House debates

Wednesday, 24 October 2018

Bills

Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018; Second Reading

12:16 pm

Photo of Cathy O'TooleCathy O'Toole (Herbert, Australian Labor Party) Share this | | Hansard source

My home town of Townsville is a strong and resilient community, but the collapse of Queensland Nickel saw our community brought to its knees, so I know better than most how important this bill is for workers. More than 800 people lost their jobs at Queensland Nickel through no fault of their own. They went to work every day, they worked hard every day and they put their trust in the executives of that company to do the right thing. Unfortunately, the company did not look after the workers and, when those 800 works lost their jobs, they were also told that they would not be paid their entitlements. Those entitlements were rightfully theirs and they had every right to expect that those entitlements would be paid to them. QNI workers had collectively more than $74 million in outstanding entitlements to be paid. Luckily for those 800 workers, when Labor was last in government we created a scheme to protect workers in scenarios exactly like what unfolded at QNI. It is a scheme that protects workers where a company has collapsed and the workers are not paid their entitlements through no fault of their own. Labor established a safety net, and that scheme was the Fair Entitlements Guarantee.

In 2012, Labor passed the Fair Entitlements Guarantee legislation, which delivered the strongest protections for workers' entitlements that this country has ever seen. Labor established the Fair Entitlement Guarantee because we believed that employees should not be punished when an employer's business fails and workers lose their legal entitlements, like unpaid wages and leave, through no fault of their own. Legislating protections for workers is in Labor's DNA. Labor is the party of jobs and Labor is the party for workers.

In contrast, this out-of-touch LNP government tried to abolish the FEG in 2014. The same government tried to abolish a scheme that more than 800 workers in my community relied upon. This simple fact alone should always be remembered when considering this government's priorities when it comes to workers. The LNP is clearly not the party that stands with the worker who has lost his or her job through no fault of his or her own but due to the fact that the company folded and there was no money to pay workers' entitlements. The government's priorities are not with the workers but, rather, with the big banks and, especially in this case, with big business that tried to dodge their responsibility to workers.

Back in 2016, the LNP government had to be dragged kicking and screaming to pay the QNI workers their entitlements from the FEG scheme. Not only were the workers being let down by the company that employed them; they were also being let down by this LNP government. Whilst this government was refusing to pay workers, Labor's shadow minister for employment and workplace relations, Brendan O'Connor, and Senator Doug Cameron came to Townsville to meet with the former QNI workers. The differences in the commitment to workers could not have been more stark. The coalition had no real commitment to protecting these workers' entitlements. In fact, the best my predecessor could do was cry on television about it. No-one should ever forget that, when it comes to the FEG, this government's primary motivation is to reduce the fiscal cost to the Commonwealth, rather than having a true commitment to protecting workers' entitlements.

As the creators and guardians of workers' rights, Labor will do whatever it takes to protect the FEG, as it is essential to providing a safety net for Australians and it is essential to former QNI workers in Townsville. After many rallies held by Labor, the AMWU, the ETU and the AWU, the LNP finally released the fair entitlements to the QNI workers, but many of these workers have still not been paid their full entitlements.

That brings us to the bill before us today, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. Once again, the current LNP government has enacted a bill after being brought to account by Labor. On 24 May last year, the shadow minister for employment and workplace relations, the shadow Assistant Treasurer and the then shadow minister for small business and financial services announced a suite of Labor policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. One of those measures was that a Labor government would introduce an objective test for transactions depriving employees of their entitlements. Labor also announced that we would reform provisions for accessorial liability. This government bill adopts and implements those measures. I support the changes in this bill 100 per cent, as hopefully they will see a greater degree of recovery for employees who are owed entitlements. And hopefully the government will be able to use these new capabilities to recover more of taxpayers' money to replenish the thousands, indeed millions, of dollars currently being paid out under the FEG scheme.

This bill will strengthen the Corporations Act to better reduce the incidence of dodgy companies structuring their arrangements in a way that evades paying employees' 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 that covers what is commonly known as illegal phoenix activity—that is, where a director forms a company structure or enters into an agreement with the intention of avoiding having to pay workers their entitlements. Essentially, they walk away from their business, leaving employees without what is owed to them. Too often, the director or business just starts up again as a new company with no liabilities. While this criminal offence has been in the act since 2000, there has never been a conviction recorded. 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 to make it easier to prosecute accessories. I'm pleased that the government has, more than a year later, adopted Labor's policy in this bill.

This bill will amend 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 fault element; significantly increase the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements; introduce a new civil penalty provision for avoiding paying employee entitlements, with an objective reasonable person test; give the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business the standing to commence compensation proceedings to recoup moneys paid out via the Fair Entitlements Guarantee; extend liability for unpaid entitlements to a related corporate entity; and extend ASIC's power to disqualify directors and other officers, either directly or on application to the court, when they have a track record of corporate contraventions and inappropriately using the Fair Entitlements Guarantee scheme to pay outstanding employee entitlements.

Although Labor supports this bill, it could still be improved to give registered organisations standing to commence civil proceedings under the new provisions for compensation and the recovery of unpaid entitlements. At this point, it's worth noting that the increase in the financial penalty for the criminal offence is significant. At the moment, the penalty is minor in comparison to the monetary amount that many of these individuals and body corporates are squirrelling away into complicated mechanisms. The current penalty is 10 years of imprisonment or 1,000 penalty units, which equates to $210,000. The new penalties are for an individual to be imprisoned for 10 years or a fine of the greater of the following: 4,500 penalty units, which equates to $945,000; three times the total value of the benefits obtained by committing the offence or both. For a body corporate, it is a fine of the greatest of the following: 45,000 penalty units, which equates to $9.45 million; 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.

The substantial increases in penalties are important, because unfortunately we are witnessing companies deliberately structuring their businesses and their arrangements to avoid paying workers' entitlements. The average annual cost under the FEG scheme has 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 between 1 July 2014 and 30 June 2018. According to the government, the startling fact behind these figures is that the increase in the FEG claims can be attributed to a small number of corporations shifting liability. The FEG was always designed to be there asking a safety net, as a guaranteed way that employees could be paid their entitlements in a timely manner and not wait for drawn-out processes before they were able to receive a cent. Hopefully, these substantial increases in penalties will reinforce the serious nature of these crimes and will also be a substantial deterrent for persons who may otherwise seek to engage in these evasive types of behaviour. It is also the case that the civil penalty provision will make it easier to hold directors and companies liable for avoiding liability for employee entitlements.

I'm happy to support this bill and subsequently Townsville workers. I only wish that this bill had been presented and legislated before 2015 and then hopefully this would have provided more support for former Queensland Nickel employees. It is timely to remember that although the FEG has provided a huge safety net for many workers and is paying the majority of entitlements to former QNI workers, there are still Townsville workers who have not received their full entitlements. There are people like John from Burdell, who still has not received $10,000 in entitlements. Laura from Burdell still has not received $7,000. Chris from Deeragun has still not received $15,000. Chris from Bushland Beach has not received $10,000. Cheryl from Mount Low has still not received $9,800. Peter from Kirwan still has not received $10,000. George from Kirwin still has not received $10,000. Glen from Gulliver still has not received $10,000. Nigel from Mundingburra still has not received $7,000. There is Peter, who has six children, and he told me personally that he still hasn't received $25,000 in entitlements.

These entitlements must be paid. I call on those responsible to pay these workers. I will not be threatened or intimidated into silence. I certainly won't be bullied into silence by an out-of-town billionaire. If the former member for Fairfax, Clive Palmer, thinks that he can bully North Queenslanders into silence, then he does not know North Queenslanders very well at all. The former member for Fairfax, Clive Palmer, is trying to revive his political career, like he's trying to raise Titanic II. But he is not fooling anyone. His barrage of advertisements won't work. They are instead a continual and painful reminder to the former QNI workers. Today I am happy to support this bill. I will always support a bill that will benefit workers and—as an extension of that—taxpayers, who will have their valuable tax dollars returned to them.

12:29 pm

Photo of Emma McBrideEmma McBride (Dobell, Australian Labor Party) Share this | | Hansard source

I rise to speak in support of the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 and to support the amendment moved by the member for Gorton. I'm pleased to speak after my colleague the member for Herbert, a strong advocate for members of her community affected by the collapse of Queensland Nickel. What a shameful rollcall of unpaid entitlements we have just heard from the workers in Townsville. This bill will strengthen the Corporations Act to better deter dodgy companies and their associates from structuring their arrangements in a way that evades paying employee entitlements and deliberately shifts liability for unpaid employee entitlements to the taxpayer via the Fair Entitlements Guarantee scheme.

The Corporations Act currently contains a criminal offence provision which covers what is commonly known as illegal phoenixing activity. This is where a director or a company structures their company or enters into an arrangement with the intention of avoiding having to pay their employees' entitlements. Essentially, they walk away from their business leaving employees without what is owed to them—what they're entitled to—and, too often, the director or business just starts up again as a new company without any liabilities. While this criminal offence has been in the Corporations Act since 2000, there has never been—as the member for Herbert has noted—a single conviction under this Act. 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 to make it easier to prosecute accessories. We are pleased that the government has in this bill adopted this Labor policy.

This bill will amend the Corporations Act to make it easier to prove a criminal offence of entering into an arrangement to avoid paying employee entitlements, by including recklessness as a mental element; significantly increasing the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements, introducing a new civil penalty provision for avoiding paying employee entitlements with an objective reasonable person test; giving the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup monies paid out by the Fair Entitlements Guarantee; extending liability for unpaid entitlements to related corporate entities; and extending 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 inappropriately using the Fair Entitlements Guarantee scheme to pay outstanding employee entitlements. Labor believes this bill could be improved by giving registered organisations, such as trade unions, standing to commence civil proceedings on behalf of their members under the new provisions for compensation and the recovery of unpaid entitlements—after all, looking after members' interests is what these organisations do every day.

It is worth noting that the increase in the financial penalty for the criminal offence is significant. At the moment, the penalty is minor in comparison to the sums many of these individuals and body corporates are squirrelling away in complicated mechanisms. The current penalty is 10 years imprisonment or 1,000 penalty units, which equates to $210,000. The new penalties are as follows: for an individual, imprisonment for 10 years or a fine of the greater of 4,500 penalty units, or $945,000, three times the total value of the benefits obtained by committing the offence, or both; and, for a body corporate, a fine of the greatest of 45,000 penalty units, or $9.45 million, three times the total value of the benefits obtained by committing the offence, 10 per cent of the body corporate's annual turnover during the 12 months before the body corporate committed or began committing the offence. These substantial increases in penalties will reinforce the serious nature of these crimes and will also serve as a substantial deterrent for persons who may otherwise seek to engage in these types of evasive behaviours.

I'd like to turn to story of someone in my community whom I met in a local shopping centre. This woman, Abby—who had just found out that she was pregnant—was distraught. Her husband had been working as a subcontractor—I note this bill doesn't directly refer to subcontractors, but I know that our shadow minister, the member for Gorton, has mentioned subcontractors—and her husband's subcontracting company was not paid. The company just disappeared and set up locally again soon after. They were a young family struggling to get started, and this company deliberately avoided paying him and many others and set up very soon nearby in the same community.

These substantial increases in penalties will reinforce the serious nature of these crimes—and so they should—and, hopefully, serve as a substantial deterrent for persons who may otherwise seek to engage in these types of evasive behaviours. The civil penalty provision will also make it easier to hold directors and companies liable for avoiding liability for employee entitlements.

Labor established the FEG scheme because employees should not be punished, when an employer's business fails, by the loss of their legal entitlements: leave, superannuation and unpaid wages. Legitimate businesses do from time to time fail, but it is particularly disturbing that workers can lose their entitlements where a company deliberately structures its arrangements to avoid paying them. The average annual costs under the FEG scheme and its precursor, the General Employee Entitlements and Redundancy 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 between 1 July 2014 and 30 June 2018. According to the government, the increase in FEG claims can be attributed to a small number of corporations shifting liability.

Labor passed the Fair Entitlements Guarantee legislation in 2012, which delivered the strongest protections for workers' entitlements in this country. In contrast, this government tried to cut the FEG in 2014. It has no genuine commitment to protecting workers' entitlements. The FEG was always designed to be there as a safety net, as a guaranteed way that employees could be paid their entitlements in a timely manner and not wait for drawn-out processes before they receive a cent. It was not intended as a mechanism to allow unscrupulous employers to shift their obligations to pay workers' entitlements to the taxpayer.

While these reforms strengthen the legal regime to punish and deter dodgy employers and companies, they're only a start. On 24 May last year, the shadow minister for employment and workplace relations, the shadow Assistant Treasurer and the then shadow minister for small business and financial services announced a suite of Labor policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. One of those measures was that a Labor government would introduce an objective test for transactions depriving employees of their entitlements. We also announced that we would reform provisions for accessorial liability.

This government bill adopts and implements these measures. The government first announced its intention to address corporate misuse of the Fair Entitlements Guarantee scheme on 5 October last year. While we accept that the government engaged in consultations on the drafting of the bill, it nonetheless could be further improved. In the end, we support the premise and intent of the bill, as we see that it will benefit employees and, as an extension of that, taxpayers, who will have their valuable funds returned to them.

Labor is glad to finally see a bill which will have some benefit to workers come onto the government's agenda. This government needs to do so much more. This government should restore penalty rates. This government should do something about stagnant wages. This government should address underemployment. This government should address insecure employment and employers systemically underpaying employees.

In contrast to the abuses seen under this government, a Labor government will protect workers and ensure that they get a fair deal, by tackling unfair labour hire and cracking down on dodgy labour hire companies that rip off and exploit workers. Labor will restore penalty rates in our first 100 days of government and legislate so that they can never be cut again. Labor will ensure that collective bargaining is not undermined by corporate gaming of our industrial relations laws, including by preventing the use of sham enterprise agreements and employers simply terminating agreements instead of bargaining. Labor will abolish zombie Work Choices agreements. Labor will restore Fair Work by reforming the definition of 'casual' so that it is used for the purposes for which it was originally intended.

We will prevent employers forcing their workers into sham contracting arrangements to avoid direct employment, and we'll work to close the gender pay gap so that women don't work until February each year for free. Labor will address worker exploitation by introducing a national labour hire licensing scheme, reverse the onus of proof for franchisor liability for underpayment of wages and increase penalties for employers and dodgy directors who deliberately avoid paying their employees' entitlements. As I said earlier, Labor is committed to supporting the working people of this country.

12:39 pm

Photo of Lisa ChestersLisa Chesters (Bendigo, Australian Labor Party, Shadow Assistant Minister for Workplace Relations) Share this | | Hansard source

I am actually going to congratulate the government on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. There's some really good stuff in this bill. It's rare for me, particularly in the area of workplace relations, to say that the government has put forward a bill that has some real merit. But I am quite surprised that, given it's also a billthat will help recover taxpayer funds and save the taxpayer dollars, there are not more government speakers on this bill. Usually there's a long list of speakers every time they go after getting back Australian taxpayers' dollars. They talk about how they're going tocrack down on all these dodgy behaviours so they don't waste taxpayers' money—particularly if it's somebody that's on a Newstart payment; they're very quick to champion the fact that it is taxpayers' money. But I note that this bill actually talks about stopping companies from ripping off the taxpayer, and stopping individuals in business from ripping off the taxpayer, so maybe that's the reason why more government members aren't speaking on this bill, or maybe they just don't understand the importance of FEG, the Fair Entitlements Guarantee.

Before entering this place, as many people know, I had the great honour and privilege of working for United Voice , representing cleaners and security guards. Far too often, I would sit with cleaners or guards whose contract cleaning company or security company had gone 'broke' , gone into receivership, force d the m to fight to keep their jobs and forced the m to apply for a Fair Entitlement s Guarantee , only for the company to reappear the next day , or a week after, under a different name.

One of the last major cases that I worked on was the Bendigo Marketplace cleaners. That was actually a day of high drama in this place , be cause, unfortunately, we changed prime ministers that day — although I did miss most of the commentary because I was working so hard with the cleaners to get their forms completed. The company that the Bendigo Marketplace cleaners had worked for was Swan Cleaning. Swan Cleaning were a national cleaning company, one of the largest cleaning companies in Australia. They had gone into receivership , and the biggest creditor was actually Judy Swan, who was the wife and partner of the business owner. I understand that case is still working its way through the system. But the taxpayer had to pick up the bill in that particular case because the cleaners had lost their entitlements, yet again—because it's not just once or twice that it happens to cleaners in the contract cleaning industry.

Far too often, the companies that many of our cleaners work for—where 80 per cent of the cost or , in some cases , 90 per cent of the cost is labour — go into receivership , expecting the Commonwealth government and the Australian people to pick up the tab for what's owed to employees in entitlements. I do want to acknowledge the work the former Labor government did to change GEARS to the Fair Entitlements Guarantee. Under GEARS, there was a cap that didn't adequately reflect what people were owed. The FEG also means a quicker processing time. In the case of the Bendigo Marketplace cleaners, it took some of them six months and some of them 12 months, but they did get what they were entitled to.

F or a lot of those cleaners, though, it has happened far too many times. Robbie had worked at the Bendigo Marketplace since it opened . She had been one of their core , stable cleaner s there, the day supervisor, since it had opened . She has what she calls 'changed her shirt' at least five times. Now, that might not be a lot if you've worked in the same place for 50 years, b ut that's five times in just over a decade. The cleaning company had lost the contract, a new contractor had come in and you had to fight for your job — or a cleaning company had gone into receivership , as in this situation, and then into liquidation, where the cleaners lost everything and had to fight to get their jobs and entitlements back.

We know that it is occurring everywhere. Unfortunately, more bad corporate behaviour means that it is occurring more and more. Since being in parliament, other workers who have come to see me who are navigating the Fair Entitlements Guarantee process include people working in construction and people working in transport. They might say to you, 'Well, I was working for Bill . H e has shut the business , but told me to come back and apply for a job with him in three weeks time. I have to apply for the Fair Entitlements Guarantee to get my annual leave and my entitlements that are ow ed to me. He says not to worry: " Take a short holiday and come back to work in four to six weeks time. " ' That's just not fair. What is wrong with corporate Australia that we have businesses who deliberately and knowingly force their business into receivership and into liquidation, shafting their employees, and rely upon the taxpayer to pick up the bill?

I believe that's the government's real motivation behind this bill. Yes, it should have been brought on sooner. Yes, it should have been before us quite some time ago. But I believe the real motivation behind this government is not really to help these vulnerable employees—these people who've worked hard but have not been paid, who have not had access to their entitlements—it's more about trying to save money from the Commonwealth. But, whatever the motivation, we'll support it and accept the bill that is before us because it is good reform. It does start to say to businesses, to bosses, to corporate Australia: 'This rogue behaviour is unacceptable. It's bad for the government, it's bad for workers and, quite frankly, it's also bad for local economies.'

This bill strengthens the Corporations Act to better deter and reduce the incidence of dodgy companies, and their associates, restructuring their arrangements to avoid paying employees their entitlements. These companies, in some cases, deliberately shift liability for their unpaid employees to the Commonwealth via the Fair Entitlements Guarantee scheme. This bill amends the Corporation Act to make it easier to prove criminal offence in entering into an arrangement to avoid paying employees' entitlements. It significantly increases the maximum fine for offences. It introduces a new civil penalty for people who try to avoid paying entitlements, with an objective 'reasonable person' test. It gives the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business the standing to commence proceedings to recoup money that has been paid out. So if someone has been paid out—but then the company reappears or they've all of a sudden got assets under another name—it gives the ability for departments to come back together. It extends the liability of unpaid entitlements to related corporate entities—so critical, as others on this side of the House have raised, in relation to the Queensland Nickel situation. And it is not just Queensland Nickel but so many other situations where companies link up—not just cleaning or transport companies but mining companies—and splinter their employees through a number of entities just to avoid paying entitlements. The bill extends the powers of ASIC to disqualify directors and other officers.

Those changes are all welcomed. I acknowledge that the government, in this bill, has adopted a number of the sensible propositions that have been put forward by Labor in this space. It's a bit humbling—and I guess it's a sign that we're on the right path—when the government starts to adopt the work of the opposition. The measures in this bill will be welcomed by good employers in the sector, employers who are doing the right thing, particularly in those contract exposed industries that do complain about the fact that they know a company who has gone into receivership, or only into liquidation, and is ripping off workers. They're in direct competition with the firms that do the wrong thing, the dodgy firms—it is part of their business plan, it is part of their building model; you see the same companies doing it over and over again.

And I strongly urge the government not to finish the work here but to adopt Labor's other proposals in the space of phoenixing. Phoenixing is a massive problem in Australia among a number of industries, and the government should now proceed to adopting Labor's proposal on phoenixing—the private member's bill that has been put forward, the reforms that have been suggested. The FEG was always designed to be there as a safety net, but it's not in itself a solution to the broader problem of dodgy companies deliberately using the FEG as part of their business structure and part of their model.

We should also remember that this is just a new acceptance by the government about how important the FEG is. Back in 2014—I remember that budget night and some of the reading of the papers after that—the government actually tried to cut the FEG. They tried to go back to the old GEERS, making it very hard for workers who may have worked a long time for a company to get the full entitlements that they were owed. I think this is why people in our community are so protective of the FEG and outraged. These aren't people looking for a handout. These are people who have worked hard and earned this entitlement. It's a bit like wage theft—the company hasn't paid them out. They've done the work. They've done the hours. They've worked hard. Yet they haven't received their reward and payment for that.

Wage theft is a problem more broadly in our community. Every day in the papers there's another case of wage theft, where an employee has done the work but not been paid by their employer. The extent and endemic nature of it in our industries is such that we now have the Labor government in Victoria committing to making wage theft a crime. A lot of people thought, 'Wow, that is a very big step for a government to take: to introduce a criminal offence for employers who deliberately—knowingly—underpay their staff, ripping them off when it is built into their business model.' This is something that may be adopted by other states. So, in many ways, the dodgy bosses and companies of corporate Australia are on notice. They have to clean up their act.

I know that there are some employers who say compliance is now their biggest worry, and they want to work proactively with people in this place on how they can improve compliance. There are also the employers who constantly get undercut by companies who don't put enough away to ensure that they can pay employees their fair entitlements. Again using the security industry as a model, take the example where a company enters a government contract, say it's with the National Gallery of Victoria. The contract is for five years. If the company doesn't put enough aside for any component of annual leave that hasn't been taken or any long service leave that a worker may be entitled to—and, in some cases in security, a worker is also able to have their sick pay paid out on termination. If the company doesn't put that aside and they lose the contract, it then has to pay the worker what is owing. But what happens far too often in the security industry, like the cleaning industry, is that the company will go into receivership, not pay that entitlement, and leave it to the Commonwealth to pick up the tab. That worker is out of pocket for a significant period of time, and then the company will re-establish itself a few months, weeks, or, sometimes, days later—under a different name. There is more work to do to break the back of this issue and to crack this model. Far too often, workers are missing out. Far too often, other employers are being made to compete against these dodgy employers. And far too often, the Commonwealth is stepping in to pick up the tab.

If only the government showed this kind of understanding and compassion for all workers. We have slow wages growth in this country, and the government is doing very little about it. We have a minister for this area who constantly belittles and criticises unions—who only stand up every day to make sure workers get paid. If we didn't have union organisers, officials and other people assisting workers to fill in and complete their paperwork and supporting people where English may not be their first language, then the government's workload in processing these FEG forms would be more complicated. I remember, back on that day, I spent about 10 hours at the Bendigo Marketplace supporting our cleaners to secure their jobs, to get the paperwork ready, and to know what to do to apply for their Fair Entitlements Guarantee. We worked very hard to make sure that all of them would get every dollar that they were owed. It's just what you do when you're someone who represents low-paid workers and others who work in a number of these industries where they're exposed.

Under this government, wages are stagnant, unemployment is stubbornly high—particularly for young workers—and exploitation is rife. There's an increasing level of insecurity at work, meaning that more and more workers, unfortunately, will be turning to the government for FEGs to get their due entitlements—as more and more workers are made redundant and lose their jobs because of unscrupulous, bad behaviour by employers. I urge the government to do more in this space, and to pick up Labor's proposals to make sure we combat illegal phoenixing behaviour. We announced our plans in May last year, and it's about time that the government got on board. I urge the government to support the amendment that is before us and take real action by cracking down on phoenixing behaviour. Don't just look at FEGs. Look at the problem across the board.

12:54 pm

Ged Kearney (Batman, Australian Labor Party) Share this | | Hansard source

I rise to speak on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. I'm pleased to see the government implementing a Labor initiative to protect workers' entitlements. The Fair Entitlements Guarantee scheme, or the FEG, is an important scheme that ensures workers cannot lose hard-earned pay that they have accrued over time and have not had the chance to materialise. They are entitlements that are often put at risk when a company or business fails. The FEG is a safety net as a guaranteed way for employees to be paid their entitlements in a timely manner. In 2012, Labor passed the Fair Entitlements Guarantee legislation, which delivered the strongest protections for workers' entitlements ever seen in this country. We legislated because Labor is the party of jobs and Labor is the party for workers. In contrast, the government actually tried to cut the FEG in 2014. It has no real commitment to protecting workers' entitlements. These entitlements—like long service leave and accrued annual leave—belong to the workers. They are, for all intents and purposes, part of their wages and conditions that, once earned, should not be taken away from them or kept at bay by long and complicated processes.

From my experience in the union movement, both at the nurses' union and the ACTU, I have too often seen workers left bereft when the company they work for goes under and they lose their job. They often had absolutely no idea that their job was even at risk. To lose your job and all you have accrued in good faith is devastating, and to go through weeks, months or years of legal proceedings to try to recover the loss too often means getting very little or nothing of what you are owed. But, even more galling than that, is for those workers to discover that the loss of their entitlements had been engineered by their employer as an egregious act designed deliberately to deprive their workers of what is rightly theirs. That's right: as unbelievable as this sounds, some employers devise schemes to avoid paying their workers what is owed to them. Imagine how those workers feel when they see their ex-bosses opening up another business—often identical in nature, and even with the same directors, but under a different name and guise. This is known, of course, as phoenixing. No industry is safe from this. I have met workers who have lost entitlements in this way in aged care, manufacturing, hospitality, construction, the beauty industry and more. Low-paid workers who can least afford to lose a single cent should not go through this. And yes, better-paid workers, too, find themselves in dire straits trying to pay mortgages and meet commitments made under the assumption of having a decent job. Losing thousands of dollars, or even hundreds of dollars, in this way can break a family. It puts strain on stretched budgets and breaks dreams. It's hard to imagine what sort of person would deliberately deprive their employees like that. But that type of person, sadly, exists out there—way too many of them.

Labor understands the importance of protecting such entitlements. We understand the impact on workers losing their hard-earned pay, not only financially but mentally as well. So many workers have suffered stress, anxiety and depression at the hands of unscrupulous employers. It is most unusual for this government to put on the table a bill that, while falling short on some measures, does actually have some benefit to workers, because it is the nature of this government to attack workers and workers' rights every chance it gets. This government has done its best to attack workers' rights, like the right to be represented by a union and the right of the unions to properly represent and fight for their members; the right to have their superannuation protected from the greedy banks; and the right to be paid penalty rates.

Under this government, wages have stagnated, threatening livelihoods and our economy. Some jobs simply do not pay enough to give anyone a decent life. A job that doesn't give you a living is not a job; it is exploitation. Under this government, underemployment has grown, with workers needing more work to survive. Zero contract hours, casual employment and short-term contracts all add up to people living anxious lives, with little hope of planning for the future. Under this government, the use of the shadow economy is rife. We have exploited migrant workers with the sickle of deportation hung over their head, being forced to accept below-award wages, working long hours, being harassed and being charged exorbitant amounts of money for things like substandard accommodation and training or not being paid at all.

Under this government, labour hire firms are underbidding for the jobs of longstanding employees who have bargained in good faith for decent wages and conditions. Workers are finding themselves dumped and out of work, replaced by insecure, low-paid and often less-skilled workers employed by labour hire firms at award or close to award rates. In fact, under this government, the number of those working on award rates has increased dramatically, a significant contributor to wage stagnation. Under this government, we have seen good, steady public service jobs disappear by the thousands and, as a result, Australians are finding themselves without the provision of adequate services. Just try to ring Centrelink or NDIS and you'll see the devastation that severe cuts have had on our public services, or ask child protection workers how overworked they are. You may well wonder how we are supposed to stop corporate tax avoidance when the ATO has lost thousands of jobs. Under this government, closing the gender pay gap for working women has languished as a priority. Under this government, accessing child-care payments has been made more difficult for working families. If you have the misfortune to find yourself out of work—like the people this bill is concerned with—heaven help you trying to survive on welfare payments. And so it goes on and on.

This government is not normally concerned with looking after workers. It is more concerned with protecting banks' profits and making sure the big end of town does better and better at the expense of everyone else. So, whilst we acknowledge that some good will come of this bill, we are not under any misconception that the motivation for these amendments are any more than a government trying to protect its own bottom line.

The average annual cost under the FEG scheme has more than tripled, from $70.7 million in the four-year period from 1 July 2005 to 30 June 2009, to $235.3 million between 1 July 2014 and 30 June 2018. According to the government, the startling fact behind these figures is that the increase in FEG claims can be attributed to only a small number of corporations deliberately shifting liability to the scheme. We're pleased to see the changes to Corporations Act contained in this bill which will hopefully see a greater degree of recovery for employees who are owed entitlements and, hopefully, the government will be able to use these new capabilities to recover more taxpayers' money, to replenish the millions of dollars currently being paid out under the FEG scheme.

This bill will strengthen the Corporations Act to better deter and reduce the incidents of dodgy companies and their associates structuring their companies in a way that evades paying employee entitlements and will hopefully deter them deliberately shifting liability for unpaid employee entitlements to the Commonwealth via the Fair Entitlements Guarantee scheme. The bill will amend the Corporations Act to make it easier to prove the criminal offence of entering into an arrangement to avoid paying employee entitlements. It will significantly increase the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements. It will introduce a new civil penalty provision for avoiding paying entitlements with an objective reasonable person test. It will give the Fair Work Ombudsman, the ATO, and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup monies paid out via the FEG. It will extend the liability for unpaid entitlements to related corporate entities and, importantly, it will extend ASIC's powers to disqualify directors and other officers 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 under the new provisions for compensation and the recovery of unpaid entitlements.

We are pleased to see the changes to the Corporations Act contained in this bill, that will hopefully see a greater degree of recovery for employees who are owed entitlements—entitlements that are their own hard-earned money. The changes in the bill will also aid the government, who will hopefully be able to use these new capabilities to recover more taxpayers' money, to replenish the millions of dollars currently being paid out under the FEG scheme.

The new financial penalties for the criminal offence are significant both for individuals and for body corporates. This will reinforce the very serious nature of this crime and, hopefully, better deter dodgy bosses from engaging in what is an abhorrent practice of keeping employee entitlements, their hard-earned entitlements, away from those workers. Directors and companies will also be on notice, as they will be made liable for avoiding paying employee entitlements.

While we welcome these changes to the act, we are alive to the motivation of this government in making them, remembering that this government is no friend at all of workers. We also expect that the new measures will indeed be enforced and that resources will be made available to ensure quick and decisive action when offences occur. There is no point in having these new measures if organisations like ASIC and the Australian Taxation Office don't have the means to use them properly—if they don't have the people employed and the resources to follow up these egregious issues. And, whilst this government remains irreparably divided on all manner of issues, from proper climate policy to its own leadership, it remains united in its attacks on workers and workers' rights.

These reforms are only a start of the changes that must be made to wind power back from employers to workers, to restore the great imbalance that exists right now. I am proud to be part of Labor, who in government will do a great deal more to restore that balance, because it is that balance that will make people's lives better.

1:06 pm

Photo of Milton DickMilton Dick (Oxley, Australian Labor Party) Share this | | Hansard source

I rise to follow on from the member for Batman. Today I acknowledge her lifetime service and commitment to improving the lives of working people and acknowledge the commitment that she not only made as an union official but now makes in this parliament as well. I am honoured to follow her fine words.

It's been a long time coming, but finally before us today we have a piece of legislation from this government to provide better support and better protections for the workers of this country, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018. The workers who drive the economy, the workers who have been neglected and forgotten about by this government, are finally getting a bit of the attention that they deserve.

As the member for Fenner has detailed in his second reading amendment, under this government, wages are stagnant, underemployment is stubbornly high, worker exploitation is rife and work is increasingly precarious. All of this comes after the government has been pulling the levers of the economy for the past five years. There can be no excuses, no blame game and no finger-pointing to explain why workers in this country are getting a raw deal and are being ripped off by this government.

Members of the government will tell you that we have so-called turned the corner, but the truth is very different. Whilst the government will try to spin the data to make it suit them, the facts are vastly different. Wages growth remains at historical lows, coming off an all-time record low of just 1.9 per cent late last year, which has contributed to inequality being at a 75-year high. No wonder Australians are feeling like they've been left out and left behind by this Abbott-Turnbull-Morrison government. While the demands of work increase along with huge increases in the costs of living, they are not seeing this reflected in their take-home pay.

This is not a government for working Australians; this is a government for the top end of town, which is out of touch with what the community expects. This was made very clear by the Reserve Bank last week, which noted that Australian employers are finding 'ways to avoid lifting wages for their staff', as reported by The Guardian on 16 October. Earlier this year, in February, the RBA governor said it would be a 'welcome development' if wages begin picking up substantially, because it would help to create a stronger sense of 'shared prosperity' amongst workers—not that this government would know anything about that. The RBA governor:

… told an economic forum in Sydney, in the context of Australia's workers enduring their longest period of declining living standards in more than 25 years—

and I will say that again for the members of the government in the chamber today: workers have endured 'their longest period of declining living standards in more than 25 years'—

that rising wages would be necessary to return inflation to normal levels, and to lift the economy out of its ultra-low interest-rate funk. He said households were worse off now than they were six years ago, and with large businesses enjoying record profits, workers would benefit from a lift in real wages.

It's not just wages growth that has become a major issue for Australian workers under this government. Local residents in my community are telling me more and more that underemployment is the new curse sweeping through our community. Six-month contracts here and there, a bit of part-time work and a bit of casual work is not what we would call sound job security, and this is only getting worse. In fact, underemployment has overtaken unemployment as the major concern when it comes to jobs. As data from the ABS shows, the gap has been widening for the past four years. This has particularly affected women and young people the most.

In the past 10 years alone, the underemployment rate for young people aged 15 to 24 has almost doubled from 12.25 per cent to 22 per cent. Media reports also point to ABS data that has recently revealed that:

… that the average weekly hours worked by Australians is falling, down to 30.7 hours in the June quarter which was the lowest figure for eight years.

It also showed that more than 1.1 million Aussies were underemployed and the number of overtime hours we worked grew to hit 135,553 hours, the highest for four years.

It's clear that life for Australian workers under this government is not easy. We know that. When you go to the shopping centres and coffee shops and visit the clubs and pubs in my area, people will tell you the same story.

That's why, on this side of the House, we welcome the reforms put forward by the government today. They will start, in a modest way, to help to level the playing field. This bill, as we heard, will strengthen the Corporations Act to better deter and reduce the incidence of dodgy companies structuring their arrangements in a way that evades paying employee entitlements and deliberately shifts liability for unpaid employee entitlements to the Commonwealth via the Fair Entitlements Guarantee scheme. This is despite—and this is an important fact—the fact that only a few short years ago many of those opposite voted to support the government's legislation to cut the Fair Entitlements Guarantee scheme. You can see why many of my Labor colleagues and myself are sceptical about what the government says when it comes to authentically protecting workers' rights.

Nonetheless, this bill will amend the Corporations Act to make it easier to prove the criminal offence by entering into an arrangement to avoid paying employee entitlements by including recklessness as a mental element; significantly increase the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements; introduce a new civil penalty provision for avoiding paying employee entitlements with an objective reasonable person test; give the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business the standing to commence compensation proceedings to recoup monies paid out by the Fair Entitlements Guarantee and to extend liability for unpaid entitlements to related corporate entities; and extend ASIC's power to disqualify directors and other officers, either directly or application to the court, where they have a track record of corporate contraventions and inappropriately using the FEG scheme to pay outstanding employee entitlements.

All of this is very sensible. These are long overdue measures to improve conditions for Australian workers. But it's worth noting that the increase in the financial penalty for the criminal offence is significant. We agree that the substantial increases in penalties will reinforce the serious nature of this crimes and will also act as a substantial deterrent for persons who may otherwise seek to engage in these types of evasive behaviours. When thinking about this bill, one can't help but think of the former member for Fairfax, who still owes former Queensland Nickel workers superannuation entitlements along with life insurance, total and permanent disability payments and income protection payments. I will say it today: this is someone who is reported to be spending upwards of $1 million per month on an advertising campaign in an attempt to buy his way back into this House. All of this is going on while liquidators try to claw back the hundreds of millions of dollars that is owed to Queensland Nickel creditors, including almost $70 million under the Fair Entitlements Guarantee safety net, to cover workers' entitlements.

In 2012, Labor passed the Fair Entitlements Guarantee legislation, which delivered the strongest protections for workers' entitlements ever seen in this country. We legislated because Labor are the party of jobs and Labor are the party for workers. We established the FEG scheme because employees should not be punished through the loss of their legal entitlements—leave, superannuation and unpaid wages—when an employer's business fails. However, the annual cost under the FEG scheme has 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 between 1 July 2014 and 30 June 2018. According to the government, the startling fact behind these figures is that the increase in FEG claims can be attributed to a small number of corporations shifting liability. The FEG was always designed to be there as a safety net, as the guaranteed way that employees could be paid their entitlements in a timely manner and not wait for drawn-out processes before they received a cent. This is especially hurtful for workers who lose their entitlements where a company deliberately structures its arrangements to avoid paying them. Once again, I'm really proud that it's Labor, under the Leader of the Opposition, Bill Shorten, who is taking the lead on this activity, known as illegal phoenix activity.

On 24 May last year, the shadow minister for employment and workplace relations, the shadow Assistant Treasurer and the shadow minister for small business and financial services announced a suite of Labor policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. While the government won't release the latest report on how much this illegal activity is costing the economy, estimates from 2012 put the number at approximately $3 billion per year. Under Labor's plan, announced by the member for Fenner last year, all company directors would be required to obtain a unique director ID number, with a 100-point identification check; penalties associated with phoenix activity would be increased; an objective test for transactions depriving employees of their entitlements would be introduced; the availability of compensation orders against accessories would be clarified; and there would be consultation on targeted integrity measures based on the recommendations of the Melbourne Law School and Monash Business School phoenix research team.

So, while these reforms we are debating today strengthen the legal regime to punish and deter dodgy employers and companies, they are only a start. Far too often in this political climate, the government continues, as we see every single day, to be divided and to be in chaos, always focused on themselves, not the Australian people, looking for the political fix to sort out their own internal issues and fighting amongst themselves. That is why I'm really proud to be a member of the opposition, who's leading the way on measures such as these and the economy as a whole.

Let's not forget just what this government has delivered. We know that the deficit has blown out to almost four times worse than forecast in the Liberal's first budget. Gross debt has crashed through to half a trillion dollars and is now sitting at $540.1 billion, and we know the debt has doubled since those opposite came to power. As I mentioned at the start, this comes at a time when wages are stagnant, underemployment is stubbornly high, worker exploitation is rife and, let's face it, work is increasingly insecure.

So, whilst we support the bills before the House today, there is much more work to be done, and it starts with standing up for workers' rights, like penalty rates. On this sides of the House, under the leadership of the Leader of the Opposition and the shadow minister for employment and workplace relations, who is at the table now, we are a united team who is so committed to ensuring that Australian workers get a fair go and that, if we are privileged to be elected, a future Shorten Labor government will, in our first 100 days, restore penalty rates and legislate so they can never be cut again.

I conclude on this remark: this is in stark contrast to the government led by the Prime Minister, where every single member—including the member for Corangamite, the member for Reid and the member for Berowra, who are all in this chamber—voted eight times to support cuts to penalty rates. I just want to finish on this matter. The day of reckoning is coming when those members of the chaotic, divisive Morrison government will face their communities at the election. Members of this side of the House will be joining forces with the Australian Council of Trade Unions and union members across this country to remind people that, when those members had the chance to stand up for penalty rates, when the member for Corangamite had the opportunity to stop the largest pay cut in Australia's history since World War II

Photo of Sarah HendersonSarah Henderson (Corangamite, Liberal Party, Assistant Minister for Social Services) Share this | | Hansard source

No, the retiree tax! I think you forgot the retiree tax.

Photo of Milton DickMilton Dick (Oxley, Australian Labor Party) Share this | | Hansard source

they sided with the decision to cut the income of thousands of workers in her electorate. I take the interjection from the member for Corangamite. She's proud of it. She's proud of the fact that she cut the wages of young people and of people working in retail, hospitality and pharmacies. She's proud of it. I'll tell you who is not proud of it, and that's Libby Coker. She is standing up every single day, fighting those cuts. We stand beside Libby Coker. We stand beside her as she takes it to the community in all of those government electorates, because they need to be held to account for the damage and the cuts to wages they've delivered.

1:21 pm

Photo of Luke GoslingLuke Gosling (Solomon, Australian Labor Party) Share this | | Hansard source

I think it's fair to say that what the member for Oxley was just saying points to the fact that this is not a government which puts the interests of workers first, generally speaking. He gave just one example around penalty rates. With this bill, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018, I am happy to say that there are some benefits for working people. The Prime Minister has been saying he wants to see people have a go and then they will get a fair go. Well, there are plenty of people working hard, putting in a hard day's work, having a go and contributing, as the Prime Minister likes to say, but those opposite have cut their pay. If they're on penalty rates, that is true to say. On this side of the House, we are concerned they're not getting a fair go, and we want to see that they do get paid what they're entitled to.

We've seen all too often companies structure their affairs to avoid paying their workers. In my electorate of Solomon, the Fair Work Ombudsman has found that several businesses are underpaying their workers. The ombudsman did an audit of 54 businesses in Greater Darwin and found that 25 were not paying their employees correctly and 16 were not keeping accurate records or providing pay slips. One example was a Darwin cafe that underpaid three workers almost $5,000 over 10 months and did not pay weekend penalty rates at all. As a result of these audits, the ombudsman recovered over $20,000 in unpaid wages. In another case, the Fair Work Ombudsman ordered an Adelaide transport company which transports bulk petroleum into the Northern Territory to pay 10 of their drivers $374,000 in outstanding wages.

This bill contains sensible reforms to the Corporations Act to better deter and punish directors and companies who deliberately avoid liability for employee entitlements. Labor have announced policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. One of those measures is that a Labor government would 'introduce an objective test for transactions depriving employees of their entitlements'. We also announced that we would reform provisions for accessorial liability. This government bill adopts and implements these measures. We are pleased to see the changes to the Corporations Act contained in this bill that will hopefully see a greater degree of recovery for employees who are owed entitlements. We also hope the government will be able to use these new capabilities to recover more taxpayers' money to replenish the thousands—indeed, millions—of dollars currently being paid out under the Fair Entitlements Guarantee scheme.

This bill will strengthen the Corporations Act to better deter and reduce the incidence of dodgy companies and their associates structuring their arrangements in a way that evades paying employee entitlements and deliberately shifting 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 what is commonly known as illegal phoenixing activity—that is, where a director or a company structures their company to avoid, or enters into an agreement with the intention of avoiding, having to pay their employees' entitlements. Essentially, they walk away from their business, leaving employees without what is owed to them, and, too often, the director or business just starts up again as a new company without any liabilities. While this criminal offence has been in the act since 2000, there has never been a conviction under it.

Labor announced in May last year that we would reform this criminal offence, of deliberately avoiding employee entitlements, to make it easier to prove and to make it easier to prosecute accessories. We are pleased that the government has, more than a year later, adopted this Labor policy in this bill.

This bill will amend the Corporations Act to make it easier to prove the criminal offence of entering into an agreement to avoid paying employee entitlements, and to include recklessness as a mental element. It will significantly increase the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements. It will introduce a new civil penalty provision for avoiding paying employee entitlements, with an objective reasonable-person test. It will give the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup moneys paid out via the Fair Entitlements Guarantee. It will extend liability for unpaid entitlements to related corporate entities, and it will extend 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 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 is worth noting that the increase in the financial penalty for the criminal offence is significant. We agree that the substantial increase in the penalty will reinforce the serious nature of these crimes and will also act as a substantial deterrent to persons who may otherwise seek to engage in these types of evasive behaviours. It is 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 the FEG scheme because, when an employer's business fails, employees should not be punished by the loss of their legal entitlements, whether those be leave, superannuation or unpaid wages. It is even more egregious for workers to lose their entitlements where a company deliberately structures its arrangements to avoid paying them.

The average annual cost under the FEG scheme has more than tripled, from $70.7 million in the four-year period between 1 July '05 and 30 June '09 to $235.3 million in the four-year period between 1 July '14 and 30 June '18. According to the government, the startling fact behind these figures is that the increase in FEG claims can be attributed to a small number of corporations shifting liability. The FEG was always designed to be there as a safety net, as a guaranteed way that employees could be paid their entitlements in a timely manner and not have to wait for drawn-out processes before they received a cent. In 2012, Labor passed the Fair Entitlements—

Photo of Kevin HoganKevin Hogan (Page, National Party) Share this | | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour, when the member for Solomon can seek continuation. Are there any statements by honourable members?