Key points

The Bill:

• ensures migrant workers are protected by the Paid Parental Leave Act 2010
• creates an entitlement to superannuation in the National Employment Standards (NES)
• clarifies the operation of workplace determinations made by the Fair Work Commission and their interaction with enterprise agreements
• expands the circumstances in which employees can authorise employers to make valid deductions from payments due to employees, where the deductions are principally for the employee’s benefit, and
• ensures that casual employees working in the black coal mining industry are treated no less favourably than permanent employees in the accrual, reporting and payment of portable long service leave entitlements under the industry portable Long Service Leave (LSL) Scheme.

Concerns about the Bill include:

• the amount of notice an employee is required to give their employer before taking UPL
• in relation to creating an NES entitlement to superannuation:
  • employers may not be protected from pecuniary penalties under the FW Act even if they have relied on a ruling from the ATO in relation to their superannuation obligations
  • the Bill does not ensure employees can commence proceedings for damages/compensation related to Death, Total and permanent disability (TPD) and other default insurances held for the benefit of employees through their superannuation lost due to the non-payment of superannuation
  • order for compensation do not include loss of returns on unpaid superannuation guarantee payments
• in relation to portable LSL in the black coal mining industry: the meaning of ordinary rate of pay and how it would impact on how the employer levy and employee entitlement to LSL is calculated.

Introductory Info

Date introduced: 29 March 2023
House: House of Representatives
Portfolio: Employment and Workplace Relations
Commencement: As set out in the body of this Digest.

Purpose of the Bill

The purpose of the Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023 (the Bill) is to amend the Fair Work Act 2009 (FW Act), Migration Act 1958, Paid Parental Leave Act 2010 (PPL Act), and Commonwealth legislation related to the black coal mining industry to:

• respond to recommendation 3 of the Migrant Workers’ Taskforce Report and recommendation 3 of the Senate Education and Employment Legislation Committee inquiry Report into the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022[1] by
  • ensuring that migrant workers (including temporary migrant workers) working in Australia would be entitled to the benefit of the FW Act regardless of immigration status and
  • therefore providing certainty about the interaction between the FW Act and Migration Act[2]
• implement an outcome of the Jobs and Skills Summit by:
  • providing stronger and more flexible access to unpaid parental leave (UPL) to complement recent changes to the PPL Act and
  • increasing families’ choice and flexibility in how to combine care and work responsibilities[3]
• provide an entitlement to superannuation in the National Employment Standards (NES) to:
  • increase the number of employees who are able to enforce and recover superannuation contributions, either personally, or by an employee organisation, or a Fair Work Inspector on their behalf and
  • complement existing mechanisms available to the Australian Tax Office (ATO) for enforcing superannuation contribution requirements on employers, as well as complementing those mechanisms available to employees covered by modern awards and most enterprise agreements[4]
• clarifying how Fair Work Commission (FWC) workplace determinations operate by providing that when a workplace determination commences, any enterprise agreement ceases to apply[5]
• expanding and simplifying the circumstances in which employees can authorise employers to make valid deductions from payments due to employees, provided the deductions are principally for the employee’s benefit[6] and
• ensuring casual employees working in the black coal mining industry are treated no less favourably than permanent employees in regard to their long service leave entitlements under the Coal Mining Industry (Long Service Leave Funding) Scheme.[7]

Structure of the Bill

The Bill has 8 schedules, each dealing with different issues and having differing commencement dates as outlined in the table below.

Table 1:     Schedules and commencement dates

Schedule	Issue	Commencement
Schedule 1	The protection of migrant workers	The day after the Act receives the Royal Assent
Schedule 2	Changes to UPL	The later of 1 July 2023 or the day after the Act receives the Royal Assent
Schedule 3	Proposed NES entitlement to superannuation	Part 1: the first 1 January, 1 April, 1 July or 1 October to occur 6 months on the day the Act receives the Royal Assent Part 2: the day after the Act receives the Royal Assent
Schedule 4	Workplace determinations	The day after the Act receives the Royal Assent
Schedule 5	Employee authorised deductions	A day 6 months after the Act receives the Royal Assent
Schedule 6	Black coal mining long service leave	The earlier of: a day to be fixed by Proclamation or the first 1 January, 1 April, 1 July or 1 October to occur after the end of the period of 6 months beginning on the day this Act receives the Royal Assent.
Schedules 7 and 8	Technical correction, application and transitional provisions	The day after the Act receives the Royal Assent

Source: Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023, item 2.

Background

As the Bill contains several discrete measures, background information is provided separately below in relation selected measures.

Which workers are covered by the Bill?

Due to the constitutional powers of the Commonwealth, the FW Act currently covers most, but not all, employers and employees in Australia.[8] Those that are covered form the national workplace relations system (national system). The national system sets out clear entitlements and rules for employers and employees.

As a result, certain parts of the Bill will not apply to some workers and some employers, generally being those who are outside the national workplace relations system, including independent contractors or sole traders, or in the state public sector in Western Australia, New South Wales, Queensland, South Australia and Tasmania (see further details in footnote).[9] The arrangements in relation to the coal mining industry are examined separately in this Digest.

Committee consideration

Senate Education and Employment Legislation Committee

The Bill has been referred to the Senate Education and Employment Legislation Committee (the Committee) which has conducted an inquiry into the Bill. The Committee recommended that the Bill be passed.[10] Opposition Senators made additional comments and proposed some amendments, which are discussed later in this Digest in relation to the relevant measures.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not yet commented on the Bill.

Policy position of non-government parties/independents and major interest groups

The policy position of non-government parties, independents and major interest groups in relation to various amendments proposed by the Bill are set out later in this Digest.

Financial implications

According to the Explanatory Memorandum the amendments in Schedule 6 are unlikely to have a significant or immediate impact on the viability of the Coal Mining Industry (Long Service Leave) Fund. The Explanatory Memorandum does not comment on the financial impacts on the Commonwealth or employers from the others proposed measures.[11]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[12]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not yet commented on the Bill.

Key issues and provisions

Due to the limited time in which to consider the diverse range of measures contained in the Bill, this Digest examines the following selected elements of the Bill:

1. protection for migrant workers (Schedule 1)
2. unpaid parental leave (Schedule 2)
3. superannuation (Schedule 3) and
4. coal mining long service leave (Schedule 6).

Readers are referred to the Explanatory Memorandum in relation to schedules 4–5 and 7 to 8.

Key issue #1: protecting migrant workers

Schedule 1 of the Bill would amend the FW Act to protect the employment rights of migrant workers in Australia regardless of their immigration status. This would be achieved by adding a new provision to the FW Act that confirms that a breach of the Migration Act does not affect the validity of a contract of employment or contract for services for the purposes of the FW Act. This would have the effect of ensuring that the FW Act’s protections and entitlements would apply to migrant workers, even if they are in breach of their visa conditions. The amendment is in response to recommendations from various reports and would not affect visa-related work rights or consequences of non-compliance under the Migration Act.

What is the issue?

The amendments in Schedule 1 respond to:

• Recommendation 3 of the Final Report of the Migrant Workers' Taskforce and
• Recommendation 3 of the Senate Education and Employment Legislation Committee inquiry Report into the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022.[13]

Migrant workers’ taskforce report

The Migrant Workers’ Taskforce (MWT) was established in 2016 following several years of media attention, and various inquiries, on the issue of migrant worker exploitation.[14] For example, in 2016 the Fair Work Ombudsman (FWO) conducted an inquiry into the workplace practices of the 7-Eleven franchise network, which identified a culture of non-compliance in a company with a high proportion of employees on temporary (largely student) visas, who were particularly at risk of exploitative work practices.[15]

The MWT was tasked with identifying proposals for improvements in law, law enforcement and investigation, and other practical measures to identify and rectify cases of migrant worker exploitation.[16] The report of the Migrant Workers’ Taskforce was presented to the Government in February 2019, and publicly released on 7 March 2019, along with the then Government’s response. The report made 22 Recommendations and the former Government accepted all Recommendations in principle.[17] Relevantly to the Bill, recommendation 3 was that that ‘legislation be amended to clarify that temporary migrant workers working in Australia are entitled at all times to workplace protections under the Fair Work Act 2009’.

Why is the amendment necessary?

Under the common law doctrine of illegality, a contract cannot be enforced if it necessarily involves an illegal act or furtherance of an illegal act or purpose.

Whilst the precise application of the doctrine of illegality to employment contracts is somewhat uncertain, the doctrine has given rise to concerns that a migrant worker who breaches their visa conditions may be precluded from obtaining the statutory benefits conferred by the FW Act to which they would (but for the illegal act) otherwise be entitled. That is, there is a view, with some judicial support (p 470), that illegal migrant workers are not captured or protected by FW Act. For example, the Final Report of the Migrant Workers' Taskforce noted (at page 84):

there is a degree of confusion among stakeholders, including academics, unions, employers and temporary visa holders themselves, about the extent of coverage under the Fair Work Act … A 2016 Senate Inquiry heard from academics who questioned the enforceability of existing workplace protections in relation to foreign citizens who perform work illegally in Australia … a 2017 Senate Inquiry heard … that there is evidence that certain employers exert pressure on temporary visa holders to breach a condition of their visa in order to gain leverage over the employee because the Fair Work Act does not apply when a person has breached their visa conditions. [emphasis added]

Importantly, as noted by a legal academic, an employment contract will be unenforceable under the doctrine of illegality only:

where it can be shown that it was the clear intention of Parliament that the transgressor of the statute [migrant worker] who has engaged in the forbidden conduct should derive no benefit whatsoever.[18]

What are the changes?

Proposed section 40B provides that a breach of the Migration Act 1958 or any instrument made under it (eg visas) would not affect the validity of a contract of employment or a contract for services for the purposes of FW Act. The Explanatory Memorandum notes that it is intended that the following conduct would not affect the validity of an individual’s contract of employment or contract for services for the purposes of FW Act:

• that the individual is without work rights for the purposes of the Migration Act
• that the individual has contravened the Migration Act or breached a condition of a visa granted under that Act
• that the individual is no longer entitled to remain in Australia in accordance with a visa granted under the Migration Act.[19]

Proposed section 40B explicitly demonstrates the intention of the Parliament that a transgressor of the Migration Act who engaged in work in contravention of that Act or their visa nevertheless should be able to derive the benefits and protections of the Fair Work Act. (The proposed provision displacing the common law doctrine of illegality in relation to employment contracts and migrant workers who might have immigration irregularities.) 

In turn, this means that migrant workers, including temporary migrant workers, regardless of whether they breach the Migration Act or their visa, are explicitly entitled to the benefits and protections set out in FW Act. This includes the protections from unfair dismissal, discrimination, freedom of association, collective bargaining, and access to an effective remedy to recover unpaid wages and entitlements.

However, as proposed section 40B only applies to the FW Act, the amendment would not affect work rights generally (or the consequences of non-compliance) under the Migration Act.

Policy position of non-government parties/independents

At the time of writing, no direct commentary from non-government parties/independents regarding Schedule 1 was identified. However, the Australian Greens Immigration and Refugees policy statement includes the principle:

Temporary migrant workers are entitled to fair pay and working conditions. They are entitled to a safe workplace, free from discrimination, exploitation, harassment and occupational hazards as well as fair remedial outcomes in the event of exploitation and underpayment.

Policy position of major interest groups

Most stakeholders appear to support the measure proposed by Schedule 1 of the Bill. The Refugee Council of Australia's submission to the Senate Committee ‘welcomes’ the legislation. However, they note that:

Much more is needed in order to fully address the ongoing crisis of exploitation of people on temporary visas, especially ensuring that all people seeking asylum have work rights and access to a safety net.

Migrant Justice Institute's submission notes:

We strongly support the passage of the Bill in its current form. However, in our view further amendments to the Migration Act 1958 (Cth) and Fair Work Regulations 2009 are required to achieve its objective to robustly protect worker entitlements. In addition, further reforms are urgently required to implement the remaining recommendations of the 2019 Migrant Workers’ Taskforce’.

The Federation of Ethnic Communities' Councils of Australia, the Australian Council of Trade Unions, and the Australian Chamber of Commerce and Industry also support the amendment.

Key issue #2: changes to unpaid parental leave

Schedule 2 of the Bill amends the unpaid parental leave (UPL) entitlement within the national employment standards (NES) to provide a greater degree of flexibility in how this leave may be taken, and to increase the amount of UPL that may be taken by employees whose partner also intends to take UPL.

The FW Act provides that every employee covered by the national system is entitled to take 12 months of unpaid parental leave[22] and already provides several categories of UPL, including continuous UPL and flexible UPL. Currently:

• Leave must generally be taken in a single continuous period.[23]
  • Section 72A provides that employees may access up to 30 days of their UPL as flexible unpaid parental leave, which may be taken a day at a time within the first 24 months of the child’s birth or adoption placement.[24] Flexible UPL may not be taken before the birth of a child.[25]
  • Once an employee takes a day of flexible UPL, they forfeit any remaining entitlement to take continuous UPL.[26]
• This single continuous period of leave must commence on, or in the six-weeks before the birth of the child, or on the placement of the child if the leave is adoption-related leave.[27]
• Employee couples (that is couples where both parents are national system employees[28]) who both intend to take UPL are limited to 8 weeks of concurrent leave.[29]
• An employee may request an extension of up to 12 months of additional UPL following the end of the available parental leave period[30] (generally 12 months), which an employer can only refuse on reasonable business grounds.[31]
  • However, a member of an employee couple’s entitlement to extend UPL in this way is deducted by the period that the other partner has taken UPL (including flexible UPL days), and the UPL entitlement of the other employee is reduced by any period of extension.[32]

The Bill proposes to make amendments on each of these points by:

• Increasing the entitlement of flexible UPL to 100 days (or a higher number prescribed by regulation).[33]
  • The explanatory memorandum states that this power to increase the flexible UPL entitlement by regulation is sought to ensure that the flexible UPL entitlement can be increased in line with future planned increases to the flexible paid parental leave (PLP) entitlement,[34] discussed below.
• Providing that flexible UPL may be taken before or after a period of continuous UPL.[35]
• Allowing both employees to commence their continuous UPL on any day within 24 months of the birth or placement of the child.[36] This removes the requirement that at least one employee must commence their continuous UPL no later than birth of the child.[37]
• Providing that pregnant employees may take flexible UPL in the six weeks before the anticipated birth of the child.[38]
• Removing limitations on employee couples taking concurrent UPL.[39]
• Allowing members of employee couples to take 12 months of UPL, and then request up to a 12 month extension of UPL, regardless of how much UPL the other member of the employee couple has taken or requested.[40]

Interaction with the Paid Parental Leave Act 2010

The unpaid parental leave provisions in the Fair Work Act complement the entitlement to parental leave pay (PLP) under the Paid Parental Leave Act 2010 (PPL Act). The FW Act creates the actual entitlement for leave for employees, and the PPL Act creates the PLP that eligible carers may apply for while they are not working,[41] paid at the national minimum wage.[42]

For reasons explained below, as PLP is only claimable by persons who are performing no more than one hour of paid work on that day,[43] the ULP provisions in the FW Act are practically required for many employees to have guaranteed access to PLP.

The recently enacted Paid Parental Leave Amendment (Improvements For Families and Gender Equality) Act 2023 made several changes to existing PLP provisions, discussed in the Digest to that Bill. Relevantly for the purposes of this Bill, that Act made PLP entitlement fully flexible, allowing parents to access the full 100 days of PLP payments flexibly within 24 months after the birth or placement of a child.[44]

Current UPL provisions however only allow for 30 days of flexible UPL,[45] requiring employees to negotiate for additional time off with their employers to access additional flexible PPL days.[46] The Explanatory memorandum states that the increase to 100 days of UPL are ‘necessary to ensure that UPL is aligned with changes to paid parental leave’[47] noting:

Typically, employees access their UPL entitlement under the FW Act in order to be absent from work and therefore eligible to claim PPL. Currently, employees are only entitled to take up to 30 days of flexible UPL. Without changes to the FW Act, employees wishing to access more than 30 days of flexible PPL would need to negotiate additional time off work or a part-time return to work with their employer. To address this, the Bill would amend the FW Act to allow parents to take up to 100 days of their UPL entitlement flexibly, including before or after another period of UPL. The Bill would also allow the maximum number of flexible UPL days an employee is entitled to under the FW Act to be prescribed by regulation, to allow the entitlement to be increased in line with future planned increases to PPL announced in the 2022-2023 Budget. These measures ensure that parents who wish to claim flexible PPL have access to a corresponding flexible UPL entitlement.[48]

The Minister for Social Services, Amanda Rishworth, announced on 30 November that further legislation would be introduced to progressively increase the PLP from July 2024, reaching 26 weeks in 2026.

Policy position of non-government parties/independents on Schedule 2

The Opposition, whilst supporting UPL, expressed concerns about the amount of notice an employee is required to give their employer before taking UPL and noted:

The Coalition believes that amendments should be made to this bill which ensures that businesses are given sufficient notice when an employee wishes to access unpaid parental leave. The Coalition notes the suggestion that an employee should be required to nominate the intended dates for a particular period of leave … The nomination of specific dates for a period of leave is particularly important for small and medium businesses which may not have the resources to adequately plan for certain periods of leave at short notice. The Coalition proposes that the bill should be amended to clarify this matter.[49]

At the time of writing, no direct commentary from other non-government parties/independents regarding Schedule 2 was identified. However, the Australian Greens ‘Close the Gender Wage Gap’ policy statement supports measure for workplaces to be more ‘family friendly’ and ‘flexible’ and supports extension of paid parental leave and in November 2022, the Australian Greens supported changes in industrial relations legislation to enforce the right to unpaid parental leave. 

In a Statement to Jobs and Skills Summit in September 2022, Independent member for Goldstein, Zoe Daniel, ‘suggest[ed] the following amendments to the Fair Work Act’ …

Improve the unpaid parental leave provisions in the Fair Work Act to make them more flexible and more shareable (this does not negate my broader view that we need 26 weeks of shareable paid parental leave.)

Position of major interest groups on Schedule 2

The Ai Group’s submission to the Senate Education and Employment Legislation Committee’s inquiry into the Bill notes:

The Bill significantly expands the parental leave entitlements of employees. While industry is supportive of measures to help employees balance work and parenting responsibilities, we are concerned that they don’t appear to be accompanied by sufficient measures that ensure that these expanded entitlements operate in a balanced and practical manner.

The Working Women’s Centre of the Northern Territory wrote, in their submission, that ‘funding investment in improving policies and providing education is needed in addition to any legislative changes.’

The Australian Council of Trade Unions submission welcomes the changes proposed, but recommends that the notice period be shortened to 8 weeks if the first type of UPL being taken is flexible UPL, and that the 24-month period in which the UPL may be extended allows for UPL to extend beyond that 24 month period.

Committee consideration

The Committee noted ‘the claims made by some submitters about the possibility that these provisions may have adverse impacts on some employers’[50] before stating: 

However, on balance, the committee is persuaded by the advice of DEWR which makes clear that existing notice requirements on employees intending to take UPL will be retained. This will ensure that employers can continue to plan their workforce arrangements with certainty and flexibility. In addition, it remains open to employers and employees to agree to UPL policies and notice requirements, that are more beneficial than those provided by the NES. Conversely, an employer is not obliged to allow an employee to take UPL if they have not properly given notice to the employer.[51]

The Committee recommended that the Bill be passed.[52]

Key issue #3: superannuation as a national employment standard

The superannuation guarantee (SG) scheme requires employers to make superannuation payments that meet the prescribed minimum level (currently 10.5%) in each quarter for each of their employees (full-time, part-time and casual), subject to limited exemptions. Like salary and wages expenses, SG amounts paid by an employer are generally deductible expenses for income tax purposes.[53]

Currently, employers who fail to provide the prescribed minimum level of support are liable to pay a tax-related liability called the superannuation guarantee charge (SGC). This is equivalent to the amount of the amount of the SG shortfall plus an interest component and an administrative charge. In addition, administrative penalties under Part 7 of the Superannuation Guarantee Administration Act 1992 (SGA Act) of up to double the amount of the SGC may also apply where, for example, there has been a failure by the employer to keep records or lodge a SGC statement.[54]

The shortfall component of the SGC is then redistributed by the ATO to a fund for the benefit of each employee in respect of whom the SGC was paid. Unlike SG amounts, SGC amounts are not deductible expenses for income tax purposes.[55]

This means that the SGC operates to both encourage employers to make the required SG payments, and to (via the interest and administrative charge components) create a deterrent for non-compliance by, in a sense, penalising employers for failing to pay the relevant amount of SG.

Current limitation on the recovery of unpaid superannuation by employees

As Justice Heydon noted in Roy Morgan Research Pty Ltd v Commissioner of Taxation:

There is no general duty on private employers to pay superannuation contributions to superannuation funds for the benefit of their employees. But particular obligations to pay superannuation contributions can arise in various ways. They may be created by an award or certified agreement [or] by contract.[56] [emphasis added]

This means that currently, unlike wages, the common law does not automatically recognise the SG as an employee entitlement. Likewise, existing legislation does not, in a strict legal sense, bestow upon employees an automatic entitlement to the SG. This means that if the employment contract, enterprise agreement or modern award is silent as to the entitlement of the employee to the SG then the common law does not recognise an automatic right of the employee concerned to recover unpaid SG amounts. As noted in one legal commentary:

The SGA Act does not provide an avenue for employees to directly sue for unpaid SG contributions, and an employee’s success is usually dependent on assistance from the ATO. Direct recovery by employees is an area of the law that is still developing and, generally, an employee’s options are more limited if there is neither an award nor a contractual entitlement to superannuation to fall back on.[57] [emphasis added]

The SGC and associated interest and penalties are tax-related liabilities that are debts due to the Commonwealth and payable to the Commissioner of Taxation—the Commissioner is entitled to sue to recover as an unpaid tax-related liability.[58] Critically however, an employee cannot compel the Commissioner to recover the SGC (which in turn, once the SGC is recovered, would lead to the ATO paying amounts equal to the SG into a superannuation fund account of the employee’s).[59]

As a result, currently many employees are unable to independently pursue amounts of unpaid SG.

Enabling employees and certain third parties to recover unpaid superannuation

The NES are minimum employment entitlements that must be provided to all employees in Australia. Importantly, workplace instruments (including employment contracts) cannot provide conditions less than the those provided by the NES, nor can they exclude the NES.[60]

The Schedule 3 of the Bill would amend the FW Act to introduce a new entitlement to superannuation contributions in the National Employment Standards (NES).  This has two effects:

• it imposes a legal requirement under the FW Act for employers to contribute to their employees’ superannuation fund to avoid:
  • paying civil penalties for failing to comply with the new NES obligation and
  • paying the SGC (which would be separate and distinct from the current requirements under existing superannuation and tax legislation) and
• allows employees, unions, and Fair Work Inspectors to commence an action to recover unpaid superannuation.

Both effects reinforce the Government's position on underpayment of superannuation as a form of ‘wage theft’ or worker exploitation.[61]

The new NES entitlement to superannuation

The Bill specifies that superannuation contributions form part of the NES.[62] In turn, proposed Division 10A to Part 2-2 of the FW Act would amend the NES to:

• impose an obligation on employers under the NES to make SG contributions for the benefit of employees so as to avoid liability to pay SGC in relation to its employees (reinforcing the employee’s new entitlement to SG contributions)[63] and
• allow employees and certain third parties (unions, Fair Work Inspectors) to pursue orders for compensation in relation to unpaid amounts of SG.[64]

The Bill provides that employer could face civil penalties if they fail to comply with the new obligation.[65] The maximum penalties that would apply where an employer fails to make SG contributions in respect of an employee depend on whether the employer is an individual (eg sole trader) or a body corporate, and if the contravention is serious or not, as the table below sets out.

Table 2:     civil penalties for failure to make SG payments

Type of contravention	Individual	Body corporate
Normal	60 penalty units ($16,500)	300 penalty units ($82,500)
Serious	600 penalty units ($165,000)	3,000 penalty units ($825,000)

Source: Explanatory Memorandum, Fair Work Legislation Amendment (Protecting Worker Entitlements) Bill 2023, xviii.

A contravention is a serious contravention if:

• the person or body corporate knowingly contravened the provision and
• it formed part of a systematic pattern of conduct.[66]

Exemption for employers who have made SGC payments

Proposed section 116B and subsection 149B(2) provides that an employer would not contravene its obligation to make SG payments with respect to its employees simply because it instead elected to pay the SGC with respect to an employee (however, as noted above, given that SGC payments are not tax deductible and are more than the SG payments themselves, there appears to be few business or tax incentives to do so).

Preventing multiple actions against employers

The Bill ensures an employer will not be liable to pay a penalty under the proposed amendments where they have already done so under existing tax and superannuation laws. The Bill does this by preventing an employee, or another person with standing, from commencing proceedings for an alleged contravention of the new entitlement to superannuation contributions in the NES where the Commissioner of Taxation has commenced proceedings against the employer for an amount which includes the debt owed to the employee.[67]

In addition, if a court were to order an employer to pay a pecuniary penalty for breaching this civil remedy provision, the FW Act already ensures an employer could not be ordered to pay a pecuniary penalty under another provision of a law of the Commonwealth (including legislation concerning superannuation) in relation to that same conduct.[68]

Policy position of non-government parties/independents

The Opposition proposed that Schedule 3 be amended to ensure that employers are protected from pecuniary penalties under the FW Act if they have previously relied on a ruling from the ATO in relation to their superannuation obligations.[69]

At the time of writing, no direct commentary from other non-government parties/independents regarding Schedule 3 was identified. However, the Australian Greens Employment and Workplace Relations policy outlines states they support ‘enhanced frameworks and resources for the prevention and rectification of wage theft’.

Policy position of major interest groups

The views of various organizations on Schedule 3 of the Bill are varied. While many interest groups either support the Bill unamended or with minor amendments, others oppose it on the grounds of creating additional obligations or undermining the existing regulatory environment.

Support for Schedule 3

Several stakeholders support Schedule 3 in its current form.[70] In addition, a number of stakeholders supported Schedule 3 of the Bill in principle but recommended amendments to the Bill or its Explanatory Memorandum that would:

• ensure that employees also have a remedy against their employer for damages/compensation related to Death, Total and permanent disability (TPD) and other default insurances held for the benefit of employees through their superannuation that are lost due to the non-payment (Australian Lawyers Alliance (ALA), CBUS Super)[71]
• clarify that an order for compensation can include not only unpaid amounts of SG, but also for loss of returns on that unpaid SG (Industry Super Australia (ISA), CBUS Super)[72] and
• also insert a ‘multiple actions’ provision in relation to modern awards (Law Council of Australia (LCA)).[73]

In relation to the final point, the LCA notes:

there should be a corresponding ‘multiple actions’ provision in relation to modern awards. Were it otherwise, the legislation would create an incentive for an employee who is covered by a modern award to take action based on the term required by section 149B, rather than based on proposed section 116B, as the former would not be restricted by an existing Australian Taxation Office action, while the latter would. In the Law Council’s view, however unlikely that scenario may seem, multiple actions should be prevented just as much in the case of actions based on modern awards as in the case of actions under the new obligation.[74]

In addition, whilst the Financial Services Council supports the Schedule 3 measures, it noted it:

has an expectation that in inserting a right to superannuation into the NES, any decisions made by the FWC in relation to superannuation payments should have no binding effect on existing legislation nor policy. That is, the FWC should not be able to make determinations that impact matters of public policy, such as the frequency of superannuation payments.[75]

The Australian Chamber of Commerce and Industry stated it ‘does not oppose’ the amendments in Schedule 3 but states ‘the deterrent effect of the obligation’ is ‘likely to be insignificant’.[76]

Opposition to Schedule 3

Several stakeholders were opposed to Schedule 3 of the Bill. The Council of Small Business Organisations Australia opposes Schedule 3 of the Bill on the basis that:

Employers must already report superannuation obligations and payments through the ATO Single Touch Payroll, superstream and payment systems. Employers are already subject to scrutiny and investigation by the ATO. These new provisions create a duplicate obligation to Fair Work Ombudsman … We are also concerned that a consequence of this amendment will be that the Award system will now be utilised to create additional obligations on employers in relation to superannuation in addition to the existing superannuation guarantee legislation e.g. more frequent payments, additional amounts of superannuation. These are matters that should be properly considered in a review of the Superannuation Guarantee legislation.[77] [emphasis added]

In relation to the claim that employers would face a duplication of work in relation to superannuation reporting obligations, the Committee concluded:

despite some claims to the contrary, under these provisions employers will not face duplication of work and will not be subject to multiple actions under both the FW Act and superannuation legislation, for the same contributions.[78]

The Australian Industry Group opposes Schedule 3 of the Bill, expressing the view that they are ‘highly problematic and unnecessary’ and would undermine ‘the efficacy of the ATO as the lead Government agency providing advice and regulatory enforcement on superannuation’ due to the potential for the Fair Work Ombudsman (FWO) and unions to act as a ‘competing regulator’ due to having standing to bring proceedings.[79]

The Housing Industry Association opposes Schedule 3 of the Bill on the basis that:

• ‘there is a risk that ‘deeming’ of independent contractors as ‘employees’ for superannuation purposes could be conflated with the application of other employment related obligations on legitimate independent contractors’[80]
• ‘the approach adds another enforcement and penalty regime on top of what is already an extensive and complex regime administered by the Australian Tax Office’[81]
• ‘the proposed approach is duplicative and has the potential to simply impose further administrative burden in an already complex regulatory environment with no guarantee of any greater improvement with respect to compliance with superannuation obligations’ (p 5).[82]

Key issue #4: long service leave for casuals in the back coal mining industry

Schedule 6 of the Bill proposes amendments to the Commonwealth scheme for portable long service leave (LSL) entitlements for the black coal mining industry in Australia. The Commonwealth Coal LSL scheme (the Scheme) is the original Commonwealth portable LSL scheme, and the only Commonwealth portable LSL scheme outside of the public service.

Background of the coal mining long service leave scheme

Long service leave (LSL) benefits were granted to black coal miners under an industrial award of the former Coal Industry Tribunal in 1949.[83] Prior this, retention of workers in the industry was challenging, and portable LSL was an important mechanism used to retain skills and support industry longevity.[84]

As the Commonwealth lacks a constitutional head of power to regulate employment generally, the current scheme is enacted under the Commonwealth’s taxation power, the validity of which has been upheld in various court decisions.[85]

Since then, the Workplace Relations case substantially expanded the Commonwealth’s power to regulate economic and business activities (including employment) of constitutional corporations.[86] It appears that the coal mining industry portable LSL scheme now also draws upon the corporations power, in that it only applies to employees of businesses covered by the Fair Work Act 2009.[87] It operates on a tax and reimbursement model.[88]

The Scheme has been the subject of several reviews.[89] The most recent review was announced in June 2021, and was undertaken by KPMG. KPMG delivered the independent report: Enhancing certainty and fairness: Independent Review of the Coal Mining Industry (Long Service Leave Funding) Scheme (the Report) in December 2021. The Review and the recommendation that the Bill seeks to enact is examined below.

How the scheme currently works

The Coal Mining Industry (Long Service Leave Funding) Corporation (Coal LSL Corporation) provides guidance materials on the coverage and operation of the Scheme. To give context to the amendments in Schedule 6, a brief summary is provided below.

The Scheme is designed to facilitate a portable LSL scheme for the black coal mining industry. In summary the Scheme operate as follows:

• payroll levies are collected from employers of eligible employees on behalf of the Australian Government. The levy is a mandatory employer tax which does not come out of employee wages, currently 2.0% of an employee’s eligible wages
• Levies are held in a pooled investment fund managed by the Coal LSL Corporation until such time as eligible employees meet the qualifying service criteria and take their accrued LSL leave.

This means that employees are paid their LSL entitlements from their respective employer at the time LSL is taken. The employer then applies to be reimbursed by the Coal LSL Corporation for the amount of pre-approved LSL hours paid to the employee.

Legislative framework

The Scheme is established and regulated by the:

• Coal Mining Industry (Long Service Leave) Administration Act 1992 (Administration Act)
• Coal Mining Industry (Long Service Leave) Payroll Levy Act 1992 (Payroll Levy Act)
• Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992 (Collection Act)
• other legislation, regulations and industrial instruments[90] and
• is overseen by the Coal LSL Corporation.

As its name suggests, it is confined to only LSL, and not any other entitlements. The Administration Act:

• defines an eligible employee[91]
• creates an entitlement to LSL by reference to a period of qualifying service, which in turn is determined by reference to working hours and
• establishes the Fund.

The Collection Act defines the meaning of eligible wages, provides the mechanics for collection of the levy, imposes a monthly mandatory due date for payment and returns. The Payroll Levy Act imposes the levy and provides the percentage of eligible wages paid which are subject to the levy and paid by the employer. As such, the operation of the Scheme is determined by the concepts of eligible employees, qualifying service, eligible wages, and working hours and week.

What did the Report recommend?

The Report noted that differential treatment exists within the Scheme between eligible employees who were permanent or casual employees. The Report noted that the differential treatment arises due to the interactions between:

• the definition of eligible wages 
• calculation of work hours and 
• reporting of hours within monthly returns.[92]

The Report noted that this meant that most beneficial calculations used to determine the accrual of LSL, and the amount that would be paid, is applied to permanent employees.[93] This led to the Report recommending:

the Commonwealth enact legislative amendments to ensure that casual employees are treated no less favourably than permanent employees in the Scheme.[94]

What does the Bill do?

The Bill amends the definitions of qualifying service, working hours and eligible wages, and introduces the concept of an applicable week to improve the operation of the scheme overall, but particularly in relation to casual employees, to give effect to Recommendation 4 of the Report.[95]

Qualifying service

Currently the Scheme operates by reference to qualifying service: periods of time that an eligible employee has worked in the coal mining industry in Australia.[96] This is used to determine their entitlement to LSL under the scheme. A minimum of 8 years' qualifying service is required to be eligible for long service leave under the scheme.[97] Whilst this can be comprised of various periods of time, it excludes certain periods of time such as unauthorised absences, ill-health, redundancy, retirement and break periods.[98]

The rate at which qualifying service accumulates will vary according to the number of hours an eligible employee works each week (working hours, discussed below), their employment status and other factors.[99] In general terms, a full-time employee who works 35 hours per week will accrue an entitlement to 455 hours of LSL (13 weeks) after eight years’ qualifying service.

Currently, subsection 39A(3) of the Administration Act provides that a casual employee’s qualifying service is calculated in one week units. Where a casual employee is an eligible employee at any time during a week, they accrue one week of qualifying service. Importantly, this also means that currently where a casual employee does not work in a week due to specific rostering arrangements, that week is not a period of qualifying service.[100]

The Bill amends section 39A of the Administration Act to:

• ensure that a week where a casual employee does not work due to specific rostering arrangements is an applicable week and therefore a period of qualifying service[101] and
• include a rule making power to allow for sufficient flexibility should it become apparent other non-rostered weeks should also be prescribed as qualifying service.[102]

The effect of this is that casual eligible employees who work on a roster with weeks on and off will accrue qualifying service at the same rate as permanent employees. However, as discussed below, the number of hours of LSL that a casual eligible employees will be entitled to after 8 years of qualifying service is determined by reference to the number of working hours they performed during their qualifying service period.

Working hours

Under the Scheme, working hours refers to the amount of time that an eligible employee has worked in the coal mining industry in a particular week and is the measurement by which an employee’s entitlement to LSL is accrued and calculated.[103]

Currently, under section 39AA of the Administration Act an employee’s working hours are calculated differently depending on their employment status. For full-time employees this is 35 hours per week but for:

• part-time employees it is the lesser of the ordinary hours worked in a week, or 35 hours and
• for casual employees it is the lesser of the total hours worked in a week, or 35 hours.[104]

The Report noted:

In the coal mining industry, it is common for employees to work rosters with ordinary orders that vary from week to week, with more than 35 hours worked in the first week, and less than 35 hours worked in the second week. In such circumstances, casuals can be disadvantaged by having only 35 hours counted in the first week and less than 35 hours counted in the second week, even though they work an average of 35 ordinary hours per week … This averaging may not reflect the true hours worked by a casual employee per fortnight.[105]

This point was reinforced by the Explanatory Memorandum, which notes:

if a casual employee works 48 hours one week and 24 hours the next, the employee will only be able to rely on a total of 59 working hours despite having worked 72 hours across the fortnight. A permanent employee working similar hours would be able to accrue long service leave on 70 working hours [of qualifying service].[106]

Currently, full time employees accrue a leave entitlement of 455 hours after 8 years of qualifying service, which as noted above, is calculated by reference to the working hours of each employee. Part time and casual employees accrue the entitlement at a rate that reflects the number of hours worked each week (with the maximum accrual equivalent to a full-time employee).[107]

The Bill amends section 39AA of the Administration Act to change the definition of working hours for casual eligible employees from the lesser of the total hours worked in a week, or 35 hours to the lesser of the number of hours for the week worked out under whichever of two new averaging process is applicable, or 35 hours.[108] The two new methods for calculating a casual employee’s ‘working hours’ per week are based on whether the employee is a casual employee for:

• all weeks in a quarter, or
• some but not all weeks in a quarter.

Proposed subsection 39AA(3) deals with when a casual eligible employee works in every week of a quarter (a period of 3 months beginning on 1 July, 1 October, 1 January or 1 April).[109] Proposed subsection 39AA(4) deals with when a casual eligible employee works some, but not all weeks, in a quarter. In both cases, the working hours of a casual employee is calculated by dividing:

• the total number of hours worked by the casual employee for all of those weeks; by
• the number of weeks beginning in the quarter.

The Explanatory Memorandum provides the following example of how proposed subsection 39AA(4) (a casual eligible employee works some, but not all weeks, in a quarter) would operate:

Angus is a casual employee working in the black coal mining industry. He is often rostered to work shifts on a sporadic basis. Over the 1 January 2025 quarter, Angus works a total of 270 hours, worked out as follows:

• Week 1 – 50 hours
• Week 2 – 30 hours
• Week 3 – no hours
• Week 4 – no hours
• Week 5 – no hours
• Week 6 – 40 hours
• Week 7 – 30 hours
• Week 8 – no hours
• Week 9 – no hours
• Week 10 – 50 hours
• Week 11 – 30 hours
• Week 12 – 40 hours
• Week 13 – no hours

Assume Angus works no hours in the week after week 13. Only the weeks where Angus works hours will count as weeks of qualifying service under the Coal LSL Scheme. New section 39A(3A) (specified non-working weeks deemed to be periods of qualifying service) would not apply here, as while there are weeks in which Angus works no hours, none of those weeks fall squarely between two weeks in which Angus does work hours.

Angus has worked 270 hours over 7 weeks. The result of dividing 270 hours by 7 weeks equates to an average of 38.57 ‘working hours’ per week. This average is to be capped at 35 working hours per week (which is the lesser of the working hours calculated under new subsection 39AA(4) and 35 hours). The formula for determining the amount of long service leave an eligible employee is entitled to for a week of qualifying service completed by the employee is set out in subsection 39AA(2) of the Administration Act as ‘13/416 x working hours’. Using this formula, Angus will accrue 1.09 hours of long service leave for each of the 7 weeks in the quarter in which he worked (13/416 x 35 (working hours) = 1.09).

The Explanatory Memorandum also provides an example of how proposed subsection 39AA(3) (where when a casual eligible employee works in every week of a quarter) would operate at pages 30 to 31.[110]

Eligible wages

Under the Scheme, base rate of pay is defined by reference to the relevant FW Act definition, namely, the rate of pay payable to the employee for their ordinary hours of work, but not including incentive‑based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or any other separately identifiable amounts.[111]

However, under the Scheme, employees who take LSL are entitled to be paid at their base rate of pay that would have been payable to the employee during the period had the employee not taken LSL. Importantly, the Administration Act provides that this amount includes both the base rate of pay as defined in the FW Act and also incentive‑based payments and bonuses (but not loadings).[112]

In contrast however, the levy that employers must pay into the Coal LSL Corporation’s Fund is calculated by reference to eligible wages.[113] The current levy rate is 2.0% of an employee’s eligible wages payable by the employers. Eligible wages include wages paid to the employee in respect of their work in the coal mining industry, including not only incentive-based payments and bonuses, but potentially also overtime, penalty rates, and various loadings, depending on a range of factors including the type of employment and how the salary is paid.[114] In this regard the Report noted some employers are ‘believing they are paying an excess of 25% into the Fund due to the ambiguity regarding casual loading rates’.[115]

In turn, this has led to a disparity, or perceived disparity, between the levy paid by employers with respect to casual employees and the amount casual employees are paid when they take LSL.

The Bill addresses this in two ways. First, proposed subsection 39AC(2) of the Administration Act provides that when a casual employee takes a period of LSL the amount the employer must pay the employee depends on whether the employee is covered by an industrial instrument (that is modern award, enterprise agreement) :

• specifies they are to be paid a casual loading and
• the casual loading can be quantified.

Where that is the case, the employer must pay an amount no less than an amount equal to the:

• base rate of pay including incentive-based payments, bonuses and the casual loading
• that would have been payable to the employee during the period had the employee not taken the leave.[116]

In all other cases, the employer must pay the ordinary rate of pay (including incentive-based payments and bonuses, but excluding overtime payments) that would have been payable to the employee during the period had the employee not taken the leave.[117] The Explanatory Memorandum notes:

‘Ordinary rate of pay’ would also be afforded its ordinary meaning. It is commonly understood as an amount of money an employee would receive for the hours they worked, excluding any additional overtime payment.[118]

In its submission to the Committee Inquiry the Australian Industry Group (AIG) argued that the ordinary rate of pay should exclude ‘shift loadings, penalty loadings, monetary allowances, and any other separately identifiable amounts’.[119] In addition however, the AIG recommended that if the meaning of ordinary rate of pay is ‘intended to encompass a casual loading’ then:

the Bill should specifically exclude any separately identifiable amounts apart from incentive-based payment, bonuses or the casual loading.[120]

The second, proposed subsection 3B(3) of the Collection Act, will ensure that a casual employee’s eligible wages for the purposes of calculating levy to be paid by employers includes casual loading. In doing so, the Bill will:

• remove the ambiguity regarding casual loading rates and the meaning of eligible wages for the purposes of the levy noted earlier
• ensure better alignment between the calculation of the levy on casual employee’s eligible wages with the levy paid on a permanent employee’s eligible wages and
• ensure that the levy paid by employers with respect to eligible casual employees better reflects both the remuneration of casual employees and amounts that must be paid to them when they take LSL.[121]

Application of the amendments

Item 17 of Schedule 6 deals with when and how the proposed amendments apply. In summary:

• the amendments to how the qualifying service and working hours of casual eligible employees is calculated will apply to weeks beginning on or after the commencement Schedule 6 and
• the amendments to section 39AC of the Administration Act will apply in relation to a period of long service leave that is taken on or after the commencement of Schedule 6, where the period begins on or after that commencement.

The Explanatory Memorandum gives the following example of how the application provisions will operate:

a casual employee may have accrued long service leave over 8 years immediately preceding the commencement date. If the casual employee elects to take a period of that long service leave on or after the commencement date, the employer must pay the employee for the long service leave no less than an amount that is equal to the new amounts set out in new subsection 39AC(2) of the Administration Act (that is, base rate of pay including incentive-based payments, bonuses and casual loading where it can be quantified in the industrial instrument that covers the employee; or the employee’s ordinary rate of pay). This would apply even though the employee’s long service leave accrued prior to the commencement date.[122]

Policy position of non-government parties/independents on Schedule 6

The Opposition proposed that Schedule 6 be amended to ‘better clarify what allowances are included as comprising the ‘ordinary rate of pay’ when calculating long service leave payments’.[123]

At the time of writing, no direct commentary from other non-government parties/independents regarding Schedule 6 was identified.

Position of major interest groups on Schedule 6 of the Bill

The Australian Council of Trade Unions (ACTU) and Mining and Energy Union (MEU) have both indicated their support for Schedule 6.

The Australian Chamber of Commerce and Industry (ACCI)’s submission to the Senate Education and Employment Legislation Committee’s inquiry into the Bill states that the ‘ACCI does not oppose the proposed amendments’ outlined in Schedule 6. However, they ‘have some reservations about the decision to include a casual employee’s casual loading in their ‘eligible wages’ for the purposes of calculating the payroll levy.’ They suggested that the Government:

should have used the opportunity to address other, more pressing issues that persist … the Government could have sought changes to the scheme which would have clarified that certain service providers and contractors who may work on coal mine sites should be excluded from its coverage.[124]

In a media release published on 29 March 2023, the AiG state that whilst the changes ‘would deliver significantly enhanced entitlements to casual employees’, Schedule 6 ‘fails to address a raft of other well known deficiencies in the scheme’. In its submission to the Senate Standing Committee on Education and Employment, the AIG highlight ‘two specific concerns that warrant amendment’ which relate to:

1. Problems associated with the new obligation to calculate the levy and entitlements by reference to an employee’s ‘ordinary rate of pay’
2. Problems associated with the proposed definition of ‘working hours.’[125] 

On 27 March 2023, the Mining and Energy Union (MEU) published a statement on their website outlining their support for Schedule 6, noting that:

Measures included in the Albanese Government’s Protecting Worker Entitlements Bill fix an unfair provision in the Coal Long Service Leave Act that limit the number of hours counted towards long service leave to 35 per week … “We are very pleased that the Albanese Government has seen the importance of addressing this issue, which affects many thousands of workers across our coalfields.”