Australia: Proposed ´457 Visa´ Regulations Make Temporary Workers Less Viable

In early February, the Minister for Immigration & Citizenship, Senator Chris Evans, released the draft Migration Amendment Regulations 2009 (Cth) (Regulations), which contain new obligations for employers that sponsor subclass 457 visas workers. These obligations leave employers with little incentive to sponsor an employee under the scheme. The draft regulations are subject to review before being implemented and are not expected to be in force before September 2009.

The proposed employer obligations under the Regulations

The key obligations proposed for employers include:

  • the employer must pay 457 visa workers the MSL commencing on the date of employment and ending on the earlier of the date on which a new visa is granted or the date on which employment ceases. This clarifies the existing position;
  • the MSL is to be determined in a manner set out by the Minister in a legislative instrument that has not yet been released;
  • the employer must create and maintain employee records in auditable and reproducible form to be kept for up to seven years. This obligation is designed to assist with enforcement;
  • where a 457 visa worker fails to leave Australia voluntarily, the employer is obliged to pay costs the Commonwealth incurs in relation to locating a sponsored person and removing the person from Australia up to a ceiling of $10,000;
  • an employer must co-operate with inspectors exercising powers under the Migration Legislation Amendment (Worker Protection) Act 2008 (Cth) (Worker Protection Act); and
  • removal of the requirement for employers to cover health care costs for temporary overseas workers.

Increased pay obligations for employers

Under the Regulations, employers will be obliged to pay an increased MSL to 457 visa workers at a rate calculated by proposed changes to the existing MSL formula. This new method of calculating and paying the MSL will be specified in a legislative instrument drafted by the Department of Immigration & Citizenship. A release date for this instrument has not yet been set down.

The Regulations also provide a clarification of the employer's obligation to commence the payment of the MSL and the conditions upon which the employer may cease paying the MSL to its 457 workers. For example an employer may cease paying the MSL at the earlier of either the grant of a further substantive visa, or termination of employment.

The proposed obligation to pay temporary 457 visa workers the MSL at the market rate paid to Australian workers was recommended by Australian Industrial Relations Commissioner, Barbara Deegan, in her recent report on the 457 visa scheme. This report drew upon submissions from a suite of Union bodies including the AMWU, ACTU and CFMEU.

The Unions argued that the 457 visa scheme was being exploited by employers to source workers from the developing world and pay temporary workers considerably less than Australian employees, at the expense of Australian jobs.

Increased compliance and reporting obligations

Under the Regulations employers also face more stringent compliance obligations, requiring a greater level of co-operation with inspectors appointed under the Worker Protection Act. Under section 140X of the Worker Protection Act an inspector may enter a business premises if he or she has a reasonable cause to believe that an employer is not complying with the obligations set out in the Regulations.

In addition, the Regulations propose a new obligation for the purpose of improving an inspector's ability to monitor employer compliance with the obligations. This obligation requires that employers create and maintain employee records in a form which is readily audited and reproduced, for a period of up to seven years. Such records must be produced within seven days of a written request by an inspector.

Strict deadlines also apply to employers' reporting obligations. An employer must report the following events to the Department of Immigration within 10 working days:

  • changes to 457 workers' "training requirements";
  • an employer entering into bankruptcy, voluntary administration, receivership, or winding up;
  • changes to legal structure and/or ownership of the employer's business; and
  • cessation or termination of employment of a 457 employee.

Where false or misleading information is provided in respect of any of the above obligations, the Minister has the power to impose sanctions on an employer. Notably, the Minister may impose a sanction upon an employer for non-compliance with any of the obligations imposed under the Regulations.

Whilst the draft regulations do not specifically address the obligations of an employer to comply with Commonwealth laws such as superannuation laws and workplace relations laws, there are provisions which allow for future sponsorships to be barred or an existing sponsorship cancelled if a court finds that a law of the commonwealth has been breached.

The Minister can impose sanctions in situations such as where an obligation has not been met, or false and misleading information is provided or where an employer has attempted to recover costs of recruitment or of obtaining registration as a sponsor from the sponsored person.

Small win for employers

The Regulations propose the removal of the requirement that employers cover health care costs for 457 visa workers. This will in effect force 457 visa workers to take out private health insurance at their own expense.

This proposed obligation clearly reduces the potential cost for employers. However, the scheme becomes significantly more expensive for migrants seeking to work in Australia, particularly those wishing to bring family members with them.

Although the Regulations also propose a $10,000 cap (previously this was an uncapped amount) on the costs an employer must pay to the Commonwealth where a 457 visa worker will not leave Australia voluntarily, this is still potentially a significant expense for the employer and an onerous obligation.

Why propose such onerous obligations?

The obligations imposed upon employers under the Regulations provide little motivation to sponsor employees under the subclass 457 visa scheme.

In releasing the Regulations, Senator Evans confirmed that they are aimed at ensuring that temporary skilled overseas workers are not employed ahead of local workers or used to undermine Australian wages and conditions.

Senator Evans set the tone for the Regulations by saying "The scheme is not to be used to employ overseas workers at the expense of local labour." This comment demonstrates the Government's intention to implement the Regulations in an effort to strengthen the position of Australian citizens in the workforce.

Senator Evans also added that 'Paying market rates for Subclass 457 visa holders will effectively make them a more expensive option for employers.'

This sentiment is reflected in statistics which show that application rates for 457 visas in January this year were 31% lower than in September last year, with the most prevalent declines in the former boom industries of construction, mining and manufacturing, a trend which is likely to continue in the short term.

Employers who have workers sponsored through the 457 visa scheme need to review their position carefully in light of the draft regulations to ensure they are complying and continue to comply with all 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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