The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Vulnerable Workers Act) has now been passed by Parliament. The Vulnerable Workers Act amends the Fair Work Act 2009 to increase the penalties available for breaches of workplace laws and to strengthen the powers of the Fair Work Ombudsman (FWO). The amendments:

  • make franchise and holding companies potentially liable for underpayments by their franchisees or subsidiaries
  • strengthen the evidence gathering powers of the FWO
  • introduce a higher scale of penalties for ‘serious contraventions’ of prescribed workplace laws
  • increase penalties for failures to keep proper employee records
  • prohibit employers from unreasonably requiring their employees to make payments (for example, cashback arrangements).

Accessorial liability

Under the new provisions, franchisors and holding companies will liable for contraventions of the FW Act in circumstances where they knew, or ought reasonably to have known, of contraventions by franchisees and subsidiaries, and failed to take reasonable steps to prevent those contraventions. However, the franchisor or holding company will only be liable if it had a significant degree of control over their business networks. Determining whether a company has a significant degree of control over their business networks will involve assessing the level of influence and involvement the company has in the financial, operational and corporate affairs of the business network. “Control” relates to the affairs of the franchisee or subsidiary broadly, not only as to minor matters that would not have any impact on the management and operational decisions of the business.

Enhanced powers of the FWO

The Act provides the FWO additional coercive powers to gather evidence of breaches. The FWO will now be able to:

  • issue an “FWO notice” if the FWO reasonably believes that a person has information or documents relevant to an investigation, or is capable of giving evidence that is relevant to such an investigation
  • require the production of documents
  • enforce powers of questioning, which will be particularly important in cases where no relevant documents appear to be available and the investigation has stalled.

The FWO’s exercise of its new powers will be overseen by the Administrative Appeals Tribunal. The amendments also expressly prohibit anyone from hindering or obstructing an investigator, or giving the FWO false or misleading information or documents.

Serious Contraventions

The amendments introduce a new “serious contraventions” regime, which increases the maximum penalty for existing civil penalty provisions where the contravention is deliberate conduct forming part of a systematic pattern. Under the new regime, serious contraventions can attract 10 times the current maximum penalties, with a new maximum of $540,000 for corporations and up to $108,000 for individuals. The regime will apply to serious contraventions of the following civil penalty provisions:

  • contraventions of the NES (s 44(1))
  • contravening a modern award (s 45)
  • contravening an enterprise agreement (s 50)
  • contravening a workplace determination (s 280)
  • contravening a national minimum wage order (s 293)
  • contravening an equal remuneration order (s 305)
  • contravention of payment of wages provisions, including method and frequency of payment, unreasonable requirements to spend amount and employer obligations in relation to guarantee of annual earnings (ss 323, 325 and 328)
  • failure to uphold obligations in relation to employee records and pay slips (ss 535 and 536).

A contravention of these provisions will be a “serious contravention” if it was engaged in knowingly, and the contravention was part of a systematic pattern of conduct relating to one or more employees or workers. In determining whether the contravention was part of a “systematic pattern”, a Court may consider the number of contraventions and the number of persons affected, the period over which the contraventions occurred, the response or failure to respond to any complaints about the contraventions, and any other relevant matter.

‘Cash back’ arrangements

The amendments also contain an express prohibition on employers requesting payments from their employees in circumstances where it is unreasonable to do so. This prohibition makes it clear that it is unlawful for employers to coerce employees into paying a proportion of their wages back in cash.

Client should be aware that these amendments will likely increase FWO’s use of the accessorial liability provisions, particularly in the context of related entities, franchisees and supply chain compliance. Clients should ensure that they are taking steps to proactively manage their potential liability for their role in the terms and conditions of employment of employees within their networks, and seek specific advice about whether such measures will be considered sufficient to meet the accessorial liability requirements.