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Education, Employment and Workplace Relations Legislation Committee - 15/02/2012 - Estimates - EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS PORTFOLIO - Fair Work Ombudsman

Fair Work Ombudsman

CHAIR: We will now recommence these estimates hearings. I welcome officers from the Fair Work Ombudsman. Mr Wilson, welcome. Do you have any opening remarks that you would like to make to the committee before we commence with questions?

Mr Wilson : No, Senator, I do not.

Senator FISHER: Mr Wilson, Mr Scully and others, thank you. In terms of your enforcement and investigatory activities, you do audits, do you not, of industries?

Mr Wilson : We do.

Senator FISHER: What is your current focus in terms of your auditing activities? Which sectors?

Mr Wilson : Senator, I will ask Mr Ronson to come to the table to take that question if he can.

Mr Ronson : Senator, the national campaigns that we have been working on in the last financial year are security industry, the clerical sector and vehicle repairs, and we are now beginning the structural metal product manufacturing sector.

Senator FISHER: So the first three were in the previous financial year and you are now embarking on the structural metal product sector?

Mr Ronson : Yes, and within this financial year, retail was completed as well.

Senator FISHER: Do you call them industry audits or sector audits or what?

Mr Ronson : Targeted campaigns.

Senator FISHER: When you do those auditing campaigns, are they necessarily national or do you focus on particular states?

Mr Ronson : The Fair Work Ombudsman is committed to four national campaigns every year and also two state campaigns in each state and territory—so two campaigns in each state as a minimum.

Senator FISHER: You have only settled on two national campaigns for this financial year thus far, then?

Mr Ronson : No, sorry if I am confusing you. In this financial year we have completed the retail campaign, we are in the process of completing the security campaign, we are conducting the clerical campaign, there is the vehicle repair—

Senator FISHER: So that is four?

Mr Ronson : Four, yes, and we are just about to start a structural metal product manufacturing campaign. But what happens is that they sometimes move through financial years.

Senator FISHER: So they can get counted more than once and still comprise your target. What audits do you have either underway or planned for my home state of South Australia? These are not on your website, are they? Because I did have a look.

Mr Ronson : Senator, they should be on our website.

Senator FISHER: Either they are kind of hidden or I am not very good but you do not need to speculate as to either.

Mr Ronson : In South Australia, which I understand is the state you are from, available on the web are our current campaigns, and they include the private hospitals, aged care centres and nursing hire agencies audit program, and we have concluded recently the SANT—that was including Northern Territory—and the Right Start audit program. We called that program Right Start; it is for new businesses who are start-ups. And there has been a Fair Work information statement audit program, and last year we also reported on the McLaren Vale Barossa Valley Winery audit program.

Senator FISHER: Your private hospital, aged care, nursing hire has been going on for a while, has it not?

Mr Ronson : That began around August last year.

Senator FISHER: That would be right. Is that all you have on foot at the moment, or recently completed, in South Australia?

Mr Ronson : Yes.

Senator FISHER: Other than the national ones, which would include South Australia. The Right Start Program was aimed at new businesses. How do you decide which sectors you will audit?

Mr Ronson : Our approach in auditing—whether national or state—is to perform some complaint analysis. We look at trends. We do research. This shows us those sectors where there are just not high complaints but also high contraventions or high violations. We are also interested in looking at sectors where there might be low numbers of complaints but we have reason to believe that there are high violations.

Senator FISHER: Yes, fair enough. In that context, is the Right Start Program designed to educate small businesses so that they do not fall foul?

Mr Ronson : Yes. All of our auditing programs contain a strong education element. They are programs that work with employers. The chief feature of an audit methodology is that you are not necessarily working with employees; you are working with employers. There is a strong education component. With the Right Start Program we are interested in talking to and working with new businesses explaining, if you like, through an audit process, their compliance levels with the Fair Work Act.

Senator FISHER: How do you establish the identity of a new business?

Mr Ronson : It would be those companies who, for example, have been registered with ASIC in a particular period. We do a random sample.

Senator FISHER: Only pty ltds?

Mr Ronson : I think in the case of the South Australian-Northern Territory campaign we were not restricted to just pty ltd. If we were in Western Australia that may have been an issue.

Senator FISHER: Why?

Mr Ronson : Because the Western Australian government has not referred their industrial relation powers.

Senator FISHER: So you do not have the power?

Mr Ronson : Yes.

Senator FISHER: Alright. What about partnerships, et cetera?

Mr Ronson : Partnerships could be included in any audit in South Australia or the Northern Territory. There would be no impediment there.

Senator FISHER: How would you look for the new businesses? What steps do you go through? What steps have you gone through, or will you go through, to work out who you will target with the Right Start campaign in South Australia?

Mr Ronson : With a campaign such as Right Start, which is a little different to a normal campaign—we are trying something new—we would look at businesses that have been registered as well as incorporated.

Senator FISHER: Registered where?

Mr Ronson : With either the state government—in terms of registering a business or a trading name —or data bases available.

Senator FISHER: How will you establish that they are new? If they are not new, will you not go see them? What is your definition of new?

Mr Ronson : New is, in the case of a company, looking at the date of incorporation. With a partnership or a sole trader it is the date that they have applied for a trading name or registered a business name.

Senator FISHER: How recent does that have to be under your criteria for them to be new and therefore part of your target audience?

Mr Ronson : I need to double check. But in the case of a program such as Right Start, we would pick a period; we would say, 'Let's look at the last 12 months' or 'Let's look at the last six months'—'Let's look at what names have been listed'—and then we would do a sample.

Senator FISHER: On notice can you tell me the time period for that program that is critical to you?

Mr Ronson : Yes; sure.

Senator FISHER: Mr Ronson, you also said that your audience is employers not employees. How do you establish that a particular business or a particular company is in fact an employer and therefore able to be visited by you? Do you consider that you have jurisdiction over someone you think might be, but who claims not to be, an employer? Or do you consider that you have jurisdiction irrespective? Is a potential employer part of your remit?

Mr Ronson : I understand your question. We attempt to use a data base—the same register that the tax office uses—in the sense that we will try our best to filter out those entities that do not appear to be employing entities. But if, in the process of communicating with a particular entity they disclose that they are not a employing entity, we will remove that entity from the scope of the audit. We try our hardest in terms of filtering. But I cannot say that it is 100 per cent: there will be some people who say, 'We don't employ' or 'We're not employers.' But we are getting better at it.

Senator FISHER: In South Australia, for example, I have a constituent who is a business listed as 'business x business services' and provides bookkeeping services essentially. From what you have told me, the only way that that could be the subject of an audit in South Australia at the moment is under the Right Start Program. Would that be the logical conclusion?

Mr Ronson : No, not necessarily. They could be included in a national campaign.

Senator FISHER: Which one?

Mr Ronson : Bookkeepers are under clerical.

Senator FISHER: Have you not finished that? This is a prospective visit. The particular constituent is looking forward to a visit from one of your officers.

Mr Ronson : My understanding is that the clerical audit is not completed. We are still in the process of conducting audits. We are still in the audit phase. I clarify those remarks I made before. The notes in front of me have helped me. We crosscheck ABR data with census data to help us ensure that we are targeting employing entities. That data is already provided by the tax office in the first instance. In respect to the second point, the bookkeeper would be included in the national clerical campaign.

Senator FISHER: Do each of your audits result in a report such as the one you provided to this committee—the results of the insulation installers audit?

Mr Ronson : All our reports—national and state—are published on the website. Once they are finalised, we publish.

Senator FISHER: What is the process when you visit?

Mr Ronson : Within an audit, there is scope for a range of approaches. Take a standard national campaign. A portion may involve a field visit. A portion may be records requested and provided to the office. So there is a desk-based audit. Visits in the field may be announced; they may be unannounced. We mix up the approaches. By and large, it is a no-surprise approach.

Senator FISHER: As part of your audit strategy, do you perform unannounced visits?

Mr Ronson : In some audits a certain portion of visits will be unannounced. We are very respectful of businesses, particularly their trading hours—what kind of industry it is, what sector it is. We do everything we can to minimise disturbing the business and its need to run. We appreciate that.

Senator FISHER: If a business has been notified that one of your inspectors wishes to visit, is that then either going to be the result of one of other of your various audits or the result of a complaint from an employee? Are they the only two ways that there could be the result of a knock-knock, can we come in?

Mr Ronson : The only other approach could be from what we call education visits.

Senator FISHER: Oh, how nice.

Mr Ronson : In South Australia there have been several thousand education visits in the last few years. I am just trying to think of any other forms of approach.

Senator FISHER: So you are kind enough to offer your services in advance? How do the educational visits work?

Mr Ronson : The education visits tend to be unannounced but they are promoted in advance. For example, if a precinct or a sector or a region is going to be the subject of education visits, there will be some media relating to that in advance.

Senator FISHER: Okay.

Mr Wilson : The work we do in the field is divided in two. There are several different categories, at least three that I can imagine, the first of which is the formal targeted audit campaign which Mr Ronson spoke about. They subdivide into the case of unannounced and announced. There is then the category where we respond to a complaint. It may be that when we are responding to a complaint, because of the confidentiality of the matter, we in fact say to the employer that we are just doing audits in your vicinity.

Senator FISHER: A white lie.

Mr Wilson : A means to an end, perhaps. Then the third category is a body of work which we have been funded for in recent years, but which has now, I think, come to an end, which we called the transitional educational visits. This particular work was aimed at small businesses who were in transition from the former states systems to the new national system.

Senator FISHER: All right.

Mr Wilson : Even within those, there are then two categories, one of which we would say we are doing visits in the southern suburbs of Adelaide this week, but not actually be much more particular than that. Then of course there are others where we actually do notify the employer that we are coming to see you particularly. The interaction that we might have can be at different levels, but I think Mr Ronson has quite properly articulated how we try to approach audits, which is a fairly formal process of determining where our risks might be and then visiting those particular workplaces. Occasionally people who we see are not particularly willing to see us or they believe that they are under some sort of threat. Quite clearly we try to be, as Mr Ronson said, respectful of that and try to work through their problems, but at the end of the day it is about establishing whether or not there is compliance in the workplace or sufficient knowledge to ensure that there is compliance.

Senator FISHER: How do you approach the scenario where you are visiting a business as part of an audit; you believe that the business employs people and a person who purports to be in control of the business says to you, 'Well, I don't employ anybody. You are looking at it.'

Mr Ronson : That is not uncommon. There will be responses to our approaches where they will say, 'Look, we don't have any employees.' Our response to that in some cases is that we accept that—that is if it appears to be a very plausible response. In other cases if we have, for example, intelligence that that may or may not be the case, then we might probe a little bit more and ask just a few more questions about the nature of their business. But by and large, we respect that response unless there is some suspicion to believe otherwise.

Senator FISHER: There is evidence to the contrary. Okay. Just one final question for now: the Fair Work Information Statement Audit Program in South Australia, how are you targeting your audience there? Who are you picking in that respect?

Mr Ronson : I will just check.

Senator FISHER: And I presume that is to ensure that employers are distributing the Fair Work information statement. Is that right?

Mr Ronson : That program was randomly targeting 150 businesses between February and July last year. The actual report is available on our website.

Senator FISHER: So that one is done and dusted?

Mr Ronson : Yes.

Senator ABETZ: I received a nice letter on 6 February 2012 from the Ombudsman enclosing documents about independent contracting. I am just wondering whether in their preparation legal advice was sought, and whether it was internal or external?

Mr Wilson : I might need to take that on notice. Certainly legal advice would have been sought but as to where I will need to check.

Senator ABETZ: Can I turn to questions on notice from the Supplementary budget estimates 0742_12 in which I asked about whether you keep a record of conflicting advice? You said that you are not able to separately identify complaints received that were specifically about conflicting advice. I understand that up until that time you did not have a mechanism. Have you since changed the mechanism so that you can pick that up in your inquiries?

Mr Wilson : I think the short answer is no, not at the moment. I will explain why that is the case.

Senator ABETZ: Time is relatively short because a certain senator used extended time this morning. If you could, keep that short or provide some information to me on notice. The only point I am trying to get at here is about the issue of conflicting advice. I am willing to accept that the Fair Work Ombudsman and its personnel does the best job possible and tries to ensure this does not happen. At the end of the day, especially for the small business sector, the robustness of the advice is for them the key performance indicator and if you could somehow harness that and then try to work on it to ensure that it is as limited as possible, it would be something that is very much appreciated, especially by the small business sector.

Mr Wilson : Through our contact centre we record details both in our database and also verbal interaction that is had between the parties. The recording of that information should alert us to the fact that there has been a telephone call previously on this subject. If we do the search. But in the context of a 10 minute phone call that is sometimes not done. It is also the case that the answer you get depends on the question you ask. It is difficult to do that. I think you are referring more to conflicting advice which is provided in the sense of the actual dollars and cents associated with a pay rate that we might provide people. We are obviously very concerned about there being a capacity for information that is wrong. We are in the process of strengthening the procedures that we do have to make sure that there is, increasingly, a separation between the person who initially calculates the information and the person who approves it to then be released to our information products. We are also in the process of revising our pay and classification system which is the back end of our computer system to make sure that there is a much more robust level of information and double-checking and we hope that will provide much better information to the community. We have also, more recently, made clear through our website that we certainly do encourage people to check back, that things do change within a six-month period. We do encourage them to come back and we also recently commenced a system whereby anybody can subscribe to an information service that alerts them to the fact that there has been a change. The combination of those things means that we hope that will certainly provide much better service to the community.

Senator ABETZ: Thank you for that. Can I take you to the answer for 0735_12—these are all from the last estimates—in relation to PayCheck, Payroll Check and the Pay Rate Calculator. In the second paragraph of that answer, on the second to last line, we were told that the building and construction base rate calculators were updated with the 2011 wage decision. Was there actually also a correction in that or not?

Mr Wilson : I cannot answer that directly, Senator.

Senator ABETZ: Take it on notice. Not much revolves around it at the moment.

Mr Wilson : We might be able to come back to that.

Senator ABETZ: I notice that there was a proactive complaints deed signed between McDonald's and—

Mr Wilson : The Fair Work Ombudsman.

Senator ABETZ: And that was after Fair Work Australia Commissioner Donna McKenna refused to approve a national enterprise agreement. Since then, on appeal that agreement has been certified, or ratified, hasn't it?

Mr Wilson : I believe so, Senator.

Senator ABETZ: Given that, what is the status of this proactive compliance deed given that it was, from what I can gather, entered into because of Commissioner McKenna's refusal, which was then overturned on appeal?

Mr Wilson : Before I ask Mr Ronson to address that, that was part of the pathway to our becoming involved in that. Part of the pathway was also that she formally referred to the Fair Work Ombudsman concerns she had that, from memory, some workers might have been underpaid. It was that particular issue that we took forward and moved into the deed.

Mr Ronson : The concerns at the conclusion of Commissioner McKenna's judgment were relating to various pay conditions throughout the McDonald's enterprise. In considering the referral, we thought it was an opportunity to work with a large national employer in McDonald's, and I am very pleased to say that we were able to work constructively in forming a deed. The deed was pretty much an innovative exercise in that, while there are company-owned stores, there are many franchisees, so there are many employing entities. McDonald's have been very constructive and positive and conducted a review and self-audit of their operations and we are in the process now of finalising our report on all the work that McDonald's and the Fair Work Ombudsman did during that period, and we hope to be in a position to report on that enterprise, that activity, in the next few months.

Senator ABETZ: Thank you for that. As you rightly point out, while McDonald's is seen as a big multi-national chain, it in fact is a conglomeration of a whole lot of small businesses and therefore the support that is provided in this document undoubtedly will be of assistance to a lot of the small businessmen and women who run their various franchises and try and do the right thing. Having something like that coming from central headquarters undoubtedly will be of great assistance to the individual franchisees. I was just wondering, though, about the basis of it, given Ms McKenna's decision had been overturned, but there is nevertheless good to come out of it, which is good to hear.

Mr Wilson : Senator, if I may just take that a little bit further, I have to congratulate Macdonald's Corporation and indeed their franchisees for being prepared to enter into this agreement. It has been extraordinarily useful in both senses: it means that when we find complaints coming into our organisation about particular franchisees, there is a mechanism by which we can refer it to the corporation which they then deal with within their network in a very competent manner, and I think it is certainly to the credit of the company and the franchisees. For us it also means that there is an assurance that quite a large number of employees—I think it is about 80,000 in total—have their rights protected, which is good.

Senator ABETZ: When was the annual report of the Fair Work Ombudsman first provided to the minister's office? I think you signed off on it, Mr Wilson, on 15 September.

Mr Wilson : I did, and I am just checking when we provided that to the minister's office. Mr O'Shea is in a position to address that.

Mr O'Shea : The annual report was submitted to Minister Evans's office on 19 September 2011.

Senator ABETZ: On 19 September 2011. Parliamentary Secretary or Fair Work Ombudsman, can you tell us when it was actually tabled in the Senate?

Mr O'Shea : The information I have is that the report was tabled out of sitting and published online at the same time, which was 21 October 2011.

Senator ABETZ: 21 October 2011. Can somebody remind me when the last Senate estimates was for the Fair Work Ombudsman, as in October?

Mr Wilson : I am afraid not, Senator. I do not recall that.

Senator ABETZ: Was it the 19th? We are just having a look at it. Parliamentary Secretary, can you please take on notice and ask, whilst it is no longer the same minister, why was it conveniently dropped at the end of Senate estimates? It was Wednesday, 19 October, as I thought. That date was stuck in my mind from the previous questioning of Fair Work Australia on another matter. So, 19 October. Sorry, Mr Wilson, when was it supplied to the minister's office again? 19 September?

Mr Wilson : 19 September, that is correct.

Senator ABETZ: So the minister had a full four weeks to consider it and miraculously must have only read it on Thursday, 20 October to then have it tabled on Friday, 21 October, conveniently after Senate estimates. Parliamentary Secretary, I know that you are not personally to blame and the current minister is not personally to blame, but can we try and get a reason or a rationale as to why this document was not tabled in a timely fashion?

Senator Jacinta Collins: We will take it on notice.

Senator ABETZ: Thank you. Parliamentary Secretary, can I take you to page 39 of the annual report. There is a table 7: Complaints finalised by state and territory 2010-11. I did know at one stage, and can you assist me, what does AVR stand for again?

Mr O'Shea : It stands for assisted voluntary resolution.

Senator ABETZ: Thank you. Assisted voluntary resolution. The people of the Northern Territory and my home state of Tasmania seem to rate higher in relation to the assisted voluntary resolution.

Senator Jacinta Collins: They must be more agreeable, Senator Abetz.

Senator ABETZ: You have made my point perfectly. Senator Scullion and I would be on a joint ticket on that one.

Senator Jacinta Collins: And Senator Crossin and Senator Bilyk.

Senator ABETZ: I was wondering whether there was any reason that you can point to other than the very reasonable point the parliamentary secretary made that Tasmanians are a lot more reasonable than other people. More seriously, is there anything about the methodology undertaken by the staff in Tasmania and the Northern Territory? Are you trying something different in Tasmania and the Northern Territory that has led to those results?

Senator Jacinta Collins: I see Victorians are pretty agreeable here too.

Senator ABETZ: You are way behind Tasmania by a full percentage point.

Mr Wilson : Senator, unfortunately it is one of those statistical random events that seems to occur. Our AVR processes are run through two centres: Sydney and Adelaide. All matters coming into the organisation are allocated to one of those centres and then staff of Mr Clarks deal with them through telephone calls, emails and letters. The same procedures apply right throughout the country, I think it is just simply an extrapolation of the numbers involved.

Senator ABETZ: If there is no real reason or background to it other than that is what the statistics throw up, so be it.

Mr Wilson : Maybe they understand our correspondence more quickly.

Senator ABETZ: Our two hits might help, do you think? Can I about table 8: number of individuals receiving payments. If I might say, that is where Tasmania does not score very well because as a percentage of the population we have about 2.7 per cent of the Australian population but on the number of individuals receiving payments, 1,186 seems to be a very high number. Is that because there is a greater rate of underpayment in my home state of Tasmania?

Mr Wilson : Senator, I am not sure I would rush to that conclusion. However, what I do know about Tasmania—and I am on record for having said this previously—is that our office in Tasmania is particularly effective and the staff are very capable, and they perform the role very diligently.

Senator ABETZ: And they serve a good morning tea as well. I was the beneficiary of one some time ago.

Mr Wilson : I have quickly consulted with Mr Ronson and I do not think we know of any particular reason other than the staff effect.

Senator ABETZ: If that is the case then that is fine. Can I turn to page 41 of the report in which we are told, in figure 6: breakdown of attributes of alleged discrimination. I will just pick on one: 20% physical or mental disability. Now that is alleged discrimination. Do we get to the stage ever in relation to these matters to ascertain whether the alleged discrimination is in fact sustained because there is a difference between an allegation and an actual determination that there has been all these various forms of discrimination of physical—age, family, race, pregnancy—but I will just pick on the first one, which as it happens seems to be the biggest cohort, and that is physical or mental disability.

Mr Lehn : Mr Karsten Lehn, Executive Director of Complex Investigations. The situation you just described is correct: that is a case where complainants have nominated effectively those attributes as being the cause of discrimination in their complaint.

Senator ABETZ: Yes, but do we ever then go further to ascertain whether the allegation is confirmed. Moving onto the next one, there might be a cohort in the community, the aged or people who say that they have been discriminated on the basis of age. I suppose it could be either being too young or too old. It might be that that is something that is used which at the end of the day, is found to be without foundation. But reading this pie chart, I would be very concerned that physical or mental disability had such a high rate of alleged discrimination and then issue of age was the second highest. I am just wondering whether we can differentiate between the allegation and the actual finding of discrimination.

Mr Lehn : In investigating a range of discrimination matters that have come to us over that period, the FWO has filed a total of three matters, two in relation to pregnancy and/or family responsibilities and one in relation to disability, and has entered into an enforceable undertaking with another enterprise in relation to pregnancy discrimination. So with respect to the number of complaints that have come in it is actually a fairly difficult process to prove to a standard sufficient to be able to put before a court for a contravention.

Senator ABETZ: So, on the pie chart—and tell me if I am verballing you—pregnancy discrimination is at eight per cent, but it seems that is where you have got most actions or voluntary agreements being undertaken. Would it be fair to say that an allegation of discrimination on pregnancy is a lot more likely to be upheld than an allegation of discrimination and this is just on the figures, on age, for example.

Mr Lehn : That is a possible conclusion you could draw. Certainly, our experience is that if an individual has experienced some discrimination as a result of being pregnant, typically it is easier to prove and we would find more documentary or physical evidence that would go to supporting that claim. I think that is the reason why—

Senator ABETZ: You can usually find physical evidence of pregnancy.

Mr Lehn : I am sure that is not what you were meaning.

Senator ABETZ: Just out of interest, political opinion is two per cent on this pie chart. Have we had any follow-up investigations in relation to any of those?

Mr Lehn : I would have to take that on notice. I do recall that we have investigated at least one of those particular matters.

Senator ABETZ: The percentage pie chart is interesting, but what are the raw numbers? Is that shown somewhere?

Mr Wilson : Not in the annual report.

Senator ABETZ: Could you take on notice what the actual raw numbers of the allegations are?

Mr Wilson : Yes. Senator, if I can also point you to a report that we released and that is on our website somewhere. We will provide it to you. I think it is about a year old, which went through the subject matter, discrimination matters, and what that first year brought for us. This data does not particularly change that picture, but we will certainly provide you with the breakdown of the pie chart.

Senator Jacinta Collins: Just while we are on the annual report and in response to Senator Abetz's earlier question about the timing of the tabling of the annual report, as I understand it, once it has been cleared by the minister's office, as with all annual reports, it needs to be printed and this usually takes a few weeks. So the minister cleared it sometime soon after 19 September, but it was obviously not printed in time before estimates, when it was released roughly a month later.

Senator ABETZ: If you can give me the timetable for that, because I thought that it was usually pretty instantaneous.

Senator Jacinta Collins: My advice is that it takes a few weeks to be printed.

Senator ABETZ: The only point I make in that case is that if Fair Work Australia could get its annual report to the minister earlier. Whatever the problem is, it would be nice to have it for the October estimates rather than having it dropped. It just seemed a bit coincidental. I might be too suspicious but, dropping it two days after the estimates, makes it relatively old news by the time we get to the February estimates.

Senator Jacinta Collins: Point taken.

Senator ABETZ: I read in the Canberra Times, on 28 November 2011, 'Restaurants face workplace audits'. We were told that your investigators expected to swoop on up to 100 of the capital's restaurants. So did we swoop? On how many? And what was the outcome?

Mr Wilson : I will have to ask Mr Ronson.

Senator ABETZ: And it might have been journalistic licence to use the term 'swoop.' I am sure that the Fair Work Ombudsman has a technical term other than 'swooping'.

Mr Ronson : The information I have in front of me says that the ACT Restaurant Industry Audit Program commenced on 10 October 2011 and that the Fair Work Ombudsman would be looking at auditing 100 ACT restaurants between October last year and March this year. The audit program is in full swing assessing compliance with hourly rates of pay, pay slip and record-keeping obligations.

Senator ABETZ: It is still ongoing, so the suggestion that this was a festive season blitz must indicate to us that in Canberra people think that the Christmas season goes from October through til March. I will only make that comment in the absence of Senator Humphries. By the reading of that I thought that the investigation had been completed but clearly not. Thank you.

Mr Wilson : Chair, if I could come back to the question that Senator Abetz asked me about the building and construction industry and the updating of our tools? I have an answer for you. I am told that the reason there was a delay was that the modern award for the building and construction industry at that time was not covered in the online tools and they needed to convert it into the online tools. If you know the construction industry at all, there is the 'follow the job' loadings that are quite technical and require a bit of work to actually be done. That explains why there was a delay in the past and because it is now in PayCheck Plus it means that in future it should not take as long to publish that information.

Senator ABETZ: Thank you for that explanation. You would be aware of some correspondence of 26 October 2011 in which the Fair Work Ombudsman dealt with the issue of whether PayCheck Plus returned different wage rates on two separate occasions. As I indicated earlier, errors will occur when human beings are involved so, whilst it is unfortunate and regrettable, what I found more regrettable was reading the correspondence and not finding an apology in it.

Mr Wilson : I have to admit that when I read that correspondence myself I felt the same thing. That is certainly something that should have been done. We should have apologised to the person concerned.

Senator ABETZ: If the point is taken, I do not have to labour the point and thank you, Mr Wilson, for acknowledging that. Was there any notice on the website alerting the visitors that previous advice may have been wrong?

Mr Wilson : I believe not, Senator.

Senator ABETZ: Do you think that might be a good idea for the future? Say, Joe Bloggs looks at the website, takes down some incorrect information. Next time they look at it why would they bother to check an area that they have already looked at unless, on the homepage, there is an alert 'correction on page' such and such—or however you might want to identify it—to alert the user of the website that there is a correction and they should possibly avail themselves of the opportunity to check that out.

Mr Wilson : Again, at the risk of being in furious agreement with you, we believe that should be done as well. I might ask Mr Bongi, who is in charge of that area, to talk about some of the initiatives that we have undertaken since these errors to ensure that the community is alerted to changes that take place.

Senator ABETZ: Mr Wilson, you would not want a change of job and become the manager of Fair Work Australia, would you? It is sort of nice to be in heated agreement with somebody.

Mr Wilson : All things are possible.

Mr Bongi : The errors are regrettable and I agree that they should not have happened. Particularly the person you mentioned should have an apology, as indeed should the others. It is a very large database, as you can appreciate, and the number of errors are very miniscule. They slipped through, but we have put and continued to put in place a whole range of mechanisms to detect, correct and notify people about these. At the beginning of this month we listed on our website all the errors since 1 July last year and we have built an RSS feed service so that for the award that they are interested in, or all awards, they can get a regular update to their electronic mailbox of what changes have occurred. That will inform them that a change has been made. Within the application itself we are doing some things to improve the visibility of those changes as well.

Senator ABETZ: And there were 40 changes to fix errors; is that correct? I am referring to page 1 of the Financial Review of 11 January this year.

Mr Bongi : Since 1 July, 43 amendments were required from queries that were raised externally. We had 55 such queries. But also through our own internal process we identified 58 others. So if you go on our website you will see listed, in total, 101 amendments that were made.

Senator ABETZ: Whilst I am sure every care is taken and, in the scheme of things, that is a relatively small number. If you are one of the small business people tangled up in it, you are not really concerned about how few mistakes there are. It is just the fact that you have to live with that one mistake that becomes an issue. On 10 January 2012 you released a report into audits conducted in the retail sector over the last two years.

Mr Wilson : We did.

Senator ABETZ: In that report—and I hope I am not verballing you, because I have it in quotation marks— you say:

"Many employers underpay as the result of a lack of information or they make mistakes interpreting the information they have …

I wonder, from your investigations, do you come across instances of employers overpaying as a result of lack of information or making mistakes interpreting the information they have?

Mr Wilson : I am not aware of that precisely myself. I might just ask Mr Ronson if he has experience. I suppose the problem we face there is that obviously overpayments might not be overpayments; they might be over award payments—

Senator ABETZ: And they might be agreed; that is quite right. But underpayments clearly are serious matters and the Fair Work Ombudsman should be advising when they discover that. So no criticism there. I am just wondering whether in doing the audit, whether the Fair Work Ombudsman says to an employer: 'Do you realise that you are paying over the award here?' to alert the small business, in particular, that they may have misread the situation?

Mr Ronson : In that sense, that information would be made available. Let us say, hypothetically, there is an employer who is clearly paying above all lawful entitlements, then the audit process will bring that information to their attention. They will become aware of what the entitlements are. It would not be the case that an inspector would seek to conceal that information or anything like that.

Senator ABETZ: When an audit is done, the business is then told, 'Look, over here you might be underpaying.' But in another one, you might actually would inform them that they are overpaying. It is not something that they would have to ask for. Is it something that you volunteer to them, because in may anecdotal evidence, that is all I have to rely on, it stands to reason that if somebody is told by the Fair Work Ombudsman that they are underpaying, they might be a bit more upset than if they are told that they are overpaying, but no small business has ever told me that as a result of a Fair Work Ombudsman audit, they have been advised that they are actually overpaying their workers.

Mr Ronson : I think it is fairer to say that for every audit there would be an audit findings letter that would be sent to the employer and within that letter there would be a reference to whether they have complied with the law or not. There would be a reference to information.

Senator ABETZ: If you are overpaying, you are clearly complying with the law. But I am just wondering whether it is specifically drawn to their attention. Take it on notice, if not, that just might be worthwhile to let employers know whether or not that is the case. Now, in determining overpayments and underpayments, it has been put to me that in circumstances where let us say I am overpaying Monday to Friday, but I have underpaid on Saturday, then the underpayment made on Saturday is not offset against the overpayments during the week. Is that how the Fair Work Ombudsman operates or not?

Mr Ronson : You are going into the work of offsetting. The common law doctrine, if you like. The industrial relations law is littered with authorities on this subject of how to apply offsetting. At its simplest, the way that the Fair Work Ombudsman approaches—

Senator ABETZ: Yes, keep it that way. That way I might understand.

Mr Ronson : Seeking to simplify it, the way we approach the question of offsetting we look for clear designation. We look for agreements between an employer and an employee, preferable written, that it is their intention to pay over, say a Monday-Friday rate, if it is to compensate deliberately a weekend rate. There could be a verbal agreement and that would require the assent of both parties. In the absence of agreement, it is hard—the authorities are fairly established—to be too liberal in the offsetting regime. Another policy that we have attempted to approach is we seek to be fair. We will list the contraventions, our practices. If someone is underpaying a weekend rate, we will draw that to the attention of the employer. We will identify that contravention. But if in overall on balance, there is no financial injury, then we are apply a commonsense reasonable approach. But this case by case. I have tried to summarise as best I can.

Senator ABETZ: There have been, once again, only anecdotally cases raised with me, to make the point. During the week, the worker has been overpaid $100. On the weekend, underplayed $20. They are told, bad luck. Forget about the $100 overpayment, you have got to make up that $20 shortfall. And they scratch their head and say, 'Well, the worker is still $80 better off. What gives here?' That is the criticism that I have.

Mr Ronson : Sure.

Senator ABETZ: Once again, only anecdotal.

Mr Ronson : It is a practice that we would advise all employers against. It is a risk an employer is taking.

Senator ABETZ: It is not a deliberate decision, so it is not a risk in the employer's mind that they are doing it. It is a genuine error that they are being generous during the week—they make a genuine error of a weekend by underpaying $20 when they are overpaying $100 during the week—and when the assessment comes around, forget about your generosity of $100 extra, you have underpaid $20 and you will have to repay that and not come to the conclusion that the worker is still $80 better off.

Mr Ronson : I think it is an established industrial relations doctrine that you cannot contract out of an award, so that is the danger, the risk if you like, of a common law contract where that practice is engaged in. Where I am trying to answer is that we try to take a common sense and reasonable approach but, traditionally, offsetting was only applied and used by magistrates. It is a sort of judicial discretion, if you like.

Senator ABETZ: Shall we start appointing you as Magistrate Ronson for these purposes so that you can apply this sort of discretion. It really does, if I might say, venture this gratuitous view and then move on. It does seem unfair because it is not a deliberate practice engaged in by the employer. It is an honest mistake and they pay what they can afford. If they have to pay $20 more on a weekend then the worker would be getting $80 a week extra during the week, not $100, and the worker would still be getting the same amount of money. It just seems that that differentiation is not helpful, especially to a lot of small businesses that are doing it exceptionally tough at the moment.

Senator FISHER: Is it not fair to say that effectively the Fair Work Ombudsman is hamstrung in that respect by the Fair Work Act because it is the Fair Work Act that means that, when you apply your financial disadvantage test to the worker, you have to apply it in accordance with the act and the modern awards, which means that you cannot allow an employer to offset generosity. For example, as in Senator Abetz's example during the week with unintended underpayment on the weekend unless the award and the act allow it. In most cases they will not. It is the Fair Work Act that is dictating your behaviour, is it not?

Mr Ronson : And before the Fair Work Act it was the Workplace Relations Act.

Senator FISHER: There you go.

Senator Jacinta Collins: There was a time when there was no fairness test.

Senator THISTLETHWAITE: Mr Ronson, a long line of authority comes to mind—Ecob and Poletti, Ray and Radano. There is a long line of authority here going way back to the 1904 act that you cannot offset award entitlements. It is established in industrial law going back to federation.

Mr Ronson : That is right.

CHAIR: It is about defence of working people because, if the agreed rate of pay is what is being paid on the weekend, then why should someone just be able to determine that it should be a lesser rate to compensate for an overpayment later on if that is the agreed rate? Why should someone be able to do that? That assumes that everyone should be on the award. Maybe that is what is being proposed.

Senator FISHER: Why should someone be able to shear on the weekend to make up for time lost during the week due to wet weather? I do not know either.

Mr Ronson : Senator, a colleague, the chief counsellor, just reminded me that best practice also is that, if you seek to offset, it should be expressed. But even then there is a risk, as Senator Thistlethwaite has identified.

Senator ABETZ: This is not about someone deliberately seeking to offset and entering into an arrangement. This is where a small business has genuinely erred in relation to payments of a weekend—and I am just using that as an example, it could be overtime—but overall the worker is still being generously compensated but the employer still has to make up that small $20 shortfall. The fact that the worker gets paid well above the rate normally during the week is not taken into account. If that has been the case for a long time, so be it. I just do not think common sense and fairness dictates that that should be the result.

CHAIR: But there is no provision to absorb any underpayments into an over-award payment is there?

Mr Ronson : No.

Senator ABETZ: No, but if an employer generously offers to pay more than the award and does so but makes an honest mistake and overpays, and say, 'I'm going to pay you the award rate,' and it is $100, when in fact the award says $80 a day, the employer cannot claw that back, can they?

Mr Ronson : No, and Senator Thistlethwaite has gone to that question with the authorities.

Senator ABETZ: That is where it seems to be one-way traffic and I am only talking about those circumstances where an honest error has occurred. Moving to my home state of Tasmania, yet again another letter from the Ombudsmen, dated 7 November 2011, telling me about a Tasmanian young hospitality and visa worker campaign. Has that been completed as yet, Mr Ronson?

Mr Ronson : Senator, we are in the midst of that campaign.

Senator ABETZ: Can I ask where are we at with the investigation into the Australian Nursing Federation Victorian Branch? There was a statement made on 24 November 2011.

Mr Lehn : That investigation has concluded.

Senator ABETZ: And what has it concluded?

Mr Lehn : We took no further action with respect to the issues that were identified in that matter.

Senator ABETZ: How long did that investigation take?

Mr Lehn : I would have to take that on notice, but it was fairly quick.

Senator ABETZ: A couple of weeks?

Mr Lehn : I would have to take that on notice to be precise.

Senator ABETZ: Can you let Fair Work Australia know how to undertake investigations?

Mr Lehn : It was certainly fairly quick.

Senator ABETZ: Talking about another investigation, Baiada, where are we at with that? Is there an investigation? I understand you were written, to seeking an investigation.

Mr Wilson : We certainly were written to. I think that was in relation to allegations of violence on the picket line.

Senator ABETZ: That is right.

Mr Wilson : That is then distinguishable from another matter which we were looking at which concerned allegations of sham contracting and underpayment. The sham contracting matter was concluded with no evidence of sham contracting being sustained. But with respect to the underpayment aspects, I will ask Mr Lehn to conclude it in an enforceable undertaking, which has recently been released.

Mr Lehn : Yes, indeed. Just to add to that, there are a number of facets of this investigation. A number of allegations were made around a whole range of issues, but certainly the underpayments were substantiated with respect to one of the Baiada group of companies, BPL Adelaide Pty Ltd, with underpayments totalling $57,940.

Senator ABETZ: Owed to how many employees?

Mr Lehn : For 112 employees identified.

Senator ABETZ: And over what period of time?

Mr Lehn : I could stand corrected, but I think it was over a 12-month period.

Mr Wilson : From recollection, the underpayments were because of a fairly minor miscalculation in the payroll system.

Senator ABETZ: Working it out, $57,000 with some 112 employees over 12 months was the conclusion I came to in my head.

Mr Wilson : Which is why we then took the decision to conclude it with an enforceable undertaking.

Senator ABETZ: Thank you for that.

Mr Wilson : Just wrapping it up, the allegations of violence on the picket line was not pursued, am I correct?

Mr Lehn : That is correct. We declined to investigate that further. Once we had looked at those issues, there was no obvious contravention or prima facie contravention of the Fair Work Act. Indeed, the allegations of the violence on the picket line were criminal allegations that should have been investigated by Victoria Police. I think there was some secondary issues such as potential secondary boycott, which we referred to the appropriate agencies, being ASIC and the ACCC.

Senator ABETZ: All right. Thank you for that. If I can return to question on notice No. 504. In response to question 2 and question 3, you gave us very helpful tables. In relation to the 15 employees at a particular time, that is referring to fewer than 15 employees.

Mr Wilson : Senator, can you just recall the date of that particular question?

Senator ABETZ: Supplementary budget estimates, EW0504_12. It was a written question but in the supplementary budget estimates process.

Mr Wilson : I am not sure we have that with us. We do not.

Senator ABETZ: I will test someone's memory then. You gave me a very helpful table and in it you referred to small businesses fewer than 15 employees. In each of those sections, and I was quoted a whole lot of sections, is the definition of small business in the Fair Work Act the same as it is for the unfair dismissal section where it is a headcount as opposed to full time equivalents? I am just wanting to know whether in the Fair Work Act there is consistency.

Mr Wilson : I am not sure we can answer that offhand. We will have to take that on notice.

Senator ABETZ: If you could, it would save me a bit of homework if somebody who has that sort of information readily available could assist. I refer you to No. 496, which was a question about sham contracting. We were told in the second paragraph that the answer to question 1:

The Fair Work Ombudsman completed 32 investigations into allegations 2009/10. That number increased to 100 in 2010/11.

Are you in a position to tell us what happened with those investigations of the 32? Did any result in a prosecution or were you satisfied that none of them were sham contracting?

Mr Wilson : I think we will have to take that on notice.

Senator ABETZ: If you do not have it readily available, please take that on notice. That is for both 2009-10 and 2010-11.

Mr Wilson : Right.

Senator ABETZ: Then we are told in the next paragraph that the Fair Work Ombudsman commenced audits of trading enterprises to assess the extent to which workers engaged by independent contractors should more properly have been considered employees. I hope I am not nitpicking here. Having said that, undoubtedly my Labor colleagues will say that I am, but what do you mean by the term 'more properly'? It seems to me you either are sham contracting or you are not, and therefore the term 'more properly' sort of suggests that you might be able to be half pregnant. You either are or you are not. You are either sham contracting or you are not.

Mr Wilson : At the risk of disappointing you, we do have a middle category.

Senator ABETZ: You do.

Mr Wilson : Which is those who are misclassified. That is, through lack of information or some other reason the party has managed to say that the arrangement is that of a contractor but it does not meet the tests of the sham contracting arrangements. So in our reporting we do refer to people who are sham contracting, those who are improperly classified and then those who are purely employees.

Senator ABETZ: So 'more properly' is a polite way of telling somebody that they have got something wrong where you do not see that there was anything—it was a genuine mistake as opposed to a deliberate manipulation?

Mr Wilson : Yes, that is correct.

Senator ABETZ: So there is a reason to use the term 'more properly'.

Mr Wilson : It connects with the body of work which we published in—

Mr Lehn : November last year—the outcomes of the sham contracting operational intervention report.

Senator FISHER: Mr Wilson, you said 'lack of information'—do you mean on the part of the person you believe is an employer?

Mr Wilson : I will ask Mr Lehn just to very briefly report on the intervention report. Hopefully, that will answer the issue that you are concerned about.

Mr Lehn : I think I would not be speaking out of school to say that the area of employment law in this area between contracting and genuine employment is complex. The authorities make it clear that it is subject to an assessment of each individual relationship and, in fact, the relationships can sit on a continuum from genuine contracting to employment and therein lies some of the issues and the need, I think, to use some cautious language around the term 'sham' and particularly 'sham arrangements' which are quite specific contraventions under the Fair Work Act. The report has made a distinction between arrangements that are and are not deliberate but may be somewhere in between the continuum of genuine contracting and a sham arrangement.

Mr Wilson : Let me give you an example. I might be running a hairdressing salon and I might, through lack of information, say to my prospective worker, Mr Lehn, 'You're a contractor, everyone does it. Give me your ABN and we'll put you on.' That may well be through just a lack of information. It is equally possible that if he is in a business of hairdressing it could be independent contracting. But it is more likely that, where the person is providing only their labour to the salon, that would be an employee. That middle category of misinformation and misclassifying is then distinguishable from the circumstance where the salon owner says to Mr Lehn, 'You have to be a contractor. There is no way you can be an employee. You are going to be a business person and the law says that I can do this.' In that case, that is probably sham contracting because it meets the test of recklessly—I forget the exact words—but recklessly holding out to the worker that they can be a contractor.

Senator FISHER: Thank you, Mr Wilson, I get it.

Senator ABETZ: Moving on to the answer to question 3. Was the National Sham Contracting Operational Intervention just something undertaken by the ombudsman's office? Or was this a joint operation with other departments and authorities?

Mr Lehn : It was only undertaken by our office.

Senator ABETZ: The 34 Fair Work inspectors—how many Fair Work inspectors are there?

Mr Lehn : I do not have the answer to that.

Senator ABETZ: The 34 was not the total complement of Fair Work inspectors, so were they specifically trained in relation to the issue of sham contracting? Or are all inspectors so trained?

Mr Lehn : I cannot really hazard a guess, but the sham arrangements do form part of the training of a Fair Work inspector. But in this specific instance and prior to the audit activity being undertaken, refresher training was given to those inspectors who were involved in the audits.

Senator ABETZ: Can you assist me—I know you released a report on Remembrance Day last year, but have any prosecutions flowed from that exercise?

Mr Lehn : To the best of my knowledge at this point in time, none have flowed.

Senator ABETZ: Is it anticipated that there will be any?

Mr Lehn : It is anticipated.

Senator ABETZ: Are you at liberty to tell us how many?

Mr Lehn : There are a number of factors that impact on whether they will actually be filed in court, so I would be hesitant to give a precise number.

Senator ABETZ: A few? Many?

Mr Lehn : Consistent with the report, I think we identified or we indicated in November last year that about seven enterprises may have contravened the sham arrangements.

Senator ABETZ: How many were checked?

Mr Lehn : In total, 103 in total of which 92 actually engaged contractors.

Senator ABETZ: And you targeted those who you thought might be the most likely to be non-compliant?

Mr Lehn : In some instances, yes.

Mr Wilson : If I can return to a subquestion you asked, which was the number of inspectors. Within our own agency we have roughly 230 or so people and that is their primary job. There are then probably about 180 or so through the state partner agencies in New South Wales, Queensland, South Australian governments as well.

Senator ABETZ: And none of those agencies' personnel were used for the sham contracting investigation?

Mr Lehn : No, they were not.

Senator ABETZ: Thank you. We were told in response to question 4 that you are currently developing an interactive online assessment tool to assist workers and business in identifying. The assessment tool is scheduled for release in February 2012. And here we are in February 2012. Has it or has it not been? Or is it anticipated that February 2012 will be the launch date?

Mr Lehn : I am pleased to announce that the online assessment tool is live on our internet service.

Senator ABETZ: Very good.

Senator FISHER: Very good.

Senator ABETZ: So it seems as though one agency in Fair Work can stick to time lines and deliver.

Senator Collins : You did not use the word 'promise' this time.

Senator ABETZ: They were saying 'scheduled for release' so that was the indication given to us. I think we are slowly making up time, but I have finished with the—

CHAIR: I just want to follow up on the sham contracting, before Mr Lehn goes. Senator Abetz asked you whether you identified people who were likely to engage in sham contracting. You said 'partially'. I am not quite sure what that means.

Mr Lehn : I think, as I understood the question, the question was around whether some of the enterprises that we selected, selected because we suspected they may have engaged in sham arrangements. The answer to that is—

CHAIR: As individual organisations or the type of industry?

Mr Lehn : In some instances these corporations, these companies, had received a letter of caution in the past about the arrangements and therefore we had a suspicion that the arrangements were not genuine and in those circumstances, on the receipt of a letter of caution, the statutory defences would no longer be available to them. In that respect they were selected for a follow-up audit activity as part of this campaign.

CHAIR: How were the others selected?

Mr Lehn : In some instances we selected companies based on observing on internet sites that they were recruiting personnel and those personnel required particularly ABNs and we also had a random sample in there as well. It would be fair to say that the selection methodology—I was at pains to point this out in the report—meant that we cannot use this data as any sort of statistically reliable interpretation of the prevalence or otherwise of these arrangements, because of the way the industries and the enterprises were targeted and selected.

CHAIR: There is a final report out on this.

Mr Lehn : Yes, it was published in November 2011.

CHAIR: Is that what has been circulated? Or you circulated information as a consequence of the report?

Mr Lehn : No, the report has been circulated. It is available on our internet.

CHAIR: Okay. That has got all that information in it?

Mr Lehn : It does, yes.

CHAIR: Thank you for that.

Senator FISHER: Chair, can I ask one more?

CHAIR: Yes, you can, Senator Fisher.

Senator FISHER: Thank you, Chair. So when you have members of the ombudsman's office surfing the net to look at those businesses that might actively be recruiting, are you doing that within a focused industry? For example, an industry that you might deem to be at risk of falling foul of the laws or are you doing that—how else are you deciding which websites you might take a peek at?

Mr Lehn : I cannot speak for Mr Ronson and the activities of the targeting team, but certainly in this particular campaign it was confined for the purposes of the campaign. It was confined into the three industries that we had nominated as being part of the audit.

Senator FISHER: All right..

CHAIR: Unless there are any other questions, I think, Mr Wilson, we are done with the Fair Work Ombudsman. Thank you to you and your officers for the appearances before estimates today.