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Education and Employment Legislation Committee
06/05/2016
Estimates
EMPLOYMENT PORTFOLIO
Fair Work Ombudsman

Fair Work Ombudsman

[16:50]

Senator CAMERON: Welcome, Ms James, Ms McAlary-Smith and Mr Scully. In the budget, your budget will fall from $187 million to $170 million over the forward estimates. Is that correct?

Ms James : Next year our budget will be reducing by $4 million. I will ask Mr Scully to set out a total figure over the four years. Is that what you are after?

Senator CAMERON: Yes, a total figure over the forward estimates.

Mr Scully : The FWO's funding from government is set out on page 132 of the portfolio budget statements. It shows that the funding for the organisation is reducing from $108 million for this current year, 2015-16, to $105.4 million in 2019-20.

Senator CAMERON: What about the forward estimates?

Mr Scully : That is the forward estimates, so that is through to 2019-20. It is $2.6 million across from 2015-16 through to 2019-20.

Senator CAMERON: Does that include any efficiency dividend?

Mr Scully : It includes the efficiency dividend that is reflected in the portfolio budget statements.

Senator CAMERON: What are the implications in terms of your capacity to service your obligations under the act?

Ms James : Our budget has been on a downward trajectory for some time now. We have had something in the realm of about 21 per cent reduction over the last five years, so we have become quite good at finding efficiencies and finding better ways of working. We will be able to continue to deliver our statutory functions within our current budget through a range of means. I would say I would not be expecting that we would be able to do any more with the current budget and with the reductions that are anticipated, but we certainly feel we will be able to continue to deliver on our statutory functions within our budget allocation.

Senator CAMERON: I suppose that is a bit of a guesstimate, because if there is another 7-Eleven type issue in another industry that creates more pressure, does it not?

Ms James : Certainly, but we allocate resources to where the priorities are.

Senator CAMERON: So they could be the priorities if it is a media priority, a political priority, but day-to-day problems for individual workers—do they come last?

Ms James : Certainly not. They, I would suggest, come first for us. We deal with a number of people who come to us for help in a number of ways, but we are, for example, increasingly using online material to assist people. Our website has had 13 million visitors so far this year, which is up on last year. We are looking at helping more and more people in online interactions. We are looking at getting people, when they phone in, more tailored support, I guess. So we are finding better ways of servicing them that are also more efficient for us, if you like.

Senator CAMERON: Given the widespread exploitation of workers that we have seen reported over the last number of years—underpayments, nonpayment of wages, sham contracting, are you satisfied that you are on top of all that and that you have sufficient resources to deal with those issues?

Ms James : I am satisfied that we are achieving extraordinary results with the resources that we have. As I said, we do target the priorities. For example, take visa holders: visa holders have represented 72 per cent of the matters that we have put into court so far this year—that is almost three in every four of the matters we have put into court this year. We work very hard to promote those court matters and our enforcement outcomes to ensure that we are having a deterrent effect. We are working very hard to leverage supply chain pressures and other pressures to work with communities and with employers and industry to tackle noncompliance with workplace laws.

Senator CAMERON: I suppose this is like trying to hold back the tide. These are huge issues that you are dealing with and they just keep coming at you, don't they?

Ms James : Certainly there are industries and sectors where noncompliance is a particular problem. I said at a conference earlier this week that most employers do want to do the right thing and a lot of the time it is about assisting them to understand the laws, but we do find in some industries and sectors there are people who are deliberately exploiting workers in order to get a competitive advantage. That is why we prioritise those areas.

Senator CAMERON: Yes, but there is a limit to what you can do, isn't there?

Ms James : There is a limit to what every regulator can do. I have put on the record in previous hearings of this committee that certainly if I had more funds I could achieve more. There is no doubt about that, and no regulator worth their salt would say anything different, I imagine.

Senator CAMERON: If you had a 20 per cent increase in your budget, workers who are being exploited would have a better chance of being looked after by the Fair Work Ombudsman. I think that is just a matter of fact, isn't it?

Ms James : Certainly we could achieve more and better results for more people with more funds. There is no doubt about that.

Senator CAMERON: If that is the case, Minister, why is the Fair Work Ombudsman given this situation of a 21 per cent cut in its funding?

Senator Cash: If you had listened to the evidence that the Fair Work Ombudsman gave, the Fair Work Ombudsman stated that the funding has actually been on a downward trajectory now for five years, and three of those years were obviously under your government. I am happy to take you through exactly what your government took from the Fair Work Ombudsman if you would like me to.

Senator CAMERON: No, that is fine. I am trying to deal with the principle here. I am happy with what Ms James has said: that if she had more funds she could look after more people. I am not saying that we are as pure as the driven snow.

Senator Cash: That is okay. You put it to me obviously, but in 2009-10 staffing went from 900 down to 723. I can take you through all of the funding if you like. Certainly, as the record shows, the funding has been on a downward trajectory since 2009-10.

Senator CAMERON: Yes. I am just saying that, regardless of whether it is Liberal or Labor, there is an issue that there is an end to—

Senator Cash: In saying that though, if you look at 2009-10, it is going down but 144, 135, 132, 125, 112, 111 and 108.

Senator CAMERON: Yes, I think we are all agreed on that. Do you expect to reduce any staff as a result of the efficiency dividend and the cuts that you are facing?

Ms James : I might take those separately. In terms of the dollar reductions there are a number of things that we can do to manage that. As I said, we look for better ways of working. My crew are a very innovative bunch. We also look at doing things like reducing the cost of our corporate services and consolidating our property portfolio. Significant savings can be made there. We do also need to actively manage our staffing numbers because we do have ASL targets in the budget as well. The PBS does show our ASL coming down from 702 to I think 675, so we will be needing to work to come to that level.

Senator CAMERON: I want to try to get through these as quickly as I can. Can you provide me details of the areas where labour hire companies are exploiting workers?

Ms James : I probably cannot do that in a really scientific way because when someone contacts us we do not necessarily record whether they are engaged by a labour hire company. What I will say is that, where we see high levels of noncompliance, it is more about the features of the industry than whether labour hire is involved or not. For example, we have seen labour hire used to exploit migrant workers on the Harvest Trail in agriculture, and so it is certainly a factor there. But we have also seen labour hire in other professions where we do not have high rates of noncompliance, and so it is not a problem there.

Senator CAMERON: Do you think that the exploitation in the Harvest Trail has diminished?

Ms James : We have been very active in our work on the harvest Trail, so we hope we are turning it around.

Senator CAMERON: Is there any way you can assess your efficiency and effectiveness?

Ms James : We are in the middle of a three-year campaign. At the end of that campaign, and even over the course of the campaign, we will be revisiting. With some growers, and their contractors, we are seeing improvements; with others we are not. Where we do not we are turning to enforcement action. By the time we get to the end of our inquiry, I will be able to give you some more hard numbers and evidence on that.

Senator CAMERON: Are you still providing services to Fair Work Building and Construction?

Mr Scully : Yes, we are. We provide a range of corporate services, including payroll and financial processing services.

Senator CAMERON: And what about enforcement services? Fair Work Building and Construction is now doing its own enforcement of award breaches in the building industry?

Ms James : If you are referring to the investigation and management of underpayment in the building and construction industry, we do that.

Senator CAMERON: Have you put a dollar figure on how much you have spent doing that?

Ms James : No. That work is integrated with our other work.

Senator CAMERON: You signed off. I think there was an exchange of letters, wasn't there?

Ms James : We did.

Senator CAMERON: Have they changed in any—

Ms James : They have not.

Senator CAMERON: So you signed an exchange of letters. You are also providing some office space, aren't you?

Mr Scully : There are some subleasing arrangements in place.

Senator CAMERON: Are you charging Fair Work Building and Construction for this?

Mr Scully : Yes, we are.

Senator CAMERON: Are there any other services you provide that you do not charge for?

Mr Scully : No. We charge for the services that we provide.

Senator CAMERON: So you do not make any analysis of how much it is costing you to carry out enforcement in the building and construction industry?

Ms James : We don't. We have always been responsible for enforcement compliance with respect to the domestic building industry. When we took on the extra, it was just integrated into our normal work. So we do not have a separate figure we can give you there.

Senator CAMERON: That does not sound a really professional way to do it in terms of getting your cost centres under control.

Ms James : It is actually very small. We have had a very small number of referrals from Fair Work Building and Construction since this. It is a small amount of work compared to the domestic industry.

Senator CAMERON: Can you provide me with details of the type of referrals, the number of referrals and the amount of time your officers have been engaged in dealing with building and construction industry issues.

Ms James : I am happy to take that on notice.

Senator CAMERON: What proportion of the matters you bring before a court involve labour hire companies?

Ms James : I would have to take that on notice.

Senator CAMERON: Are there any particular issues you have observed in relation to worker exploitation in labour hire companies?

Ms James : I am not even sure I would call them labour hire companies. Some of these are individuals who are operating out of the back of a car with an ABN and a mobile phone. I think that is what my colleague, Mr Campbell, said to the visa holders inquiry. Where it has been set up as a deliberate scheme to exploit workers, I do not know that I would dignify them by calling them a proper labour hire company. They are under the radar. They are very different from the legitimate labour hire industry, which is usually keen to engage and be compliant.

Senator CAMERON: How many people are in your Young Workers' Team?

Ms James : I know you are in a hurry, so if you do not mind, I will take that on notice, because I think I have figures about complaints and the like but not about actual staff in that team.

Senator CAMERON: Really? Does anyone know?

Ms James : I do not think we have that with us.

Senator CAMERON: Where are your Young Workers' teams based?

Ms James : All our compliance teams are distributed throughout the country. We would have members of the Young Workers' teams in Melbourne, Sydney and a number of other metropolitan and perhaps even regional offices.

Senator CAMERON: Can you provide on notice what they actually do?

Ms James : Absolutely.

Senator CAMERON: Do they deal with exploitation of interns?

Ms James : Yes.

Senator CAMERON: How many complaints do you receive about internships?

Ms James : Give me a moment; I might have that figure. Would you like it for this financial year?

Senator CAMERON: What figures do you have?

Ms James : I have figures for the last full financial year and for this year so far.

Senator CAMERON: Can you give me those figures?

Ms James : We received 1,205 infoline inquiries in 2014-15 in relation to unpaid work—it might be slightly broader than interns—and 576 this year, up to 31 March. We received 117 dispute forms in 2014-15 and 58 so far this year, up to 31 March.

Senator CAMERON: Do you follow through with interns about where they end up? Would you know if they get a job?

Ms James : We would normally just deal with the matter they bring to us. If they are in a placement that is not a vocational work placement or a genuine internship and is actually paid employment, that is where it is a problem. An internship that is part of a structured vocational education and training program is not an employment relationship and not a problem. It is a problem where it is an employment relationship. In examples like one that we took to court involving Crocmedia, you have young people, usually straight out of uni, working for six or 12 months in unpaid or barely-paid work. That is a different category of problem. We take that very seriously. We would deal with the matter that is brought to us. We would not necessarily follow up with what happens to them afterwards. We hope that they would move on to something more satisfactory.

Senator CAMERON: We had a discussion about a zero-tolerance approach some estimates ago. Do you remember that discussion?

Ms James : It was some estimates ago, but I think I recall it.

Senator CAMERON: I think you indicated that you do not use a zero-tolerance approach. Can you outline to me what your position was again?

Ms James : We would say that we take a balanced and proportionate approach as a regulator. As I said, in many of the issues that arise for us, if the law is being breached, it is an error or mistake. The workplace system is quite complex, and most employers are trying to do the right thing and simply not getting it entirely right. We resolve some 80 per cent of our matters through dispute resolution. We distinguish between people being confused and deliberate exploitation of workers to gain a competitive advantage.

Senator CAMERON: I think you said to me that education was one of your approaches.

Ms James : Education is extremely important in assisting people to understand how to apply workplace laws.

Senator CAMERON: You want to be balanced and proportionate, you want to educate—how about litigate?

Ms James : We put between 40 and 50 matters into court every year. We ensure that those are the most serious of matters. They are usually matters where we have been unable to get compliance through other means. They are often matters involving repeat offenders or people who are deliberately trying to avoid engaging with us, and so there is no other way to resolve the matter. They usually involve very vulnerable workers.

Senator CAMERON: Okay. How many active matters do you have in court?

Ms James : I will ask our chief counsel, Ms Webster, to come to the table. At last count it was around 86 matters currently before the courts.

Ms Webster : We currently have approximately 82 matters currently before the courts.

Senator CAMERON: 82.

Ms Webster : That is right.

Ms James : A few have come out the other end.

Ms Webster : That is correct.

Senator CAMERON: How many unions do you have before the courts?

Ms Webster : We currently have three matters involving unions before the court.

Senator CAMERON: On the issue of the Fairfax journalists: did you seek to have any dispute resolution in relation to the Fairfax matter before you litigated?

Ms James : We are certainly not litigating that matter. That is a matter that is currently under investigation, so it is not with Ms Webster. I might ask Mr Ronson, who oversees our dispute resolution processes, to come to the table. That is a matter that is currently under investigation. We do investigate matters of unlawful industrial action and we have a number of matters that we have put into court in the past.

Senator CAMERON: Have you had discussions with the MEAA in relation to this matter?

Mr Ronson : My understanding is that they are in the scope of the inquiry, but I will have to take on notice what discussion we have had to date.

Senator CAMERON: Have you had any discussions with them?

Mr Ronson : I am confident that we have, but I would like to take it on notice to be sure.

Senator CAMERON: Okay. Are you now going through your dispute resolution approach with them?

Mr Ronson : No, at this stage this is an investigation as opposed to a dispute resolution.

Senator CAMERON: So why do you need the names and the personal details of 600 employees?

Mr Ronson : In this investigation we understand that there were 528 workers who it is alleged took unprotected industrial action. We are seeking to establish and determine whether they have complied with section 417 of the act.

Senator CAMERON: Who made the decision to go to this stage, if you are not about zero tolerance and you are about education and dispute settling?

Mr Ronson : This is standard operating procedure. No decision been made at all at this point as to what, if any, enforcement outcomes will result. We are just in the investigation stage.

Senator CAMERON: So when did the investigation commence?

Ms James : The protection action occurred between 17 and 20 March—that was well publicised in the media. Standard practice for our people is that they monitor industrial action, and particularly where it may be unlawful there are a number of issues that they look for. One is, for example, whether the strike pay provisions of the act have been complied with. Strike pay provisions obviously impact on employers as well as employees. Those provisions are something that we always like to advise people about, because you need to—

Senator CAMERON: Ms James you have told me the answer!

Ms James : Sorry! I cannot help it!

Senator CAMERON: Thanks. Did the Fair Work Ombudsman receive any request or complaint from anyone, including Fairfax Media, or any employee of Fairfax Media or the minister, requesting an investigation?

Mr Ronson : No.

Senator CAMERON: So no-one complained about this?

Mr Ronson : No.

Senator CAMERON: What documents and other material do the notices require the production of?

Mr Ronson : My understanding of the investigation is that we are seeking to secure contact details of those workers who have taken unprotected industrial action.

Senator CAMERON: Do you intend having direct contact with the 500-odd workers?

Mr Ronson : It is possible.

Senator CAMERON: So you have some unprotected industrial action and you have workers out there being ripped off mercilessly in industries all around this country: how much are you going to spend on this? How much have you spent so far?

Mr Ronson : I will have to take the cost of this investigation on notice. But this is one of many investigations that our team, which is responsible for industrial action, has conducted over the last six years.

Senator CAMERON: Nobody complained: the company did not complain, the union did not complain, no employee complained. No-one complained to you; you just decided you would take this up and you are going to investigate over 500 individual employees?

Mr Ronson : Again, the answer to your question is 'yes'.

Senator CAMERON: What do you expect the outcome of all this effort to be?

Mr Ronson : We want to satisfy ourselves that both the employer has complied with the act and the employees have complied with the act.

Senator CAMERON: Can you not just sit them down around the table? Can you not just sit the union and the executive officers of the company around the table, satisfy yourself and then get on with exposing some of the rorts that go on, like 7-Eleven, and get on with some real work?

Ms James : Senator, I think we would say that all of the provisions of the act are important and deserve to be complied with.

Senator CAMERON: Sure, but you do say that you want a balanced and proportionate approach.

Ms James : We do, Senator—

Senator CAMERON: I am not sure—if there are no complaints about this, then people have done what they have done and we move on. There are no complaints from the employer, no complaints from the union and no complaints from the employees—no complaints anywhere—yet your officers are going to sit down and interview 500-plus employees, while workers are being ripped off mercilessly in areas like 7-Eleven.

Ms James : Senator, we have not made a decision to interview 500 employees. What we have done is that we have asked—

Senator CAMERON: You just told me you were going to interview them.

Mr Ronson : You asked if there were going to be direct contact and I said that it was likely.

Senator CAMERON: So you are not going to interview them, are you?

Mr Ronson : It would be unlikely that we would interview 528 workers.

Senator CAMERON: Okay. What discussions have you had with the union on this?

Mr Ronson : I need to take that on notice.

Senator CAMERON: I think if we are going to be balanced and proportionate then maybe you can start getting your priorities right. Okay, I am finished.

CHAIR: I just want to go to the Community Based Employment Advice Services. Does the Fair Work Ombudsman currently provide funding through the Community Based Employment Advice Services?

Ms James : Yes.

CHAIR: How is that funding set up?

Ms James : That funding is set up under the Community Based Employment Advice Services program. It is a four-year program that is due to terminate at the end of this financial year. However we have secured an extension to the end of the calendar year, as a transition period.

CHAIR: The former Labor government set this program up to be a terminating program?

Ms James : That is right.

CHAIR: Terminating this financial year?

Ms James : That is right.

CHAIR: Okay. Have any decisions been made relating to the termination of the funding on 30 June, aside from the six-month extension?

Ms James : The government has agreed that we can set up a new program. I just want to get this right: it will be called the Community Engagement Grants Program. It will commence from 1 January 2017 and it will involve a similar amount of funding. It is funded from the Fair Work Ombudsman's existing budget, so it is a similar amount—not identical, though—over the forward estimates.

CHAIR: Thank you. What does that actually mean for the current agencies who receive the funding?

Ms James : What it means for the current agencies is that they will continue to receive funding from us until the end of the calendar year. It does mean that we will have a new process through which organisations can apply for funding under our new Community Engagement Grants Program. That will happen between 1 July this year and the end of the year, so we can begin the new program on 1 January 2017.

CHAIR: You are telling me that current recipients of that funding, who were going to be pushed off the cliff under the previous government's funding proposal—a terminating program—have effectively been given nine months' notice by Minister Cash that is this when they are going to be able to apply?

Ms James : That is right.

CHAIR: So what will happen from 1 January 2017?

Ms James : From 1 January 2017 the new program will commence. We are still working on the details of that. The idea is that it will be focused on giving intensive support and legal advice to the most vulnerable employees throughout the country.

CHAIR: Why will Working Women's Centres be required to reapply for funding post 1 January through an open tender process?

Ms James : We will run a procurement process that complies with the Commonwealth grant guidelines. Taxpayer dollars do not just get given out to whoever I feel like giving them out to. I would be in such trouble under the Public Governance and Performance and Accountability Act if I did that. We have to have a merit-based process with clear guidelines, and we do need to also ensure we are getting value for the taxpayer dollar and that we are meeting the needs of the most vulnerable employees in the country.

CHAIR: Who sets the requirements that grants be made—obviously the legislation around good governance of public moneys?

Ms James : I suspect it is the Department of Finance who is responsible for those rules.

CHAIR: Does this requirement apply to other grants?

Ms James : Yes.

CHAIR: Is it only of a certain financial amount?

Ms James : Within the guidelines there are different rules based on amounts, I understand, but these are the current guidelines, in any case, that we will be complying with.

CHAIR: What are the benefits of an open tender? Why is that something that is considered good governance?

Ms James : It is important to test the market, if you like. We do not want to create an onerous process but we do want to make sure that we are providing the opportunity for legal advice and assistance for the most vulnerable of workers throughout the country, that we have that coverage there, we have that service available, and also that it is of a high standard and that it is integrated with our work at the Fair Work Ombudsman as well. Obviously we have a lot of experience with working with very vulnerable people, and we want to make sure that this work complements our work but does not duplicate our work.

CHAIR: I want to touch briefly on the 7-Eleven investigations. You have given some updates to Senator Cameron. Is there anything else you would like to add?

Ms James : We have talked before this committee many times about the 7-Eleven matter. On 9 April we released our inquiry report in which we talked about our findings of widespread and systemic noncompliance with workplace laws amongst the 7-Eleven network. Particularly we found that franchisees were deliberately falsifying records to disguise underpayment of wages—quite serious underpayment of wages. That report has now been released and we are working with 7-Eleven and are hopeful of reaching an arrangement that we formalise in a compliance partnership where they will commit to taking steps to sustainably clean up their network.

CHAIR: From your investigations, when does it appear these breaches started to happen?

Ms James : I guess we first started dealing with concerns about 7-Eleven back in 2009. We conducted some audits, we had some complaints, we conducted a very significant litigation—the Bosen matter—

CHAIR: In 2009?

Ms James : I think it might have been 2010 by the time that matter went into court. That was a matter which involved underpayment of international student workers and falsification of records. Unfortunately it was a matter where, although the individual directors paid their penalties, the company dissolved and we never got full penalties out of the company.

CHAIR: This committee is all too well aware of the disastrous systemic problem within this company. That was all quite public, from the Fair Work Ombudsman perspective. In terms of drafting the fair work laws under the previous Labor government, was the previous government aware of this issue?

Ms James : It was not a secret. We issue media releases about our litigations and the like. I guess what we had hoped was that, after the work we did between 2009 and 2012, the network would have taken that information on hand and cleaned up its act. That clearly was not the case, given what we have seen more recently.

CHAIR: Thank you so much. I will put the rest of my questions on notice.

Senator CAMERON: I know we have limited time and we are running over two hours over time. Senator Carr has issues that he has to deal with and the committee has another whole department to deal with. We have Fair Work Building and Construction next. I do not think anyone misunderstands my position on Fair Work Building and Construction—

CHAIR: Your passion, Senator Cameron.

Senator CAMERON: and I do not think anyone misunderstands the government's position on the CFMEU. We could spend a couple of hours on that or we could move on to the next agency, but it is certainly a call for the government and the chair. I am happy to wrap it up and excuse the Fair Work Building and Construction.

CHAIR: I note Fair Work Building Industry Inspectorate has just entered the room. We have just become aware that you are not required at Senate estimates. Our sincere apologies for you being called and having no questions, but we hope you get your flight home. We do apologise for that.

Senator O'NEILL: I have a question for the Fair Work Ombudsman on notice. I would like an update on 7-Eleven. I do not need an answer now. You can take it on notice and provide an update.

Ms James : We did cover it really briefly before you came into the room. We are happy to provide you with more on notice.

CHAIR: That being the case and seeing that we are swapping complete departments, I suggest we go to the dinner break half an hour early, if that suits senators. Thank you, Employment, and all the agencies. You are all free to go home.

Proceedings suspended from 17:27 to 18:30