20 June 2017
Sam Cahill, Associate
The Fair Work Ombudsman (“FWO”) carries out a range of compliance and enforcement activities. In this article, we look at the different ways in which the FWO engages directly with employers and set out our tips for how employers should manage such an engagement.
What are the FWO’s areas of concern?
The FWO is responsible for bringing about compliance with various federal workplace laws. The key areas of concern for the FWO are:
- the National Employment Standards, which includes entitlements such as annual leave, personal leave, parental leave, notice of termination and redundancy pay;
- Modern Awards and Enterprise Agreements, which can include entitlements such as minimum rates of pay, penalty rates and rostering requirements; and
- General Protections issues, including unlawful discrimination, sham contracting and coercion.
The FWO is less likely to be concerned about employment entitlements that are purely contractual, such as performance incentive payments.
What will trigger the attention of the FWO?
A common way for an employer to come to the attention of the FWO is for one of its employees to make a complaint. In the 2015- 16 financial year, the FWO received nearly 30,000 complaints of alleged non-compliance.1 However, it is not necessary for an employee to have made a complaint. The FWO may act on information received from other sources, such as media reports. It may also take an interest in an employer as part of an industry-wide compliance campaign.
Early intervention (FWO as Good Cop)
When a complaint is made to the FWO about an employer, or the FWO otherwise suspects that an employer has engaged in non-compliance, the FWO will generally begin by using an “early intervention” approach to resolve the dispute and/or bring about compliance with the relevant laws. This approach is characterised by an emphasis on education, conciliation and voluntary correction. It usually involves advising the parties on their rights and obligations and offering to act as a mediator where there is a dispute.
During this phase, the FWO relies on the parties to:
- provide relevant information (records of hours worked, wages etc.);
- attend discussions and consider options for resolutions (eg, mediation); and
- take steps to resolve any compliance issues (eg, making backpayment and committing to take steps going forward).
This means that the FWO does not exercise its powers under the Fair Work Act 2009 (Cth) (“FW Act”) and parties are not legally compelled to cooperate or take any action.
The FWO considers that an “early intervention” approach is often successful in resolving workplace disputes and bringing about compliance. In 2015-16, the FWO conducted over 10,000 “early interventions”, resulting in the backpayment of over $4.3 million in wages.2
In the same period, the FWO finalised over 4,500 workplace disputes by mediation, resulting in the backpayment of over $7 million in wages.3
Generally speaking, the FWO may decide to conduct an investigation where the available information suggests there is:
- exploitation of vulnerable workers;
- significant public interest or concern (e.g. gender discrimination);
- blatant disregard for the law; and/or
- an opportunity to provide an educative or deterrent effect.
The FWO has a range of investigation powers under the FW Act. Importantly, an inspector may enter a workplace without the permission of the employer or the occupant of the premises. While on the premises, the inspector may:
- inspect any work, process or object;
- require a person to tell them who has, or who
- can access, a record or document;
- require the person with access to a record or document to hand it over while the inspector is on the premises or within a specific timeframe;
- inspect and make copies of any record or document kept on the premises (hardcopy or on computer); and
- take samples of any goods or substances after informing the owner or other relevant person in charge of the goods or substances.
The exercise of these powers is subject to certain conditions and limitations. For example:
- an inspector must not use force to enter the workplace or premises;
- an inspector must show his or her identity card to the employer or the occupier of the premises;
- an inspector must only interview a person if the person consents;
- an inspector must reasonably believe that the FW Act applies to the work performed at the workplace, or that there are records at the premises that are relevant for compliance purposes; and
- an inspector must enter the workplace or premises during working hours, unless the inspector believes that it is necessary for compliance purposes to enter outside of working hours.
FWO inspectors also have powers to require people to produce documents and provide their name and address.
The FWO expects that, during an investigation, all parties will:
- always tell the truth;
- fully disclose all relevant matters from the outset of the investigation;
- provide relevant information as it comes to hand; and
- respond in a timely manner to requests.
At the completion of an investigation, the FWO will provide the employer with a letter setting out its findings. This letter will also set out any steps that the FWO would like the parties to take, and any steps that it may intend on taking.
Enforcement (FWO as Bad Cop)
If the FWO is not satisfied with the outcome of the investigation phase, or if the FWO is concerned that the employer may engage in further non-compliance in the future, the FWO can use one of its enforcement options, including prosecution for breach of the FW Act.
(a) Compliance Notices
A Compliance Notice is a written notice that legally requires a person to take certain steps to remedy a breach of workplace laws. Compliance Notices are typically issued where the FWO suspects that the employer will not voluntarily rectify an alleged breach.
In 2015–16, the FWO issued over 180 compliance notices.4 Failure to comply can result in financial penalties of up to $27,000 for a company and $5,400 for an individual.
(b) Enforceable Undertakings
Enforceable undertakings are legally-binding documents that set out an employer’s commitment to addressing contraventions and preventing future breaches. This can include:
- back-payment of wages;
- training sessions for managers;
- independent wage audits; and
- announcements to media.
An employer will usually enter an enforceable undertaking under the threat of prosecution. In 2015-16, over 40 employers entered enforceable undertakings with the FWO.
The FWO will generally only take legal action in the most serious instances of non-compliance. Cases typically involve deliberate exploitation of vulnerable workers, refusal of an employer to cooperate with the FWO, or a significant history of non-compliance. In 2015-16, the FWO initiated 50 civil penalty litigations.5
Tips for engaging with the FWO
If the FWO seeks to engage with your business in relation to a compliance issue, we recommend you consider the following tips:
- Don’t take it personally. It is not uncommon for management to take offence when contact is made by the FWO with the organisation. By not reacting defensively, you will be better able to develop an appropriate strategy for managing the engagement.
- Ask yourself: Why is the FWO interested in our organisation? This will not only help you to resolve the immediate issue, but will also help you to understand what it was that resulted in the FWO’s interest in the first place.
- Ask yourself: What is the FWO asking us to do? The FWO may be asking your organisation to take some action voluntarily, in which case there may be some flexibility about how and when these acts are done. However, if the FWO is exercising its powers under the FW Act, you need to be mindful of the consequence of any non-compliance.
- Don’t be afraid to play by the rules. You should not be afraid to request that the FWO only exercises its powers in accordance with the FW Act. For example, you can request that an FWO inspector present his or her identity card before entering the workplace. At the same time, do not attempt to interfere with or prevent the lawful exercise of powers by the FWO. If you are not sure how the rules apply, you should consider seeking legal advice.
- Keep the ball rolling. Do not seek to resist or delay when you are required to deal with the FWO. You should develop a strategy early on for managing the engagement, involving planned and active compliance, rather than ad hoc appeasement.
- Don’t defend the indefensible. If your organisation has issues with compliance, you should move to address these issues as soon as possible. It is clear from the way the FWO exercises its powers that organisations that assist the FWO and rectify any issues are dealt with more favourably in the long term. On the other hand, organisations that attempt to conceal and obfuscate are more likely to end up feeling the full force of the law.
- Fair Work Ombudsman, Annual Report 2015-16, at p. 17.
- Fair Work Ombudsman, Annual Report 2015-16, at p. 18.
- Fair Work Ombudsman, Annual Report 2015-16, at p. 18.
- Fair Work Ombudsman, Annual Report 2015-16, at p. 21.
- Fair Work Ombudsman, Annual Report 2015-16, at p. 22.