INDUSTRIAL RELATIONS SUMMIT
Update from the Fair Work Ombudsman
AiGroup and National Personnel Industrial Relations (PIR) Conference Monday 30th April 2012 Plans and Priorities (40 mins)
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[SLIDE 1 TITLE PAGE – INTRODUCTION]I begin by respectfully acknowledging the traditional owners of the land on which we meet today, the Ngunnawal people, and pay my respects to Elders both past and present.
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I would also like to thank the Australian Industry Group for their invitation to speak at the PIR conference. The views I express today are my own and do not necessarily reflect Government policy. I take responsibility for any errors in the text.1
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Before starting, I would like to record my appreciation for two people at this conference, and to wish them well for the next stage of their lives. The leadership of Heather Ridout and Jeff Lawrence, respectively of the AiG and ACTU, has had important influence not only on the way in which the Fair Work Ombudsman has been formed, but also on the way it operates. The advocacy of both for their respective causes has been of the highest standards and effect and sometimes for the same effect. Their leadership has ensured the Fair Work Ombudsman has had at all times a properly nuanced view about how the enacted policies of Government or tribunal should be acted upon by us. My senior staff and I wish both the greatest success and enjoyment for their next directions and look forward to working constructively with their successors, Innes Willox at the AiG and Dave Oliver at the ACTU.
[SLIDE 2 – OUR PAST YEAR]
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When I last spoke at the PIR conference last year I appealed to your corporate sense of responsibility as employers of choice and your risk management responsibilities in terms of outsourcing. I encouraged you, as senior practitioners, to be alive to what goes on with your organisation’s employee relations, as you may have some personal responsibility to this. I urged you as professionals to be careful about the risks of a corporately sanctioned ‘blind eye’, which could be detrimental to your organisation’s reputation or may be considered unlawful.
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While still servicing millions of employers and employees through our web and phone lines, and helping around 22,000 employees each year with their complaints of underpaid wages, the Fair Work Ombudsman’s shift towards building proactive compliance through our educative activities is gaining momentum. Engaging with the Australian community, forming collaborative relationships with key external stakeholders and providing innovative solutions to the matters we deal with is assisting with making compliance with workplace laws easier and more accessible.
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Our general deterrence work remains on a solid footing and it will continue to do so. However our focus has shifted, we’re now coupling our compliance work with new and innovative ways to engage with the Australian community, encouraging businesses to be more proactive when it comes to complying with workplace laws.
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I am alive to the concerns sometimes expressed that the Fair Work Ombudsman has overly concentrated on what are said to be heavy handed small business compliance or litigation activities. This is why I want to suggest our regulatory focus is as much on medium to large enterprises and that we are now working differently in this area.
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As an example, this year we have entered into a Pro-active Compliance Deed with Spotless Services Limited – a company we have directly received complaints about from more than 200 employees over the past 5 years.2 In that time we recovered around $200,000 in underpaid wages, and separately our inspectors were involved in the recovery of $84,000 in underpayments for over 1,1003 employees for work performed at Patersons Stadium for Anzac Day events. The Compliance Deed commits Spotless and its subsidiary companies to complete self-auditing work for about 1,500 employees and to undertake comprehensive reporting activity which includes reporting back to us. This initiative will give compliance assurance for over 30,000 employees.
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By entering into the Deed, Spotless has shown commitment to ensuring their employees are being paid their correct entitlements and we acknowledge Spotless for showing corporate responsibility to the thousands of young and casual workers on its payroll.
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The Deed adds to others we have entered into with such high-profile and large employers as McDonald’s, Domino’s Pizza and Red Rooster, and I expect we will enter into more. The reason we do this is two-fold. On the one hand, employees of large business and the public sector are entitled to just as much confidence about their working conditions as people working in SMEs. On the other is that the fair work system is founded on several things, including that industry should be confident their competitors are working to no less than their industry’s specified minimum wages.
[SLIDE 3 – A FOCUS ON PRODUCTIVITY]
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When looking at the plans and priorities for the Fair Work Ombudsman, we’re increasingly finding that our focus is on businesses who seem intent on ‘pushing the boundaries’ of workplace relations and, as a consequence, the treatment of their workers, sometimes under a reference to ‘productivity’.
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Now, the true importance of productivity doesn’t need to be explained to this group today. Even if it can be difficult for everyone to always agree on exactly what they mean by productivity, there is no doubt that it was a common theme throughout the many submissions, many by those here in the room, to the Fair Work Review panel.
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The Fair Work Ombudsman’s role in productivity is undeniable. In fact – the Fair Work Act charges us with the specific responsibility of promoting harmonious, productive and cooperative workplace relations. To this end, we applaud innovation, we marvel at high quality and the mutually beneficial bargaining arrangements which drive productivity.
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Increasingly, what is beginning to concern us is the appetite of some for high risk behaviour in order gain modest workplace efficiencies and competitive advantages. We are seeing businesses use industrial relations, sometimes crudely, as the primary tool to push the boundaries with workplace entitlements. The settled view of who is, or is not an employee is no longer as settled as it once was; and similarly it seems the accepted coverage of the legislative boundaries is not so accepted.
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The risky behaviour seen by us takes several forms – coercion of employees into particular bargaining arrangements; deliberately ignoring that the law or particular instruments might apply to working arrangements; and the careful and meticulous challenging of established patterns of legislative coverage. Finding loopholes in laws is what some do very well. While I am open to the view that perhaps the loopholes will be found to be legitimate, I am entitled to approach my role (and believe it is my responsibility to do so) with the policy intention of the legislation in mind and to test particular examples in Court where I think the arrangements are not consistent with the policy.
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While I am all for innovation and productivity improvement in the workplace, it should not be at the expense of individual’s rights.
[SLIDE 4 – Case example – THE AUSTRALIAN SHOOTING ACADEMY] Coercion -
Coercive activity continues for agreements even under the current Act. Recently, we were successful in prosecuting an employer who admitted to placing undue influence or pressure on its employees to enter into Individual Flexibility Agreements (IFAs).
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Late last year, a Court found a company and its managing director failed to ensure that Individual Flexibility Arrangements were made genuinely without coercion or duress4. The managing director had asked his existing casual employees to sign IFAs which would convert them to a permanent employment status, but would remove their entitlements to penalty rates and overtime. Seven employees signed the IFA. One employee was told he would not have a job if he didn’t sign the agreement and when a second employee declined to sign; the company refused to roster him for any future shifts. The Australian Shooting Academy was found by the Court to have both threatened and ultimately taken adverse action against its employees with the intent to coerce them not to exercise their workplace rights. The company and its managing director were ultimately was fined a total of $30,000 for the contraventions.
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The general deterrence in this case is against “pushing the boundaries” too far by so focussing on the need for flexibility or productivity at the workplace, that there is no focus on the legitimate rights of the employees under the Fair Work Act. While we see few cases involving IFAs I know there are pockets of use, and so it is essential those who use them do so carefully and respectfully.
[SLIDE 5 – LEGISLATIVE COVERAGE CHALLENGED] Challenging established patterns of legislative coverage -
For over a century State and federal laws have covered employment, and employment has co-existed with work that is governed by other laws, such as contracting or unpaid work such as volunteering. Yet, the relatively established patterns of coverage are under some creative challenge.
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In 2011, the FWO initiated proceedings against entities involved in the labour supply chain of four Filipino nationals on sub-class 456 visas who worked on oil rigs off Western Australian. It has been alleged that there are over $79,000 in underpayments as the four men were working 12 hour days, 7 days a week for US$900 a month in wages (roughly $3 an hour). Each employee was underpaid between $17,000 and $22,000.
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At its very heart, this issue concerns a key jurisdictional issue – is work that is being performed within the Australian Exclusive Economic Zone subject to the Fair Work Act because the oil rig is a “fixed platform”?5 Or is it excluded because the rig is not “permanently attached to the sea-bed”?6 Certainly there is a significant legal question involved here, however I approach the question partly from a policy direction which is about what might be the policy intention of the law.
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In April 2012 we commenced legal action against Jetstar on our allegation cadet pilots were employed on New Zealand individual contracts for work done exclusively in Australia.7 We allege that between October 2010 and January 2011, Jetstar hired pilots on ‘cadetships’ and informed the pilots their employment conditions were governed by New Zealand labour laws. Because of their patterns of work, we consider the pilots were covered by the Fair Work Act and the applicable modern award.
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The heart of this issue is a question about the factual point at which an employee becomes covered by the FW Act. In an increasingly international economy where foreign workers are seen as a means to overcome labour market shortages, this is an important question. While I might not have much interest in the foreign worker who legitimately enters Australia for work for a few days and soon leaves, of course I am vitally interested in the visa sub-class 456 worker who enters for 2 months and 3 weeks, leaves for a fortnight and then returns for further Australian work and repeats this pattern for a year, all the while being paid their Philippines wages. At some point between these two extremes, the FW Act commences its coverage.
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This issue of moving from accepted patterns of coverage is also occurring in some other aspects of our work.
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In November 2011, we released a report into the prevalence of sham contracting in several industries, including hair and beauty, cleaning and call centres.8 While the report found some level of sham contracting, it found a greater problem with misclassification of employees as contractors and called for employers to exercise a greater degree of diligence over their contracted labour arrangements. The work was initiated because of our concerns employment was being masked with other names.
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The same concern has led to the initiation of work about the use of internships and unpaid work experience. Last year we saw an outrageous newspaper headline – ‘Eager workers can be free and easy’9 – that openly advocated the benefits of using free labour through internship arrangements. The article urged workers to try internships but not expect to get paid and encouraged business owners to ‘tap into’ a skilled and eager workforce by putting workers on unpaid internship arrangements. This is simply exploitation, and not acceptable.
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We have commissioned Professors Andrew Stewart and Rosemary Owens from the University of Adelaide Law School to undertake a research project into the range, nature and prevalence of unpaid work arrangements in Australia and to examine international best practice for dealing with such arrangements. Research will include interviews with various stakeholders including industry groups, unions, government & non-government bodies, universities and schools.
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Plainly the Fair Work Act does not prohibit internships and work experience if there are genuine vocational placements and neither should it; however these arrangements need to be authorised under a law or an administrative arrangement of the Commonwealth, State or Territory10 and undertaken as a requirement of an education or training course. Masking valuable and ultimately profitable work as an unpaid work trial, work experience or volunteering does not change the fact that it should be work that is paid. I am hopeful that the outcomes from the study will provide visibility on the issue.
[SLIDE 6 –SUPPLY CHAIN GOVERNANCE] Lack of proper supply chain governance -
There is without question an invisible workforce around many large businesses – cleaners, security guards, truckies and IT professionals are just a few. They work for, and within, an enterprise and often have very different pay arrangements to the core workforce. Sometimes these arrangements are unlawful. What do you know about those workers who are indirectly associated with your business? How much do you know about the operations of your labour supply chain? Do you know who you’re dealing with – do you know how well these people are treated? Are you pushing boundaries without knowing it?
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From the outset, I want to say that contracting is a good thing, as it can provide flexibility and efficiency in resource allocation. However, in some instances we see, procurement becomes a vehicle to undermine entitlements to employees. Procurement chains become problematic when the competitive nature of tendering drives down costs in a way that results in underpayments. They may also distort employment in other markets when competitive pressures create incentives for other employers to cut their labour costs and breach their obligations.
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The facts in the oil rig case I have already referred to include our allegations that, while the contractor at the top of the chain is relatively well remunerated, by the time the payments filter down through subcontracting and labour hire arrangements, the people actually performing the work are quite poorly treated. Our recent claims involving shopping trolley collectors in SA are not dissimilar in that we think procurement decisions by Coles Supermarkets has that company involved in contraventions for some very vulnerable workers.11 Our allegations in this case include that Coles Supermarkets and three trolley collection operators underpaying four Adelaide trolley collectors $143,000. All four collectors were Indian men in their 20s who spoke limited English and were allegedly underpaid between October 2009 and July 2011. The FWO claims the workers should have received more than $16 an hour for normal hours of work and up to $34 an hour for some overtime, weekend and public holiday work.
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The issue of non-compliance with the FW Act through procurement chains is a high priority for the Fair Work Ombudsman in both the private and public sectors. The FWO is continuing to focus on this emerging problem and its far-reaching impact on exploitation in Australian workplaces.
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Whether or not this is another example of pushing the boundaries too far will be an issue for the courts, but what the cases highlight is that, when necessary, we will dedicate significant resource to keenly and forensically examine employment practices to ensure they are compliant.
[SLIDE 7 –ALTERNATIVES TO COMBAT POOR BEHAVIOUR] Consideration of alternatives to combat poor behaviour -
Most matters we deal with are underpayment of wages and entitlements to leave and overtime12, with 23 of the current financial year’s, 29 lodged litigations relating to wages and conditions, which could result in us being labelled a ‘time and wages regulator’ or ‘workplace watchdog’. And in some aspects, that’s correct. It is the bulk of the matters we deal with. But we’re not afraid to step into unfamiliar territory and prosecute alternative matters that have been gaining prevalence, such as breaches of general protections, allegations of adverse action, improper inter-company arrangements and freedom of association. As the next case illustrates, we treat these contraventions of the workplace laws seriously, as the frequency of these practices equally inhibit the existence of fair workplaces and productivity.
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In a very recent decision (20 April 2012), the Federal Court of Australia imposed penalties of $115,200 on Stuart Ramsey and Ramsey Food Processing Pty Ltd for denying eleven employees their termination entitlements. The Federal Court found that Stuart Ramsey treated employees “callously and with flagrant disregard for their legal rights”13.
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While the facts of the case are complex, in summary, the employees worked for an abattoir, and the company and director we litigated against attempted to avoid the employing company’s liability by creating a further entity. It was then claimed the employees worked at the abattoir through a labour-hire arrangement with the new entity. After the employment of the eleven South Grafton abattoir workers was terminated, Tempus Holdings Pty Ltd was drained of funds and placed into liquidation in an effort to prevent the workers from recovering their termination entitlements.
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Justice Buchanan said he regards “the breaches in this case as very serious. They appear to me to have involved a deliberate, calculated and systematic refusal to comply with the requirements of the WR Act and to take advantage of the vulnerability of the complainant employees”.14
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Stuart Ramsey, has been fined $19,20015 and Ramsey Food Processing Pty Ltd (through which he formerly operated the abattoir), $96,00016. This represents 97% of the maximum penalties available.
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As I have stated before ‘This case demonstrates that employers who try to use legal or corporate trickery to avoid paying staff their full entitlements will be held to account, the case also serves to highlight the willingness of Fair Work inspectors to go the extra mile to conduct meticulous investigative work, in the face of firm resistance, to ensure employees receive their full lawful entitlements.”17
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There was a very long history with this case that culminated in injunctive proceedings by us to have $1.5 million from the proceeds of the South Grafton Abattoir business paid into a solicitor trust account, with the trust money only to be released for the purpose of meeting the lawful entitlements of the employees of whose employment is terminated upon the closure of the killing or boning operations at the South Grafton abattoir.
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This is the first time we have sought an injunction in a wages matter, and while it might be some time before we do so again, the experience has shown us how the tool can be used.
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Again - the key message here for all workplace participants is this...the FWO is all for boosting productivity, being innovative and instilling dynamic workplace relationships which improve competitive advantage and bottom lines, but if you’re going to push the boundaries of your operations by attempting to disregard workplace laws, there are risks in doing so.
[SLIDE 8 – IS YOUR HOUSE IN ORDER?]
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So, what does all of this mean for you and your clients? Put simply – If your house is in order, you won’t hear from us.
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We can and often do make broad assumptions - that if we don’t hear from you or your staff, then everything is probably ok.....afterall, a compliant workplace is a happy workforce – and vice versa. If your house is in order, there will be much fewer reasons for your employees to approach us for information, assistance or intervention; it’s as simple as that.
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Or is it?
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To reduce the possibility of breaching workplace laws, it is important that any of your staff members who deal with workplace relations matters, such as HR managers, are equipped with the skills and knowledge to adequately handle any internal issues that arise. Keeping up to date with current legislation and emerging trends in the workplace relations environment is absolutely essential. This information should then be passed down through the organisation to line managers who are making decisions about your employees’ entitlements.
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This all sounds pretty self-explanatory and not too difficult to execute; if you’re doing this already, great! A lot of you right now are probably sitting back thinking your house is already in order, as you engage with and pay your staff well, your records are well kept, your HR staff are up to date and you’ve got minimal disputation. But is it?
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Right now the FWO is in a valuable position to really impact and shape the Australian community’s interaction with and understanding of workplace laws by highlighting and raising awareness of practices that can easily fixed by applying a due diligence approach to your company’s operations. We are therefore afforded with the opportunity to create new and innovative strategies that will hopefully encourage businesses to implement better business practices.
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The majority of our work is directly aimed at improving fairness and compliance in the workplace, and we are committed to achieving this. Our approach is to ensure that industries know their responsibilities more than ever before, and to give practical help to implement these responsibilities. The FWO is active in this space through our targeted campaign and education functions as I mentioned earlier today.
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Therefore when we think it’s appropriate to head down the litigation pathway or test the effectiveness of the different enforcement approaches we’ve been implementing, we shall. We will act to ensure that the objectives of the Fair Work Act are met in creating fairer and complaint workplaces.
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The success of the Fair Work Ombudsman in achieving this vision is contingent on business owners and industries being onboard with our operations and assisting us to drive our ambitious agenda. Creating fairer and compliant workplaces is a job for us all, including industry, HR professionals and business owners. It cannot be solely left to the Fair Work Ombudsman.
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By being a member of such associations as the Ai Group, makes it clear to us that you are already aware of your responsibilities and the importance of keeping up to date with legislative changes. You ultimately can see the benefits of having a fair and compliant workplace however, if you’re going to attempt to push the boundaries come and have a chat with us first.
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In closing, and building somewhat on this theme, the best business insurance that can be purchased is membership of organisations such as the AiG and the best employee protection that can be purchased is membership of a union. The Fair Work Ombudsman is not and never will be resourced to be a competitor of either, and it is essential industry organisations continue to flourish. Firstly, their advice and service to you will always be in greater depth and more relevant to your circumstances, and secondly, it means we can concentrate our services on those industries, regions and employees which have greatest need.
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I look forward to working with you all, in helping to create a fairer and more compliant workplace for working Australians.
[SLIDE 8 – QUESTIONS AND CONTACT DETAILS]
Fair Work Ombudsman – Contact Details
Nicholas WILSON, Fair Work Ombudsman
Location: 414 Latrobe Street, Melbourne
Telephone: 03 9954 2611
Email : nicholas.wilson@fwo.gov.au
Infoline: 13 13 94
Web: www.fairwork.gov.au
Mail: GPO Box 9887 in each capital city
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