Australia: Monthly Update - Australian Labour & Employment - January 2016

Last Updated: 26 February 2016
Article by Adam Salter


Labor Foreshadows Tougher Penalties and Imprisonment for Underpayment of Wages

The Federal opposition has foreshadowed that if elected to Government this year, it intends to advance a number of reforms to substantially increase the penalties associated with breaches of the Fair Work Act 2009 (Cth) and the underpayment of wages and employment-related entitlements.

The Labor party argues that current penalties are inadequate. Currently, if an employer fails to pay an employee's wages, they may be fined up to $10,800 as an individual and $54,000 as a corporation. Labor proposes an increase in these fines to $216,000 for an individual and approximately $1 million for a corporation.

Further, Labor's proposed reforms also include a plan to extend the accessorial liability provisions of the Act such that company directors are personally liable for unpaid wages owed to employees by the companies they manage (and civil penalties imposed on corporate employers by the Courts) and the introduction of a criminal offence (carrying up to two years' imprisonment) to cover instances of deliberate and intentional exploitation of migrant labour.

New Legislation to Resurrect the Australian Building and Construction Commission Faces Uncertain Future

In response to one of 79 recommendations made by Commissioner Dyson Heydon in his Final Report to the Royal Commission into Trade Union Governance and Corruption, the Federal Government has introduced a bill to re-establish the Australian Building and Construction Commission (the "ABCC") as the prime regulator of industrial relations within the building and construction industry.

As part of his Final Report, Commissioner Heydon recommended that legislation be enacted conferring a regulatory body with compulsory investigatory and information-gathering powers. This recommendation was made in response to the Royal Commission's uncovering of evidence of "widespread" and "deep-seated" failures in corporate governance within Australian trade unions.

On 2 February 2016, the Building and Construction Industry (Improving Productivity) Bill 2013 was re-introduced into the lower house. The Bill was unchanged from legislation originally introduced by the Abbott Government in 2013 and rejected by the Senate in 2014.

The ABCC will be tasked with promoting respect for the rule of law and for the rights of building industry participants by ensuring participants are held accountable for unlawful conduct. For this purpose, the ABCC will be granted extensive powers of investigation and enforcement to enable it to uphold the Act, designated building laws and the Commonwealth Building Code. Importantly, the ABCC will be able to impose harsher penalties for those participants engaging in unlawful industrial action. This includes penalties for breaches of laws specific to the building industry accompanied by a broadening of the circumstances under which industrial action may attract penalties. For instance, in response to a contravention of the civil penalty provisions (that include unlawful industrial action and picketing, coercion and discrimination), an authorised applicant (such as an inspector or affected person) may apply to a court for orders including pecuniary penalties, compensation orders or any other order the court considers appropriate. Further, a court may make an order for an injunction (including interim injunction) in respect of the contravention. At the same time, the ABCC will work to improve the bargaining framework to facilitate genuine bargaining at a workplace level.

The ABCC was first introduced by the Liberal Government in 2005 (by Prime Minister Howard) and then later abolished by the Labor Government in 2012 and replaced with the Fair Work Building Industry Inspectorate (operating as the Fair Work Building and Construction, or FWBC). In contrast to the dramatically reduced powers of the FWBC, the ABCC had a full suite of coercive capabilities at its disposal, including the ability to serve examination notices on persons the ABCC reasonably believed had information (or documents) relevant to an investigation or who were capable of giving relevant evidence. Such persons could be required to give such information or documents or attend before the ABCC (with a failure to comply constituting a criminal offence).

The Government may have hoped that the outcome of the Royal Commission would persuade cross-bench senators to give their support to the Bill (with the Government needing the support of six out of eight cross-bench senators to ensure its passage). However, on 6 February 2016, the vote on the Bill was delayed after several cross-bench senators sided with Labor and the Greens to have the Bill sent to the Australian Senate's Standing Committee on Education and Employment (which does not report until 15 March 2016).

This move will reduce the time the Government has to debate and pass the Bill before delivery of the Federal Budget on 10 May 2016 and will also further narrow the constitutional window that would permit a double-dissolution of parliament (and send the nation to an early election). Therefore, the fate of the Bill (and the potential resurrection of the ABCC) still hangs in the balance.


Notice of Termination Cannot Run Concurrently to a Period of Leave

In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz (Australia) Pty Ltd [2016] FWC 669 (3 February 2016), the Fair Work Commission ("FWC") found that Kentz (Australia) ("Kentz") was in breach of its enterprise agreement when it gave notice of termination to employees just before a period of rest and recreation ("R&R").

Kentz, an electrical contracting company, which was involved in the Ichthys LNG project, gave 150 fly-in fly-out workers notice of retrenchment directly before a designated R&R period provided for in their enterprise agreement (the "Agreement"). Under the Agreement, the employees worked four weeks "on" followed by one week of unpaid rest. The Electrical Trades Union used the dispute resolution provision of the Agreement to refer the matter to the FWC.

The first question which the Commission was asked to determine was whether the Agreement permitted notice of termination to run concurrently with the employees' period of R&R. The Electrical Trades Union ("ETU") submitted that the employees' entitlement to R&R, which formed part of the working cycle, could not be offset against other entitlements such as notice of termination.

Kentz argued that the matter in dispute was what amount of payment in lieu of notice should be provided rather than whether notice could run concurrently with a period of R&R. Section 117(2)(b) of the Fair Work Act 2009 (Cth) states that the worker must receive his or her full rate of pay for the hours the employee would have worked during the notice period. Since the R&R period is unpaid, Kentz submitted that its employees were not entitled to receive payment where they were paid in lieu of notice for that week (had the notice period run its course, they would not have received payment in this week).

In the alternative, the ETU asked the Commission to determine that the Agreement did not permit employees to be put on a period of R&R where there was less than two weeks' work for the employees remaining on the project.

It was held that Kentz failed to comply with its Agreement because R&R was considered a type of regulated and approved leave and that notice of termination under the Agreement could not run concurrently with a period of leave.

Further, Commissioner Bissett rejected the interpretation of section 117(2)(b) advanced by Kentz. Commissioner Bissett considered that payment in lieu of notice cannot be reduced based on the assumption that the employee is on unpaid leave for part of the notice period.

Additionally, the Commissioner was satisfied under the Agreement that the employees could not be put on R&R within their last two weeks of work. Therefore, where workers were paid in lieu of notice, this had to be calculated as if they had worked for the entirety of the notice period.

Lesson for Employers. This decision is somewhat problematic, as it treats a period of rest mandated by an enterprise agreement as a form of leave. Alternatively, the R&R period can be thought of as the accumulated weekend days the employees missed by working four weeks "on". It will be interesting to see whether Kentz appeals the decision and whether it is upheld by the Full Bench of the FWC.

Nevertheless, the decision demonstrates that employers should take care when planning the implementation of large-scale redundancies. As a result of this decision, Kentz may now be required to pay the 150 retrenched employees substantial amounts in lieu of this additional week of notice of termination.

$200,000 Fine for Essendon Football Club for Endangering Players

The Victorian Magistrates Court has imposed a penalty of $200,000 on the Essendon Football Club ("Club"). The Court found that during its 2011–2012 Supplements Program, the Club risked players' health and failed to keep a safe workplace.

The Club was investigated in 2013 by the Australian Sports Anti-Doping Authority and the World Anti-Doping Agency over its supplements program for the 2012 Australian Football League ("AFL") season and preceding preseason. The Club was found to have injected its players with banned peptide Thymosin beta-4. As a result, 34 of its players who were part of the program were suspended from the AFL, and various other staff members were subject to disciplinary action.

Essendon pleaded guilty to two charges under section 21 of the Occupational Health and Safety Act 2004 (Vic) ("Act") brought by Worksafe Victoria in November 2015 arising from the 2011–2012 supplements program. The charges included failure to provide and maintain for employees a work environment and system of work that is, so far as is reasonably practicable, safe and without risk to health. The maximum fine that could have been imposed was more than $300,000 per offence, although a higher court could have imposed a larger fine.

Magistrate Reardon found that the Club was in breach of section 21 of the Act. He referred to a "blatant disregard" for the safety of players, many of whom were young and vulnerable, and noted that the supplements program was conducted under a veil of secrecy.

In response to concerns raised by senior players regarding the scheme in January 2012, protocols were introduced requiring the informed consent of players, for substances to be cleared by the Club's doctor and for the doctor to advise on the effects of substances and the suitability for individual players. Magistrate Reardon found that those protocols were "totally ignored" and that people at the Club did not proactively ensure that the protocols were being followed. He stated that the case involved "the proactive involvement of an employer intent on doing something to its employees, namely to inject with supplements".

As such, Magistrate Reardon found that the players were exposed to risks to their personal health and safety by Essendon's failure to provide and maintain a safe workplace. The Magistrate ordered the Club to pay $20,000 in legal costs and $200,000 in fines. In setting the penalty, Magistrate Reardon took into account Essendon's lack of prior offences and the penalties it had already faced as a result of the supplements program, including a $2 million fine from the AFL.

This case involved the criminal prosecution of the Club for endangering players' health. It remains to be seen whether any of the 34 players who participated in the supplements program will pursue civil action to recover compensation for their personal and/or financial losses.

Lessons for Employers. Employers have an obligation to provide and maintain a healthy and safe workplace for their employees, regardless of the duties that the employees are performing. This case demonstrates that regulators are not afraid to penalise employers where they do not meet those obligations.

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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Adam Salter
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