Changes to the Fair Work Act

Date: November 10, 2017

Significant changes have been made to the Fair Work Act 2009 (Cth) including changes to prevent certain benefits being given to employee organisations (unions) and to introduce new responsibilities on franchisors and holding companies to ensure compliance with employment laws.

ISSUE

The Fair Work Act 2009 (Cth) (FW Act) has been amended by the Fair Work Amendment (Corrupting Benefits) Act 2017 (Cth) (Corrupting Benefits Act) and the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) (Protecting Vulnerable Workers Act).

Corrupting Benefits Act

The changes made to the FW Act by the Corrupting Benefits Act implement recommendations of the final report of the Royal Commission into Trade Union Governance and Corruption (the TURC Report).

The new provisions make it a criminal offence for a “national system employer” (other than an employee organisation) to provide, offer to provide, or cause to provide, a “cash or in kind payment” to an employee organisation or a prohibited person (who is connected with an employee organisation) in certain circumstances.  A “cash or in kind payment” is broadly defined to include a benefit that is “in cash or any other form of money…or goods or services”.

Some “cash or in kind payments” are allowed.  One example is a payment for union membership fees where the relevant employee has agreed in writing to become a member of the organisation.  A second example is where the benefit is provided and used for the sole or dominant purpose of benefitting the employer’s current or former employees.  The maximum penalty for a breach of these provisions by an individual is 2 years’ imprisonment or $105,000, or both.  The maximum penalty for a body corporate is $525,000.  (The Corrupting Benefits Act also introduces significantly higher penalties and potential imprisonment of up to 10 years for certain conduct relating to collusion with employee organisations over terms and conditions of employment.)

The Corrupting Benefits Act also introduces new disclosure requirements on employee organisations during enterprise bargaining and requires them to provide employers with a document itemising the beneficial terms of certain financial benefits it will directly or indirectly receive or obtain.  The employer is then required to provide the relevant employees with a copy of the document as soon as practicable (and by no later than the fourth day of the period in which employees who are voting on a proposed enterprise agreement are given access to that agreement).  Unions must not make misrepresentations in the disclosure documents they provide.

Further legislation is also proposed to implement recommendations of the TURC Report.  The Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017 (Cth) (Proper Use of Worker Benefits Bill) was introduced into Parliament on 19 October 2017.   If passed, in particular, this will affect the operation of worker entitlement funds and require any term of a modern award or enterprise agreement that names a worker entitlement fund or insurance product to allow an employee to choose another fund or insurance product.

The Explanatory Memorandum to the Proper Use of Worker Benefits Bill states as follows:

Worker entitlement funds are established for the purpose of funding employee entitlements such as redundancy pay and sick leave. Funds are typically established as ‘joint ventures’ between industry parties. These funds share many of the features of a managed investment scheme; however, worker entitlement funds are currently exempt from the regulatory requirements that apply to managed investment schemes and financial products under the Corporations Act 2001.

The Royal Commission noted that worker entitlement funds invariably distribute the income generated on contributions received by the worker entitlement fund to industry parties to be used as the parties see fit rather than for the benefit of the employers who contribute to the fund or the employees who are ostensibly the intended beneficiaries of the fund.

The amendments contained in the Bill address a regulatory gap that has the potential to allow registered organisations to favour their own interests over those of their members.

Protecting Vulnerable Workers Act

The changes made to the FW Act by the Protecting Vulnerable Workers Act introduce a higher scale of civil penalties for “serious contraventions” of the legislation.  A serious contravention can arise where a person knowingly contravenes the FW Act and there is a systematic pattern of conduct relating to one or more persons.  The changes also now impose specific obligations on franchisors in relation to certain contraventions by franchisee entities and on holding companies in relation to certain contraventions by their subsidiaries.  These changes mean that franchisors and holding companies will need to be more proactive in ensuring compliance with employment laws, even where they do not directly employ those workers.

A franchisor or holding company will not be liable for a contravention where it can show that it had taken “reasonable steps” to prevent the contravention by the franchisee or subsidiary.  A court may have regard to all relevant matters to determine whether or not reasonable steps were taken including:

  • the size and resources of the franchise or body corporate;
  • the extent to which the person had the ability to influence or control the contravening employer’s conduct;
  • any action the person took directed towards ensuring that the contravening employer had a reasonable knowledge and understanding of the requirements;
  • the person’s arrangements (if any) for assessing the contravening employer’s compliance with the relevant laws;
  • the person’s arrangements (if any) for receiving and addressing possible complaints about contraventions by the employer; and
  • the extent to which the person’s arrangements with the contravening employer encourage or require the contravening employer to comply with relevant employment laws.

The Protecting Vulnerable Workers Act also makes certain terms of a contract of employment invalid, such as allowing unreasonable deductions from pay etc. and increases the penalties for breaches of the record keeping and pay slip requirements as set out in the FW Act and Fair Work Regulations 2009 (Cth) (FW Regs).

The Fair Work Ombudsman (FWO) has also been provided with greater evidence gathering powers which are intended to be similar to the evidence gathering powers given to the Australian Securities and Investment Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC).

IMPACT

These changes to the FW Act (and the further proposed changes in the Proper Use of Worker Benefits Bill if enacted) are likely to have a significant impact on enterprise bargaining and compliance matters.

CONTACT

Please contact us if your organisation requires advice about the matters raised in this publication.

Whitehall Workplace Law

Level 14, 330 Collins Street, Melbourne, VIC 3000

T +61 (0)3 8605 4841

M +61 (0)428 041 272

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