Unpaid internships are increasingly becoming the default way of beginning a professional career in Australia. Last May, we wrote about the increased use of volunteer and unpaid workers by employers and the potential legal issues surrounding the use of unpaid work arrangements.
By way of summary, it is important to remember that some unpaid work arrangements are permissible at law, while others are not. Whether an unpaid work arrangement is lawful under the Fair Work Act 2009 (Cth) (“FWA”) depends on whether an employment relationship exists or whether the arrangement involves a vocational placement for the purposes of training.
The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (“The Bill”) has passed the Parliament, after the House of Representatives yesterday accepted amendments made in the Senate. The new law will apply from the day after the Bill receives royal assent, except for the new franchisor and holding company liability provisions (discussed below) which will start six weeks later.
The Bill was introduced as a response to the underpayments and exploitation of vulnerable workers within some of the 7/11 franchisees as well as similar subsequent scandals with Caltex, Yogurberry, Pizza Hut and Dominos. The Bill will introduce a number of initiatives to increase deterrence and punishments in relation to systematic exploitation of vulnerable workers. It also strengthens the power of the workplace regulator, the Fair Work Ombudsman.
The ability to attract and retain talented staff greatly benefits an organisation’s ability to sustain a competitive advantage. The loss of a key employee can have a significantnegative impact the business. Remuneration plays an important factor in the attraction, engagement, motivation and retention of employees. Employers need to be well aware of their obligations surrounding this sensitive subject as well as considering what, in addition to salary, their organisation may offer an employee to improve engagement and motivation within their business.
Fair Work Ombudsman Warning to Employers
The Australian Government has consistently signalled that it intends to ensure companies who do not pay their employees properly or who have breached the workplace laws will face significant penalties. Given the numerous high profile cases in which employee have been underpaid by their employer including companies such as 7Eleven, and Dominos, this has become an important issue for both the Australian Government and the Fair Work Ombudsman.
The Fair Work Commission (“FWC”) handed down a landmark decision yesterday regarding the payment of penalty rates that may have far reaching consequences for many employees and their employers.
As part of the 4-yearly review of modern awards under section 156 of the Fair Work Act 2009 (Cth) (“FWA”) the Fair Work Commission has reviewed penalty rates in a number of modern awards in the hospitality, retail and pharmaceutical industries.
According to a report released by the Senate Education and Employment References Committee entitled “A National Disgrace: The Exploitation of Temporary Work Visa Holders” dated 17 March 2016 there are approximately 1.4 million temporary visa holders working in Australia who are covered by the national Fair Work system. Startlingly, many visa holders experience a significant amount of employment mistreatment. The Fair Work Ombudsman, Natalie James, recently observed that migrant worker complaints of mistreatment have soared in recent years, and sponsorship breaches were often deliberate acts of exploitation by unscrupulous employers. Similarly, Professor Allan Fels of the newly appointed Federal Government Ministerial Taskforce (“the Taskforce”) established to protect migrant workers commented that the exploitation of migrant workers in Australia was “systemic” and “deeply embedded in the practices of some businesses”.
For employers, casual employment has a number of distinct advantages. It provides significant flexibility, allowing employers to rapidly adjust staffing levels when required. For employees, casual employment may provide similar opportunities for flexibility through greater work-life balance and ensuring that personal commitments and family responsibilities can be sustained. If casual employment provides benefits all-round, why is this mode of employment such a contentious industrial relations issue.
It is not uncommon that we receive a query as to whether employers can direct employees to take annual leave. This often arises when the business shuts down usually over the Christmas and New Year season. Conversely, it is not uncommon that we receive a query as to whether, and in what circumstances, employees are able to trade in a portion of their annual leave entitlement for cash.
The answer to both questions is far from straightforward. The industrial relations landscape in Australia does permit employers to direct employees to take leave under certain specified conditions. In addition, some employees may be entitled to “cash out” their leave, subject to specific requirements which apply under legislation and various industrial instruments.
In recent years, Australia has witnessed a marked increase in the density and willingness of volunteer and unpaid workers to join the workforce. In fact, for many young people at the end of their academic life, undertaking an unpaid internship has become a naturally viable step in scoping the market for work opportunities. For many graduates, an unpaid internship provides practical experience and a launching pad to other possible career paths. For employers, it provides an opportunity to trial an employee’s skills before committing to an offer of employment. But what is the position at law, and what does the Fair Work Act 2009 (Cth) (“FW Act”) and other relevant employment relations legislation have to say about unpaid work arrangements.
It is astounding that so often we have discussions with both corporate and individual clients, and when we enquire what Modern Awards apply in their business or cover their employment, they either answer that they don’t have any as all employees are paid above award rates, or they just do not know. Modern Awards cover a vast number of employees across almost all areas of work. It is most unlikely that all an employers’ employees are award free, unless they have an enterprise agreement or other industrial agreement in place that overrides and displaces the operation of a Modern Award.
The distinction between an employment relationship and that of independent contractor is often vexed. However, the failure to properly characterize the relationship may lead to significant adverse consequences, including prosecution under the Fair Work Act 2009 (Cth) for sham contracting. In this article we focus on the risks associated with prosecution for sham contracting. However, it should be noted that in addition, employers who improperly classify employees as independent contractors may also be liable for underpayment of wages claims, leave claims, payroll tax and other ATO liabilities, superannuation payments; and civil penalties. Not to mention that misclassified employees will also have all the rights of employment including to unfair dismissal remedies, redundancy entitlements and the like.