The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Act) commenced on 15 September 2017, with the provisions relating to franchisors and holding companies recently applying from 27 October 2017. The Act introduces a range of changes to the Fair Work Act 2009 (Cth) (FW Act), following federal government inquiries into the underpayment and exploitation of workers, most notably the Fair Work Ombudsman's (FWO) report into the 7-Eleven franchises.

Whilst the Act is designed to protect vulnerable workers, the provisions in the Act amend the FW Act and apply to all national system employers. In summary, the Act:

  • Imposes higher penalties of up to a maximum of AU$630,000 for a company and AU$126,000 for an individual for "serious contraventions" of certain civil remedy provisions of the FW Act (maximum penalty for standard contraventions is AU$63,000 for a company and AU$12,600 for an individual)
  • Makes franchisors and holding companies responsible for contraventions by their franchisees or subsidiaries in certain circumstances
  • Amends the FW Act to expressly prohibit payments from employees to employers where the payment is for the benefit of the employer
  • Increases the FWO's investigation powers
  • Increases civil penalties for providing false and/or misleading information, including payslips and employee records and provides for a reverse onus in relation to employee records

Serious Contraventions

The Act introduces a new category of "serious contraventions" for which higher penalties are payable. These amendments do not add new contraventions to the FW Act, but provide for serious contraventions of certain existing civil remedy provision where the following conditions are met:

  • An employer knowingly contravenes a civil remedy provision of the FW Act
  • The person's conduct constituting the contravention was part of a systematic pattern of conduct relating to one or more other persons

Employers should not be concerned that an inadvertent mistake will be found to be a serious contravention. A systematic pattern of conduct includes methodical conduct or a series of coordinated acts over time, not inadvertent or ad hoc conduct.

Franchisors and Holding Companies

Most of the focus on the Act has been in relation to its application to franchisors, in light of the FWO 7-Eleven report. However, the provisions in relation to franchisors also apply to holding companies.

A franchisor or a holding company can be liable for a contravention of the franchisee or subsidiary, if it knew, or could have been reasonably expected to know, the contravention would occur, or a same or similar contravention would occur. However, if the franchisor or holding company took reasonable steps to prevent the contravention, they will not be held liable.

Cash Back Payments

The FW Act currently provides that an employer cannot require an employee to pay back any amount of the employee's remuneration in relation to the performance of work if the requirement is unreasonable in the circumstances. The Act amends this to add a further criterion that the payment cannot be directly or indirectly for the benefit of the employer, or a third party linked to the employer, and extends this section to prospective employees.

The aim of the amendment is to make it clear that an employee cannot be required to pay back to the employer, for the employer's benefit, any amounts the employee received in relation to work.

Increasing Powers of the FWO and False/Misleading Employee Records

The FWO has been given greater powers to investigate contraventions of the FW Act, and the Act also provides for higher penalties where persons fail to comply with these provisions. These amendments are designed to deter rogue employers from refusing to provide information or answer questions (when compelled to do so) or providing false information.

Under these provisions a person is prohibited from giving false or misleading information or documents to the FWO, or making or keeping false employee records. A new reverse onus under the Act also provides that if an employer was required to keep records and they failed to do so, the employer then has the burden of disproving the allegation made by the employee.

Tips for Employers

With the above amendments in mind, we provide the following reminders to employers:

  • It is important for employers to undertake regular reviews of their employment arrangements to ensure they meet any FW Act and modern award obligations.
  • Holding companies and franchisors should not turn a "blind eye" to the activities of their subsidiaries and franchisees and should implement and document measures to monitor whether the subsidiary or franchisee is meeting its legal employment obligations.
  • Before requiring an employee to pay back any money or make deductions from an employee's pay, employers should check that any payments or deductions are in accordance with the provisions of the FW Act.
  • Employers should ensure that they are creating employment records in accordance with specific requirements of the FW Act and Fair Work Regulations 2009 (Cth) and retaining such records. Employers should regularly check that their employee records and payslips are accurate and any errors are promptly rectified.