Increase in Penalties for Contraventions of the Fair Work Act 2009(Cth)

Proposed amendments to the Crimes Act 1914 (Cth) will result in increased penalties for contraventions of the Fair Work Act 2009 (Cth) (the "Act"). Penalties for contravention of the Act are determined by reference to penalty units. The value of a penalty unit is set by section 4AA of the Crimes Act 1914 (Cth). A current penalty unit according to that section is $170. 

The Crimes Legislation Amendment (Penalty Unit) Bill 2015 (Cth) (the "Bill") proposes to increase the value of a penalty unit under the Crimes Act 1914(Cth) to $180. This will increase the maximum penalty available for a contravention of the Act. For example, contravention of a term of a national minimum wage order currently attracts a maximum penalty of 60 penalty units for an individual and 300 penalty units for a corporation. If the bill is passed, the maximum penalty for such contraventions will increase from $10,200 to $10,800 for an individual, and from $51,000 to $54,000 for a corporation. 

Further, the Bill proposes to introduce a scheme which implements an automatic adjustment to the value of the penalty unit every three years in line with inflation, meaning the Bill will likely have an enduring impact. If Parliament passes the Bill, the changes will come into effect on 31 July 2015. Given the substantial maximum penalties that corporations are exposed to under the Act, this amendment will have a significant impact on employers' exposure for contraventions of the Act. 

Impact of the Federal Budget Changes to the Paid Parental Leave Scheme for Employers

On 12 May 2015, the Commonwealth Treasurer, Joe Hockey MP, delivered the Federal Budget for 2015–2016 (the "Federal Budget"). One of the announced changes involves amendments to the interaction between the current government-funded Paid Parental Leave ("PPL") scheme and employer-funded PPL schemes. The government-funded PPL scheme entitles employees to 18 weeks' PPL at the national minimum wage, totalling $11,500, when they take time off work to care for a newborn or recently adopted child.

Currently, employees are eligible for government-funded PPL payments even if they are also receiving payments from an employer-funded PPL scheme. This means that employees can receive dual payments while on PPL, from both the government and their employer. As a practical matter, however, many employers have made their PPL schemes complementary to the government schemes, by "topping up" the government-funded payments to ensure that employees on PPL receive their usual salary. 

If the proposed change is passed, employees will no longer be eligible to access the government-funded PPL scheme if their employer provides a more generous scheme. As such, only employees receiving less than 18 weeks' PPL at minimum wage will be eligible to receive government-funded payments. When the employer's scheme offers less than the government-funded scheme, the employee will receive "top-up" payments from the government for up 18 weeks at minimum wage, which currently represents approximately $11,500 in total. 

The government intends to implement this change from 1 July 2016. The Treasurer has estimated that the change will represent a cost saving to the government of nearly $1 billion. However, it remains to be seen whether Parliament will pass this component of the Federal Budget. 

Lessons for Employers

If this change is passed by Parliament, employers will need to consider the appropriateness of offering their own PPL schemes. This decision will clearly be informed by other considerations relevant for employers, including the impact of offering PPL benefits on an employer's ability to recruit and retain employees. However, depending on how the legislation implementing the proposed change is drafted, it may be open to employers to provide other incentives fulfilling those purposes, such as payments made when an employee returns to work. 

Any alterations to an employer's existing PPL scheme could raise practical and legal challenges. Such schemes are often set out in employment contracts, employment policies and enterprise agreements. This means that employers could be bound to uphold such schemes, and PPL schemes could be difficult to change quickly. Employers may be obliged to continue providing employees with their existing PPL entitlements under those instruments, unless employers can amend or renegotiate the aspects of those instruments dealing with PPL. 

Uncovering the Exploitation of Temporary Labour within Australia's Agricultural and Food Processing Sector 

On 4 May 2015, Four Corners, an Australian investigative journalism program, broadcasted a report titled "Slaving Away", uncovering the exploitation of temporary labour within Australia's agricultural and food processing sector (the "Report"). The Report examined the conduct of a number of labour hire companies supplying workers engaged in seasonal crop picking and the processing of fresh foods that are sold in many major Australian supermarket chains, such as Coles and Woolworths. 

The Report revealed that some labour hire companies are exploiting vulnerable tourists, predominately from Asia, who have travelled to Australia on holiday visas. These tourists are often in a vulnerable position, due to their lack of understanding of Australian labour laws and lack of competent English skills. The labour hire companies appear to be paying such workers significantly less than the minimum wages set out in the applicable awards, and in some cases up to half of the award wage. Further, it is alleged that the labour hire companies often impose unsatisfactory working conditions, including long hours and poor working environments. 

Underpayment of workers and the imposition of unsatisfactory working conditions is a clear contravention of Australian labour laws on the part of the labour hire companies. However, it is also possible that the farmers who engage noncomplying labour hire companies, and the supermarkets acquiring the services of such labour through labour hire companies, could be liable under the accessorial liability provisions in the Fair Work Act 2009 (Cth) (the "Act"). They will be found liable if they are "involved" in a contravention of the Act. Under section 550 of the Act, a person is "involved" in a contravention if he/she aids, abets, counsels, procures or induces it, or is knowingly concerned in or party to it, or has conspired with others to affect it. 

A particular farmer or supermarket could be caught by section 550 depending on their involvement in the labour hire arrangements. For example, if the supermarket had the capacity to influence the conduct of the labour hire companies, had knowledge of the poor working conditions and had knowledge that the workers were being underpaid, this could constitute sufficient involvement to amount to a contravention. If the amount paid by a farmer under a labour hire agreement is so low that it could not conceivably allow the labour hire company to pay workers the minimum award wage, that farmer may also face liability under section 550. 

Lessons for Employers

It remains to be seen whether any action will be taken against the companies and individuals implicated in the Report. However, given the broad nature of section 550 and the expanding reach of Australian labour law generally, there is potential for such action to be brought against numerous actors in relation to the exploitation of temporary labour in the Australian agricultural and food processing sector. 

Thanks to associate Michael Whitbread and graduates Talia Calgaro and Stephanie Crosbie for their assistance in the preparation of this Update.