Introduction
Every employee has a right to be paid the wages and entitlements which they are legally entitled to under Australian law. This goes to the heart of the relationship between the employer and the employee. Throughout its period in office, the Australian Government has introduced a raft of measures to support the rights of employees in this regard. In our view, the Majority Report insufficiently considers the positive impact of these measures and proposes a range of recommendations which are insufficiently supported by evidence.
Australian Building and Construction Commission
The comments in the Majority Report in relation to the Australian Building and Construction Commission (ABCC) in paragraphs 3.64 to 3.66 are deeply concerning. The discussion leads with evidence criticising the focus of the ABCC. It is noted at paragraph 3.65 that the Construction Forestry Maritime Mining and Energy Union (CFMMEU) calls for the abolition of the ABCC. In our view, the presentation of the evidence fails to provide a balanced overview of the important work of the ABCC, including in relation to the recovery of underpaid wages and entitlements.
The submission of the Attorney-General’s Department provides evidence of the success of the ABCC in pursuing matters relating to wages and entitlements. In its most recent Annual Report 2020–21, the ABCC provides further information in relation to its actions. The annual report indicates that the highest number of investigations commenced by topic in that year related to wages and entitlements (it was the same in the 2019–20 year). Hence, the evidence does not support the assertion that the ABCC has a lack of focus on its core objectives.
In relation to the views of the CFMMEU, the Annual Report 2020–21 indicates that the CFMMEU and its representatives were subject to penalties of $3,010,790 out of total penalties imposed during the year of $3,491,890. In this regard, it should be noted that the penalties are assessed by the courts.
There is no recognition in the Majority Report that it is the repeated infringements of the CFMMEU which require the deployment of resources by the ABCC. The view of the CFMMEU to abolish the ABCC is stated without the inclusion of any evidence as to context—over 85 per cent of the penalties levied in the 2020–21 year were against the CFMMEU.
The ABCC is discharging its role to uphold the rule of law on building and construction sites. The presentation of the evidence in the Majority Report is not a reasonable representation of the facts. It is deeply concerning that the true position is so distorted in the Majority Report.
Measures taken by the Government
Through its period in office, the Australian Government has introduced a range of measures to address the issue of underpayment of employee wages and other entitlements. This is across a range of policy areas.
As detailed in the submission of the Attorney-General’s Department, on 5 September 2017, the Parliament passed the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017. The legislation introduced a higher scale of penalties for serious contraventions of prescribed workplace laws. This included a ten-fold increase of penalties for serious contraventions.
A range of other reforms were introduced including:
doubling of penalties for record-keeping and pay slip breaches;
extending liability to franchisors and holding companies liable for breaches by their networks, where they knew or could reasonably be expended to have known of contraventions, and failed to take reasonable steps to address them;
additional evidence gathering powers for the Fair Work Ombudsman (FWO);
outlawing of cashback arrangements; and
new penalties for hindering an investigation.
The effectiveness of these amendments is evidenced by the results of cases brought by the FWO. Particular case studies are provided in the submission from the Attorney-General’s Department.
It should also be noted that over $180 million in new funding to the FWO has been provided since 2016 to prevent wage underpayment and improve compliance.
The establishment of the Commonwealth-funded Employer Advisory Service provides advice to employers. Through this service, which commenced on 1 July 2021, small businesses can seek free written advice, tailored to their circumstances to help employers meet their workplace obligations to employees. The Australian Government is providing $12.9 million in funding over four years from 2020–21 to the FWO for this purpose.
As part of the Australian Government’s industrial relations reforms legislation that was introduced into the Parliament in late 2020, proposals were included to make the more egregious form of wage underpayment a criminal offence. The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 would have provided for this criminal offence, amongst a raft of other measures which supported Australia’s recovery from the COVID-19 pandemic. It is noted that the bill was not passed as proposed because of lack of support from the Opposition.
In relation to migrant workers, the Australian Government has introduced the Migration Amendment (Protecting Migrant Workers) Bill 2021 which addresses two of the recommendations in the report by the Migrant Workers' Taskforce. This legislation will strengthen protections for migrant workers in Australia. This is important to maintain Australia’s international reputation as a preferred migration destination. Passage of this bill through the Parliament will build on existing compliance mechanisms and sanctions against unscrupulous employers, labour hire intermediaries and others who misuse Australia’s visa programs and immigration status to exploit migrant workers in the workplace.
The Australian Government’s Superannuation Guarantee Integrity Package, contained in the Treasury Laws Amendment (2018 Measures No. 4) Act 2018, received Royal Assent on 1 March 2019. The package provided the Australian Taxation Office (ATO) with new powers to detect non-compliance and enforce employers’ superannuation guarantee obligations. This included:
From 1 July 2018, superannuation funds have been required to report more frequently the contributions they receive, enabling the ATO to identify non-compliance earlier and take prompt action.
The ATO’s recovery powers have also been improved, through strengthened director penalty notices and the use of security bonds for high-risk employers. These measures enhance the ability of the ATO to act on behalf of employees.
The ATO has been empowered to seek court-ordered penalties in the most egregious cases of non-payment, including up to 12 months jail for employers who repeatedly fail to pay superannuation guarantee liabilities.
The ATO can inform all affected employees the steps taken by the ATO to recover unpaid super.
The rollout of Single Touch Payroll (STP) is also making it easier for employers to comply with their superannuation obligations. STP has reduced the regulatory burden on business and transforms compliance by aligning payroll functions with regular reporting of taxation and superannuation obligations.
The Australian Government introduced a one-off amnesty to encourage employers to self-correct historical superannuation guarantee non-compliance. The amnesty period applied to disclosures of historical non-compliance made between 24 May 2018 and 7 September 2020.
The amnesty encouraged employers to come forward and pay historical superannuation guarantee debts without facing the usual financial penalties from the ATO. Importantly, employers still had to pay the amounts owed in full and with interest. More than 28,300 employers qualified for the amnesty, disclosing nearly $912.5 million in Superannuation Guarantee Charges (SGC) on behalf of more than 690,950 employees. The goal was to seek the payment of the SGC for the benefit of the affected employees.
Given the initiatives which have been taken by the Government across a range of policy areas, care is required prior to making additional changes. Time is required to assess the impact of Government initiatives. Further, the costs (financial and otherwise) of additional policy measures must be carefully weighed against the benefits.
Comments on Recommendations
In relation to Recommendation 1, it is noted that the Australian Government’s 2020 industrial relations reforms proposed a new criminal penalty for wage theft, as well as higher civil penalties for other forms of underpayments that did not meet the criminal threshold. The Opposition voted against the legislation.
Recommendation 2 is vague and imprecise in relation to seeking to: 'capture all parties and individuals…[that] create an environment of wage theft…'. It is unclear how this would work in practice.
In relation to Recommendation 3, the policy benefit for making such an amendment has not, in our view, been established.
In relation to Recommendation 4, under the Corporations Law, directors have a duty to prevent a company trading if it is insolvent. The Australian Securities and Investments Commission (ASIC) has successfully prosecuted directors for allowing companies to incur debts when the company is insolvent—and has sought orders making directors personally liable for company debts.
It should also be noted that the Australian Government has also given the ATO increased recovery powers, including strengthened director penalty notices and the use of security bonds for high-risk employers. The ATO can now also seek court-ordered penalties in the most egregious cases of non-payment, including up to 12 months jail for employers.
In relation to Recommendation 5, it is noted that there is already provision under section 548 of the Fair Work Act 2009 (Fair Work Act) for certain proceedings to be dealt with as small claims. This is referenced in the submission from the Attorney-General’s Department.
Further consideration is required in relation to Recommendation 6, including how this recommendation would work in practice and the amendments required to legislation.
In our view, there is inadequate evidence to justify the measures proposed in Recommendations 7 and 8.
In relation to Recommendation 9, it is noted that many large businesses already pay their superannuation guarantee obligations either monthly, fortnightly, or weekly. The current payment frequency of superannuation seeks to strike a balance between ensuring the timely payment of superannuation and the burden on business, particularly small businesses. The impact on small business of any such change would need to be carefully considered; especially given the measures which have been taken by the Government to secure compliance of employers with their legal obligations.
In relation to Recommendation 10, it is noted that most workers and their legal representatives can already pursue unpaid superannuation through the court system due to superannuation clauses in their award or employment agreement. Accordingly, it is difficult to understand how including the superannuation guarantee in the National Employment Standards (NES) would have a material or practical impact.
It also needs to be noted that, unlike the legislation relating to the superannuation guarantee, the Fair Work Act does not have universal coverage of all Australian workers, due to constitutional constraints on the Commonwealth’s industrial relations powers.
Finally, it is noted that the costs of pursuing unpaid superannuation via the courts is significant for individuals. Including superannuation in the NES would not make it more economically viable for individuals or groups to pursue unpaid superannuation. The ATO provides a more economic route to recovery.
In relation to Recommendation 11, the Majority Report lacks any analysis of the cost of such an expansion of the scheme. It is important that the Fair Entitlements Guarantee (FEG) is sustainable. Any expansion of the scheme (however well intended) needs to consider the cost.
In relation to Recommendation 12, as a general proposition, we support the communication of information with the employee. It is noted that since 1 April 2019, the ATO has been able to disclose to employees a greater range of information relating to the superannuation owed to the individual employee, including ATO efforts to recover unpaid superannuation from the employer.
Where an employer has entered into a payment arrangement to repay super, the ATO can disclose this to an employee and, in addition to this, the high-level terms of the payment arrangement as they relate only to that employee. For example, the ATO can disclose the start and end dates of the payment arrangement, the frequency of payment agreed by the employer, and the amount of superannuation that is being collected for that employee.
Additional information that the ATO is also able to disclose to an employee includes other actions that the ATO may be taking to recover unpaid superannuation debts from an employer. The ATO may also disclose that they are pursuing related parties against whom they may be able to recover an unpaid superannuation debt (for example, using director penalties or garnishee powers).
To better inform employees, the ATO can now inform all affected employees about their actions to recover unpaid superannuation and display contribution information on the MyGov website.
In our view, care needs to be taken prior to imposing additional processes upon the ATO in relation to its pursuit of unpaid superannuation. How much will these additional processes cost? Could they have the unintended consequence of delaying the ATO taking the steps it needs to take in order to secure the best prospects for payment of unpaid superannuation?
In relation to Recommendation 13, further consideration is required with respect to the current distribution of powers with respect to enforcement. The role of each regulator needs to be recognised and clearly defined. The demarcation of responsibilities should be clear.
It is noted that the Australian Government legislated the Superannuation Guarantee Integrity Package, contained in the Treasury Laws Amendment (2018 Measures No. 4) Act 2018 in 2019. The package was a result of the findings of the Superannuation Guarantee Cross Agency Working Group which reported on the operation, administration, and extent of non-compliance in the superannuation guarantee system. The package provided the ATO with new powers to detect non-compliance and enforce employers’ superannuation guarantee obligations.
From 1 July 2018, superannuation funds have been required to report more frequently the contributions they actually receive, enabling the ATO to identify non-compliance earlier and take prompt action.
The ATO’s recovery powers have also been improved, through strengthened director penalty notices and the use of security bonds for high-risk employers. These measures enhance the ability of the ATO to take action on behalf of employees to ensure that unpaid superannuation is paid to employees’ super accounts.
It should be noted that the ATO has primary oversight of superannuation regulation. In comparison, the functions of the FWO relate to providing advice about, and enforcing compliance with, modern awards and enterprise agreements requiring employers to make superannuation contributions. The FWO also has functions in relation to record keeping and payslip requirements relating to superannuation contributions.
The FWO does not have statutory access to payment information from employers or superannuation funds in the same way as the ATO. Hence, as a result, the FWO is not able to proactively monitor the superannuation guarantee and forwards on complaints regarding superannuation contributions to the ATO for action.
Actions to enforce unpaid superannuation guarantee charges are brought by the ATO. If an employee reports their employer to the ATO for non-payment or underpayment of superannuation contributions, the ATO may investigate the employer on the employee’s behalf.
In relation to Recommendation 14, it is noted that superannuation legislation is based on the taxation power. Further legal advice is required in relation to whether superannuation trustees could be empowered to bring claims. Such a change would require substantive legislative reform. Given measures which have been introduced relatively recently (described throughout this dissenting report), further time is required to consider the impact of the new measures. One benefit of the ATO taking action is that the costs are not incurred by the superannuation funds.
In relation to Recommendation 15, financial analysis would need to be undertaken in relation to any extension of the FEG Scheme. It is also noted that the Australian Government is committed to a nationally consistent approach to labour hire and continues to work with State and Territory governments to achieve this objective. Moreover, labour hire employees have the same rights and protections as all other employees when it comes to, for instance, unfair dismissal rights, award entitlements, general protections and work health and safety protections. Labour hire employees working under enterprise agreements already have rights and entitlements above the award minimum safety net.
In relation to Recommendation 16, as noted above, the Australian Government has strengthened legislation to better protect migrant workers by enhancing the powers of the FWO. The FWO has made clear that the protection of vulnerable workers, including migrant workers, is a priority area. The Government also established the Migrant Workers’ Taskforce in 2016 and is continuing to progress implementation of the Taskforce’s recommendations.
It is also noted that: (a) the FWO offers a telephone interpreter service (tel: 13 14 50) and an online reporting tool for workers to report issues anonymously and in languages other than English; and (b) there is no obligation for any migrant worker to disclose their visa status when seeking assistance from the FWO, and (c) under the Assurance Protocol that the FWO has with the Department of Home Affairs, migrant workers will generally not have their visa cancelled, or be detained or removed by the Department of Home Affairs if they are assisting the FWO.
In relation to Recommendation 17, it is noted that the Australian Government has provided $18.1 million in new funding for the FWO over four years from 2021–22 to support a doubling of the current scale of the Pacific Labour Scheme and Seasonal Worker Programme, and the establishment of the new Australian Agricultural Visa program. This new Government funding will enable the appointment of 27 additional Fair Work inspectors to ensure compliance with workplace law under the expanded Pacific labour mobility programs and the Australian Agricultural Visa Program.
Migrant workers are covered by the same basic workplace rights and protections as Australian citizens and permanent residents, and these rights and protections will continue to apply to future workers under the Australian Government’s labour mobility programs.
In relation to Recommendation 18, it is noted that the Commonwealth Procurement Rules provide:
… the Australian Government promotes the proper use and management of public resources. Proper means efficient, effective, economical and ethical … Relevant entities must not seek to benefit from supplier practices that may be dishonest, unethical or unsafe. This includes not entering into contracts with tenderers who have had a judicial decision against them (not including decisions under appeal) relating to employee entitlements and who have not satisfied any resulting order.
In relation to Recommendation 19, it is noted that the employees who expose workplace non-compliance are protected from adverse action taken by their employer. This is under the general protections provisions contained in the Part 3-1 of the Fair Work Act. There is a summary of these provisions in the submission of the Attorney-General’s Department.
Senator Paul Scarr
Deputy Chair
Liberal Senator for Queensland
Senator Andrew Bragg
Member
Liberal Senator for New South Wales