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Thursday, 22 March 2012
Page: 3976

Ms LEY (Farrer) (11:42): —I am pleased to speak on the Fair Work Amendment (Textile, Clothing and Footwear Industry) Bill 2012 and express the coalition's very real concerns. I must begin by picking up on the disingenuous remarks of the minister at the end of his speech where he indicated that if you are doing nothing wrong then you have nothing to fear. In fact, by extending the provisions of this bill to independent contractors, and I do not just mean people who work as outworkers but people who might have recently graduated from a fashion design course at university and be designing a new Australian label in their own home, they will be caught up and described as outworkers and forced to apply the principles of an employer-employee relationship to somebody that they may engage just to sew something that they have designed and bring it back to be considered or put it into a fashion show. The suggestion that if you are doing the right thing already you have nothing to fear is not a good one from the minister.

I want to make it very clear that nobody in this House, and that includes the coalition, supports any type of sweatshop labour in Australia. Nobody in this House approves of the exploitation of generally migrant women. Nobody in this House approves of the most vulnerable workers being taken advantage of. But that is not really what this bill is about, and that is not really why the minister is bringing this legislation to the table today. Just by way of background on the bill itself, it extends the operation of most provisions of the Fair Work Act to contract outworkers in the textile, clothing and footwear industry by deeming contract outworkers to be employees. It provides a mechanism to enable TCF outworkers to recover unpaid amounts, including from contractors, up and along the supply chain. It extends specific right-of-entry rules that apply to suspected breaches affecting outworkers which allow entry without 24 hours notice to the TCF industry and it enables a TCF outwork code to be issued.

The TCF industry, particularly the garment industry, has become dependent upon and structured around subcontracting, outsourcing and the prolific use of outworkers or home based workers, most often migrant women with limited English skills, forming supply chains of manufactured items with each other for final completion and distribution to retail outlets. That is a fact. The development of supply chain production systems through subcontracting methods has posed unique challenges to the traditional award based and state and territory based occupational health and safety systems and the worker compensation schemes as well. We accept that. However, we do not accept that the situation has not had considerable adjustments to it and that the conditions that once did exist for so-called sweatshop workers do not exist and are in fact against the current provisions of the Fair Work Act.

I only have to go to the minister's second reading speech in the Senate to see that he clearly makes the point that the Fair Work Act already contains a number of important protections for TCF outworkers, including scope for awards to include targeted outworker terms and enhanced right-of-entry arrangements. Additional entitlements and protections for outworkers are already contained in the Textile, Clothing, Footwear and Associated Industries Award. So it is not correct to suggest that if we do not move on this legislation this group of, yes, vulnerable workers are somehow unprotected. They are not.

When we are faced with evidence of endemic and inappropriate conduct in workplaces in a specific industry the coalition are always willing to consider industry-specific legislation that addresses that conduct. It was on this basis that we maintained protections for outworkers in the textile, clothing and footwear industry in various iterations of workplace relations legislation between 1996 and 2007. It was on this basis that the coalition implemented the workplace legislation specific to the building and construction industry so recently wound back by the government. So we do know there are specific provisions in the Fair Work act that protect outworkers and we know that there are equivalent provisions in state and territory legislation.

But the whole point of this is: why does the government feel it necessary to introduce additional amending legislation to the Fair Work Act when the Fair Work Act itself is already the subject of a post-implementation review—a long and exhaustive process? Perhaps it is because the government does not want to see what that review will finally come up with. The reality is that the modern award system is failing in many areas. When I say 'failing', I mean that it is not passing the government's own disadvantage test. It is in fact reducing the wages of a range of lower paid workers in society. So in the middle of a process where the government is reviewing its own Fair Work Act, and spruiking that review with every step it takes, it is inserting this specific piece of legislation about the textile, clothing and footwear industry into that act. We in the coalition say, 'Bring it on when you bring out the review of that act. If there are problems with this, introduce them at that stage.'

I then come back to the rationale for the legislation that we are seeing here today. The minister just now and the minister in the Senate have both mentioned that it relates to two reports. Its justification, as proposed by the minister at the time, Minister Evans, was based on a reference to a 2007 report by the Brotherhood of St Laurence and a 1996 Senate economics reference committee inquiry. Both these reports had been completed prior to the passage of the fair work bill. If these reports constituted such a strong case for this proposed bill then why has the government waited until now to act? Why did the government not address those concerns as soon as it had its first legislative opportunity, which was the introduction and subsequent passage of the Fair Work Act? I put it to you, Deputy Speaker, and members of the government that there was no problem to correct at that stage, that the protections that were already in place were sufficient.

I want to come now to the concerns that were expressed by those who made submissions to the Senate review of this legislation. The government does not like its legislation being referred to Senate committees because it does not like the truths and the realities that come forward from people who live and do business in the real world. It was reluctant but, yes, we got the Senate inquiry up. However, the inquiry's process was guillotined at the first opportunity and so the Council of Textile and Fashion Industries of Australia—that is, the industry body that represents textile, clothing and footwear—was not even allowed to appear at the Senate inquiry. The Textile, Clothing and Footwear Union of Australia was, and it was entirely appropriate that it was. I appreciate, as the shadow minister reflected in the Senate, that it made a professional and well-written submission and the briefing that it gave to the opposition was both those things as well. That is entirely as it should be. But why would a Senate committee prevent the industry body that looks after this industry coming to talk to senators from all sides of parliament about a piece of legislation that will make such a difference to that industry? What is the government running and hiding from? What are the deficiencies in the existing legal system?

The minister mentioned just now the Channel 9 story on a Melbourne TCF sweatshop. I am sure there were real difficulties to address, but I am sure they were in breach of the current legislation. Why is the minister relying on Channel 9 stories to move such complex legislation? The Sunday Herald Sun report on sweatshops and outworkers producing school uniforms is something else the minister just referred to. Where is the evidence base? Where is the rationale for bringing this legislation to the table if all you can come up with in your second reading speech to the House today is two media reports?

The Council of Textile and Fashion Industries of Australia, while they did not appear before the Senate committee, were nevertheless able to make a submission. They have said that the argument for introducing the legislation is based on research conducted nearly five years ago, not current evidence, and fails to acknowledge the gains made in 10 years of existing legislation and four years of investment by the federal government in Ethical Clothing Australia.

If there was such a strong case for change, why did the now Prime Minister when she introduced the Fair Work Act as minister for education and employment say:

I believe the Fair Work system is right …

We worked hard to get the balance right and I believe the Fair Work Act is right.

These amendments were not imagined for this particular industry at that time. So we are led to the inescapable conclusion that the government's motivation for this amendment is more about appeasing the trade union movement in the lead-up to the next federal election. As I said, the review of the Fair Work Act is currently underway and will pick up any deficiencies that had not been identified when the act was introduced.

I will turn to some of the submissions made by people who work closely with small businesses. They are people who took time to make submissions to the inquiry. They are people who understand the realities of life in a small business environment. I remind the House and those listening to the broadcast today that we are talking about the fashion industry, in large part, and the clothing industry in Australia. Many women, like me, really do look at the labels of the clothes they buy. We seek out labels whose clothing is made in Australia. We love the fact that we have bright young designers here in Australia, but they are threatened by this legislation. Australia has a fabulous fashion industry; we have great home-grown designers: Carla Zampatti, Sass and Bide, Dion Lee, Alannah Hill and Lisa Ho to name a few. The next generation of design superstars is threatened by this legislation.

One submission to the committee came from a young woman who describes herself—I draw directly from her submission—as an emerging Australian fashion designer who is: 'starting a label from home. The textile, clothing and footwear modern award regime and this associated amendment defines me as an outworker, despite my four-year degree in fashion from Ultimo TAFE. The catch-all modern award has a catch-all definition where anyone working from home in the fashion industry is an outworker. Yes, I can be considered an outworker if I sell to a boutique or a department store.' With this bill we are stifling the young, innovative and entrepreneurial in this country. This young woman continues:

… as a fashion student/designer, if I hand out work to a 'maker/outworker' to sample a design I am obligated by law to employ them with full benefits and entitlements, and that is against the law for me to employ them casually. Further I am aware that in the final form—

of this bill, the parliament will deem—

all outworkers to be employees for most purposes of the Fair Work Act 2009 … including the National Employment Standards, Superannuation and unfair dismissal laws. As a start-up business, in the beginning it will be challenging to pay myself, never mind employ a ‘maker/ outworker' …

who is knocking up a design on a casual basis so you can put it on the catwalk next weekend. Suddenly, the outworker becomes an employee and the designer becomes subject to all of the draconian—they are not always draconian—aspects of the legislation. It is absolutely unworkable. In trading in such an environment this woman, as she says, faces prosecution in breach of the modern award. She finally states: 'The risks are too great.'

For ladies—and it is generally ladies—who like to buy fashion labels in Australia, I want to place on the record that it is that activity that is under threat from this legislation. It was not mentioned by the Minister for Employment and Workplace Relations when he gave his second reading speech earlier, and it was not mentioned when this bill was introduced in the Senate, but it is clearly something that would be scooped up by the catch-all provisions of this legislation.

Making a submission to the Senate inquiry was Apl Financial Pty Ltd. They are chartered accountants who deal with small businesses on a day-to-day basis, unlike this government. They have a unique insight into the difficulty of applying some of the fair work legislation to the real world. They state:

The Fairwork outworker legislation is so restrictive and draconian that it is no longer viable and administrative possible to engage outworkers.

Why? They state:

The amendment deems outworkers to be employees …

If the amendment is passed then outworkers and the contractors supplying the work will be required to choose between complying with the Income Tax Act and the Fair Work Act.

That is quite a neat point. There are no amendments to the Income Tax Act to take away from the real world situation where you are either an employee or an independent contractor. That is decided under the Income Tax Act. It is a matter of fact, not a matter of interpretation. Their submission is right: it is not possible to comply with both. They state:

The amendment will cause the direct costs of using outworkers to increase … Businesses engaging outworkers will now be liable for unfair dismissal claims.

There is no research to indicate that the exploitation of workers in the clothing industry is greater than other industries.

There is no research which defines the number of outworkers in Australia.

Apl Financial's submission continues:

How can such a situation arise; an industry in crisis, no definite knowledge of whether a problem exists, no definite knowledge of the size of the problem, introduction of draconian legislation which will place further costs on production to be carried by small business which cannot be complied with and will not fix the issue.

Because people who operate outside the law, as I am sure we saw in those media reports that the minister quoted, will continue to operate outside the law. The submission continues:

The major proponent of the legislation is the TCFU(Victoria).

A review of the audited financial statements of the union for the years ended 30 June 2004 to 30 June 2010 shows a 48% fall in membership to 2,617 members.

On current trends by 2015 membership of the TCFU will be nil.

It appears that the reduction in membership income is being replaced by government funding.

For the year ended 30 June 2010 the union received $1.15 million of funding.

The TCFU is fighting for its survival.

Is the exploitation of outworkers issue a ruse run by the union so the government has a reason to keep funding the union?

This is a question that has been raised in submissions to the committee. It is a question that I am not necessarily taking a position on, but is one that needs to be put on the table so that the House can understand all aspects of the situation in relation to this legislation. As Apl Financial said in its submission:

Special provisions in the Act are not required protect outworkers. The general provisions of the Act together with the Contractors Act and the Income Tax Act are adequate to prosecute and shut any business exploiting outworkers

There are many reasons this legislation will not improve the conditions of outworkers. That is what we should come back to. As I said at the outset, nobody in the coalition supports sweatshops or the exploitation of vulnerable workers, but we do want to make sure that we do not shut down an industry altogether. Perhaps it will become too difficult—too expensive, too overburdened with paperwork, too unrealistic. The minister mentioned a code of conduct. It sounds good, but my goodness: imagine the paperwork associated with that code of conduct. Some regulations will probably come in later on that will require an enormous amount of bureaucratic compliance to be done by those who work in this industry. Regarding the supply chain recovery of money aspects of this bill, you might be performing quite well in your position in the supply chain of clothing manufacture, but now all of a sudden you can be caught up as a notional employer and be required to fix one of the wrongs that has been done by somebody further down the supply chain whose activities you have no knowledge of. That is really quite ridiculous.

The clothing industry has lost 13,000 jobs in the last 12 months, according to the Textile, Clothing and Footwear Union of Australia. With the high Australian dollar and the global financial crisis, designers and Australian manufacturers cannot afford a further impost on their production costs. As one manufacturer advised, 'We will stop manufacturing in Australia and just import all our garments from Asia.' Anyone involved in the clothing industry and the designer fashion industry has seen that trend inescapably over the last 10 to 15 years.

Manufacturers who remain in Australia and who endeavour to comply with the additional red tape will of course pass part of the cost of compliance on to the outworkers, thus reducing their income. How counterproductive is that? As designers and manufacturers move work to Asia there will be less work for the outworkers. These changes are dramatic and will increase production costs substantially, which will cause businesses to fail, reducing the work available to outworkers. The Fair Work Act will create a situation whereby the cost of preparing and monitoring the paperwork on small, low-volume production runs will be greater than the price the designer will be prepared to pay to have the garments manufactured.

Unethical, unprofessional and disreputable businesses that exploit outworkers are not concerned with government legislation, because, as I said, such businesses will always find a way around legislative changes. When such businesses are prosecuted, as we see all too often, the assets are dissipated.

According to the Textile, Clothing and Footwear Union of Australia there are now sections in the act covering instances where an outworker is exploited, the contractor is prosecuted and all funds have disappeared. Then the organisation or individual providing the contract to the contractor is liable. Liability continues up the supply chain until funds are available to meet the underpayment and penalties of up to $30,000. If you are a person of high integrity and ethical standards with a good reputation you would have to consider your position now in that supply chain, as well as what you might be liable for from those further down the supply chain and what that might then do to your reputation in this somewhat precarious industry.

This legislation is nonsense; it is unworkable. It will be impossible to determine which entity or individual in the production chain should pay the underpayment and penalties. Why penalise companies and individuals further up the supply chain when in fact they have complied with all of the legislation?

We want to demonstrate our faith in the protection that the parliament, its legislation in the Fair Work Act and the albeit flawed modern award process should offer to Australia's most vulnerable workers. Therefore, I foreshadow that I will be moving amendments to this legislation that focus on quite reasonable things. One of these things is the time line within which this is introduced. In other words, it should actually wait until the post-implementation review of the Fair Work Act is completed. As I said, anything that arises from a situation in the textile, clothing and footwear industry as it now exists should be dovetailed and fed back into that review and brought to the parliament in legislation that brings other aspects of the review to the parliament. So that is one modest amendment that we will be moving.

The other amendment concerns the fact that we actually want to make sure that no-one is worse off after this legislation is passed. We are not interested in contractors being turned into employees to boost union numbers and memberships. We know that is an agenda. What we are really concerned about is the reality for these vulnerable workers. So we will be moving an amendment that focuses on the fact that they actually should not be worse off after this passes through the parliament, if in fact it does. I thank the House.