By Lisa Anaf, Partner and Diana Diaz, Senior Associate 

After some tweaks in the Senate, the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (the Bill) was passed.

Now that the Bill is law, we have summarised some of the key changes to the Fair Work Act 2009, along with some practical steps that you and your business can take to ensure you’re ready for the changes.

What will change?

The Fair Work Act 2009 (the Act) has always had ‘accessorial liability’ provisions that make persons who are involved in contraventions of the Act liable as if they had contravened the Act themselves.  In recent years the Fair Work Ombudsman has used these provisions to go after a wide range of persons, including HR Managers, Directors, franchisor and group entities, and external accountants.

Accessorial liability provisions will still be in the Act after the changes in the Bill become law.

What the Bill does is introduce the concept of ‘serious contraventions’ and make it possible for franchisors and holding companies to be held responsible for the ‘serious contraventions’ of their franchisees and subsidiaries.

Some of the key aspects of the Bill are:

• Serious contraventions – contraventions of certain provisions of the Act will be considered ‘serious contravention’ if a person ‘knowingly’ contravened a provision as part of a ‘systematic pattern of conduct’.
• Franchisors and holding companies – franchisors / holding companies (as the case may be) may be held responsible for a franchisee’s / subsidiary’s serious contravention if:
  • the franchisor / holding company ‘knew or could reasonably be expected to have known’ that the contravention would occur; or
  • at the time of the contravention, the franchisor /holding company (or their officer) knew or could reasonably be expected to have known that the contravention was likely to occur.

• Ten-fold increase in penalties – penalties for serious contraventions will increase to $630,000 for companies and $126,000 for individuals.
• Reverse onus if records are not kept – where it is alleged that an employer has contravened certain sections of the Act and they have failed to keep employee records or provide payslips as required without reasonable excuse, the onus of proof will be reversed and the employer will need to show that it did not contravene the provisions alleged.
• Prohibition of ‘cashback’ arrangements – employers will be prohibited from requiring employees to make certain unreasonable payments, such as the cashback schemes adopted by some 7-Eleven franchisees.
• Beefed up Fair Work Ombudsman powers – the Ombudsman’s powers will be beefed up in a number of ways, including by requiring persons to provide information, documents or attend and answer questions relevant to an investigation. Importantly, persons will not be able to be excused from giving information, producing documents or answering questions if that might incriminate them.

What businesses should do to prepare for the changes

The penalties for employers who commit ‘serious contraventions’ will be set at a level that not only makes the contraventions uncommercial, but they may also put the ongoing viability of the business at risk.  It has therefore never been more important for employers, legal counsel, HR Managers and others involved in running the workplace aspects of a business to ensure that their business is meeting its minimum legal obligations to employees.

Practical steps that employers can take include regular audits of pay, conditions and record-keeping obligations.  Audits are particularly important in industries that engage vulnerable and/or low-paid employees.

The situation for franchisors and holding companies is somewhat more complicated and may depend on what knowledge they had about the conduct of the franchisee / subsidiary business and what arrangements they had in place with them.  However what is clear is that franchisors and holding companies will not be able to turn a blind eye to workplace breaches in their network.

Franchisors and holding companies will have the opportunity of a reprieve under the Bill – but only if they can show that they took ‘reasonable steps’ to prevent a contravention.  When a court determines whether ‘reasonable steps’ were taken they may consider things such as:

• the extent to which the franchisor / holding company had the ability to influence or control the franchisee’s / subsidiary’s conduct;
• any action the franchisor / holding company took directed towards ensuring that the franchisee / subsidiary had a reasonable knowledge and understanding of their relevant laws;
• any arrangements of the franchisor / holding company for assessing the franchisee’s / subsidiary’s compliance with the relevant laws;
• any arrangements of the franchisor / holding company for receiving and addressing possible complaints about alleged underpayments or other alleged contraventions of the Act;
• the extent to which the franchisor’s / holding company’s arrangements (whether legal or otherwise) with the franchisee / subsidiary encourage or require the franchisee / subsidiary to comply with the Act or any other workplace law.

Whatever your specific situation, Mills Oakley can assist you in setting up your own internal audit process so that you can be confident that you have taken the reasonable steps necessary to protect your business and brand.