HR managers in the FWO’s sights?


HR managers in the FWO’s sights?

A new report on the Fair Work Ombudsman suggests the regulator should be making more use of its powers under the Fair Work Act.


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A new report on the Fair Work Ombudsman (FWO) suggests the regulator should be making more use of its powers under the Fair Work Act and bring cases against HR managers and other accessories where non-compliance is suspected.

The Report (The Transformation of Enforcement of Minimum Employment Standards in Australia: A Review of the FWO’s Activities from 2006-2012) from Melbourne University's Centre for Employment and Labour Relations Law assesses the effectiveness of the Fair Work Ombudsman (and its predecessors) over a six year period (27 March 2006 – 30 June 2012).

The report’s authors John Howe, Tess Hardy and Sean Cooney find it “is a major and ongoing challenge” for the FWO to achieve widespread compliance by employers with their Fair Work Act obligations, citing factors such as “changing patterns of production, increased competition in product markets, increased labour migration and rapid technological advances, as well as the complexity of the legal framework of minimum employment standards”.

The FWO received general praise in the report, which found it to be adaptive to change and a “highly reflective” organisation. In line with its legal obligations, the FWO devotes much of its resources to responding to complaints, which have increased over time. However, the report notes, while the FWO must continue to respond to complaints, it should focus its resources on the most vulnerable workers and areas of high non-compliance – both of whom are not necessarily represented by high complaint rates. The FWO should therefore focus its audit activities on occupational groups which have high-rates of non-compliance and which have high proportions of vulnerable workers.

Compliance and enforcement

While, in the authors’ view, the FWO has under-utilised Compliance Notices and Penalty Infringement Notices, it has been very successful in the cases it has selected for litigation. On average, 95 per cent of cases have been successful, with the majority of these being against small-to-medium enterprises in the accommodation and food services, administrative support services, and retail trade industries.

The number of cases selected for litigation has however dropped off  over the last few years, mainly because of “shrinking resources” but the authors caution the FWO should be careful not to be restricted by “a cautious application of the Litigation Policy”,  preferring litigation in cases where there is documentary evidence or where the complaint refers to more recent matters.

In particular, the report warns that employers should not be let off the hook because the FWO is reluctant to prosecute them in cases where “they have failed to keep or provide employment records, or actively resisted attempts at achieving voluntary rectification of the matter”. Instead the report suggests the FWO should aim to “more quickly identify the potentially serious cases” which should be litigated.

The FWO is also urged to publish a searchable database of  finalised cases on its website, including full company names, trading names and names of directors.

The report suggest the FWO should run more test cases to clarify particular aspects of the FW Act and “the boundaries of employment responsibility” because traditional employment relationships are in a state of flux. It is also urged to increase its use of other remedies, instead of its traditional use of  compensation for underpayments, interest and penalties, with the aim of achieving culture change rather than “simply strengthening deterrence signals”. The sorts of things the authors envisage include: “remedial orders in lieu of civil penalties, publicity orders, corporate rehabilitation orders, probationary orders and community service orders”.

More innovative remedies sought

Other recommendations by the authors for more innovative remedies include:
  • Bringing cases against company officers and accessories – in particular human resources managers – in non-compliant medium-to-large companies. The aim would be to “better engage key gatekeepers” and to send messages to other companies to “strengthen” their motivation to comply.
  • Garnishment orders or Mareva injunctions to gain access to company assets
  • Compensation orders against accessories to make up the shortfall between an underpayment amount and the penalty amount
  • Changing the public interest test in the FWO’s litigation policy so that an arbitrary amount (currently $5000) is replaced by a proportionate amount of the overall worker’s pay. There is concern the current system disadvantages low paid and precarious workers, who are more likely to fall below the threshold.
  • More use of Enforceable Undertakings and Proactive Compliance Deeds as alternative enforcement approaches.
The report recommends the FWO drop its current requirement that the employer make an admission regarding its contravention of the FW Act and promise to rectify the breach. Because enforceable undertakings are a fundamental policy goal, more of these could be achieved if this “major block” to negotiations could be removed.

Read the Report: The Transformation of Enforcement of Minimum Employment Standards in Australia: A Review of the FWO’s Activities from 2006-2012 (PDF 1.8MB) 
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