First FWO prosecution for race-based underpayments

Therese MacDermott, Consultant

It is fairly well known to HR and legal practitioners that the extent of race based employment discrimination is not accurately reflected in the number of complaints lodged by individual workers. This makes the role of the regulator, in pursuing breaches of the Fair Work Act 2009 (Cth) (the “FW Act”) that are linked to race, a significant aspect of enforcement and compliance.

The Fair Work Ombudsman (“FWO”), since its inception, has assiduously prosecuted egregious underpayments and other conduct amounting to substantial non-compliance with core employment obligations.

In a recent case, following an audit of its work arrangements, an employer was found to have breached the FW Act in a number of respects, including by failing to pay the minimum award rates and other allowances for overtime, weekend work and public holidays and in relation to its record keeping obligations.1

The respondents admitted the underpayment and record keeping contraventions in relation to a number of its employees. However, the case proceeded on the outstanding issue of whether, in addition to the established breaches, the respondents had taken adverse action against particular employees because of their nationality or descent. Ultimately, the Court found that the employer contravened the prohibitions on discriminatory treatment in the FW Act. It held that the failure to pay particular workers correctly and other treatment was adverse action based on race.

In establishing the causal link between the treatment and the prohibited ground (in this case, race), many adverse action cases have turned on the state of mind or motivation of the decision-maker in order to ascertain the real reason for the decision-maker’s conduct. Many employers have been able to discharge the onus of establishing that a prohibited ground was not a substantial and operative factor for the treatment by establishing that the prohibited ground had nothing to do with the reasons the decision was made.

However, in this case, the Court did not accept that the second respondent (the decision-maker) was confused about the award obligations and concluded that the Malaysian national extraction and Chinese race of the employees in question was the substantial and operative reason. The Judge found that the employer failed to provide any convincing or credible explanations for the treatment consistent with the absence of race as a substantial and operative reason for the action.

This case is significant as it is the FWO’s first racial discrimination litigation. It is also a reminder to employers to ensure that decision-making within their organisations is not impacted by any prohibited grounds so as to bring into question compliance with the FW Act. Decision-makers must be able to provide credible explanations for the treatment of workers that is disassociated from any discriminatory treatment or other proscribed bases.

Fair Work Ombudsman v Yenida Pty Ltd & Anor [2017] FCCA 2299

Fair Work Act amendments enhance penalty provisions & impose new franchising obligations

Michael Starkey, Associate

Last week, the Federal Parliament passed amendments to the Fair Work Act 2009 (Cth) (the “Act”) which aim to protect “vulnerable workers” from exploitation by employers. The amendments follow a period of intense media scrutiny in relation to such workers, particularly migrant workers employed by franchise companies.

Serious contraventions

The amendments impose penalties of up to $630,000 for a corporation and $126,000 for an individual in respect of a new category of “serious contraventions” of the Act. A contravention of a civil penalty provision of the Act (for example, underpayment of wages) will be considered a “serious contravention” if:

  • the person knowingly contravened the provision; and
  • the person’s conduct constituting the contravention was part of a systemic pattern of conduct relating to one or more other persons.

These new penalty provisions also capture persons who are knowingly involved in a serious contravention.

Employers should bear in mind that the category of “serious contraventions” applies to all employers, not just franchisors.

Franchising obligations

The amendments create a new offence to capture franchisors and parent companies in the event that they fail to take reasonable steps to prevent contraventions within the franchise group. This means that franchisors will be directly exposed to liability for contraventions such as underpayments, even if they do not employ the workers in question themselves.

Other changes

Other changes introduced by the amendments include:

  • new powers for the Fair Work Ombudsman to require the production of evidence in relation to investigations; and
  • new prohibitions preventing employers from implementing cashback arrangements that require employees to spend their money in connection with their employment or prospective employment, where the requirement is unreasonable and the payment is directly or indirectly of benefit to the employer or prospective employer.

Given the nature of these amendments, we encourage all our clients to undertake workplace audits in relation to payment of wages, award compliance, and leave entitlements to identify any systemic issues (within their own organisations and any franchising group) and rectify them.

Please contact your PCS Team Member for further information and assistance.

Crime doesn’t pay: the consequences of charging for migration outcomes

Adriana Bedon, Senior Associate

Charging for a “migration outcome” or a “sponsor-related event” has become a criminal offence and the subject of steep penalties: The Department of Immigration and Border Protection (“DIBP”) is honing in on the growing incidence of employers and/ or recruiters seeking to derive a “benefit” from securing a migration outcome from prospective visa candidates, or such employees open to providing sponsors with a benefit to facilitate their stay in Australia.

Whilst visa scams are the first thing that comes to mind, the manner in which a person can derive a “benefit” from such a scenario is broader than first appears and the policy implications are significant.


The Migration Amendment (Charging for a Migration Outcome) Bill 2015 was introduced on 17 September 2015 (and entered into effect on 14 December 2015) following an independent report on what’s been dubbed as “payment for visa activity”. This refers to a scenario in which an employer sponsor requests payment from a nominee in return for procuring a migration outcome on their behalf. This practice has always been unlawful as it strikes at the integrity of Australia’s visa programmes that are designed to address genuine skill shortages in the Australian labour market.

The Senate’s Legal and Constitutional Affairs Legislation Committee inquiry reported that this activity is prevalent amongst employers and migration agents involved in sponsoring subclass Temporary (Work) Skilled (Subclass 457) visa applicants, particularly by way of clawing back migration agent fees or additional payments from employees once their 457 visa has been granted.

Changes introduced

The Migration Amendment (Charging for a Migration Outcome) Act 2015 introduces new criminal and civil penalties as well as visa cancellation provisions to be imposed on either a person who seeks to derive a benefit from a visa applicant in return for a “sponsorship-related event”, or from a visa applicant who provides such a benefit in that context.

In essence, this legislation prohibits sponsors, nominators, employers or other third parties from making a personal gain from their position by requiring payment in return for processing a visa sponsorship arrangement. Current or prospective visa holders seeking permanent residence, or an opportunity to work in Australia by providing a benefit to an employer for a job are also subject to consequences. These changes extend beyond the scope of the Temporary (Work) Skilled 457 program.

Where prior legislation classed activities such as the clawing back of migration agent costs, and any related recruitment costs from subclass 457 visa applicants as a breach of sponsorship obligations subject to penalties and sanctions, the new legislation imposes criminal and civil penalties as well as imprisonment sentences.

Potential consequences under the new legislation are summarised below:

  • up to two years imprisonment;
  • penalties of up to $324,000 for a body corporate, (and $64,000 for an individual); for each instance a person requests or receives a benefit in return for sponsorship, or a sponsorship related event;
  • civil penalties of up to $216,000 may apply to people found to have offered or provided a benefit in return for a sponsorship event occurring;
  • visa holders involved in such activities (temporary or permanent residents) may be subject to the new discretionary power to consider cancellation of their visa; and/or
  • visa applicants who are found to be involved in such activities whilst in the process of applying for a visa will have their applications refused.

Practical measures implemented

Sponsors and nominators will be required to acknowledge in a statement in the application that there has been no payment for visa activities under the “paying for visa sponsorship certification requirement”. Visa applicants will also be presented with an additional declaration on their application forms, which require their acknowledgement and compliance with the “paying for visa sponsorship – declaration requirement”.

This is a time of application requirement and works in tandem with the DIBP’s intention that this certification be incorporated into online application processes. As such, in order to comply with application requirements, nominators and applicants must comply with such certifications when lodging an application.

Flow on effects

In the same vein, a new policy has been introduced directing case officers to increase the scrutiny on employer sponsored nominations when assessing whether an occupation is genuine, and to consider whether the position has in fact been created to facilitate an applicant’s entry, or stay in Australia (or their family members’).

Such policy has the potential to complicate visa applications for self-sponsoring business owners via the Temporary (Work) Skilled 457 visa program, or sponsoring their family members.

This increased scrutiny will equally apply to working holiday visa holders applying for subsequent sponsored employment whilst in Australia. The rationale behind this is that sponsored employment should only be offered when a genuine recruitment need arises.

In these circumstances, where local recruitment attempts have been exhausted, this should lead recruiters to seek such skills offshore. However, in practice it can be the case that such offshore skills happen to be onshore on a working holiday visa when this need arises. For sponsors in this situation, such applications should be prepared with added caution.

As a consequence of this new policy the chance of a refusal is higher if certain risk indicators are found in an application. These risk factors are indicated below:

  • the nominee is a relative or personal associate of an officer of the sponsoring business;
  • the nominee is a director or owner of the sponsoring business;
  • the nominee is currently in Australia as the holder of a 417 visa;
  • the salary level is inconsistent with other workers in the occupation (for example, if the nominated salary is significantly lower than industry standards for the nominated occupation);
  • the business has indicated on the application form that they have received a payment from the nominee for lodging the nomination; and/or
  • the nominee has indicated on their visa application form that they have made a payment (or entered into an arrangement to make a payment) to the proposed employer for nominating them.

The direction also specifies that the size of a business, length of operation and the number of Australian employees is to be taken into consideration in determining whether the nominated role is genuine.

It should be noted that this direction is a policy change and not a legislative change. This means that nominations presenting such risk indicators will not be necessarily be refused but may be subject to requests for further information, or a genuineness submission to substantiate that the nominated role is legitimately required by the sponsor’s business.

This update serves as a timely reminder to review your organisation’s migration sponsorship practices and supporting policies for compliance with current and evolving legislation. If in doubt, contact your People + Culture Strategies advisor.

Key Takeaways

  • Employer sponsors should review contracts and letters of offer to ensure that no reimbursements, claw backs or other arrangements that can result in a “benefit or charge” are presented to a prospective visa holding employee or applicant.
  • Employers should amend existing mobility and recruitment policies in light of such changes.
  • Self sponsors (i.e. business owners sponsoring their own visas), and/or their family members should seek professional advice in preparing sponsored visa applications.
  • Sponsors looking to employ working/ holiday visa holders should seek professional advice in preparing applications.