With an election due later this year, employers should be aware
of the federal ALP's policy to crack down on employers who
exploit their workers. The Opposition has stated that it plans
significant changes to increase the penalties imposed on employers
for underpaying their employees.
The Opposition's position is in response to the high number
of underpayment and sham contracting cases last year, involving
Myer, 7-Eleven and Pizza Hut. According to the ALP's
information sheet about the proposed reforms, the Fair Work
Ombudsman recovered $22 million in backpay for more than 11,000
workers in 2014-15.
The planned reforms are set out below.
Tougher penalties for underpaying workers
The ALP proposes to increase the maximum civil penalties for
underpaying workers in breach of the Fair Work Act 2009
(Cth) (FW Act) in order to act as a greater
deterrent, which could be the higher of:
three times the amount of the underpayment; or
$216,000 (1,200 penalty units) for an individual and $1,080,000
(6000 penalty units) for a body corporate.
This exceeds the current maximum civil penalties of $10,800 per
breach for individuals and $54,000 per breach for corporations.
Importantly, for intentional or reckless underpayment the ALP
proposes it become a criminal offence involving up to two years
imprisonment for an individual. The Courts may also have power to
Under the FW Act, it is unlawful for an employer to engage a
worker as an independent contractor under a contract for services
if they are really an employee. However, it is a defence if the
employer can prove that they did not know and were not reckless as
to whether the contract was a contract of employment.
In a significant departure, the ALP plans to change the test so
that if a reasonable person would think someone is an employee,
then the person must treat the person as an employee with access to
entitlements such as annual leave and personal/carer's leave.
The ALP also plans to develop a definition of independent
contracting that will provide certainty to workers and employers,
instead of having to rely on the current test under the common
There are also plans to increase the current penalties for sham
contracting. The ALP may also introduce a new criminal offence and
the Courts may be given power to disqualify directors.
Under the proposed changes, directors will be personally liable
for debts in relation to outstanding compensation owing to workers
or civil penalties owing as a result of breaches of the FW Act. The
term "phoenixing" refers to the arrangement where assets
are intentionally transferred from an indebted company to a new
company, whereby the existing debts are left with the old company.
The old company is then generally placed into administration or
liquidation, thereby leaving nothing for its creditors. It is
proposed that directors will be personally liable for unpaid
employee entitlements in order to overcome
The ALP will also crack down on exploitation of temporary
overseas workers who work in Australia pursuant to temporary visas
with work rights, including 457 visas. The ALP wants to introduce a
new criminal offence for those who deliberately exploit such
workers and breach the FW Act, even if they are employing the
worker in accordance with the terms of a visa. However,
inadvertence or negligence would not constitute an offence.
This offence will be punishable by up to two years imprisonment
or a fine of up to $43,200 for an individual or a fine of up to
$216,000 for a corporation. This offence will supplement the
current criminal offence which makes it illegal to employ someone
or to refer someone to work if they are not legally entitled to
Further, any person who is underpaid will be able to seek
recourse for unpaid entitlements, and not just those who are
employed pursuant to a visa. That is, illegal workers will now have
Employers will also be required to provide all temporary
overseas workers a new Temporary Overseas Worker Support Pack, upon
the commencement of their employment in Australia, which sets out
their rights and entitlements. Failure to do so will expose
employers to a civil penalty of up to $10,800 for an individual and
up to $54,000 for a corporation.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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