Work in progress

Monday, 01 August 2022

Susan Muldowney photo
Susan Muldowney

    Part 1: Fair Work Ombudsman

    The workplace relations system faces substantial change. Amid rising costs, an historic minimum wage rise and acute skills shortages, the new federal government has pledged to amend the Fair Work Act 2009 to include job security. Fair Work Ombudsman Sandra Parker PSM GAICD outlines challenges ahead for directors.

    The complex economic environment is creating uncertainty around how organisations manage and invest in their employees. It’s pushing the topic of workplace relations to the top of boardroom agendas, and Australia’s Fair Work Ombudsman (FWO) Sandra Parker PSM GAICD says that’s precisely where it belongs.

    “Workplace relations reform is always going on,” says Parker, appointed to the role for a five-year term in July 2018. “Changes from the new government reflect the need to keep up with workplace change and societal expectations. People will always be focused on the quality of their jobs, what they get paid and whether they are being treated fairly. I’ve always said, one of the most important things that people have is their job, so workplace relations should be a front-and- centre issue for executives and boards.”

    Fair pay day

    The FWO provides free advice for Australia’s 12 million workers and two million businesses about the workplace relations system. Parker’s role is subject to the Fair Work Act 2009, which sets minimum standards and conditions for employees, and provides the legal framework for employer-employee relations for the majority of workplaces in Australia.

    The Act is a primary piece of legislation that Parker helped create during a public sector career spanning more than two decades. She took up her first government role after starting her career as a schoolteacher, but says her understanding of fairness at work was shaped during her very first job as a teenager. “My sisters and I worked in a takeaway food shop on the weekends and my father was very upset when he found out we weren’t being paid fairly. He went and sorted it out. We got our money, but we didn’t go back. We weren’t invited to return, either.”

    Today, the bulk of the FWO’s work focuses on the issue that goes to the heart of the employment contract — ensuring that people are paid what they are owed. Underpayments remain rife in workplaces across the country, particularly in labour-intensive sectors such as hospitality and horticulture. However, a recent Economic References Committee report shows more than half of Australia’s 40 universities have also been implicated in the underpayment of staff, largely due to their highly casualised workforce.

    The recent spate of high-profile corporate cases — including Bupa, Wesfarmers, Qantas, MADE Establishment Group, the Commonwealth Bank, Super Retail Group, Maurice Blackburn and the ABC — also sparked the attention of the FWO. Large corporates and universities are among its priority sectors for 2022–23, along with other areas, such as contract cleaning, fast food, cafes and restaurants, sham contracting and the agricultural sector.

    “It’s fair to say that five years ago, we weren’t focused on corporates and universities in relation  to underpayments,” says Parker. “We were focused on small to medium businesses and we just assumed that corporates or universities would be big enough and well-resourced enough to take care of themselves.”

    She says the bulk of underpayments in Australia are not deliberate, but generally occur through neglect. “The award and enterprise agreement system is complicated. It changes a lot and requires ongoing effort and expertise to ensure payroll systems are current. Companies merge and take over each other’s payroll systems and move workers over onto new agreements. All of that is time-consuming and businesses have a thousand other things they need to focus on. We understand all of that and take it into account, but we’re also saying that businesses have to get their act together, do regular audits of payroll and fix it.”

    Enforcement action

    When Parker joined the FWO, the agency favoured education and mediation over compliance and enforcement. However, landmark inquiries, such as the banking Royal Commission and the Migrant Workers’ Taskforce, chaired by former ACCC chair Professor Allan Fels AO, found that the workplace watchdog needed sharper teeth.

    After reviewing the FWO approach, Parker determined it wasn’t using all of the enforcement tools at its disposal, such as compliance notices, which inform employers of their need to fix a breach of an Australian workplace law. As a result, the FWO “shifted the dial”.

    In 2020–21, for instance, the FWO issued 2025 compliance notices, recovering more than $16.5m in unpaid wages from this enforcement tool alone. This compares with 220 compliance notices issued in 2017–18, recovering less than $1m for workers. The FWO also initiated 76 litigations in 2020–21, 41 per cent more than the year before.

    “We’ve moved from less than five per cent compliance and enforcement to where we sit at the moment, which is about 25 per cent [of disputes received being resolved with compliance and enforcement tools],” says Parker, noting that compliance notices are not a punitive tool.

    “If an employer who receives a compliance notice fixes a breach in a timely manner, that’s the end of it,” she says. “However, if they don’t pay, we’ll generally take them to court and get a penalty, as well as the money paid back.

    That’s been a deliberate shift. It’s much more transparent, and it’s a much timelier way for people to get the money they’re owed.”

    Rising operating expenses

    Dramatic changes to the economy during the peak of the COVID-19 pandemic saw the regulator apply more flexibility to this enforcement approach. If a business was receiving JobKeeper, for instance, which required a 30–50 per cent drop in revenue, Parker regarded that as evidence of significant financial pressure. If non-compliance was not deliberate, the watchdog would consider not taking legal action for serious underpayments or delaying backpay.

    Parker does not rule out such leeway for businesses under strain in the current economic environment, where inflation and wage pressures are leading to significant spikes in operating costs. In June this year, 46 per cent of businesses experienced increases in operating expenses over the previous month, according to data from the Australian Bureau of Statistics (ABS). This compares to 21 per cent of businesses in June 2021.

    “We have a compliance enforcement policy that says we will always take account of a business’s financial circumstances in the approach that we take,” says Parker. “If a business is under pressure because of increased wages they need to pay, for instance, then if they can show that, and if we can assess that it’s reasonable, we can give them longer to pay. But ultimately, the money is owed to the worker and our job is to make sure it gets paid to them.”

    Enshrining job security

    In the lead-up to this year’s federal election, Labor proposed to amend the Fair Work Act with a particular focus on job security. This may include amending the definition of “casual employment” by legislating an objective test to determine the correct classification. Labor promised to introduce “same-job, same-pay” legislation, which would ensure workers employed by labour hire firms receive the same pay and conditions as workers employed directly. It also committed to enshrining job security in the Act.

    Parker says these proposed changes will have little impact on the work of the FWO, as job security is already a key focus of its work. “We have priorities that include vulnerable workers, such as those working in the fast food, the restaurant and cafe sector, and horticulture. They employ a lot of casuals and, by its very nature, casual work is less secure than having a full-time, permanent job. We already prioritise those sectors of the community and those industries more likely to need our help.”

    Advice for the board

    When it comes to the boardroom agenda, Parker compares workplace relations issues such as payroll to be where work health and safety was 15 years ago — just beginning to become a focus of attention. However, with Labor pledging to make wage theft a criminal offence, she says that if companies aren’t already auditing their payroll system, it should be a “flashing red light for boards”.

    “Companies have relied on antiquated payroll systems and nobody’s been checking whether they are up to date, or that their payroll team may not have been given the same level of attention and resources as the rest of the finance team,” says Parker.

    “Given how many businesses have found themselves to have underpaid their workers, boards really just need to be asking the questions. The board’s role is to seek assurance. How long since we’ve audited out payroll system? When did we last train our payroll team in the award and the enterprise agreement system? Have our payroll systems lined up since our merger? If there’s an enterprise agreement, are there regular meetings with the union to talk about whether it’s being implemented correctly? That’s what we’ve found with universities. They’ve had enterprise agreements and they’ve been breaching them.”

    Parker adds that workplace relations should be high on the boardroom agenda.

    “Boards should be asking questions about it and must be prepared to require evidence of compliance from executives if they have concerns,” she says.

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