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Thursday, 1 November 2012
Page: 8874


Senator McLUCAS (QueenslandParliamentary Secretary for Disabilities and Carers and Parliamentary Secretary to the Prime Minister) (18:31): I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Fair Work (Transfer of Business) Bill 2012

I am pleased to deliver on the Government’s commitment to introduce legislation extending the existing transfer of business protections in the Fair Work Act 2009.

The Fair Work Amendment (Transfer of Business) Bill 2012 extends the existing transfer of business provisions in the Fair Work Act to certain former state public sector employees that transition into the national system as a result of a sale of assets or outsourcing of work to a national system employer.

The Government does not accept that these employees should be worse off, or that they should have their entitlements put at risk, simply because their jobs are outsourced.

The bill is a necessary response to this challenge - to ensure that these employees generally retain the benefit of their existing terms and conditions of employment by protecting them where a transfer of business occurs between their former state employer and an employer covered by the national workplace relations system.

These reforms mean that the Commonwealth will establish for the first time, a nationally consistent set of transfer of business rules for public sector employees that will protect their entitlements when they transfer to a national system employer. Employees in the Commonwealth, Victorian, and Territory public sectors are already covered by the Fair Work Act and already have the benefit of the transfer of business protections. However, those protections do not currently extend to public sector employees in the remaining jurisdictions which leaves them at risk when things like outsourcing and assets sales occur. That is why this bill is necessary and a priority for the Government.

The bill will, as far as possible, reflect the transfer of business provisions in Part 2-8 of the Fair Work Act.

The transfer of business rules under the FW Act

The transfer of business rules in the Fair Work Act reflect the Government’s clear policy intention to protect employees’ existing terms and conditions of employment where their employer changed but their work stayed the same.

These protections apply where the two employers enter into certain transactions such as an asset sale or an outsourcing arrangement.

These rules are designed to balance the protection of employee terms and conditions of employment with the interests of employers in structuring their assets and operations efficiently.

These rules also provide certainty for all parties. The arrangements they replaced were overly complex, often difficult to apply, legalistic and sometimes resulted in employees losing the benefit of their industrial instruments even though they were performing exactly the same work for the new employer. Those pre-existing rules also applied to a narrow set of business transactions - for example, they rarely covered the outsourcing of work.

The findings of the Fair Work Review

The recent post-implementation review into the operation of the Fair Work Act, which the Government publicly released on 2 August 2012, had the following to say about the existing transfer of business rules:

‘The [Fair Work Review] Panel considers there is a clear need to protect employees in transfer of business situations. The alternative is to allow employees to be exploited by the structuring of businesses and contracting arrangements.’

‘On the basis of stakeholder submissions, academic advice...analysis of cases under the provisions and an examination of the provisions themselves, the broader legislative definition succeeds in providing better protections for employees than the previous arrangements did.’

‘...the scope [within the transfer of business framework] for employers to determine the appropriate outcome for their business on application to FWA provides significant flexibility.’

The overwhelming evidence suggests that the transfer of business provisions deliver a balanced framework that provides both fairness and flexibility to employees and employers.

The Panel made one recommendation in relation to a particular aspect of the transfer of business provisions and the Government is considering that recommendation in the context of its response to the review.

What is a transfer of business?

In broad terms, the transfer of business rules apply where:

an employee transfers to a new employer within three months of their employment terminating with their old employer; and

the employee performs the same or similar work for the new employer as they did with their old employer; and

the old employer transfers assets or outsources work to the new employer, or undertakes certain corporate restructuring activities, such as movements to associated entities.

Where these conditions exist, the default rule is that the transferring employees’ existing workplace instrument transfers with them to their new employer. Fair Work Australia has broad powers to ensure that these rules operate fairly to both transferring employees and the new employer.

The bill

However, the current rules only apply where both the old and new employers are covered by the national workplace relations system. In other words, they must both be covered by the Fair Work Act.

Employees in the Commonwealth, Victorian, and Territory public sectors are already covered by the Fair Work Act and already have the benefit of the transfer of business protections. However, public sector employees in the remaining jurisdictions, Queensland, New South Wales, South Australia, Tasmania and Western Australia do not.

That is why the bill will amend the Fair Work Act to enable certain employees in these jurisdictions to retain their existing terms and conditions of employment where they transfer from a public sector employer to the national workplace relations system as a result of a transfer of business.

The bill will do this by:

providing for the transfer of employees’ terms and conditions of employment from an old public sector employer to a national system employer where there is a connection between the two employers;

preserving the transferring employees’ existing terms and conditions of employment, whether those terms are reflected in a relevant State award or agreement, by the creation of a federal instrument containing those terms and conditions and recognising service and certain accrued entitlements such as annual leave;

enabling Fair Work Australia to make orders that modify the general effect of the transfer of business rules, where appropriate;

providing for the interaction between the transferring terms and conditions of employment and the Fair Work Act, including the National Employment Standards, and other necessary transitional and technical provisions.

Preserving entitlements for certain transferring employees

Transferring employees’ terms and conditions of employment from the old employer to a national system employer will be protected under the bill through the creation of a new federal instrument - a ‘copied State instrument’.

The instrument will copy the existing terms and conditions of employment for a transferring employee where those terms are derived from a State award or agreement. This will enable those terms and conditions to transfer across to the national system with the employee where there has been a decision to sell assets or outsource work so that the employee will continue to benefit from the conditions in their existing industrial instruments.

To put it plainly, transferring employees’ existing terms and conditions of employment as set out in their industrial instrument will be protected.

The bill also ensures that a term of a copied State instrument has no effect to the extent that it is detrimental to an employee, in any respect, when compared to an entitlement of the employee under the National Employment Standards.

The bill will also generally ensure that an employee’s service with the old employer counts as service with the new employer for the purpose of determining the employee’s entitlements under the copied State instrument.

This means, for example, that an employee’s accrued annual leave entitlement is preserved when they transfer to the new employer and their entitlement has not already been paid out by the old employer.

Orders to modify the effect of a transferred instrument

Similar to the position under the existing Part 2-8 of the Fair Work Act, the bill confers power on Fair Work Australia to make orders that modify the general effect of the transfer of business rules in certain circumstances.

In particular, Fair Work Australia will be able to make orders regarding the coverage of certain instruments, including enabling transferring workplace instruments to better align with the new employer’s business operations.

In some circumstances it may also be in the interests of transferring employees and a new employer to consolidate terms and conditions of employment in a copied State instrument, so that they can apply to more than one employee. This may be the case, for example, when different instruments set out similar terms and conditions for transferring employees.

To this end, Fair Work Australia will also have the power to make orders that ‘consolidate’ various workplace instruments applying at a workplace. For example, FWA may order that a copied State instrument for a particular transferring employee is also a copied State instrument for both transferring and non-transferring employees, having regard to the views of the relevant employees and the new employer.

Conclusion

The Government takes very seriously moves by any employer to attempt to restructure their business operations that would have the effect of undermining employee entitlements. This Government will not countenance employees incurring real cuts to their pay and conditions because of decisions by their employer to sell assets or outsource work.

Employees should be able to retain the benefit of their existing terms and conditions of employment in circumstances where there is a transfer of business - that is, where their employer changes but the work stays the same.

There are some who might say that this bill is unnecessary, because employers can already agree in the course of contractual negotiations for any transferring employees to maintain their existing terms and conditions of employment with the new employer.

However, that approach does not provide certainty for employees and does not provide protection for their hard earned entitlements. It allows employers to restructure their businesses with no ongoing protection for employees’ terms and conditions.

Nor does that approach reflect the policy intent underlying the Fair Work transfer of business rules. It is not grounded in fairness, nor does it provide the nationally consistent and transparent set of rules which this bill provides.

This bill protects employees moving from the state public sector to the national workplace relations system. It does so by putting in place, as far as possible, a nationally consistent set of rules which will protect public sector employees’ existing terms and conditions of employment as set out in their industrial instrument where a transfer of business occurs between their former state employer and an employer covered by the national system.

I commend this bill to the Senate.

Personal Liability For Corporate Fault Reform Bill 2012

Today I introduce a bill to amend a number of Commonwealth Acts across several portfolios, including the Corporations Act, as part of the Government's commitment to implement the directors' liability reform - a reform of the Council of Australian Governments' (COAG) National Partnership Agreement to Deliver a Seamless National Economy.

This reform commits all jurisdictions to establishing a nationally consistent and principled approach to the imposition of personal criminal liability on directors and corporate officers for corporate fault. The initiative aims to remove regulatory burdens on directors and corporate officers that cannot be justified on public policy grounds, and to minimise inconsistency between Australian jurisdictions in the way personal liability for corporate fault is imposed in Australian laws.

This reform, agreed to by COAG in November 2008, followed earlier reviews that had recommended reform.

Calls for reform stemmed from the recognition that there appeared to be an increasing tendency for personal liability provisions to be introduced in Australian law as a matter of course and without robust justification.

These provisions had the potential to operate in a manner that was both unfair and inefficient - unfair in the sense that an individual could face a criminal penalty for a breach of the law by a corporation when the individual had no knowledge of or control over the breach; and inefficient to the extent that company directors could face excessive risk of personal criminal liability, which may detract from their strategic and entrepreneurial responsibilities.

A further concern was that inconsistencies in the standards of personal responsibility both within and across jurisdictions were resulting in undue complexity and a lack of clarity about responsibilities and requirements for compliance.

For example, directors and corporate officers have been held to be personally liable in one jurisdiction for an act by a company, but not in another; or been held personally liable for an act by a company in day-to-day business operations, over which they could not reasonably be expected to exercise control.

To address these concerns, COAG endorsed a three-step approach to reforming derivative liability in Australia.

First, COAG endorsed principles to guide jurisdictions when imposing personal liability for corporate fault. Guidelines were also developed to provide greater clarity and consistency in the way the COAG principles would apply.

Secondly, all jurisdictions would undertake a thorough audit of their legislation against these principles and recommend amendments to bring them into line with the principles.

The outcomes of the audits by the Commonwealth, States and Territories were also collectively reviewed to ensure that the principles had been applied appropriately.

Thirdly, jurisdictions would commit to implementing the audit outcomes by introducing legislation to make any necessary amendments to their laws by the end of 2012, and to apply the COAG principles when drafting future legislation.

The COAG principles and guidelines, which have guided the amendments in this bill, are concerned with personal liability provisions that hold directors and other corporate officers criminally liable because an offence has been committed by the corporation. They are not concerned with circumstances where such officers may be held liable as a result of their personal involvement in the commission of an offence.

While recognising the need for a more principled and consistent approach to the imposition of personal liability for corporate fault, this need has been balanced against the importance of holding corporate officers directly accountable to the community for the actions of their company, where there are important public policy considerations at stake. Personal liability would typically be justified in circumstances where directors and corporate officers have been negligent in relation to their company's contravention, resulting in significant public harm, and where the liability of the corporation is unlikely on its own to sufficiently promote compliance.

Examples of significant public harm include corporate misconduct which could result in significant harm to the national economy, to public health, or to vulnerable persons. For this reason, a number of offences that provide personal criminal liability for corporate fault will remain in the law.

In assessing the appropriateness of the directors' liability provisions in the Commonwealth legislation against the reform principles, we have taken into account a number of factors - including the seriousness of the harm a corporate offence would cause, the effectiveness of only penalising the corporation, and the general appropriateness of punishing the individual for the conduct of a corporation.

To give effect to the COAG directors' liability reform commitment, the bill removes a number of provisions in Commonwealth legislation - such as in Corporations Act and the Therapeutic Goods Act. The bill also reforms various provisions either to remove criminal penalties, or to make clear the circumstances in which criminal penalties will apply.

Minco Approval

The Ministerial Council for Corporations has been consulted in relation to amendments to the Corporations Act, and has approved the amendments contained in this bill.

Summing Up

In summing up - the Personal Liability for Corporate Fault Reform Bill amends Commonwealth legislation to bring it into alignment with the COAG principles and guidelines for the imposition of personal criminal liability for corporate fault. This bill will ensure that a person is only made criminally liable for the fault of a corporation where it is fair and reasonable to do so after taking into account:

the nature of the harm that the crime would cause;

the extent to which corporate officers can directly control the relevant corporate conduct; and

the effectiveness of other forms of penalties and enforcement against the corporation alone.

This reform, once implemented by all jurisdictions, will significantly reduce the overall number of laws containing directors' liability provisions nationally.

This will reduce the regulatory compliance burden on businesses, while at the same time retaining laws that are necessary to ensure that company directors and other corporate officers take reasonable steps to ensure that their companies comply with its obligations under the law.

This is an important red tape reduction that will benefit all Australian businesses. In particular, the application of a consistent set of principles by the Commonwealth and all States and Territories will provide greater certainty for companies that are subject to both Commonwealth and State or Territory laws, and those that trade in multiple jurisdictions, thus helping to promote a more seamless national economy.

I commend this bill to the Senate.

Ordered that further consideration of the second reading of these bills be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.