Australia: 457 visa monitoring of sponsorship obligations and consequences of non-compliance for the franchise community

Since our last edition of Franchising Focus, the second stage of the reforms to the 457 visa program was released on 1 July 2017. This is further to the Federal Government's announcement on 19 April 2017 about the abolition of the 457 visa program and the proposed staggered changes until March 2018. 457 visa applications can continue to be lodged until March 2018. From March 2018, prospective visa applicants must apply for the new Temporary Skill Shortage (TSS) visa.

As it is anticipated that the sponsorship obligations will continue beyond March 2018, those employers who have employees on 457 visas will still need to be alert to their obligations, including the consequences of non-compliance with those obligations.

In our previous edition of Franchising Focus we focused on the sponsorship obligations as they pertain to 457 visa employers and suggested a number of strategies for compliance with the sponsorship obligations. In this article, we will focus on the monitoring of the sponsorship obligations and the consequences of non-compliance in the context of the franchise network.

How are these obligations monitored?

Sponsors will be monitored for compliance by the Department of Immigration and Border Protection (DIBP) during the period they are a sponsor and for up to five years after they have ceased to be a sponsor.1

The DIBP generally relies on a target risk-based approach to monitoring 457 visa sponsors and are commonly informed of potential breaches by written requests from DIBP or Fair Work Ombudsman (FWO) inspectors for information (sponsors have an obligation to cooperate with these inspectors under reg 2.78); announced or unannounced audits and site visits to the employer business premises by DIBP; allegations from visa holders, community members and other third parties using the 'dob-in' line; and exchanging information with other agencies or areas such as the FWO, Department of Employment, Australian Taxation Office or 457 processing areas.

The DIBP also works closely with the FWO under a Memorandum of Understanding which grants FWO inspectors powers to specifically investigate breaches of reg 2.79 (the obligation to ensure equivalent terms and conditions of employment which are no less favourable than those provided to Australian citizens or permanent residents performing equivalent work in the same workplace and location) and reg 2.86 (the obligation to ensure that the sponsored person works or participates in a nominated occupation, program or activity for which their nomination has been approved).

The FWO then refers potential breaches to the DIBP. In 2015-16 the FWO referred 212 visa sponsors to the DIBP for further investigation.2

Taskforce Cadena

In 2015, Taskforce Cadena, a joint agency taskforce of the DIBP's operational arm, the Australian Border Force (ABF) and the FWO, was established to reduce visa fraud, illegal work and exploitation of foreign workers. The taskforce is not limited in its scope of inquiry across industries and visa types, drawing on the collective powers of the ABF and FWO as conferred by the Migration Act 1958 (Cth) and the Fair Work Act 2009 (Cth).

Migrant Workers Taskforce

Furthermore, in May 2016 the Federal Government announced its Policy to Protect Vulnerable Workers, including the establishment of an additional joint taskforce, the Migrant Workers Taskforce. This taskforce's role is to identify further proposals for improvements in law, enforcement and investigation methods, to reduce instances of migrant worker exploitation. This will include collaborating with Taskforce Cadena and other compliance operations.

What are the consequences for breaching these obligations?

The DIBP may initially issue letters to employers reminding them of their sponsorship obligations, or alternatively issue a formal warning letter, depending on the severity of the breach.

If an employer is found to be in contravention of their sponsorship obligations under the Migration Regulations 1994 (Cth) (the Regulations), depending on the severity of the breach, the court may issue sanctions such as a civil penalty order, or accept an undertaking. DIBP may also issue an infringement notice under the Regulations for the purposes of s 506A of the Act as an alternative to a civil penalty order.

The Minister may also bar the sponsor from doing certain things (e.g. sponsor non-citizens or limit the number of non-citizens to be sponsored, etc) or cancel the employer's sponsorship status.

Furthermore, failure to comply with these obligations may amount to allowing non-citizens to work in breach of their visa conditions under the Migration Amendment (Reforms of Employer Sanctions) Act 2013 (Cth) (the Employer Sanctions Act). The civil penalty provisions of the Employer Sanctions Act do not require any intention on behalf of the employer in allowing an unlawful non-citizen to work in breach of visa conditions. However, having knowledge of, or being reckless in allowing a non-citizen to continue to work, can potentially constitute an aggravated offence with a potential sentence of five years imprisonment.

The recent cases summarised below indicate the factors the courts will take into account when considering the appropriate sanction.

Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd3

Choong Enterprises Pty Ltd operated a number of restaurants and cafes in Darwin. The business obtained approval to act as a sponsor for ten Filipino citizens who had travelled to Australia on 457 visas to work as 'Cooks' and 'Restaurant/Café Managers'. Between 2009-12, Choong Enterprises contravened a number of regulations, with the most significant being the obligation to ensure equivalent terms and conditions of employment and to not recover certain costs from the visa holders. The conditions provided were far less favourable than would be provided to Australian citizens working in the hospitality industry at that time. The effect of this contravention was compounded by deductions of between $1,400 and $1,800 of pay from four employees to recover their recruitment costs.

When determining the appropriate sanction, Mansfield J took into account the fact that Choong Enterprises had received three reminders of its obligations from the DIBP during the relevant period and the presentation of inaccurate records to DIBP officers while under investigation. The element of general deterrence was considered significant and even more so when the sponsor had been directly made aware of their obligations. Consequently, Choong Enterprises had its sponsorship approval cancelled and was ordered to pay $180,000 in pecuniary penalties and $6,400 to employees for the recruitment costs that had been deducted from their salaries.

Minister for Immigration and Border Protection v Hallmark Computer Pty Ltd4

Hallmark Computer Pty Ltd conducted a business assembling, distributing and repairing computer products and mobile devices and was approved as a business sponsor to employ four 457 visa holders. Hallmark admitted to failing to meet its obligations to ensure equivalent terms and conditions, and to ensure the visa holders were being engaged in their nominated occupation and to not transfer costs to the visa holder.

In his decision, Buchanan J made it clear that in such a case, courts should attempt to ensure that civil penalties for breaching statutory obligations are not seen as an acceptable cost of doing business. The seriousness of the contraventions and deliberately sustained deception by Hallmark Computer during the DIBP investigation was taken into account when issuing the penalty. It was reinforced that to confine the assessment of the penalty for each course of conduct to the range of penalties for a single offence would not recognise the seriousness of Hallmark Computer's conduct.

Ultimately a final penalty of $430,000 was imposed on Hallmark Computer and $86,000 on its director.

The significant penalties and scathing judgments in these two cases demonstrates the serious approach the courts take with employers who fail to comply with their sponsorship obligations.


In light of these decisions and the increasing scrutiny of legal compliance in franchise networks, it is imperative that anyone in a franchise network who routinely engages employees on 457 visas understands and complies with their obligations as a 457 business sponsor. Further, franchisors of such networks should consider what, if any, additional steps they should take to ensure that their franchisees are compliant with their 457 obligations, in order to minimise their own potential exposure.


1 Mr David Wilden, Acting Deputy Secretary, DIBP Committee Hansard, 17 July 2015, p46; DIBP, answer to question on notice, 17 July 2015 (received 14 August 2015)
2 Australian Border Force – Department of Immigration and Border Protection, 2016, Sponsor Monitoring Unit – Monitoring and Compliance
3 [2015] FCA 390
4 [2016] FCA 678

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