Fair Work Commission's Expert Panel Lifts the National Minimum Wage by $15.80 per Week

In a highly anticipated ruling that will directly affect more than 1.86 million employees, the Fair Work Commission Expert Panel has decided to lift the minimum wage by $15.80 per week, bringing it to $672.70 (an increase of 2.4 per cent). The ruling will affect not only those workers whose wages are set by award rates, but those under enterprise agreements (as these are required to leave workers better off than the award entitlements). As part of its annual review of the national minimum wage and minimum wages in modern awards, the Expert Panel cited a number of compelling economic factors in support of its decision, including on-trend economic growth, stronger labour market conditions and historically low levels of inflation and wages growth.

While various union groups were hoping for a substantial increase of $30.00 a week, employer and industry groups called for more modest increases of no more than 2 per cent, for fear that higher increases could adversely affect employment figures and lead to job cuts. In response to a submission by the United Voice union, the Commission also signalled that it would hold a preliminary hearing (as part of the 2016–17 review) into whether the Expert Panel should adopt a medium-term target for the national minimum wage.

Fair Work Ombudsman Inquiry into Housekeeping Services in Australian Hotels Uncovers Potential Contraventions of Fair Work Act 2009 (Cth) and Leads to Enforceable Undertakings

This month the Fair Work Ombudsman ("Ombudsman") completed its inquiry into the procurement of housekeeping services by a number of Australian four- and five-star hotel operators.

The resulting report uncovered a range of potential contraventions of the Act, many of which arose from a lack of awareness of employers as to the applicable industrial instrument. For instance, it was found that some workers were incorrectly paid under the Hospitality Industry (General) Award 2010 rather than the Cleaning Services Award 2010, whilst others were paid a flat rate for each room they cleaned. Consequently, the Ombudsman recovered more than $57,000 for over 120 underpaid workers. Of even greater concern to the Ombudsman was that many of the housekeepers interviewed were young, overseas workers who had a limited understanding of their workplace entitlements and so were particularly vulnerable to exploitation.

Legal Background. As outlined in previous Updates, the Ombudsman is increasingly cracking down on employers who mischaracterise employees as independent contractors (intentionally or otherwise) and thus fail to provide them minimum workplace protections. However, this recent inquiry demonstrates that the practice is still prevalent within the commercial cleaning sector.

In its report, the Ombudsman made a clear distinction between "misclassification" by employers (which is unintentional) and "sham contracting" (which it defined as "the deliberate misrepresentation of [an] employment relationship as [an] independent contracting arrangement"). While either conduct may constitute a contravention of the Act, the latter will likely lead to the imposition of harsh penalties and compensation orders.

Findings. The Ombudsman investigated the arrangements of Oaks Hotels & Resorts Limited ("Oaks") and its wholly owned subsidiary, Housekeepers Pty Ltd ("Housekeepers"). Oaks was the sole principal contractor for Housekeepers and had expressly set up the company to provide housekeeping services. The Ombudsman found that the two entities were engaging workers as subcontractors under contracts for service when, at law, they were properly characterised as employees. As a result, they allegedly failed to afford the housekeeping workers their minimum entitlements under the Act and the Hospitality Award in respect of wages and conditions, including prescribed penalty rates, annual leave and sick leave entitlements.

Both Oaks and Housekeepers agreed to enter into enforceable undertakings on 9 May 2016 after the Ombudsman threatened to launch legal action in respect of the alleged breaches of the Act. As part of these enforceable undertakings, Oaks recognised that its operating model led to its workers being vulnerable to exploitation and acknowledged its responsibility to ensure its entities and individuals act in compliance with the relevant workplace legislation. It undertook, amongst other things, to implement changes to its labour engagement practices by ensuring that all individuals engaged by Oaks to perform cleaning work are, or will be, engaged as employees, not independent contractors and that any underpaid workers are repaid their full entitlements. Housekeepers gave similar undertakings and, in addition, undertook to provide its directors with workplace relations training and to make a donation of $20,000 to the Cleaning Accountability Framework to fund education about workplace rights.

The Ombudsman's inquiry report also contained general recommendations to the subsector as a whole. This included a recommendation that other named hotel and resort operators enter into compliance partnerships with the Ombudsman (which are formalised through Proactive Compliance Deeds) as a means of publicly demonstrating their commitment to compliance with Australian workplace legislation. As a result of the inquiry, the Ombudsman entered into three Enforceable Undertakings and issued eight letters of caution, six compliance notices and two infringement notices in total.

Restricted Legal Representation Before the Fair Work Commission

Under section 596 of the Fair Work Act 2009 (Cth) ("Act"), a lawyer can appear on behalf of a party in a matter before the Commission only if leave is granted or if the lawyer works as a party's in-house counsel or for a trade union or peak industry body. While designed to reduce the cost and complexity of workplace disputes and to ensure a fairer outcome for both employees and employers, in practice section 596 of the Act has not delivered those outcomes.

Efficiency, Costs and the Achievement of a Fair Outcome. It has been argued that the absence of lawyers in matters before the Commission may create fairer and more cost-effective outcomes and save unnecessary formality. However, experience suggests that the absence of legal representatives imposes an additional administrative burden on the Commission (and hence increased public costs) and also creates substantive fairness concerns insofar as all material factual intricacies and pertinent legal decisions may not be drawn to the Commission's attention. The potential for lawyers to improve, rather than inhibit, efficiency and fairness in hearings has been recognised by the Commission in several recent decisions.

Appearing as of Right: In-House Counsel and Lawyers Employed by Trade Unions and Peak Industry Bodies. The ability of in-house lawyers and lawyers employed by trade unions, peak councils and other similar organisations to appear as of right in matters before the Commission under section 596(4) of the Act is anomalous. Why should the same right not also be provided to other parties, such as non-unionised employees and small business employers that do not have the benefit of an in-house legal team?

Despite the anomaly, and notwithstanding previous decisions to the contrary, the Commission has sensibly recognised in more recent cases that an employer cannot automatically be considered to be on an equal bargaining footing with an employee during a hearing simply because it can rely on its dedicated human resources team. For example, in Wilcox v Holcim (Australia) Pty Ltd, [2016] FWC 2359, the Commission granted leave for a large employer with specialised human resources personnel to have legal representation because the personnel were not legally qualified and also lacked any detailed understanding of the Act and advocacy experience. Further, some of the key personnel would have had to perform the dual roles of advocate and witness during the hearing, imposing an unfair burden for individuals without any legal knowledge or experience.

Conclusion. The Commission's recent decisions indicate that employers will likely be granted leave for legal representation where their in-house personnel do not have legal qualifications or procedural or advocacy experience and/or are required to act as both witnesses and advocates during a hearing.

Nevertheless, to address procedural inefficiency and substantive fairness concerns, reforms to section 596 of the Act may be warranted. Even if the restriction on legal representation is not removed entirely, more clarity needs to be provided, particularly for employers, as to the circumstances when leave for legal representation will be granted.