Australia: Cops and robbers in the Fair Work economy - Are regulatory authorities barking up the wrong tree?

Last Updated: 8 June 2017
Article by Brian Powles

Despite the existence of a national framework of minimum entitlements for employees, there is still a strong distinction between workers' rights and workers' reality. This is particularly the case amongst vulnerable employees. While much political attention is devoted to the legislative provision of rights, enforcement of these rights is perhaps more relevant. Two Commonwealth agencies are the primary stakeholders in employer compliance. The Australian Taxation Office are responsible for enforcement of PAYG tax, FBT, and Superannuation; while the Office of the Fair Work Ombudsman (FWO) is entrusted to enforce the minimum entitlements provided by the Fair Work Act and the Modern Awards.

The majority of enforcement action still arises as a direct result of employee complaints, as gathering other information cost effectively is a challenge for agencies. The agencies share memoranda of understanding with each other, other commonwealth agencies, and many of the large employer organisations. Both agencies also conduct random audits, based on data provided by employers. The upcoming introduction of 'single touch payroll' measures aim to use technological integration with employers to ensure enforcement. These each provide valuable investigative opportunities.

What the overall system lacks, is an effective mechanism for detecting cash.

The "black economy" in Australia is booming, with some estimates valuing it at $15 billion. A large component of this economy exists within in the hospitality and retail industries, who collect cash from customers, and pass some of it on to their employees "cash in hand". These off the book payments are often made not only with the intent to avoid paying tax and superannuation, but to grossly underpay employees. These employers are often not known to the ATO, to FWO, or the employer organisations. Significantly, employees in this situation are typically vulnerable. Those who even understand or suspect that the practice is wrong, generally believe themselves to be complicit in the wrongdoing, and rarely complain to the authorities.

Employers in cash rich industries such as hospitality and retail, who intentionally intend to exploit workers, evade tax, and mislead the government, have very little incentive to be 'partially' compliant. There is no practical benefit to complying with one Commonwealth regime, merely to disregard another. By far the easiest way to conceal your activity from FWO, is to concurrently conceal your activity from the ATO. In the extreme examples such as the 7-eleven cases, employers may declare the actual employment to the ATO, but simply falsify the records, relying upon employee vulnerability and coercion to avoid detection.

It follows, therefore, as a question of logic, that those employers who are at least cooperating with the ATO, and honestly declaring their employees' wages and tax, are fundamentally less culpable for breaches of the Fair Work Act. In this situation, non-compliance is generally a product of employers' ignorance or lack of understanding of the complex framework of obligations. Most of the time employers in this category are merely careless, at worst reckless, to their obligations. Very few, in my opinion, are proactively or intentionally non-compliant.

FWO's mandate under the act is to promote a 'productive, harmonious cooperative workplace', as well as compliance with the act and other fair work instruments. The responsibilities are three-fold: to provide education, assistance, and guidance to employees and employers; to investigate; and to bring litigation against employers in order to seek civil penalties. Where this overlaps, and which approach is taken, appears to be at the discretion of FWO, on a case by case basis. The FWO's Litigation Policy provides that there is a two-step process in place when deciding to litigate. Firstly, there must be sufficient evidence to prosecute the case. Secondly, to commence proceedings must be in the public interest. Clearly, the 'educative' face of FWO's mandate can be used to determine which employers should be investigated, as a method of collecting evidence, and ultimately informing the decision over whether public interest is engaged. Like any 'good cop / bad cop' move, the results are efficient.

This efficiency, however, creates an odd situation where the real "bad guys" are largely not pursued due to lack of evidence, or other inherent difficulties in bringing prosecutions. Meanwhile, those who are clearly mostly ignorant, careless, or reckless to their responsibilities, make it all too easy.

A further factor complicates the role of the enforcer. Like all commonwealth agencies, FWO and ATO do not have infinite resources. They are held to account for their funding, and need to choose the right battles to fight. Current Fair Work Ombudsman Natalie James is on record indicating that litigation decisions are made strategically, with reference to FWO's particular short term political and social objectives, and most notably, by the employers' capacity to pay penalties. This further factor not only complicates FWO's ability to objectively perform their statutory mandate, but makes this 'middle ground' offender, a particularly attractive target.

The Way Forward

Litigation is both time consuming and costly. As private law practitioners we are told, ad nauseam, that prevention is better than cure, and that a litigious approach to most matters is positively irresponsible. It's perhaps time our Commonwealth agencies were held to the same standard. Contraventions of the Fair Work Act resulting in litigation, should be reserved for only the objectively most culpable offenders. There should be no other criteria.

Exposing the worst offenders will only be achieved by the eventual transition to a cashless society. The 2015 Westpac Cash Free report predicts that Australia would be cash free by 2022. In addition, later this year the New Payments Platform will be launched which will allow Australians to send money to another person or business in real-time. The receiver of the payment will be able to be identified by an email address, telephone number or in the case of a business, by their ABN. In the coming years as we potentially transition to a cashless society, it will be interesting to note the effect these changes will have on the intentional 'bad guys', who may find it more difficult to actively dodge their obligations to the Commonwealth. The role of the enforcer may take on some clarity.

Finally, FWO's complex mandate needs to be properly allocated to at least two different agencies. To the extent that the fair work system needs an adversarial face, this face should be unmasked at all times. Procedural fairness dictates it – whether one is a 'bad guy' or not.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Brian Powles
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions