Legislation update

Discussion paper released on the implementation of wage underpayment and other important reforms to the Fair Work Act

By Damon King / 17 October 2019
7 min.
Worthwhile read for: Business Owner, Employer

Key issues:

  • The Commonwealth Attorney General’s Department has released a discussion paper and commenced a public consultation process relating to industrial relations reforms recommended earlier this year by the Migrant Workers’ Taskforce (MWT).
  • Significantly, the discussion paper confirms a bill is currently being drafted by the Morrison Government and seeks public submissions specifically relating to regulatory enforcement outcomes arising out of wage underpayment contraventions, including:
    • addressing the adequacy of the existing civil penalty (fines) regime under the Fair Work Act 2009 (Cth); and
    • introducing criminal law sanctions for certain forms of worker exploitation to punish employers and individuals, particularly where the conduct is clear, deliberate and systemic.
  • Public submissions to the Department must be lodged by the closing date on 25 October 2019.
  • In this IR reform update, we briefly discuss key aspects of the Government’s industrial relations reform agenda which is now well underway and likely to gain widespread and bipartisan support.


Earlier this year, the MWT delivered a report to the Government which highlighted the apparently widespread exploitation of migrant workers in Australian workplaces, particularly in relation to underpayment of award based minimum wages. 

The Government has since accepted, in principle, all 22 recommendations made by the MWT.

You can access our earlier update about the MWT’s report and the implications for the Agribusiness sector here.

Penalties paper

The release of the discussion paper ‘Strengthening penalties for non-compliance’ (Penalties paper) is the next step in the Government’s reform implementation agenda.  The Penalties paper and the public submission templates are available online.  If you require assistance in making a submission to the Attorney-General, please let us know.

The Penalties paper describes the current state of the law, the issues at play, identifies general directions and options for reform and poses questions for submissions to address, with an overall emphasis on seeking evidence to support any changes to be made to industrial laws.  

Public submissions will be made available online following the closing date on 25 October 2019, unless a dispensation from release is granted.

Increased civil penalties and other matters

In the Penalties paper, the Government says openly that it considers there to be now a strong case that the current penalty, compliance and enforcement framework for breaches of the Fair Work Act, established over a decade ago, needs to be improved.

Here are examples of questions posed in respect of the topic of increased civil penalties:

  • What are some alternative ways to calculate maximum penalties?  For example, by reference to business size, the size of the underpayment or some measure of culpability or fault?
  • Have the 2017 amendments effected by the Protecting Vulnerable Workers Act already positively influenced employer behaviour and, if so, in what way?
  • Has the new ‘serious contravention’ category in the Fair Work Act (attracting maximum penalties for corporate offenders of up to $630,000 per contravention) had, or is it likely to have, a sufficient deterrent effect?

In addition, the Penalties paper raises other important issues for discussion and potential reform, which have to date surprisingly garnered less public attention, relating to:

  • Extending liability for accessories:

The Fair Work Act presently extends liability for contraventions of workplace laws in circumstances where a third party is involved in the offence but is not the principal person/employer responsible for the contravention.

Changes are mooted to the accessory provisions to address enforcement difficulties apparently experienced by the regulator, the Fair Work Ombudsman, specifically in the context of third party involvement in unlawful labour supply chains.  It is suggested that the existing accessorial liability provisions have been interpreted in a manner which sets too high a bar in terms of proof of knowledge and therefore liability.

A number of questions are posed, some of which are as follows:

-  Should actual knowledge in a contravention be the decisive factor in determining whether to extend liability to a third party?
-  What degree of control over aspects of a business is required before a business owner should be expected to check the compliance of contractors further down the supply chain?
-  Would recklessness constitute a fair element to an offence of this type?

  • Sham contracting:

Two questions are posed in respect of the prohibition against misrepresenting employees as independent contractors:

-  Should the “did not know and was not reckless” defence in subsection 357(2) of the Fair Work Act be amended, and, if so, how, in order to make it easier to prove unlawful conduct?
-  Should there be a separate contravention for more serious/systemic cases of sham contracting that attract higher penalties (presumably akin to the ‘serious contravention’ provisions referred to above)?

Criminal law sanctions

The Penalties paper deals with responses for misconduct to complement existing offences for serious criminal forms of labour exploitation, including forced labour, servitude and debt bondage in the Criminal Code 1995 (Cth). 

In the Penalties paper, the Attorney-General reiterates that the Government will not be targeting employers who make inadvertent errors and mistakes, but rather persons who deliberately engage in exploitative wage practices of a systemic nature and thereby gain an unfair business advantage.

The Government specifically flags three general issues and related discussion points on this topic, but says it welcomes submissions on any other aspects of the criminal sanctions regime to be considered.

  1. Fault elements:

The key consideration will be determining the precise level at which criminal rather than civil penalties are appropriate.  It is suggested that relevant criteria might include the nature of the conduct, the deliberateness of the conduct, the period of time over which it occurred, and whether there has been any dishonesty involved. In terms of the requisite mental element of the offence, it is suggested that proof of intention, knowledge, recklessness or even negligence might suffice.

  1. Attributing criminal liability to a corporation:

This is simply acknowledged as a rather vexed issue for discussion, particularly in respect of the difficulty of tracing fault back to a particular individual or leadership cohort, ie accessorial liability. Reference is made to the potential applicability of Part 2.5 of the Criminal Code which allows the conduct of the company’s employees and officers to be aggregated for the purposes of proof of the fault element for an offence alleged against a corporate offender, ie corporate criminal responsibility.

  1. Maximum criminal penalties:

One of the main discussion questions is what should the maximum penalty be for an individual and for a body corporate. Reference is made to other legislation, such as, for example, the model workplace health and safety laws which attract criminal penalties of up to five years’ imprisonment for the most serious offences.

More broadly, the Penalties paper relevantly asks if there are any potential unintended consequences of introducing criminal sanctions for wage underpayment, and, if so, how might these be avoided.

More reform on the horizon

Another discussion paper has been flagged for future release which will deal with two other reform agenda items arising out of the MWT’s recommendations, namely:

  • the adequacy of compliance and enforcement tools currently available to workplace regulators and the courts; and
  • other mechanisms to recover unpaid wages (for example, the potential involvement of the Fair Work Commission in adjudicating claims).

Our Workplace and Employment Law team will continue to follow events closely as they unfold and will keep employers and other stakeholders up to date with all of these important IR reforms.

Contact Damon King or any member of the Workplace and Employment team for further discussion.

Damon King
Special Counsel
Damon King is a Special Counsel in our Workplace and Employment practice with extensive knowledge of industrial and employment law matters.

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