Key issues:

  • On 7 March 2019, a report was released by the Migrant Workers’ Taskforce (MWT) regarding serious concerns of widespread and endemic exploitation of temporary migrant workers in Australia.
  • Significantly, the MWT recommends, amongst a number of other measures, that:
    • criminal law penalties be enacted to allow the Courts to penalise the most egregious instances of deliberate ‘wage theft’; and
    • a mandatory National Labour Hire Registration Scheme be created for certain ‘high risk’ industries, including the horticultural industry.
  • The Federal Government has since accepted in principle all of the recommendations made by the MWT and allocated funding for a number of those key measures in the 2019-20 Budget.

Background

Agriculture is an important contributor to the Australian economy, generating $65.9 billion in gross value of production (3% of GDP) in 2016-17. In Australia there are more than 88,000 farming businesses which directly employ over 304,000 people.

An estimated 35,000 to 40,000 temporary migrant workers supplement the local agribusiness workforce each year. They predominantly consist of backpackers on working holiday visas who perform work in peak labour periods such as seasonal harvests in the horticultural industry.

Temporary migrant workers work across numerous industries in Australia. At present, an estimated 1.2 million temporary migrants (excluding New Zealand citizens) live and work in Australia, made up of:

  • international students (over 50% of the temporary visa holders with work rights);
  • working holiday visa holders / backpackers (15% of the temporary visa holders with work rights);
  • temporary skilled workers formerly known as 457 visa holders (15% of the temporary visa holders with work rights);
  • lower skilled workers, primarily employed in the horticultural industry under the Seasonal Workers Program (a small component with only 8,459 visas granted in 2017-18, but growing each year);
  • bridging visa holders; and
  • ‘undocumented workers’ who have overstayed their visa and/or do not have work rights.

Key findings

The MWT observed that the exploitation of workers can take many forms, such as:

  • payment of below minimum wages;
  • ‘cash back’ schemes;
  • unsafe working conditions; and
  • the threat of visa cancellation for temporary migrant workers.

The MWT generally found that:

  • exploitation of migrant workers, whether inadvertent or deliberate, was widespread, entrenched and multifaceted in nature given it can involve unlawful conduct which is subject to the intersection of laws including employment, migration, corporate and tax legislation (e.g. wage underpayment, tax avoidance, sham contracting and phoenix activity); and
  • the sheer extent of unlawful labour practices, particularly across a number of problematic industries, was such that the MWT called for:
    • increased and better funded regulatory compliance regimes to monitor and deter employers, including labour hire operators, from exploiting workers; and
    • the implementation of stronger civil and criminal law penalties in order to deter non-compliance with the minimum standards in the Fair Work Act 2009 (Cth).

Recommendations and potential reforms

In all, there were 22 recommendations made by the MWT. The most important recommendations in terms of the agribusiness sector, along with our observations as to their potential reform implications, are summarised in the table below.

Recommendation Potential reform implications

Recommendation 4

Legislation to be introduced to prohibit the advertising of jobs with pay rates below the minimum standards. 

The onus will be on the prospective employer to determine the minimum wage payable before advertising a role. This may be problematic for some employers, for example, the recruitment of fruit and vegetable pickers for piece work engagements in the horticultural industry. 

Recommendation 5

Pecuniary penalties (fines) for wage underpayment contraventions should be increased in line with maximum penalty levels under consumer laws.

A wage underpayment contravention presently attracts a standard civil penalty of up to $63,000 for corporate offenders and $12,600 for individual offenders, including individuals involved in corporate contraventions. Since the 2017 protecting vulnerable work amendments to the Fair Work Act, “serious contraventions” attract enhanced penalties of up to ten times greater than the standard penalty regime (up to $630,000 for corporations).

If this recommendation is adopted, SMEs may be held liable for civil penalties in excess of $1,000,000 per contravention, potentially crippling their ongoing viability as a going concern. The Government is somewhat circumspect in its support of this recommendation by the MWT. At this stage it has only committed to a review of the recently enhanced penalty regime once it has had a reasonable time in which to operate. 

Recommendation 6

Carefully designed criminal law sanctions should be introduced for the most serious forms of exploitative conduct, where the conduct is clear, deliberate and systemic.

Criminal law sanctions will be able to be imposed by the courts, including imprisonment and community service orders and also orders for disqualification from running a business, where the wage underpayments have intentionally occurred. The Government has recently committed to drafting a bill to give effect to this recommendation for the most “egregious conduct”.

Recommendation 11

Government should consider additional avenues for holding individuals to account for involvement in workplace law contraventions, such as extending the boundaries of the accessorial liability provisions in the Fair Work Act. 

The MWT has suggested building on existing provisions relating to franchisors and holding companies being held liable in supply chain scenarios. At this stage, the Government has only committed to examining options for extension of accessorial liability in appropriate circumstances.  It remains to be seen what transpires in terms of any expansion of legal responsibility for those non-employer parties involved in unlawful labour supply chains. 

Recommendation 14

The establishment of a mandatory National Labour Hire Registration Scheme with the following features: 

  1. an industry specific scheme applicable to the horticultural, meat processing, cleaning and security industries;
  2. a “light touch” model imposing a low regulatory burden on labour hire operators; 
  3. host employers must use registered labour hire operators; and
  4. registration status may be cancelled in the event of serious non-compliance with relevant laws. 

Broad-based state labour hire licencing schemes in Queensland, Victoria and South Australia will operate in conjunction with the national scheme which will only apply to the horticultural industry and other high risk industries considered prone to migrant worker exploitation.  

The Government has begun to broadly consult with stakeholders prior to finalising and introducing a model in 2020.

Key takeaways

‘Wage theft’ is an emotive term which is in vogue and commonly used by the media and the trade union movement alike to describe all forms of wage underpayments, whether deliberate or inadvertent.

However, the Federal Government is not intending to introduce criminal law sanctions for all forms of wage theft as the term is broadly used. The criminal law concept of mens rea (a guilty mind) means that only intentional acts of wage underpayment will be liable for potential criminal law sanctions. A genuine mistake in applying an industrial instrument or misapplying the wrong industrial instrument will not attract potential criminal law sanctions. The Attorney General and IR Minister, Christian Porter has publicly clarified that criminal penalties would only be applied for the “most serious forms of deliberate worker exploitation” which in our view is likely to involve repeat offenders.

Mr Porter has additionally clarified that an extensive period of consultation over the coming months will be undertaken in relation to these reforms and only once this is completed will legislation be finalised and released publicly.

Similarly, the final form of the National Labour Hire Registration Scheme will be the subject of a public consultative process before any enacting legislation will be released. This stage of the process will be particularly important for determining how the national scheme will interact with state-based schemes, which already impose substantial regulatory burdens on labour hire operators and give express rights to trade unions to object to the granting of registration status.

Labour hire operators and primary producers should certainly watch this space. The potential costs of non-compliance in terms of compensation awards, civil and potential criminal law penalties, outlays in terms of legal costs and associated brand and reputational damage are very significant.