are not deterring exploitation, the Government will consider options for further increasing penalties.

Consider additional avenues to hold individuals and businesses to account for involvement in workplace law breaches – including extending accessorial liability provisions to situations where businesses contract out services to other persons (building on the franchisor and holding company liability provisions introduced by the Vulnerable Workers Act) (Recommendation 11). The Government will explore options for ensuring responsible companies cannot contract out of their workplace obligations, eg by further extending accessorial liability.

Establish a National Labour Hire Registration Scheme, focused on labour hire operators and host users of their services in four sectors at greatest risk of operations by rogue labour hire operators: horticulture, meat processing, cleaning and security.

This mandatory scheme should impose a low regulatory burden for labour hire operators in these four sectors – however registration will be cancelled if operators contravene a relevant law.

(Recommendation 14)

The Government will consult with stakeholders on introduction of a model for a National Labour Hire Registration Scheme.

The scheme will be aimed at reducing worker exploitation, increasing accountability and transparency, and effecting behavioural change among labour hire providers in the high-risk sectors – but without causing major disruption to the wider labour hire sector.

Provide the Fair Work Ombudsman (FWO) with the same information gathering powers as other business regulators (eg ACCC) (Recommendation 9).

Consider whether the FWO requires further resourcing, tools and powers to undertake its compliance and enforcement functions (Recommendation 10).

The Government agrees that the FWO should have equivalent enforcement powers to those of the ACCC. It will also examine options to enhance the role of Proactive Compliance Deeds in promoting compliance with workplace laws.

The Government will continue to ensure the FWO has the appropriate resources, powers and tools to effectively counter worker exploitation.

Consider legislation making a person guilty of an offence where they knowingly unduly influence, pressure or coerce a temporary migrant worker to breach a visa condition (Recommendation 19). The Government will consider introducing this new offence.
Explore mechanisms to exclude employers from employing temporary visa holders for a defined period, where they have been convicted by a court of underpaying migrant workers (Recommendation 20). The Government will commence exploring these mechanisms.

FAIRNESS IN FRANCHISING REPORT

The Report of the Parliamentary Joint Committee on Corporations and Financial Services was released on 14 March 2019, following an extensive inquiry into the operation and effectiveness of the Franchising Code of Conduct.

Much of the Report is devoted to the problems caused by the substantial disparity of power between franchisors and franchisees under the current franchising model, and the use of franchise agreements to protect franchisor interests and place most of the commercial risk on the franchisee.

The Report makes many recommendations to address systematic exploitation of some franchisees by franchisors, including higher penalties for breaches of the Franchising Code and a boost to the ACCC's enforcement powers.

The Report also notes that 'wage theft continues to occur in many franchises: partly due to the business model franchisors operate and partly due to a range of socio-cultural problems'.

The Joint Committee indicated some of the Report's recommendations should help by 'mitigating incentives to engage in wage theft'. Specific recommendations addressing employment issues included that:

  • the Australian Government amend the Franchising Code to require guidance on employment matters as part of mandatory disclosure between franchisors and franchisees, eg awards, minimum wages and overseas worker issues to be developed by the FWO (Recommendation 6.16); and
  • the ACCC develop a FranchiseSmart website (similar to ASIC's MoneySmart website) to address issues that franchisees may encounter, including Australian Fair Work rights, minimum wages laws, awards and migrant workers' rights (Recommendation 18.2).

The Government has not yet responded to the Fairness in Franchising Report.

LOOKING AHEAD

It is highly unlikely that the Government will introduce legislation implementing the recommendations of the MWT Report before the upcoming Federal election.

The ALP's 2018 Policy Platform includes the following measures to address worker exploitation:

'Labor will extend, where appropriate, responsibility for compliance with workplace laws to corporations who are the economic decision makers, including franchisors and along the supply chain.

Labor will increase penalties for employers and related entities who systematically underpay and exploit workers. Labor will provide the resources necessary to focus on detection and prosecution of serious contraventions of the Fair Work Act by employers.

Labor will act to eradicate the exploitation and wage theft experienced by temporary migrant workers – working closely with trade unions – by introducing a range of measures that deliver increased protections.'

The Labor Opposition has not announced any policy commitment to introduce criminal penalties for wage theft (State laws to that effect are now being developed in Queensland and Victoria). Federal Labor could be expected to use the MWT Report as a basis for criminalising serious and systemic underpayments,

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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