Equal Employment OpportunityPay and Conditions

Exploitation of Migrant Workers: A Systemic Issue

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”.

In some of the worst cases of migrant worker exploitation, it has been reported that foreign workers have had their passports confiscated by employers, been provided accommodation sleeping up to eight people and forced to work from very early hours of the morning without any employment documentation. In addition they face exorbitant wage deductions for rent, food and other expenses. In another study completed in October 2016 entitled “The Economic Migration and Australia in the 21st Century”, the following findings were noted as reasons why migrant workers are vulnerable to mistreatment and exploitation in Australia:

  • workers on 457 and international student visas employed by members of their own immigrant country, who they may depend on for employment opportunities and information about their rights, are susceptible to underpayment of wages;
  • some visa arrangements create conditions where migrant workers can become dependent on unscrupulous employers and that discourage migrant workers from seeking redress. For example, 457 temporary skilled visa workers have limited mobility between employers in that they now face a 60-day limit to finding another sponsored job;
  • Temporary migrant workers are denied many social rights, such as public health care and student concessions which is seen to likely increase the cost of living. This in turn potentially prompts them to work lengthy hours and in some cases in contravention of visa conditions to meet the cost of living. In these situations, they are unlikely to report employment law breaches; and
  • new immigrants are not provided with information on their minimum workplace rights on arrival.

In light of these enquiries and high profile cases such as the 7-Eleven underpayment of wages scandal, where franchisees were discovered paying as little as $5 per hour to workers, new measures are being introduced with the cooperation of the Fair Work Ombudsman to rectify the increased exploitation of vulnerable foreign workers. This includes more rigorous investigations being carried out across a number of selected industries including agriculture, retail and hospitality amongst others. The exploitation of foreign workers has made the issue one of public importance and as a result there is a greater level of scrutiny more generally, which may affect all employers who either wittingly or unwittingly are failing to ensure they are paying their workers correctly.

As is already evident, the Fair Work Ombudsman has prosecuted numerous employers for modern award contraventions as well as wilful breaches of employee visa conditions. In a recent decision in Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290, the Yogurberry frozen yoghurt chain was penalised over the exploitation of four Korean workers at one of its Sydney outlets in a precedent-setting Federal Court judgment. In this decision, for the first time the Fair Work Ombudsman secured heavy penalties against the Master Franchisor for being an accessory to the exploitative practices of one of its associated companies. In summary, this case concerned four Korean workers on 417 working visa. They were all paid as little as $8 an hour while working at a Yogurberry outlet at the World Square Shopping Centre in the Sydney CBD, leading to total underpayment of $17,827. The workers also did not receive a special clothing allowance as required by the relevant Modern Award, or superannuation entitlements and three of them had unlawful deductions made from their wages.

As a result of the proactive use of the accessorial liability provision in the Fair Work legislation by the Fair Work Ombudsman, Justice Flick found that the head Australian company and Master Franchisor of the Yogurberry chain, YBF Australia Pty Ltd (“YBF”) was directly involved in the contraventions. Justice Flick also found that YBF and its associated companies had deliberately not disclosed information about the financial position of the business to the FWO. As a result of these contraventions, the Court penalised three companies within the Yogurberry Group of companies operated under the same family as follows:

  • Yogurberry World Square Pty Ltd, which directly employed the workers was penalised $75,000;
  • YBF Australia Pty ltd was penalised $25,000; and
  • the Yogurberry Group’s payroll company, CL Group Pty Ltd was penalised $35,000.

In addition, YBF’s part owner Ms Soon Ok Oh was personally penalised $11,000 for her involvement in exploiting the migrant workers. Furthermore, the Court ordered the Yogurberry Group of companies to commission a professional external audit of all Yogurberry stores in Australia. It was also ordered to rectify any underpayments discovered as well as implement workplace relations training for its managers. Yogurberry was also ordered to pay the Fair Work Ombudsman’s legal costs.

The Fair Work Ombudsman has recently flagged that it intends to pursue companies and directors under the accessorial liability provisions. This decision should send a strong message to employers and individuals in management that they can be held accountable through the accessory liability provisions of the Fair Work Act 2009 (Cth) for exploitation of workers in their organisations. It also demonstrates the ability of the Court to look behind the corporate veil to impose penalties on associated entities who have turned a blind eye to inappropriate practices.

Consistent with this approach, the Fair Work Ombudsman has proposed the introduction ten-fold increases in the penalties applicable to employers who underpay employees and who fail to keep proper employment records as well as proposing new laws to capture franchisors that fail to deal with exploitation of workers by their franchisees. Moreover, the Taskforce has indicated that several other aligned government agencies, such as the ATO, ASIC and the Department of Immigration have also affirmed their commitment to the following priority areas:

  • better communication with visa holders;
  • stronger measures to prevent workplace exploitation and ensure adequate redress when it occurs;
  • more effective enforcement, including adherence to visa restrictions, but with greater emphasis on compliance by employers; and
  • ensuring policy frameworks and regulatory setting meets necessary objectives.

The issue of migrant worker exploitation emphasises the importance for employers to comply with modern award requirements and ensure they are seeking to conduct themselves in a manner that is in keeping with the requirements of any visa restrictions applicable to foreign workers. In this regard, we recommend that all employers regularly undertake an audit of their modern award compliance and visa restrictions to ensure they do not have any actual or contingent liability.

If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law issue, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

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