Monday, 22 October 2018
Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018; Second Reading
I rise to speak on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 and I move:
That all words after “That” be omitted with a view to substituting the following words:
“whilst not declining to give the bill a second reading, the House notes that:
(1) this Government has previously tried to cut the Fair Entitlements Guarantee scheme and has no real commitment to protecting employee entitlements;
(2) in May 2017 Labor proposed a suite of measures to combat illegal phoenix activity; and
(3) under this Government wages are stagnant, underemployment is stubbornly high, worker exploitation is rife, and work is increasingly precarious”.
Labor is pleased to see this bill come onto the agenda. The reforms in the bill are sensible and, in some cases, the bill adopts announced Labor policy.
I note that the government first announced its intention to address the corporate misuse of the Fair Entitlements Guarantee Scheme, or FEG, on 5 October last year. So this has taken some considerable time to come before the parliament. Interestingly, the government released an exposure draft of the bill and gave stakeholders the opportunity to comment, in stark contrast to the way it engages in drafting the union-busting bills that have been and continue to be the main focus of this government. In those instances, there was not consultation or, if there was consultation, it was lip-service paid to consultation not genuine efforts to engage with stakeholders affected by those proposed bills. Again, we support the introduction of this bill and we do support the fact that there was some sensible consultation.
We're pleased to support the changes to the Corporations Act in this bill, which will hopefully see a greater degree of recovery for employees who are owed entitlements, and successful prosecutions of directors and corporations who deliberately avoid liability for these entitlements. The provisions of this bill will also give the government new options to recover from liable companies and directors at least some of the taxpayers' money which is paid out under the Fair Entitlements Guarantee scheme and will enable employees to seek compensation from liable companies and directors.
This bill will amend the Corporation Act to, firstly, make it easier to prove the criminal offence of entering into an arrangement to avoid paying employee entitlements by including recklessness as a mental element; and, secondly, increase the maximum fine for that offence. The current maximum penalty is 10 years imprisonment or a fine of $210,000. This bill increases the fine for an individual to whichever is greater of $945,000 or three times the total value of the benefits that are obtained through the offence and, for a body corporate, to whichever is the greater of $9.45 million or three times the total value of the benefits that were obtained through the offence or 10 per cent of the body corporate's annual turnover during the 12-month period before the offence. Further, it will introduce a new civil penalty provision for avoiding paying employee entitlements and will give the Fair Work Ombudsman, the Australian Taxation Office and the Department of Jobs and Small Business standing to commence civil compensation proceedings. It will extend liability for unpaid entitlements to related corporate entities and extend ASIC's powers to disqualify directors and other officers, either directly or on application to the court, where they have a track record of corporate contraventions and inappropriately using the Fair Entitlements Guarantee scheme to pay outstanding employee entitlements.
Labor believes this bill could be improved to give registered organisations standing to commence civil proceedings, as they currently have under the Fair Work Act, and standing to make applications for compensation on behalf of the employees they represent. Where a union is entitled to represent the industrial interests of an employee or group of employees, they should have standing to represent those people to assist them in obtaining compensation for loss of entitlements. We have informed the government that it's our intention to move amendments in the Senate to make these improvements, and we do hope to receive the government's support. I've had discussion with the minister and the minister's office, and I believe, in those conversations more broadly about this and other matters contained in the portfolio, that the minister was open, at least, to engaging with the opposition and reconciling the differences between the opposition and the government wherever possible. I say that sincerely. We do hope we can engage on more substantive amendments that we moved in the other place that would look to improve this bill to strengthen the protections for employees, to ensure that we can go after those directors who deliberately seek to effectively steal public moneys by using a scheme designed for companies that collapse, not ones that are contrived in a manner to avoid obligations to creditors or, in this case, to employees. So, whilst I won't be so naive as to think that we can reach agreement on all of these matters, we will go into the negotiations with the government with respect to the amendments we'll be moving in the Senate with a view to finding common ground to improve this bill.
It's no surprise to Labor that some companies and directors are specifically structuring their arrangements to avoid paying employee entitlements. We established the FEG scheme when last in government because employees should not be punished, when an employer's business fails, by the loss of their legal entitlements—leave, superannuation, unpaid wages. The premise of the Fair Entitlements Guarantee scheme is simple: when a company goes bust and employees lose their jobs, through no fault of their own, employees should receive what is owed to them. They are the innocent parties to those practices.
It is particularly egregious when workers lose their entitlements because a company has deliberately structured its arrangements to avoid paying them. It has been a crime to do so for 18 years now, yet no-one has ever been successfully prosecuted for it. That's why, to make it easier to prove, Labor announced in May last year that a Shorten Labor government, if elected, would introduce an objective test to the offence of deliberately avoiding employee entitlements. We also announced that we would reform provisions for accessorial liability. So we are pleased that in this bill the government has, after almost 18 months, effectively adopted Labor policy.
There is no doubt that corporate activity has led to the Fair Entitlements Guarantee scheme being used more in the last four years. The average costs under the Fair Entitlements Guarantee scheme have more than tripled, from $70.7 million in the four-year period between 1 July 2005 and 30 June 2009 to $235.3 million in the four years between July 2014 and 30 June this year. That's a very considerable increase in the expenditure of a very important scheme. According to the government, the startling fact behind these figures is that the increase in FEG claimants can be attributed to a small number of corporations shifting their liability. In fact, the former member for Fairfax has some level of responsibility for this cost blowout, with nearly $70 million paid out to former employees of his Queensland Nickel company.
The FEG was always designed to be a safety net, as the guaranteed way in which employees could be paid their entitlements in a timely manner and not have to wait for drawn-out processes before they received a cent. There's nothing worse than losing your job other than losing your job and not knowing whether you are going to be paid the entitlements owed to you. It's just not right when the owner of a particular company says: 'Sorry, folks. I know you've been working hard for me. I know you've helped produce profits. I know you've helped make millions of dollars, which I can donate to a political concern. But, by the way, now that it's your turn there's nothing there for you.' With respect to that company, you'd have to say it was a disaster for those workers in terms of losing their jobs, but the scheme at least, though it didn't pay all the entitlements owed to those workers, paid a very significant proportion of them. That was as a result of this scheme.
It is true to say that this government has not always supported this scheme, and I think it's important to note that. Whilst, as I say, we're in broad support of the provisions of this bill, I think it's important to note the history of fair entitlements. The first entitlements scheme, GEERS—a very bare, stripped-back scheme very different to the FEG scheme—was established, under the Howard government, off the back of the collapse of National Textiles. There was some scuttlebutt, of course, that one of the directors of the company was Stan Howard, the brother of the then Prime Minister, but the government was right to introduce a scheme to at least, in a very minimal way, underwrite and protect some of the entitlements owed to those employees in the face of that collapse, namely the collapse of National Textiles. The Labor opposition supported the then government, the Howard government, to introduce that scheme. To that extent, it was the beginning of at least some capacity for workers who'd been deprived of what could have been a very significant proportion of their own personal wealth, people who were not very rich and who had worked hard. I applaud the then government for at least introducing that scheme at the time.
When Labor were last in government, we built upon that scheme. We introduced the Fair Entitlements Guarantee scheme, which afforded a greater level of protection. So instead of, for example, 16 weeks as a maximum payout, it allowed for 52 weeks of the redundancy payout—so a maximum of 12 months. That might have meant that some workers on very good redundancy schemes did not receive their full entitlement. They might have worked for 30 years and had 18 months or two years owing to them. But 12 months compared to 16 weeks and compared to nothing before the GEERS was certainly the right direction to look after those workers. That's why we introduced the scheme to build on the original scheme.
This government made an awful error in the 2014 budget by seeking to cut this scheme back to the original minimalist scheme. The effect of the 2014 budget when introduced into this place in May 2014 was to strip away the building upon the original scheme so it would go back to the 16 weeks maximum. Labor could not abide that. We did not abide that. We did not support that proposition and we fought it and fought it until this government dropped its inclination to cut away those potential entitlements to those who were victims of corporate failure. I made comment about people's support for that at the time, and I did make comment about the former member for Herbert, who was memorably standing next to the then Minister for Employment, Senator Cash, up in Townsville, crying about the loss of jobs for those workers. I said, 'You don't get to cry in Townsville and come to Canberra and vote against those workers without someone saying something.' I did say something because he did vote, as a member of the government, to cut away the entitlements, which would have left those QNI workers a lot worse off if the 2014 budget had passed the House and the Senate unamended with respect to the Fair Entitlements Guarantee. I think that has to be noted.
The government have taken a different position or, at least, haven't pursued reducing the scheme in recent times. It may still be formally the policy of government, but there have been no efforts to test the parliament in relation to that. They failed when the then Prime Minister Tony Abbott, the member for Warringah, and the then Treasurer, the then member for North Sydney, were pushing hard for a very austere, pretty brutal budget which of course was the beginning of the problems that beset this government, I would contend. So I am glad to say that the FEG is still standing. It's a good scheme.
I do agree with the government and the minister to this extent: we have a generous scheme, but that doesn't mean that corporate directors or companies get to game the system to steal taxpayers' money by contriving arrangements to get access to that scheme. It should be for genuine corporate failure. When that occurs, when everything has been done to prevent that happening and everything has been exhausted to prevent taxpayers having to underwrite such entitlements, only then should the scheme come into effect. We should not have a situation where a contrivance and potential crime is committed and the taxpayers exposed and yet the directors are not held to account or not charged, convicted and, if necessary, imprisoned or, for that matter, sufficient fines contained within the bill are not imposed on individuals or, indeed, on a company that acts in a manner to effectively steal from the public in order to get access to this scheme. That cannot be. We cannot allow that to happen. To that extent, the motivation behind the government's action is right. The government's motivation is right to stop that corporate misconduct or that corporate criminal behaviour, as it would be in some of the instances we've seen. Therefore, that's why, of course, in the main we support this bill, but we do move amendments to broaden out this debate.
The FEG was always designed to be a safety net as the guaranteed way, as I said before, that employees could be paid their entitlements in a timely manner. But the fact is that the FEG means that workers can receive their entitlements in a timely manner, move on to find another job and get on with their lives. We have seen the problems when the government started to think about slashing these entitlements contained within this scheme. As I've said, we were right in 2012 to pass the Fair Entitlements Guarantee legislation.
On this side of the House, we know that employees who lose their jobs through insolvency or the bankruptcy of their employer have enough to worry about. They have to worry about paying their kids' school fees, buying children's clothes, helping even grown-up kids at university, paying the mortgage or paying the rent, and putting food on the table and petrol in the car—the usual household pressures that many families experience. Therefore, I think it is fitting that the government seeks a way to prevent this scheme being gamed. We also believe that these employees should not have to worry about being paid what their entitlements are under law and has now lost through no fault of their own.
As I say, it's really a warning to this government. If they are genuine about protecting the interests of employees who may be able to access this scheme, then we say to this government: we do not want to see a repeat of an effort to take away many of the provisions of the FEG scheme that have been improvements since the original scheme. Of course, it's not just about that. Under this government, as we've said—and I said it when I moved the amendment—wages are stagnant. There's no point suggesting otherwise. We've got the lowest wage growth in 25 years. For over the last three or four years, the wage growth has been low. The government likes to welcome improvements in employment, and so do I—any new job should be welcomed—but underemployment is still a challenge and something we need to tackle. Wage stagnation is a challenge, and we need to tackle that too.
It's not just a phenomena of this nation—that's true too. We're seeing it in other parts of the world where the usual course of events is you see some decline in unemployment leading to some commensurate increase in employment, a reduction of underemployment or, indeed in this case, an increase in wages. That hasn't happened. We haven't seen an increase. There hasn't been a correlation between any reduction in unemployment and a consequential increase to wage growth, and that is a concern to us. This is the legacy for Australian workers from this government, I would contend.
As I mentioned, on 24 May last year I announced, accompanied by Andrew Leigh, the member for Fenner, Labor's policy to crackdown on abuse by directors and the problems associated with illegal phoenixing activity. While this bill adopts and implements some of our policy initiatives, unfortunately there's more for the federal government to do. We put to this government that we want to negotiate with this government and consider substantive amendments in the Senate.
For example, the government has dragged its feet on implementing the director identification numbers to stop directors going from failed company to failed company, wreaking havoc as they go. Despite making promises to the crossbenchers in order to get the crossbenchers' vote for the ABCC bill, this government has done nothing to reform security of payments to make sure that subcontractors on major projects aren't left unpaid when contractors go bust. So there's plenty of work in this policy space. Indeed, there were commitments made to a number of crossbench senators, and, as yet, they have not been fulfilled. They have not been realised. I do think the government could also look at some of the other areas where we're seeing corporate malfeasance and misconduct by companies.
As is the case far too often with this government when it is dragged kicking and screaming to do something to help working Australians, it is, sadly, too little, too late. Having said that, when it comes to the provisions of this bill, we do see that it will benefit employees and, as an extension of that, taxpayers, who will have their valuable funds returned to them.
So this is an important bill. I have to say, of all the bills I have had to rise and speak to in this place since I have been shadow minister, this is one of the better bills. I give a pass maybe—yes, I give the government a pass.
B minus! Do you use the alphabet system still? Yes, we'll give the government a pass because it is actually going in the right direction. It is attending to the problem of corporate misconduct. It's seeking to protect the interests of the public and the taxpayer by preventing the scheme being misused and public moneys being accessed improperly, completely against the spirit of the scheme. It's not a focus on stripping back the scheme, as was the original intention of the government in 2014—and I think they held that position for many years after that. But there's been no real debate about that. I'm glad to say that Labor were stalwart resisters of the proposition by the government that we should strip the FEG scheme back to the original Howard scheme.
This bill is worth supporting, but we think it can be a better bill if some of the amendments that we will be moving in the Senate are considered. We will have plenty of time; the Senate won't debate this matter until the end of November. Well, it may come on before then. If it does come on before then in the Senate, I'm willing to speak directly with the minister. She's invited me to talk to her about a range of matters, including this one, and I will take her up on that invitation and talk to her about the ways we think we can improve the bill.
We would start by looking at whether, in fact, we need to consider some elements around fighting the phoenixing that occurs all too often—where a company goes bust and then reappears, and somehow manages to avoid its creditors and its corporate obligations. We'd like to think that we could also improve this bill in other ways, and I think there are opportunities for us to do that. If the minister and the government are serious about that proposition, I think this bill—quite a good bill; deficient but quite good—could be a better bill. It could be better for workers insofar as giving them better security, better for taxpayers in terms of protecting their interests and better at holding companies and directors to account.
There have been criminal sanctions on the statute books for 18 years, and yet no-one has been convicted under those provisions—which really speaks to, I think, a failure; there's no point having such sanctions contained within our statute books if they're never going to be used—even when there's been misconduct that should have seen, at least, sentencing of certain individuals who acted in contravention of those laws. So I think there is an opportunity to improve the bill, and I would be very happy to discuss this with the minister soon and see whether we can reach agreement on all matters that are relevant and incidental to the substantive provisions of this bill.
The original question was that this bill be now read a second time. To this the honourable member for Gorton has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.
There's much in the member for Gorton's contribution that I can agree with, but there's also some that I can't. I'm sure that was his reverse position on the bill as well. It is always important to recognise that, as we are seeking to pass legislation such as this to protect employees' entitlements, we also reflect on the number of other things that we are doing as a government to ensure that people have the opportunity to work, are paying lower taxes and are better able to meet their day-to-day cost-of-living needs. In that regard, I think this is a very important piece of legislation as it seeks to further protect employee entitlements by strengthening enforcement and recovery options to deter corporate misuse of the Fair Entitlements Guarantee.
The FEG, as the member for Gorton has outlined, commenced in December 2012, replacing previous schemes that applied from January 2000, namely the General Employee Entitlements and Redundancy Scheme. The FEG is designed to provide financial assistance to employees left with unpaid employee entitlements due to liquidation or bankruptcy of their employer. The FEG scheme remains an important safety net for workers and ensures the Australian people are not left out-of-pocket if their employer becomes insolvent. The government implemented the FEG Recovery Program from 1 July 2015 to more proactively pursue recovery of FEG payments, and the recovery of these payments has doubled since the recovery program commenced.
The objective of this bill is that we aim to better provide and protect entitlements to employees that are payable on the termination of these employees through the FEG scheme, including unpaid wages, annual leave, long service leave, payment in lieu of notice and redundancy pay. Over time, there are been receipted instances, sadly—and the member for Gorton mentioned a couple, but I'm sure there are many others—where employers have avoided their employee entitlement obligations and exploited the FEG scheme. The consequence of that is that it leaves a burden—an unfair burden at that—on the Australian taxpayers who do the right thing; not just individual Australian taxpayers but also corporate Australian taxpayers and small-to-medium business Australian taxpayers who do the right thing by ensuring that their employees are paid the entitlements they're due. It's disappointing that we as legislators in this House have to be in the position where we have to pass laws such as this because a small number of our business community don't take the responsibility of ensuring that they pay their employee entitlements as and when they are due and they leave that burden unfairly on the taxpayer. It is important that we ensure that these entitlements are paid.
The scheme originally, when it was set up, was to be used only as a last resort. In some cases, it's fair to observe, it could create an unfair commercial advantage between those who are seeking to do the right thing and those who aren't. That is why the government is the committed to implementing these legislative reforms, to stop the corporate misuse of the taxpayer funded FEG scheme.
Raising the professional responsibility of employers will not only play a significant role in saving the taxpayers' dollars, it will provide the Australian people with greater income security and confidence. We need to remember that many of these entitlements, particularly superannuation, are forgone wages; if it wasn't being withheld to go into superannuation, the companies would actually have to pay that in wages. So I don't see—and the government doesn't see—that it's fair to allow the actions of a few to result in the improper shifting of costs onto the Australian taxpayer.
We strongly believe that the responsibility of all employees is to pay their workers' entitlements as and when they are due. As of 30 June 2018 a total of $2.8 billion has been paid to over 203,000 workers under the FEG and predecessor schemes since they were introduced in 2001. This excludes another $383 million paid to 13,000 former employees of the Ansett Group under a special scheme. As you can see from those figures it's crucial to address the impost on taxpayers of the scheme's annual bill, which has more than tripled over the past nine years from $70 million in the four-year period between July 2005 and June 2009 to $235 million in the four-year period between July 2014 and June 2018. Sadly, what this reflects is a poor outcome for the employees in Australia who are missing out on their entitlements and, importantly too, a poor outcome for the taxpayer.
I think it is good to see that, as part of this bill, we are seeking to minimise the cost to the taxpayer whilst ensuring that Australian employees get their entitlements. This bill will deter and penalise company directors and other persons who engage in or facilitate transactions that aim to prevent, avoid or reduce employer liability and employee entitlements in insolvency. The framework introducing the bill enables a swift recovery of employees' entitlements from other entities in the corporate group, or closely connected economic relationships, where it will be just and equitable and where these other entities have unfairly benefited from the work done by hardworking employees. The bill also strengthens sanctions for directors and company officers with a track record of corporate contraventions and insolvencies where the FEG is repeatedly and inappropriately relied upon.
The reforms build on other actions the government has taken to protect employee entitlements, including introducing legislation to tackle non-payment of the superannuation guarantee by targeting employees who fail to meet their superannuation obligations and releasing draft legislation to combat illegal phoenix activities involving the deliberate avoidance of company debts, including employee entitlements, by company operators and pre-insolvency advisers who facilitate this activity. We've also released draft legislation that contains discussion around director identification numbers.
This bill will mean that Australian taxpayers don't bear the cost of business doing the wrong thing, it will mean employees don't miss out on their entitlements and it will mean hardworking Australians can continue to provide for their loved ones. These new laws mean we will have stronger levers to ensure employers are held accountable for their obligations. The new criminal offence and civil penalty provisions will strengthen the ability of ASIC to take enforcement action against directors and facilitators who do the wrong thing. The criminal offences will carry the highest penalties available under the law to act as a strong deterrent to these egregious behaviours that hurt all hardworking Australians. This sends the strongest possible message to employers, large and small, and reminds negligent businesses that, when it comes to paying your bills, this government believes your workers come first.
By expanding the parties who can commence compensation proceedings to include the ATO, the Fair Work Ombudsman and the Department of Jobs and Small Business, we're enhancing prospects for the recovery of unpaid employee entitlements, for the benefit of all Australian workers. The new disqualification powers will enable ASIC to strike off those company directors and officers whose behaviour has inappropriately impacted the FEG scheme, acting as a deterrent to those who make a habit of liquidating their businesses and leaving their employees behind. The changes are tightly targeted to deter and punish only those who seek to avoid their employee entitlement obligations and exploit the FEG. They will not affect the overwhelming majority of companies who are doing the right thing.
The unfortunate reality is that businesses can become insolvent, but that does not absolve them of their obligation to pay their employees. The FEG related law reforms contained in the bill aim to put a stop to this behaviour and prevent wrongdoing, with new measures holding businesses accountable for ensuring employees are paid all their entitlements for as long as they are operating. These reforms send a strong message to those who are seeking to exploit the FEG scheme: don't rely on the FEG to do this for you when you can do it, and should be doing it, for yourself and your employees today.
This bill upholds the government's commitment to protecting the entitlements of those in our community who go out every single day to work to build wealth not only for this country but for their families, allowing them to put a roof over their heads, put food on the table, educate their children and contribute to our community, as so many of them do.
I commend this bill to the House in its original form—despite the pious amendment from the member for Gorton—because we owe it to those people in our community who work so hard each and every day to protect the entitlements that are due to them.
I'm pleased to rise to speak on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018; in particular, to speak on the second reading amendment moved by the member for Gorton. The amendment points out that the government has previously tried to cut the Fair Entitlements Guarantee scheme and is not committed to protecting employee entitlements; notes Labor's suite of measures, announced in May last year, to tackle illegal phoenixing activities; and points out that under this government we've seen real wages flatlining. It is a government bereft of policies to get wage growth going again, to get Australians the pay rise that they deserve.
Let me go to those points in turn. Labor is pleased finally to see coming onto the government's agenda a bill that will have some benefit to workers. It contains some sensible reforms to the Corporations Act to better deter and punish directors and companies who deliberately avoid liability for employee entitlements. As I said, this measure follows on from an announcement on 24 May last year by the shadow minister for employment and workplace relations, the then shadow minister for small business and financial services and me. We announced that Labor, were we to win government, would introduce a suite of measures to crack down on abuse by directors and the real problems associated with phoenixing in this country. We support a director identification number. The government has some process or other which it promises might one day produce a director identification number. The fact is that dodgy directors have been burning firms and hurting honest businesses, workers and taxpayers for well over a year, since Labor first called for a director identification number.
Part of the package announced by Labor in May 2017 was that a Labor government would introduce an objective test for transactions depriving employees of their entitlements. We also announced we would reform provisions for accessorial liability. The government bill adopts and implements those measures.
This bill follows on from an announcement in October last year that the government would make changes to the Fair Entitlements Guarantee scheme. There were consultations as a result of that, although in our view that consultation process could have been better. We are pleased to see the changes in this bill which should see a greater degree of recovery for employees who are owed entitlements and, indeed, for the government, which will be able to use these new capabilities to recover taxpayers' money to replenish the millions of dollars currently being paid out under the Fair Entitlements Guarantee scheme. It will strengthen the Corporations Act to better deter and reduce the incidents of dodgy companies and their associates structuring their affairs in a way that avoids paying employee entitlements and deliberately shifts liability for unpaid employee entitlements to the Commonwealth via the Fair Entitlements Guarantee scheme.
The Corporations Act currently contains a criminal offence provision which covers activity commonly known as 'illegal phoenixing activity'. That is where a director structures a company in a way in which they are deliberately aiming to avoid having to pay employee entitlements—in essence, allowing them to walk away from a collapsed business without paying up what it is owed to workers and then to start a new business. This has been a criminal offence under the act since 2000, but there has never been a conviction under it. Labor announced in May last year that we would reform the criminal offence of deliberately avoiding employee entitlements to make it easier to prove and make it easier to prosecute accessories. We're pleased that the government has, over a year later, adopted Labor's position on the bill.
The bill amends the Corporations Act to make it easier to prove the criminal offence of entering into an arrangement to avoid paying employee entitlements by including 'recklessness' as a mental element. It significantly increases the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements. It introduces a new civil penalty provision for avoiding paying employee entitlements, with an objective reasonable person test. It gives the Fair Work Ombudsman, the tax office and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup money paid out via the Fair Entitlements Guarantee. It extends liability for unpaid entitlements to related corporate entities, and it extends ASIC's power to disqualify directors and other officers, either directly or on application to the court, where they have a track record of corporate contraventions and of inappropriately using the Fair Entitlements Guarantee scheme to pay outstanding employee entitlements. Labor believes this bill could be improved to give registered organisations standing to commence civil proceedings under the new provisions for compensation and the recovery of unpaid entitlements.
It's worth acknowledging that the increase in the financial penalty for the criminal offence is significant. At present, that penalty is minor relative to the amount that individuals and bodies corporate may be squirrelling away through complicated mechanisms to engage in phoenixing activity. Currently, the penalty is 10 years imprisonment or 1,000 penalty units, which equates to a little over $200,000. The new penalties for an individual would keep the imprisonment period the same but would raise the penalty to the greater of 4,500 penalty units, currently a little over $900,000, or three times the total value of the benefits obtained by committing the offence, or both. Including in the penalty provision some reference to the ill-gotten gains is, we believe, appropriate. For a body corporate, the fine is the greater of 45,000 penalty units, currently a little over $9 million, or three times the total value of the benefits obtained by committing the offence or 10 per cent of the body corporate's annual turnover during the 12 months before the body corporate committed or began committing the offence. We think that increasing the penalties will reinforce the serious nature of these crimes and act as a deterrent for people who might otherwise seek to engage in these types of evasive behaviours.
It's also the case that the civil penalty provision will make it easier to hold directors and companies liable for avoiding liability for employee entitlements. Labor established this scheme, the Fair Entitlements Guarantee, because employees should not be punished through the loss of their legal entitlements when an employer's business fails. Employees should not lose their leave, superannuation and unpaid wages. It is even more egregious that workers might face the prospect of losing their entitlements in a context in which the employer has deliberately structured their arrangement to avoid payment. The average annual cost under the Fair Entitlements Guarantee scheme has more than tripled. For the four-year period from 1 July 2005 to 30 June 2009, the scheme cost taxpayers $71 million. For the four-year period from 1 July 2014 to 30 June 2018, the scheme cost taxpayers more than three times as much—$235 million.
The Fair Entitlements Guarantee scheme was always designed to be there as a safety net—a guaranteed way to ensure that employees could get what they deserved in a timely fashion. Labor passed the Fair Entitlements Guarantee legislation in 2012, delivering the strongest protection for workers' entitlements ever seen in this country. We did this because of Labor's history of standing up for jobs and standing up for workers. But, in contrast, the Abbott-Turnbull-Morrison government has attempted to cut the Fair Entitlements Guarantee scheme. It said in 2014 that the current scheme created a moral hazard, encouraging 'employers and unions to sign up to unsustainable redundancy entitlements, safe in the knowledge that, if the company fails, the Fair Entitlements Guarantee and the Australian taxpayer will pay for it'.
Labor doesn't agree with that philosophy, and I'm pleased that at least the first speaker opposite hasn't sought to reprosecute that argument. It is appropriate that workers have decent redundancy provisions in their contracts. Workers shouldn't be forced onto contracts with inappropriate redundancy provisions simply because the government is concerned about the cost of the Fair Entitlements Guarantee scheme. The primary motivation here should be looking after the voters who put us in this place, not simply trying to penny-pinch on the Commonwealth budget.
Labor recognises the value that the Fair Entitlements Guarantee scheme plays as a safety net for Australians, yet we have a government which is united never more than when it is attacking workers and their representatives and which is doing nothing about the fact that underemployment is stubbornly high; that wages are stagnant; that worker employment is rife and work is, for many workers, too unsecure; and that we have, as Andy Haldane, the Chief Economist of the Bank of England has put it, a 'divided' workplace in many advanced countries, which is leading wages to depart from productivity growth. We're seeing solid productivity growth but a lack of real wage increases, even in places like the United States, where the unemployment rate is below four per cent. So we support the intent of the bill to the extent that it benefits employees, but we also warn against attempts to penny-pinch on the Fair Entitlements Guarantee scheme in a way that would hurt workers.
Finally, I would be remiss if I didn't also call upon the government, as it looks to improve the standing of protections for workers, to adopt Labor's plan to require large listed firms to report the ratio of CEO pay to median worker pay. This is done in Britain; this is done in the United States. It provides a measure of transparency when firms are required to report not just on what the CEO earns but on the ratio between what the typical worker in the firm earns and what the CEO earns. Last year in Australia we had the situation where the average total pay of ASX 100 CEOs rose nine per cent, which is four times the speed of average wage growth. The typical ASX 100 CEO now earns more than $4 million, and the best-paid Australian CEO, according to work conducted by the Australian Council of Superannuation Investors, was Don Meij, who was estimated to have made $37 million last year.
Mr Meij supports Labor's plan for CEO transparency, so it does make you wonder why the coalition won't come on board. If the person judged by the Australian Council of Superannuation Investors to be the No. 1 paid CEO in Australia is comfortable with listed firms that employ more than 250 people having to report the ratio of CEO pay to median worker pay, then why on earth wouldn't the coalition come on board, back this transparency measure and get real wages growing again?
I rise to support this bill in its original form, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. This bill is the government's move to better protect employees' entitlements and the Australian taxpayer. We have all seen in our electorates what happens when a company folds or becomes insolvent. It has a particular impact in small rural and regional communities. Most recently, perhaps, we saw the devastation for families and small local businesses and communities with the Queensland nickel refinery issue. But for those of us who live and work in rural and regional areas, it has a real knock-on effect to a whole range of people: the employees are immediately impacted and the creditors, particularly small business creditors, are directly affected. There are times when I've seen small businesses fold as a result of the amount that's owed to them by the company that's become insolvent.
The Fair Entitlements Guarantee scheme follows on from the earlier coalition government General Employee Entitlements and Redundancy Scheme, known as GEERS. It was introduced in 1999. It was a relatively non-controversial measure by the Howard government, a simple protection measure. The importance of it showed in 2001, when Ansett Airlines collapsed with a debt which meant its employees would not have had their legislated entitlements such as leave and long service payments. So GEERS has been in place as an administrative option for government to use for some time.
In 2012 the Fair Entitlements Guarantee was created, putting GEERS on a legislative basis. Subsequent to the collapse of Ansett, FEG has been called on a number of times, and too many times. Like GEERS, the FEG scheme is meant to be a safety net. It's a scheme of last resort, with assistance available for eligible employees. It's vital legislation which really goes to hold to account companies that try to evade their obligation to workers and simply shift the obligation and burden to taxpayers. We see this through employees who lose their wages, their superannuation and a whole raft of other benefits, whether it's their unpaid wages, their lost wages, their super—you name it. Of course, the company then attempts to shift that burden to taxpayers.
The Fair Entitlements Guarantee scheme is not there for the sole purpose of enabling a corporation to avoid their responsibilities. It is not there for corporate misuse. It's not a vehicle for corporate misuse. It does place an unfair burden on Australian taxpayers, who ultimately bear the cost. Companies that choose not to pay their employees correctly are basically, by default, achieving an unfair commercial advantage over their business competitor who is trying to do the right thing by their employers and by the business. So this bill means there will be stronger levers to make sure that employers are accountable for their obligations, including stronger penalties, stronger options to recover entitlements—really important—and stronger powers to deal with directors and companies that deliberately evade their obligation. The FEG is an important safety net for all Australian workers.
We know that while the overwhelming majority of companies are doing the right thing, unfortunately, some employers shift employee costs onto the FEG scheme for their own advantage or simply to exploit the scheme. That, by default, exploits Australian taxpayers.
These changes that the government has introduced are tightly targeted to deter and punish those who seek to avoid their employee entitlement obligations and who simply exploit the scheme. This exploitation is contributing to a significant increase in the cost of the scheme, and that was never the purpose. The average annual costs have more than tripled, from $70.7 million in the four years to 30 June 2009 to $235.3 million in the four years to 30 June 2018. This evidence indicates that misuse of the scheme is rising.
Some of the amendments in this bill strengthen enforcement and recovery options under the Corporations Act, and that's specifically designed to deter company directors who facilitate transactions that are aimed at preventing, avoiding or significantly reducing employer liability for their employee entitlements in the case of insolvency. These changes include extending the fault element necessary to contravene the existing criminal offence in the Corporations Act, and it includes, now, recklessness; increasing the penalties applicable to contraventions of the criminal offences in the Corporations Act and introducing a new civil penalty for entering into a transaction that's likely to avoid, prevent or significantly reduce recoverable employee entitlements, and this is done with an objective test based on what a reasonable person in the circumstance would have known about the transaction. Also they expand the parties who can commence civil compensation proceedings to include the Australian tax office—as they should—the Fair Work Ombudsman and the Department of Jobs and Small Business.
Other amendments in this bill enable the court to make a contribution order against an entity or a corporate group or entities with a closely connected economic relationship with an insolvent company, where that company has unpaid employee entitlements and where the other entity has unfairly benefited—this is from the work done by the insolvent company's employees—and where it would be just and equitable for the court to make the order. These amendments ensure that courts have the ability to order companies that may be misusing the FEG scheme to provide funds to contribute to the FEG scheme, meaning that the taxpayer is then not left with the cost of paying those entitlements. This is a great part of the intent of this legislation.
The last set of amendments in this bill strengthen the ability of ASIC to disqualify company directors either directly or on application to the court where they actually have a track record of corporate contraventions and of inappropriately using the FEG scheme to pay outstanding employee entitlements. It's like repeat offenders.
The reforms are the result of extensive public consultation processes during 2017-18. They've been developed with the government's insolvent trading safe harbour reforms in mind, and are tightly targeted to deter and punish only those who actually do the wrong thing by their employees, the workers, and taxpayers. They will not affect the overwhelming majority of companies who are doing the right thing.
We need to make sure that working Australians have their entitlements protected. They've worked for these entitlements. They've worked for their wages and their super. These reforms build on other actions that the government has taken to protect employee entitlements: amendments to the Fair Work Act to protect vulnerable workers, including increasing penalties up to tenfold for serious contraventions of workplace laws.
We know that those opposite have talked about the unions in relation to this. The union movement has a fair bit to say. But it is an inescapable fact that the policies of this government have seen the creation by business of over one million jobs since 2013, and the opposition leader, with his relationship with the CFMMEU, announced that, if he were elected Prime Minister, he would run Australia like he ran his union. Does this then mean that some of the lower paid workers will find themselves in the same place as those workers? Will they be taken to the cleaners like those workers at Cleanevent? Perhaps they will be treated like second-class workers, kept in the dug and literally fed manure, like those at Chiquita Mushrooms?
This government believes in as many people as possible being able to get a job and keep a job. As we've said repeatedly, the best form of welfare is work. We have policies to help businesses to employ more people. I want to talk, particularly in the moments I have left to me, about the PaTH (Prepare, Trial, Hire) Program and numbers of young people who, as a result of the actions of this government, actually have access to work that they've never had before. We see young people, who have been receiving Centrelink payments, who then have been provided support and nurturing to actually apply for a job. Some young people have come from families where they may be the second generation or the third generation that hasn't worked. The preparation process in the PaTH program is exceptionally good and gives them the ability to have the confidence to actually apply for work in the first place.
There is then trial period, where there's actually a job at the end of it should the employer and the employee find that they work well together and the skills and the intent of both work particularly well together. We have seen this repeatedly. I see young people in my electorate who have got an opportunity that they wouldn't have otherwise had if it wasn't for the policies of the government, particularly around the PaTH program. They then go on to get a job. I was speaking at a school graduation recently. One of the things that I encourage young people to do is to take whatever job they can as a starting point and, equally, to know that there's nothing that gives any of us the self-respect, the independence and the experience that a job does.
I want to acknowledge so many of the small businesses in Australia that often offer our great young people, particularly in rural and regional Australia, their first-ever job. It can often be with a small business. The other side of what small business does well, as we've seen with over one million jobs that have been created, is they often offer senior Australians their last job. With small business, often they will take on people that others will not. They see the value and the opportunity they want to create for young people. They also see the great value in mature-aged workers who have so much experience, often a lot of patience and a real commitment to the job itself, because they understand that on many occasions they find it a challenge to actually get a job in the first place. Some of the measures of this government have made it possible for more older Australians seeking work to be able to find that work as well. It has encouraged employers to consider more mature-aged employees and the amount of experience they actually bring to that job. I'm very pleased to support the bill before the House today.
I think most people who were around at the time will remember where they were when the planes flew into the World Trade Centre back in September 2001. I certainly remember it and remember watching it, because at that time there was another matter that was unfolding that I was up to my eyeballs in as a young lawyer. That matter was the collapse of Ansett. People will remember that Ansett, at the time, was one of Australia's big airlines, employing tens of thousands of people. Nobody thought anything could go wrong, and then it did. They grounded the fleet because they had run out of money and a deal with Air New Zealand wasn't working out quite as hoped. All of a sudden, tens of thousands of people, who had been working for a company that people had thought was safe as houses, all of a sudden found themselves out of a job. Grounding the airline was, I still think, a very poor decision by the administrators at that stage, because coming in the context, as it did, of the attacks on the World Trade Centre made it very, very difficult for it to ever get off the ground again. People lost their jobs. Thousands of people lost their job that day.
What also became apparent, perhaps for the first time—it was certainly brought to the attention of people for the first time on a very large scale, with one exception, which I'll come back to in a moment—was that people thought that all of their entitlements were secure and, all of a sudden, they weren't. They found out that, when the deal fell through and when the company went belly-up, all their long service leave, their redundancy pay and the annual leave that they'd earnt and was theirs was not available to them. The money had not been put aside in the bank and there was no law requiring the company to put the money aside. When people found that out, naturally it came as a shock, as it would, and people asked, 'What can we do about it?' It turned out that the only recourse at that stage was to line up, under company law, with all the other creditors and put yourself on the same footing as a big company, such as an airline company that might have had a contract with Ansett and was able to bring in lawyers to litigate. You had to line up with them. We spent a long time with the union. The union organised the ASU. The union organised all of their members who were about to be out of a job to get together and work around the clock to take the steps they could under the Corporations Law to try to get their money. Some people waited years and years and years to get their full payout and some people didn't see their full payout.
I note as an aside that the bill that the government are introducing is about strengthening protections available to workers. It's notable that they can't even let a speech go by without kicking unions, as the previous speaker did. Can I say that, if it weren't for the union involved at that stage, the ASU, those workers would never have seen their entitlements, because they had to front up just like every other creditor, push and go to court to get them. What that Ansett case opened the lid on is that this was happening right around Australia. There were many, many other companies that were engaging in shark practices as well—not putting money aside for people's entitlements and leaving them in the lurch when their company went belly-up, through no fault of the workers; the company went belly-up and, all of a sudden, they found the money wasn't there.
One other case that we were involved in was for textile workers—very low-paid workers. It turned out when their company went belly-up that the employer had transferred their employment a few years earlier, from the company that they signed their employment contract with to another one that, just coincidentally, had absolutely no assets at all. So, when the employees said, 'Where's our money? Hang on, you're a very profitable company,' they said, 'No, you're not actually employed by company A, which you signed up with; you're employed by company B.' We had to go to court to get that undone. If it weren't for the union taking the company to court, those low-paid textile workers would never have seen their money. They were only able to get some kind of partial redress because of their union. Those scandals paved the way for the entitlements scheme to come in. It was called by a different acronym then, but it paved the way for legislation to come in to say, 'No, the Commonwealth government had better step in.' Until that point—I stand to be corrected on this—the only workers in Australia who had been beneficiaries of federal government support when a company had gone belly-up were the workers who were employed by former Prime Minister John Howard's brother's textile company. When they went belly-up, they got a Commonwealth bailout, but everyone else had to go to court and wait years and years for their final payments.
When the federal government took the steps to say, 'No federal government has a role here,' that was certainly something that we supported. It's been disappointing to see that the scheme that is there to say, 'You may find out, when your company goes belly-up, that no money has been put aside for your annual leave, redundancy, long service leave or other entitlements,' is a scheme that the Liberal government previously tried to cut, saying, 'We'll only cover part of it.' I have to say, as someone who has spent a lot of time with workers who had been left in the lurch, that that cut hurt. That cut was very, very significant.
When you have an agreement, it might give you more generous provisions for annual leave or long service leave, for example, than others in the community but you're often trading that off—you're saying, 'I'll accept lower wages in return for getting more benefits.' But the federal government said, 'Well, no, we're only going to pay you up to a certain amount.' Some people found themselves in enormous strife, because they had been counting on this annual leave and redundancy pay and it turned out the government wasn't going to step in and support them when the company went belly-up—through absolutely no fault of the employees. So we know the government's motivation historically has been to cut the amount of support available and the amount of money going towards the scheme.
It is also worth noting that there are alternative ways of trying to skin this particular cat. Some have argued very, very strongly that we should have industry trust funds, where employers contribute a small amount across employers, but if you've done the wrong thing you have to contribute more, and it goes into a pool—effectively some sort of self-funding scheme—and that's then available to people when the company goes belly-up. So there might be a way of doing it off the government's books. The government hasn't wanted to explore that, so we've got that this scheme—and this scheme, in the absence of anything better, should definitely stay and should definitely be strengthened.
One thing that the government are doing in this bill, though, which I applaud, is they are finally saying, 'If you want to reduce the amount of money that government has to pay because company directors have engaged in dodgy practices and have tried to do over their workers, maybe we should go after those company directors a bit harder.' That's something that many of us have been saying for some time. It's good to see that, in this instance—even though it is motivated by a desire to save money—they are at least listening. The government are now saying that we need to have a go at some of those company directors who might be engaged in some of the practices that I have spoken about—perhaps trying to transfer employees from one shell company to another to limit their liability; perhaps saying, 'It's not our fault; it's the parent company.' It is good that now, as a result of this bill, if it passes, the penalties they're going to be exposed to might be strengthened. That is a good thing. At the end of the day, a company is an amorphous thing, but it is run by directors who are human beings. If they sit down and say, 'How can we structure it in a way that we don't have to pay out people's entitlements, because we know the government is going to foot the bill?' they should be chased down. They should be chased down and they should be stopped. That is the right approach.
But where the rubber is going to hit the road on this is whether or not any of this bill gets enforced and whether any directors have to pay the penalty. As someone who worked in this field for 13 years, not once did I see the federal government chase a rogue employer for underpayments or non-payments when they'd gone belly-up. It was left to the workers and their unions to use their union dues to chase an employer to do nothing more than to pay them money that was legally theirs in the first place. This wasn't seeking a pay rise or that some grand penalty be imposed; it was just saying, 'We just want the money that we're legally entitled to. You've stolen it from us, and we're now going to have to dip into our own pockets through our union dues to get it back.' Not once did I ever see a federal government come to the table and say, 'Well, actually, it's probably our responsibility to chase some of these companies.' So I would hope that, if we're going to change the law, it comes with a change in law enforcement.
Perhaps there are better things to do to get our workplace regulators working on than chasing down unions, because they happened to give a donation to a group a while ago, and raiding their offices in the full view of the TV cameras. Perhaps there are better things to do than coming in here with bill after bill that's designed to do nothing more than restrict people's legitimate and internationally recognised rights to organise. Perhaps it might be better to put some resources into chasing down rogue employers, given that this bill is an admission that they are there and that they're costing the public money. Well, if they're there and they're costing the public money, I hope it is only a matter of months before the first prosecution happens. But I fear that this is one of those instances where the government does something good on paper and then doesn't back it up.
A good provision in this bill is saying to those directors who have done the wrong thing, 'This is potentially going to follow you.' We have seen it often in the construction industry that a company goes belly-up just before Christmas—and, all of a sudden, everyone is left without pay—and then pops up in another guise after the Christmas holidays and starts hiring workers again when everyone has gone without their Christmas pay or leave entitlements. That is phoenixing. It's good there is a provision that says, 'If you try and do that, or if try and do versions of sharp practice, it's going to follow you as an individual and you're going to be restricted from being able to set up those businesses again in the future.'
But what concerns me—and I think this will be a test for our regulator—is that, when it comes to policing the banks, ASIC hasn't exactly covered itself in glory. We are seeing those practices exposed in the royal commission that we led the charge for in the teeth of opposition from the old parties—finally one came on board and then the other one did. I hope that we don't have to have a further inquiry or investigation into why it is that, despite passing these bills, we are still finding people going without their legitimate entitlements getting paid. We are putting ASIC on notice that it should pay more attention to this bill than it did with the banks. We will be expecting a much higher level of vigilance to go after directors who do the wrong thing by their workers than ASIC has shown with bank CEOs who have done the wrong thing by customers.
As this bill passes through the parliament, if there are suggestions for improvements, hopefully the government will consider those if opportunities arise. But I do hope that, perhaps in the summing-up speech, the minister could come in and tell us how the bill will be enforced, how we can have confidence that these provisions are going to result in rogue employers actually facing the full force of the law. In the absence of that, it might look good, and you might book you a budget saving, but it won't be realised unless the laws are enforced. It's certainly been my experience that directors have been more than willing to steal from employees and take the money that is lawfully the employees' money and then make them jump through hoops just to get it back. And that is what fundamentally we're talking about here. Money that people have earned and is theirs is not being made available to them and directors are holding it back, using legal fictions to do it. It's time that we closed the ability for them to do that. If some of them have to go to jail in order to learn that lesson, then that's what should happen because it is nothing short of theft.
I apologise in advance—I have one of those shocking colds that's going around at the moment. I actually cancelled speaking on every piece of legislation today, but not this legislation. That shows you that the spirit and the intent is wholeheartedly supported by me and also by the government. I will begin by acknowledging the Marxist member for Melbourne and his speech, as he acknowledged the speaker before him. You're always so negative, Marxist member for Melbourne—'negative, negative, lemon negative,' as they would say in The Thick of It. Never has there been any legislation brought into this place by the government that has not attracted your contempt, your ire or your ridicule when we're simply trying to do the right thing.
The thing about this government and this parliament is it's intention, at every point, of working for the Australian community so people are able to realise their own dreams. We're the people who actually back people who get up every day—and I've spoken about it before—and have their breakfast, brush their teeth and get on with helping to build the future of this nation, if by doing nothing more than taking care of themselves and their families, being able to buy their own home and being able to go on and retire with security. The provisions in this bill are about turning around and saying: 'If you have been wronged, we're going to back you too. If you have been wronged because the company you worked for has done the wrong thing—has sought to minimise its obligations and not meet the reasonable expectations that any worker in this country has around unpaid wages, annual leave, long service leave, payment in lieu of notice and redundancy pay—we're going to expect the company to do the right thing.'
Responsibility and loyalty go both ways. Workers who do the right thing deserve to have employers do the right thing by them, because they have offered their labour—a fair day's work—for a fair day's pay. Where that is denied then the employer must have the responsibility in return, rather than seeking to buck-pass it through trickery, through finding different legal instruments or different ways—phoenixing, as the member for Melbourne talked about before, and others—to minimise their obligations. That isn't a society built on responsibility. It's certainly not a society built on the responsibility that, I would hope, we all think employers have to workers and government has to citizens, where appropriate. Equally, workers have a responsibility to their employer, because it's not some uni-transaction where employers come along and seek to manipulate, and take away advantages, and screw over the workers—though sometimes that does happen. I'm not sure whether 'screwing over' is unparliamentary language. I saw that question mark.
I'm happy to withdraw it, Deputy Speaker. 'To take advantage of'—how about that? We also can't have it that workers take advantage of employers. It's one of those beautiful things. We go back to the wonders of economic philosophy and the principle of voluntary exchange, people being able to come together to advance mutually beneficial relationships. We actually want people to do the right thing.
Of course, the government has put a backstop into the arrangements around making sure that workers get their pay through the establishment of the Fair Entitlements Guarantee scheme. The principal scheme is quite straightforward when it comes down to it. If, for some nefarious or ill-gotten reason, an employer cannot meet their obligations to employees, ultimately the Australian people have those workers' backs. But we know, as it's often the case, that people always align themselves to incentives. We have experienced a demand on the FEG scheme where annual average costs have more than tripled, from $70.7 million in the four-year period between 2005 and 30 June 2009 to $235.3 million in the four-year period between 1 July 2014 and 30 June 2018. That's not sustainable. We shouldn't be rewarding people for finding ways to minimise their obligations to their fellow Australians. The job of the government isn't to turn around and just accept that. Ultimately, that's somebody else's money—meaning taxpayers'. It was taken from taxpayers' pockets to line the Treasury for the collective good of the nation and it shouldn't be misused. We should hold those people who have done the wrong thing to account. And that's what we've sought to do with this piece of legislation.
It's not the only space where this government is working. As the member for Forrest, our Chief Whip and somebody who is fierce in her advocacy for her electorate, rightly pointed out, this government is working at every point to try to provide Australians with opportunities to realise their dreams and their success. The PaTH program is designed to encourage more people to get into work. We are trying to remove the barriers that inhibit the capacity of small businesses to go on and employ more people. We provide tax relief so that, when people actually do work, they're in a better position to support themselves. We're trying to minimise the tax burden so that people are able to not just support themselves, although that's critically important, but go on, of course, and fuel the rest of the economy, because only people pay taxes, and people are in the best position to drive the economic growth of this country. But we're also looking beyond the issues specifically around workers and their entitlements from a consequence of work—that's why it's an entitlement—and the obligations of employers to looking at what happens in other areas of the economy as well.
One of the things that I have the privilege of doing at the moment is being the Chair of the Standing Committee on Economics. We're dealing with some of the challenges we face around the banks, and we've been having inquiries looking into the four major banks by bringing forward the CEOs. We've just finished a round recently. We're holding big banks to account to make sure they're meeting the expectations of the Australian people, because ultimately this piece of legislation is about that: accountability and responsibility. We've been turning around to the banks as well and asking: 'Are you accountable? Are you responsible in meeting the expectations of your consumers, your clients and Australian shareholders and, of course, their critical role in greasing the wheel of the Australian economy?' Just like Labor is a critical part of the Australian economy, so is capital. Everybody has to be accountable, everybody has to be responsible and everybody has to be part of building this nation's future. When we grill those bank CEOs, just like when company directors are grilled by those who seek to liquidate companies or insolvents, ultimately it comes down to what you're doing, what your conduct is and making sure you're doing the right thing.
The practical reality, and it's sad to say, is: there will always be incentives for people to do the wrong thing. That's the story of human history. Well, I believe that justice sits in the hearts of most Australians and of most people around the world. The reality is we know that there have always been people who have sought to make a quick buck by doing the wrong thing. You just need to look at the illicit drugs trade. You just need to look at the illicit tobacco trade, where, of course, when you increase taxes and introduce regulation that creates interchangeable products, like plain packaging, people then go and take advantage of that to finance their nefarious agendas, whether it be crime, terrorism or organised activity, at the same time.
There will always be people who do wrong. The question for the people in this place is: do we have the legal system in place to have the infrastructure and the framework to incentivise people to do the right thing and the punitive measures in place when people cross that line? That's what the government are trying to do. I would have thought it's one of those little things that the opposition should back, but I see, once again, as part of their constant efforts of trying to draw attention to themselves and their utter irrelevancy, they've moved an amendment to this bill as well. I look forward to having the pointless and needless division that we're going to have for no purpose and no sake because they simply want to go up and grandstand in front of the nation. They're more than entitled to do so.
I'm a charitable man by nature! But, in the end, I'm reluctant to even mention it, simply on the basis that we actually think what you're fighting for and what you're engaging your cheap parliamentary tactics in is somehow causing problems or a waver, rather than, I'd imagine, tiring out a lot of your own people from the mundanity and repetitiveness of it. But such is the parliamentary system that they are welcome to do so.
If they want to distract from the good work that this government is doing in making sure we're able to deliver a better outcome for the Australian people, then so be it. But, ultimately, Australian workers who are wrong will know who did what was right. We've done what is right here because we recognise that workers should be protected. We've have done what is right here because we have said that rogue employers should be held to account. We've done what is right because we believe that the taxpayers of this nation should be protected, and I would have thought that that's a pretty good framing and the foundation of public policy in this great country.
I will begin by wishing the member for Goldstein a speedy recovery. He clearly isn't very well. I saw him walk in with a tissue—I thought he might have still been wiping the tears away from Saturday's by-election, but he's clearly not very well.
I do rise to speak in support of this bill, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. I must say that every time I see a government bill on the Notice Paper with the word 'employee' in it, I tend to brace myself, because it seems that whenever this government seeks to discuss industrial relations it uses it as an opportunity to attack pay and conditions that workers have fought really hard for over years and years. It's happened time and time again. It shouldn't be a surprise. You can look to the Liberals slashing the take-home pay of hardworking Australians all around Australia or to the government turning a blind eye to the rampant exploitation of labour hire in this country, allowing the issue to get worse and worse. Or you can look at the sluggish wage growth, which has stagnated under the LNP, allowing economic inequality to skyrocket in Australia.
Deputy Speaker Howarth, you and I share a really beautiful part of the world, the Moreton Bay region. You and I both know, with respect to the three areas that I've just raised, that we have tens of thousands of hospitality and retail workers that live in the Moreton Bay region. You know and I know that they don't deserve to have their take-home pay slashed, and that's exactly what this government has done to those workers that live in our beautiful region.
It did come as a huge relief to see that this bill amends the Corporations Act to deter unscrupulous employers from deliberately avoiding liability for unpaid employee entitlements and from shifting that liability to the Commonwealth via the Fair Entitlements Guarantee, or, as many people know it, the FEG. Let's be clear though; let's be honest: essentially this bill is a repurposed Labor policy. Tired of this cowardly government's inaction, Labor announced in May last year—that was nearly a year and a half ago—that we would reform the criminal offence of deliberately avoiding the paying of employee entitlements. Labor's policy would make it easier to prove and it would make it easier to prosecute accessories. It's good to see the government have adopted Labor policy in this bill, even if it took them over a year. They say that imitation is the sincerest form of flattery, so it's nice to see the government acknowledge which party it is that's developing this policy which will lead Australia forward—a party that's got vision, a party that is truly leading Australia. So I would like to call on the government to continue following our lead, to follow Labor's lead. Maybe then we will finally see a greater focus on protecting workers in this country.
I suggest the government should start by listening to Labor and improving this bill. The member for Goldstein picked up that Labor wants to move some amendments, and that's because we want to make it the best bill, the most protective bill, for workers in this country. And we want to do that by expanding the powers of registered organisations. In giving registered organisations standing to commence civil proceedings under the new provisions for compensation and unpaid entitlements recovery, workers will be far better off. I know this. Labor knows this. In their heart of hearts, I'd suggest that all the members on the other side of the chamber know this as well. We have all seen registered organisations stand up for workers in these situations before. It's what the trade union movement does. The Australian trade union movement has always stood up for workers and it's always there for them when they're being ripped off by a shonky employer.
It was about a decade ago that the early childhood education sector was thrown into absolute turmoil when ABC Learning closed, almost overnight. Loyal early childhood educators went from having a stable job, decent pay, decent conditions and accrued entitlements to losing any form of stability. It was the Liquor, Hospitality and Miscellaneous Union, which has now changed to be known as United Voice, that stood there beside its members, beside those workers. It was the union that supported each and every one of its members who had been mistreated. It was this union that made sure, together and united, their voices were heard. Giving it the ability to truly represent its members and commence civil proceedings would be an absolutely huge win for Australian workers. In a submission, the Australian Council of Trade Unions championed this suggestion. They identified that it would give an option to workers, instead of insisting that they rely on the tax office, Fair Work or the department to represent them. It's a proposal that's got merit. It could bring a dash of fairness back to a system that so desperately needs it.
Just last year, the then President of the ACTU and now member for Batman, the amazing Ged Kearney, who sits behind me here in the chamber, made note that between 11,949 and 19,800 Australian companies have been involved in potentially illegal phoenixing activities. Can you believe that—nearly 20,000! That's according to the Australian Securities and Investment Commission and the Australian Tax Office. The now member for Batman and, at the time, ACTU president Ged Kearney recognised that:
Allowing dodgy company directors to tank a company to avoid paying working people their entitlements is a serious abuse of power. It is an indication of where corporation rules and regulations are too lenient and favour business over workers.
When you look at the facts, the statement of Ged Kearney, the member for Batman, looks increasingly relevant. Since their introduction into the Corporations Act in 2000, there have been no successful criminal or civil recovery actions for the intentional avoidance of underpaid employee entitlements. Let me repeat that: there have been zero successful criminal or civil recovery actions. None whatsoever. I'm hopeful that this bill will be seen as a step in the right direction in evening out what can only be described as a lopsided playing field.
Despite not yet including the ability for registered organisations to represent workers, as it stands, part 1, schedule 1 of the bill makes available three courses of action to pursue persons who engage in and facilitate transactions to avoid paying unpaid employee entitlements. The first course goes to proceedings to seek criminal sanctions for when a person intends to enter into or recklessly enters into or causes the entry into a transaction that avoids, prevents or significantly reduces the recovery of employee entitlements. The second point goes to civil penalty proceedings for when a person knows or it was reasonable for the person to know a transaction is likely to avoid, prevent or significantly reduce the recovery of employee entitlements. Point 3 goes to civil compensation proceedings to allow the liquidator or potentially the tax office, Fair Work or even the department to seek compensation for the loss or damage suffered as a result of a contravention of the civil penalty provision. These are sensible reforms. They are sensible reforms that will help protect countless workers who have been let down by a system that still lacks proper protections that are so, so desperately needed.
I'd love to commend the government for bringing these reforms forward, but I do have to note that the bill hasn't come from a new-found support for working people. No, not at all. The primary motivation of the government in raising this bill is to reduce the fiscal cost to the Commonwealth of the Fair Entitlements Guarantee rather than any true commitment to protecting workers and their entitlements. While looking to the budget is certainly not a bad thing—I'm not saying it is—it's disappointing to know that the Liberal-National Party haven't changed their tune and aren't now advocating for workers.
The memorandum that accompanies this bill notes that the average annual costs under the current FEG scheme have more than tripled from $70.7 million in the four-year period between 1 July 2005 and 30 June 2009 to $235.3 million in the four-year period from 2014 to 2018. That is a huge rise—an absolutely huge rise. This sharp rise in costs can be attributed to a small number of corporations shifting the liability of paying out employee entitlements onto the FEG rather than paying them out as they should.
One such operation was the ill-fated Queensland Nickel, to which the Queensland businessman Clive Palmer has strong ties. I note that the member for Herbert is here in the chamber now. I would suggest that, if I sat down right now and allowed the member for Herbert to have my remaining 3½ minutes and all of the rest of the speaking spots, the member for Herbert could tell you some stories about Queensland Nickel and about the workers who are still suffering in Townsville. I would suggest that she could probably finish the night off, if we allowed her to.
But I find it rather galling that, while many Queensland Nickel workers—I join with the member for Herbert and I would back, 100 per cent, everything she would be able to tell us about those workers in Townsville—still haven't had their entitlements paid out, Mr Palmer is throwing huge buckets of cash at advertising companies to get his face above every road in Australia. If you put on the radio, all you hear is Clive Palmer. If I put on Sky TV in my office, all I hear is Clive Palmer. Well, I'll tell you what: what we want to hear is these workers in Herbert who haven't had their entitlements.
I support this bill. Don't get me wrong; I support this bill. As a member of the party that has always stood up for working people, for bringing fairness into the industrial relations system, I will always support legislation that brings the system a little bit closer to an even playing field, which can quite often just seem like a fanciful pipedream.
The LNP have never fought for working people. It's not in their DNA. They don't even know how. I'm going to be honest: they don't know how. They're more into cutting workers' rights. At the moment, after months of turmoil, they are dysfunctional. They are divided. But there's one thing that does unite them, and that's attacking workers' rights. Under this government, wages have remained stagnant. You can't argue about that. Underemployment is shockingly high. The exploitation of workers is all too common, and work is increasingly insecure.
I'll tell you what: you don't have to go very far in my electorate to hear these stories. Go on a Tuesday night or a Saturday to Caboolture Community Action. Go and hear the stories there about the people and about underemployment. They're turning up there for a meal. No, they're not unemployed; they're underemployed. There's enough money to pay the rent and put a bit of fuel in the car, but that's it. They're underemployed.
This is what's happening under this government. Great community groups like Caboolture Community Action are picking up the pieces where this government is letting people down. It is letting them down. When you cut their take-home pay, when you force them into insecure work, when they can't get the hours that they need to raise their families, this is what happens.
Nonetheless, these reforms are a step in the right direction. They certainly aren't all that is needed, of course. We know there's only one way to get every reform that working people in this country need, and that is: we need a Labor government.
This bill, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018, goes to a very, very important issue, and that is: what happens to working people when the firm they work for goes belly up and there is an insolvency. As you know, Deputy Speaker Howarth, what happens under the Corporations Act is that employees are ranked ahead of all other unsecured creditors for the distribution of remaining moneys of the corporation, but they are ranked behind all of the secured creditors. So if a bank or another lender has a mortgage or a charge over the assets of the company that is going into liquidation then that bank or other lender gets priority ahead of the employees and also ahead of other unsecured creditors, like some small businesses that might have been contracting to the corporation.
So it is very important to say: what happens to those working people in the event that the company they work for goes broke? Often, they might see a few signs along the way. Maybe the pay has been late coming in. Maybe they didn't get paid for a week that they were supposed to and are having to argue with the company about underpayment of wages. It can be quite gradual. But sometimes it's just all of a sudden—the boss walks in and says: 'I'm sorry. The company has gone broke and we're going to have to wind up.' In that situation, once the bank gets their cut and once the other secured creditors get their cut, then sometimes there can be just nothing left over for the employees. And that's terrible. You've just lost your job; you may not even have got your last pay, so you are owed that; and then you are owed your annual leave, your long service leave and the other entitlements that you might get paid out on termination, such as payment in lieu of notice, but the company itself is out of money.
That's why this scheme matters to working people, because this is a scheme of last resort. It's a scheme that says, 'All right, if the company has gone bust, working people then end up getting at least some of their entitlements covered by public funds.' In other words, the failure of the firm to make provision for the working people that it employs then gets socialised into a loss that the entire Australian public bears. Obviously, I think it would be preferable if firms could make continuous provision for their employees' entitlements and we wouldn't be asked as a nation to pay entitlements that should be paid by the firm. But of course it's not a perfect world, and there are situations where firms are going to go broke.
This situation, though, that I've described, where a business goes broke, the bank or the other secured creditors get their cut and then there is nothing or only a tiny fraction left over for the employees, really is all too common in Australia. I know that, recently, the government pursued measures to make the insolvent trading provisions less strict, and the argument for that was an argument that had been supported by the Productivity Commission, which said that, if you could give directors less risk, then they could do more to trade out of trouble and the benefit for everyone would be that the company would still exist and the employees would still have their jobs. I was very pleased to support some sort of safe harbour to allow that to happen, but what the government did and what the government created went further than the recommendation of the Productivity Commission report in relation to a safe harbour. It was a more extensive provision. Labor raised concerns about that, at the time, in the Senate, but, ultimately, the provision was passed, and we have a situation now where there has been an erosion or reduction in the strictness of the insolvent trading provisions.
What that means, of course, is that the risk, when it gets taken off the shoulders of directors, has to fall somewhere else, and, in a regime where there are employees and other unsecured contractors or creditors—it might be a small cleaning firm, for example, that isn't a secured creditor but is a bit out of pocket because it gets paid in arrears—the risk is now, in part, falling onto them. That makes it even more important that the people whose only source of income is the employer for whom they work have some form of protection.
So I welcome the strengthening of this scheme. It is important that people are not left destitute when they lose their job. It might be the failure to pay redundancy pay. It might be the failure to pay notice. It might be the failure to pay annual leave or long service leave. If you've just lost your job and maybe didn't get your last pay either, a lot of people in that situation are in incredibly dire straits. They've got to turn to unemployment benefits, and then they've got to think about what they can possibly do to get the money that they are lawfully entitled to but which they haven't received. That is why this scheme is important, as I say.
I do welcome some of the changes in this bill that the government is bringing in. They're part of the announcements that we made, the policy that we had, in relation to looking at cracking down on phoenixing behaviour—phoenixing, of course, being the deliberate misuse of the corporate form to avoid your obligations to employees and other creditors. But this goes beyond phoenixing because it goes into situations where firms might have had the best of intentions but ended up going broke for whatever reason. This is important to those firms. A lot of those firms see their employees as family. They don't want to do the wrong thing by them, but sometimes, even with the best of intentions, you go broke. So this is important in that situation as well.
I think it is very sensible to change the provision about arrangements aimed at avoiding paying entitlements—to move from being one solely resting on intent and moving to recklessness. This is the phoenixing situation where you make an arrangement to avoid entitlements. I always thought that the requirement to demonstrate intent was pretty tough, as, obviously, you're trying to bring a case about what was in the mind of the people leading the corporation. The new threshold of recklessness will make it more workable. So I congratulate the government on doing that.
I do worry, though, about a point that has been made by some of the other speakers in this debate around who will have standing to bring a proceeding under the existing provision or who will have standing to seek compensation under the new civil provisions that are being inserted by this bill. As I understand the bill, the people who will have standing are some regulators and the employee themselves. But what's missing from that is the employee's union. As an employee, if you've just lost your job and maybe haven't got your last pay, haven't got your redundancy, haven't got your notice, haven't got your annual leave and haven't got your long service leave and you don't have savings, as a lot of people don't—a lot of people are living week to week—you're in no position to personally bring legal proceedings to enforce your rights to seek compensation. You are just not going to be able to afford to do that. That means that, unless the union has the standing, you have to rely on the regulator.
Even the best regulators in the world don't have unlimited funds. It's our job in this place to give them the right level of funding but we can never give them unlimited funding. So there'll always be priorities when it comes to regulators. We shouldn't as a nation expect working people to have to rely on the goodwill of regulators or the willingness of regulators to bring proceedings and we also shouldn't want to spend our nation's money on regulators having to do everything when there is a body of people out there who have the capacity to do it—in terms of ability and their specialist knowledge—but not the right.
One way to do this is to allow unions to bring these proceedings. You might ask, quite reasonably, why the union wouldn't just represent the worker, with the worker bringing the proceeding themselves. It is because a lot of people in unions who would do this sort of work are not necessarily lawyers who'd be able to represent a person in that way. But the unions themselves have rights of appearance in the Federal Circuit under the legislation. So, if they were able to do it, that would be a win-win. It would be a win-win-win, really. It would be a win for the public, because public funds wouldn’t be expended on the bringing of proceedings; it would be a win for the worker, because they would be represented rather than having to self-represent or shell out for a private lawyer at a time when they've just lost their job and haven't had their entitlements to paid; and, frankly, it would be a win for the court. The Federal Circuit Court already has a lot of self-represented litigants, and that slows down the administration of justice. The court wants to make sure that the litigant gets a fair go, but of course the person rolling up to court for maybe the first time ever doesn't know how it works. You are not going to know how it works in a court if you've never been to a court and suddenly you're in this situation where, through no fault of your own, the firm you've worked for, perhaps for a long time, has gone belly-up.
So it would make sense to allow registered organisations, trade unions who represent working people in commissions and courts all the time and have recognised rights under the law to appear in the relevant courts, to bear the cost of bringing these proceedings—to spend the money on doing it through their expertise that they've already developed in industrial law and related legal issues through representing people in tribunals and commissions for years. It would certainly make sense for the working person themselves, instead of having to find the money for a private lawyer or instead of having to turn up and run the race in a really unfamiliar and alien scenario with an overworked judge who has 300 cases on their docket—and they might range from migration, to bankruptcy, to human rights, to industrial relations, to family law. Rather than having to turn up to see a judge who is already overworked and who is then trying to help them to make sure that they get access to justice in a meaningful way, it would just make sense to allow workers to combine together, put their money towards an organisation that will be able to represent them and allow that organisation to do what it's meant to do, which is to represent those people. I do think that is an omission in this bill. I don't think this is an ideological question. It doesn't go to the questions of unions going on strike, unions' bargaining rights or any of that. It just goes to the question of what would be the most efficient way of ensuring that the people on whom you are conferring rights can actually exercise those rights? There is no point having a right that you can't enforce. You can have all the rights in the world, but if we don't have the capacity to enforce them then they're meaningless.
This law shouldn't be meaningless; this law should help people in their darkest hour, when they have lost their job. It is terrifying to lose your job. It's terrifying when you boss comes in and says, 'I'm really sorry. This firm does not exist anymore. I'm shutting the company down. I know you've worked really hard. It's devastating for me. I see you as my family, but I have to shut it down. We've gone broke.' That is a terrible time in your life, whether you're the boss or whether you're the worker. To have a situation where there are some rights that could be exercised if only there was the ability to exercise them, but the law just leaves it a little bit short, would be incredibly frustrating. That could be fixed in a fairly straightforward manner.
Most of these provisions in this bill will really go some way to improving this scheme. It is, in my view, quite sensible to think about other ways in which we can ensure that the loss that arises when a business goes broke is fairly attributed so that people fairly carry the burden of that loss. I think there are legitimate questions about the extent to which employers should bear the loss, employees should bear the loss, small creditors should bear the loss, banks should bear the loss and, for our purposes, the public should bear the loss. This scheme is really an admission that, despite the best of intentions, there will still be situations where the loss falls on the public to ensure that people are not ripped off when a business goes broke.
Some of that is about dealing with phoenixing. Some of it is about dealing with insolvency generally. All of it is about making sure that people are not left out of pocket, with their entitlements ripped away, in a situation that is completely outside of their control and outside of their responsibility. They may have been an absolutely model employee and yet they find themselves in a situation where they are without a job—and for various reasons, of course. Maybe it was technological disruption that sent the company broke, maybe it was poor management that sent the company broke or maybe it was deliberate phoenixing to rip people off that sent the company broke. I believe that we would all agree that's the minority of corporate insolvencies in this country, but we also can't ignore that it happens.
There is a very strong bipartisan view that we need to do more on phoenixing. We've been critical about some of the delays from the government in responding to the issue of phoenixing. We've called for measures like this one for some time and other similar measures, like the director identification number. The director identification number is incredibly important to make sure that people can't just have different records on the ASIC database and get around the law through administrative means. I believe that everyone in this place would like to see an end to deliberate phoenixing, deliberate rorts, deliberate rip-offs and deliberately ripping off the people who are employed, the small cleaning contractor, the small security firm or whoever has provided services on a payment-in-arrears basis.
It's also about that much broader perspective of looking at a situation where we have an economy in which, quite rightly, we seek to remove the barriers to new businesses starting. We don't want to have anticompetitive rules and regulations in place that make it harder to start a business or make it harder to run a business. But the quid pro quo of that is the issue of corporate insolvency, including small business corporate insolvency, and where the loss and the risk falls as a consequence of that corporate insolvency. That's something that we have to keep addressing in making sure we protect the most vulnerable.
I rise to make a contribution on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. From the outset, I support the amendment moved by the shadow minister. Having said that, I find much of this bill contains sensible reforms to the Corporations Act, particularly the measures to deter and punish companies and directors who deliberately avoid the liability for their employees' entitlements, shifting liability to the Commonwealth and through the Fair Entitlements Guarantee scheme. We support that because Labor introduced the Fair Entitlements Guarantee scheme and Labor will always fight to make sure that we protect the integrity of employees' entitlements. So we will protect this scheme.
There are two essential facts to this. Firstly, back in 2012 we passed the Fair Entitlements Guarantee legislation. It was the strongest protection of workers' rights ever seen in this country to guard against companies that lose market share and go bust or that, alternatively, by design, move their assets and become liquidated to rise in another entity but free of having to maintain the entitlements of the original employees that regrettably lost their jobs. So that's why this occurred. Secondly, in 2014 it was this government that attempted to abolish the Fair Entitlements Guarantee scheme. So it shows that they had no real compassion for employees. I understand the statistics to be that something like 20,000 companies fell under this scenario. It's not all that long ago—2014—that they were going to remove this safety net.
You have to ask: why the change of heart? I am glad to see a bill come before us on which I think the government has a reasonable agenda—that is, to ensure that employees' entitlements are being honoured. But what is the primary motivation for it? I think it gets down to cold hard cash. I suspect the primary motivation is the reduction in fiscal costs to the Commonwealth. Liabilities could accrue to the Commonwealth resulting in them having to pay out as opposed to chasing and then forcing dodgy employers to pay the entitlements that employees are due.
I note the explanatory memorandum to this bill talks about the annual costs involved under the FEG scheme. Since 2009, annual costs under this scheme have more than tripled. In the four years to 30 June 2009, the cost was $70.7 million. In the four years to June 2018, the cost increased to $235.3 million. That's a very significant cut to the government's bottom line. There's a motivation there as to why we should not simply sit back when we know there is a prospect that, with a few amendments, we can force employers to pay the appropriate entitlements to employees. Regardless of the motivation, this bill is, nevertheless, protecting the safety net.
The Fair Entitlements Guarantee scheme was designed to be a safety net. It wasn't there to simply pay the entitlements for everybody. Employees' entitlements are the responsibility of the employer. It is to ensure that, for whatever reason a company goes bust, employees are paid in a timely manner and without having to wait for a very long, drawn-out legal process to able to access their entitlements. I think it's probably common ground in this place that, where a firm does go bust for whatever reason, which is always a tragedy—but apart from the tragedy of the firm going under—there are all those people who lose their jobs and all those people who lose their future employment prospects. But, where all those people lose their superannuation, lose their accrued leave and lose unpaid wages, that becomes very, very different.
Within my family, we've been through some of this. One of my sons is a builder. When he was a lot younger, he worked with a very small company. I don't know what the reasons were, but the work dried up. They closed the company down, but there was no money to pay my son. His entitlement was a second-hand drop saw. He left there with nothing in his bank account and nothing to pay for his vehicle or anything like that. He carries a second-hand drop saw because the employer told him that there was no money left. That was certainly before the Fair Entitlements Guarantee scheme, but it shows that these things aren't new. It's been happening for some time. There are people who will restructure their finances and do things like this—or, alternatively, it could be quite legitimate. But, nevertheless, employees can lose out. I would imagine that there would be people on the other side of the House who would probably have a similar experience to that.
There are very clear positives in the provisions of this bill and the way it streamlines and improves the way it acts as a safety net. Part 1 of schedule 1 of the bill amends the act to strengthen the enforcement and recovery options so as to deter and penalise company directors and other persons who engage in or facilitate the transactions that are aimed at preventing or significantly reducing the employer's liability for employees' entitlements in insolvency. What it does is it extends the fault element requirement to initiate criminal proceedings under the act to include 'recklessness' and a significant increasing of the penalties applicable for the entering into arrangements to avoid paying employees' entitlements. It also introduces new civil penalty provisions for avoiding paying employee entitlements, with the objective of the reasonable-person test. I think that, for many, that would be quite significant. But it also extends the standing of parties who can commence compensation proceedings to recoup moneys paid out via the Fair Entitlements Guarantee to the Fair Work Ombudsman, the Australian Taxation Office and the Department of Jobs and Small Business.
As the member for Griffith only just recently said, this bill could be improved by extending it further to incorporate registered organisations, principally trade unions. When you think about it, there are many occupations that are covered by the trade union movement. People of their own volition decide to join a union for one reason—for protection. Unions don't exist under our Constitution. Unions only exist to fulfil a need, and that is the need to protect employees. That's why the unions should have actually been included in this. Expecting unions to recover unpaid wages and expecting unions to chase unpaid entitlements would ordinarily be regarded as the bread and butter of the trade union movement—looking after workers. So you have to ask: why would the government purposefully sideline trade unions? There's got to be a reason for it. You'd have to think it goes something along the lines that they have a very clear view when it comes to the trade union movement. They despise the trade union movement. I don't know why.
The only union I've heard mentioned in this place for some time is the CFMMEU—I hope I got all those letters right! But for all the registered trade unions in this country who do good work looking after their members and ensuring that their members are in safe working conditions and safe environments, I just haven't heard this government yet say one good word—not about the trade union movement let alone individual unions in the trade union movement. That's unless you call the National Farmers' Federation a trade union. I suppose it's a registered organisation. I have heard the government mention the National Farmers' Federation occasionally. But their prejudice about the trade union movement is just taking the debate too far when it comes to protection of entitlements, because they know this is what trade unions do. They are in existence to look after workers.
The fact that the government want to try to sideline unions quite frankly leads one to ask, 'Why would you do that?' But, as I remind my colleagues, you shouldn't get too inquiring about this, because we are talking about those opposite, who are the party of Work Choices. I was around when the conservative government of the day introduced Work Choices. It had such an impact throughout the community. The reason why was that Work Choices made it legal for the first time in Australian history to be able to pay people below the award rates of pay. So that's what it's all about. It's no wonder there was such a revolt against the Howard government in 2007 about these things, because people started to understand that people could be paid less than the award rate of pay. It may not have affected the mums and dads out there who had solid jobs or professionals, but the ones who approached me were the parents and the grandparents worried about kids coming up into such a workforce. They did not like to see the government use an anti-union piece of legislation that could impact adversely on their kids and grandchildren.
This bill, as I said at the start, I think actually goes some distance to try to streamline the provisions that allow for the recovery of unpaid entitlements so they're not coming out of the Commonwealth coffers. It is ensuring that the companies that are directly responsible are the ones that are held liable . Even if they enter into arrangements and become liquidated, it also makes it allowable to chase those directors—effectively to follow the money—to see where the assets went and to go after any other entity that benefited from the exchange of assets. They can, too, be held liable in proceedings for the unpaid entitlements for their employees. That is pretty significant when you think that, at this stage, something like 20,000 companies fall under this scenario.
We want people in business to act honestly and with integrity, as we do employees who work for businesses. This should not be something that we need to be focusing on, but it is a reality. It is something that has occurred and is occurring with a fair degree of repetition. But we should ensure that we do everything we can to discourage this form of objectionable behaviour at a corporate level.