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Education and Employment References Committee
24/09/2015
Australia's temporary work visa programs

CAMPBELL, Mr Michael, Deputy Fair Work Ombudsman, Fair Work Ombudsman

JAMES, Ms Natalie, Fair Work Ombudsman, Fair Work Ombudsman

O'SHEA, Mr Tom, Executive Director, Policy, Media and Communications, Fair Work Ombudsman

WEBSTER, Ms Janine, Chief Counsel, Fair Work Ombudsman

CHAIR: Welcome. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I remind senators that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by the minister and should be accompanied by a statement setting out the basis for that claim. I now invite you to make a short opening statement of no more than a few minutes and at the conclusion of your remarks, I will invite members of the committee to put questions to you.

Ms James : Thank you for inviting us, once again, to appear before the committee. I do have an opening statement. I suspect it goes a little longer than your preferred few minutes. Given the time, I am comfortable perhaps giving a slightly abridged version and tabling the full document.

CHAIR: Thank you.

Ms James : I did, however, want to talk about a couple of things. There have been a few developments since we last spoke. I would like to, for example, table recent correspondence that I provided to the Productivity Commission in relation to their inquiry on workplace relations—their draft report. Its relevance to these proceedings is that it contains some comments from us about migrant workers and also about the impact of phoenixing on our enforcement work. It makes clear, for example, that the Fair Work Ombudsman can and does enforce fair work laws with respect to all workers in Australia irrespective of their visa status and conditions. This includes through court action, including matters involving international students working at 7-Eleven franchises.

When I first appeared before the committee on 18 May, I spoke about the fact that overseas workers are an area of focus for us. Our most recent data for the last full financial year continues to show that visa holders are overrepresented compared to their numbers in complaints and enforcement outcomes with the Fair Work Ombudsman. We understand that just over five per cent of the Australian workforce is made up of visa-holder workers. However, they represent over 10 per cent of all of our complaints. More than a third of all of our enforcement outcomes in the last financial year involved a visa holder. So that was 202 of our enforcement outcomes out of a total of 558. When it comes to the most serious enforcement outcomes, litigations, they represent 42 per cent of all of our litigations. So 21 of the 50 matters we put into court last year involved a visa holder.

It is a source of frustration to us that some of the penalties and underpayments ordered by courts as a result of our legal action are not ultimately paid by corporate employers; matters like the one involving Haider Enterprises, where just over $21,000 owing to a 7-Eleven worker will not be paid in full because the company went into liquidation after we filed the matter in court. We were able to secure a fine of just under $7,000 directly against Mr Haider, the director, and when it is paid that will be directed to the employee. But it is less than a third of what he was owed. In my might recent correspondence to the Productivity Commission, I note the challenge that illegal phoenix activity poses to our ability to enforce workplace laws. We refer relevant matters such as the Haider matter to the Australian Securities and Investments Commission for their consideration.

So now turning to our work involving 7-Eleven, which I gather has been the focus of today's proceedings. From 1 July 2009, which was when 7-Eleven first came to our attention, we have recovered over $600,000 for 182 7-Eleven employees. This has been through a number of different activities, including two separate audit activities between 2009 and 2011. It resulted in the recovery of around $140,000 and also one litigation—the Bosen matter. We had hoped that these activities had resulted in the franchise cleaning up its act. However, in 2014 we again became concerned about some of what we were seeing in the 7-Eleven network. So we commenced a broader inquiry—a piece of work that does not merely respond to complaints but involves proactive compliance work. Our aim here is to assess the root cause of the noncompliance that we have been hearing about.

We are wanting to assess how the 7-Eleven franchise model impacts on franchisee behaviour and whether there is liability beyond the franchisees who are the employers of these workers. We have conducted site visits at 20 stores and identified serious concerns with a number of them. Our inquiry audits from this recent inquiry so far have recovered over $200,000 for 30 employees. We have commenced two matters in court and we anticipate there will be further court action. We have had discussions with 7-Eleven head office as part of this inquiry and we have expressed our concerns about what we have seen so far. This is a continuing inquiry. We have ongoing investigations.

As was the case with our Baiada inquiry, this inquiry will result in a report which will be made public. It will contain recommendations that are designed to achieve real sustainable change in the 7-Eleven network to ensure the franchise is both accountable and compliant. This matter, like the Baiada matter and like our work on the Harvest Trail, has a number of features in common. It involves a network or chain of entities, where there is an entity or person at the centre or at the top who benefits from the labour of workers for which it is not legally or directly responsible. They often involve low-skill work, vulnerable workers and tight profit margins. These arrangements, whether they be franchising supply chains, outsourcing or procure almost arrangements, are legal. They are utilised by many legitimate operators in quite lawful ways and for quite legitimate reasons.

But we have also seen cases where some operators take advantage of these structures to reduce their labour costs by paying unlawfully low rates of pay in order to gain a competitive advantage. The settings across a range of frameworks—workplace laws, visa settings, corporations law, franchising regulation—can be harnessed in a way that results in vulnerable workers being exploited. But those who profit from the unlawful, black-market rates of pay are not ultimately held to account. In the last hearing, Senator Rice asked me about systemic problems. In response, among a number of things, I said that if you want sustainable outcomes, if you want to change behaviour over time, it takes focus and effort and investment across a number of regulators and interest groups working together with a clear mission to stamp out deliberate exploitation of workers.

Businesses, communities and industries that care about their reputation work with us to achieve this goal. We work closely with a number of other agencies and organisations, sharing information, referring relevant matters and undertaking joint activities. I strongly believe that this is one of the keys to achieving real and sustainable change in sectors where deliberately exploitative conduct is occurring. I have been asked by this inquiry on both occasions that I have appeared whether more resources or greater powers are necessary. I have noted that we received some significant results within the current framework—$1.6 million returned to the hands of visa-holders last financial year, for example—but I have also said I could achieve more with more resources and higher penalties and enhanced powers. And I have noted that there are some powers that other regulatory agencies have that my inspectors do not have, such as the power to compel people to speak with us.

I also observe that other frameworks, such as immigration and corporations laws, have access to higher maximum penalties and to both criminal and civil sanctions. The Fair Work framework contains mostly civil penalties, which corporations in particular can avoid through phoenixing. A case in point is record keeping. We know that an absence of records or false records is at the heart of the 7-Eleven matter. The maximum penalty under the Fair Work Act for knowingly making false or misleading records is 20 penalty units, which amounts to $3,600 for an individual. That is the maximum penalty an individual can have imposed on them. On the other hand, if one looks at the Migration Act, if you provide false or misleading information relating to a non-citizen, there is a maximum penalty of 1,000 penalty units—a fine of $180,000 for an individual—or up to 10 years imprisonment.

The Fair Work Ombudsman is committed to continuing to tackle the exploitation of visa workers on all fronts, no matter what the legal and operational settings are, and will continue to treat this as a high priority for the agency. We welcome the opportunity to continue to engage with the community and with this committee in relation to our work.

CHAIR: You are looking at liability beyond the franchise. Does that mean you are looking at taking legal action?

Ms James : We are looking at identifying breaches of the law by any person. We have instituted proceedings against two 7-Eleven franchises quite recently—and there was a third one earlier on, in about 2009. I said that we have more in the pipeline, but I am not going to comment on investigations that are underway. Certainly—and I know it has been aired a little—accessorial liability is an option under the act. Section 550 says that a person involved in a contravention can also be found to have breached the civil remedy provision. It was noted in a recent interview with Jacob Varghese, from Maurice Blackburn, that this is a high bar. Indeed, mere knowledge is not enough. Our chief counsel, Janine Webster, is able to talk more about this. But if we find evidence that supports a person having been knowingly concerned in a contravention of the act, then we will certainly use accessorial liability. In almost three-quarters of the matters we put into court last year—something like 72 per cent of the 50 matters—we did involve an accessory in the matter as well as the employer.

CHAIR: You would no doubt recall my frustration that you do not put enough matters into court—and I have said before that I do appreciate that it is difficult. Why have you had to go to court with 7-Eleven? Is that because there was no cooperation? What precipitated you taking the court action?

Ms James : We have actually had a range of responses. In the case of Mr Haider, we did not have cooperation. We served two formal notices to produce on Mr Haider and both of them were not complied with. We served a compliance notice and that was not complied with, so we went to court and then the company was liquidated. In another matter though—I do not recall the name, but someone else will—we achieved an enforceable undertaking with the store owner, the employer, and I believe he has actually paid the $30,000 that was owing to his workers. In that case we did achieve very good cooperation. So we have seen a range.

CHAIR: Is that enforceable undertaking on your website?

Mr Campbell : Yes.

Ms James : I think it is called PSP enterprises.

Mr Campbell : PSP International Trading Pty Ltd.

CHAIR: As part of the enforceable undertaking, you often require that the employer make some kind of community contribution. Did you on this occasion?

Ms James : I think we would need to take that on notice.

CHAIR: That is fine.

Ms James : The enforceable undertaking will be on the website. I think, in this matter, the franchisee was under considerable financial pressure and so we were primarily concerned with putting money back into the hands of the workers, but we will check that and come back to you on notice.

CHAIR: I think you said in evidence that you are looking at the franchisee arrangement.

Ms James : We are, as part of this inquiry.

CHAIR: When will that work be finished?

Mr Campbell : Early 2016.

CHAIR: Can you give us any heads-up on your work so far?

Mr Campbell : Ms James pointed to some of the results of the inquiry thus far.

CHAIR: Let me be more specific: Mr Allan Fels has said publicly, on the Four Corners report, that he does not believe there is enough in the franchisee arrangements to enable the franchisee to pay correct wages pursuant to the award. Is that something you are looking at?

Mr Campbell : Not directly. If that is evidence that is put by, I suppose, the operators of the franchises then we will no doubt report on it.

CHAIR: Mr Fels is a well-known, revered Australian. If he makes a comment like that, you would take some notice of it, so why wouldn't you look at that, on the basis of the comments he has made?

Mr Campbell : That might be a mitigating factor in a prosecution that we put before the courts, but an employer has an obligation to pay a wage irrespective of the nature of the commercial arrangement they have entered into to run their operation. It is interesting, but it is not something that would necessarily stop us from commencing proceedings against the franchise.

CHAIR: I was not suggesting that. Ms James said that you are looking at the franchise arrangement. What are the key things you are looking at?

Mr Campbell : We are trying to work out if there are systemic issues within the franchise arrangement which lead to these outcomes or encourage these types of outcomes. We do not have that evidence to put to you today.

CHAIR: So you would be looking at the percentages that the head franchise takes, the available amounts left to the franchisee, what they have to pay in wages and so on and so forth?

Mr Campbell : They are matters that, if they become apparent through the inquiry, we will report on in a way similar to what we did with the Baiada inquiry.

CHAIR: Ms James, you said that you expressed concern to the head office of 7-Eleven. Who did you express that concern to and when?

Ms James : I will check the names of the individuals that we spoke with, but I think one of them was one of your witnesses earlier today. We have met with Natalie Dalbo, the national operations manager, on two occasions, and there have been a number of conversations as well. In fact, in a conversation in May this year, in a meeting at our own initiative, we met with Ms Dalbo and Sue Owen to discuss our preliminary findings.

CHAIR: You said that you expressed concerns. How did you express that concern and to what level?

Ms James : We expressed strong concerns about the conduct that we have seen so far. It is an ongoing piece of work and so I do not want to go into too much detail. When we carry out these processes, we always give due process, so we give businesses the opportunity to work with us and respond. I will observe that that was in May and that was some time ahead of the recent publicity.

CHAIR: Would you have said that you think there is a systemic problem?

Senator RICE: That was my question.

Ms James : I was not at the meeting, and these are without prejudice discussions that we have in these early stages. We are pleased, of course, that 7-Eleven is engaging with us, but I guess we would also say that we are still working on our findings and we have a number of investigations under way. They would have been under no illusions about the extent of our concerns and the nature of the findings in relation to those 20 stores that we visited.

CHAIR: Does it surprise you that today in evidence they have said over and over again to all senators asking questions that they had no idea about the level of wage fraud?

Ms James : I am not going to react with surprise or anything else to what someone else may or may not have said—

CHAIR: But would it concern you that they said that?

Ms James : I would have thought, based on the conversations we have had up to that point, that they would not have been surprised. But I guess they have been carrying out their own work as well and there are a number of bases on which they might form their conclusions that might be different from ours.

CHAIR: What do you say to their evidence that pre the Four Corners program and post the Four Corners program there was a 16 per cent jump in their payroll? I think it is more than that, but because they have given us the figures I have not had a chance to work it out.

Ms James : I could not comment on that. There are obviously some complexities in the way they manage their business, and there might be a number of reasons for that.

CHAIR: They certainly did not tell us that they had put on more staff. They said there had been a 16 per cent jump and that the payroll at that point was similar to the payroll that they paid last week, which was something like $2.485 million, and that prior to the Four Corners program it was $1.84 million.

Ms James : I look forward to reading the transcript. I am sure my inspectors will as well, and that they will find this information a very interesting source for our ongoing inquiries.

CHAIR: When you read the transcript—perhaps you could take it on notice and make some comment about a 16 per cent jump in pay?

Mr Campbell : I would just note—to add to Ms James' response to your question about our meeting with the company in May—there is no doubt that we explained to the company at that point that as a result of our 20 interventions at the various stores in Sydney, Melbourne and Brisbane we found compliance issues and that there were enforcement outcomes, compliance notices, infringement notices, enforceable undertakings being likely and beyond. It would be unlikely that they would have left that meeting without some appreciation that franchisees were in the gun.

CHAIR: Ms James, you said that there was a network or a chain of events that were quite similar—and I agree with you, and you did a beautiful piece of work on the Baiada labour hire chain—and that at some point there is a benefit to the head office. What is the benefit of this wage fraud to the 7-Eleven head office?

Ms James : I do not want to make comments that might go to people's motivations. I will just make some observations—

CHAIR: No, I am not asking you about their motivations. You said there was a system.

Ms James : I am not an expert in their business model, but there are some things which I think we all know now and which are on the public record. Fifty-seven per cent of the profits that come from the stores—it might even be the takings, actually—are returned to head office. Obviously, the costs of the stores and the income of the stores has a direct contribution to the franchise or itself.

CHAIR: Senator McKenzie.

Senator McKENZIE: I think you have basically covered it.

CHAIR: Sorry. I put you ahead.

Senator McKENZIE: You did! I have been waiting for the call all day, and I have had to be last in line all day.

CHAIR: And then I give it to you.

Senator McKENZIE: Government department, I get it!

CHAIR: Senator Rice.

Senator RICE: Thank you, Ms James and others. In your ongoing investigation that you are now doing, how many of the franchisees are you now looking at?

Ms James : There are the 20 that were a part of our initial inquiry and we have a number of other ongoing lines of inquiry, so I do not have a number but I think it would probably be slightly more than that at this point.

Senator RICE: 7-Eleven told us this afternoon that they have 602 stores—

Ms James : They are a very large network, yes.

Senator RICE: We had evidence presented to us this morning by Mr Fraser, who has spoken to workers from an awful lot of those stores across the whole country, that he had yet to find a worker who had been paid properly—and I noted that if happy and well paid workers existed the 7-Eleven management would have been presenting them to us today. Do you feel that there is actually a need to be looking beyond that 20, 30 or 50, given that there are 602 stores?

Ms James : That might be one approach. Our inquiry is focused not on carrying out audits of every 7-Eleven in the country. Frankly, now that 7-Eleven head office is under no illusions—I think—about what is going on in their network, they should be stepping up and taking responsibility to do something about it. And the reports I have read in the media suggest that they are. We welcome any step that they take that will deliver unpaid wages back into the hands of workers.

A central focus of our inquiry is about the future. It is about making recommendations that will achieve real and sustainable change and bring about accountability within the franchise operations. In other words, what we are hoping is that through the engagement we have with 7-Eleven we will be able to assist them to put in place systems and processes that will ensure that this will not happen in future. We feel that the work we are doing with the information and the evidence that we have so far will form the basis of recommendations that will enable us to have that conversation with head office.

We are also pursuing legal options against the franchisees and we will also be looking for any evidence of anyone else who might be legally liable in this situation. But we also say, 'Step up and make good, 7-Eleven.' If that were being done with some accountability and transparency around it, if we were working in partnership with 7-Eleven and were satisfied that it was being done, we would not need to go and raid 600 stores. Frankly, I think I would need tenfold the number of inspectors, and possibly more, in order to do that. I do not know if that is the best way to get a sustainable outcome. However, ongoing monitoring by the franchise, with the assistance of third parties such as auditors, with some accountability back to us—which other franchises and businesses we have worked with have put in place—might bring about a sustainable change in the 7-Eleven network.

Senator RICE: Presumably, when you took action in 2009, and then again in 2014, you informed head office at that stage. What did you ask at that stage, and did they deliver on those prior occasions?

Ms James : I would have to go back and look at the detail. What I would say is that, when we have asked for things, head office has provided us with the material that we have asked for. When we carry out these inquiries, we always operate with due process. We let people know what we are doing and we give them the opportunity to engage and work with us. The best way to achieve sustainable outcomes is for the businesses to step up and take responsibility for what is going on in their networks and supply chains. If they are prepared to genuinely engage with us and work in partnership to resolve these issues then the compliance path may not be necessary.

Senator RICE: Were you satisfied that they were working with you, were genuinely engaged with you and were taking action following the 2009 and 2014 cases that you took?

Mr Campbell : There was a level of engagement. I would not say that it was lasting engagement, and it did not lead to a profound change in the instances of noncompliance that we were coming across.

Ms James : I guess what concerns me in all of this is that, while there has been engagement and many discussions, we have seen systemic and deliberate falsification of records—a pattern continuing over a number of years now. It is great that 7-Eleven are making statements to the media about the steps they are going to take and it is good that they say they are taking responsibility, but as long as this conduct is continuing within their network and as long as they are taking 57 per cent of the profits from the stores, I would suggest that there is more that they might do within their franchising model and within their business arrangement to put a stop to this conduct.

Senator RICE: We read the transcript. To me, it seemed that they were still in denial—or at least professing denial to us—about the extent of the problem. I am interested in your perspective as to whether you feel that 7-Eleven head office is with you. You said in your opening statement, 'Businesses that care about their reputation will work with us.' Are they actually doing that?

Ms James : I have not yet had an opportunity to satisfy myself of that. I mentioned that we had some meetings before the recent publicity—before the Four Corners report. In addition to that, on 31 August there were a number of communications between the CEO of 7-Eleven and my office. They requested a meeting which was to happen last week and has not yet occurred. I have not yet had a chance to put a number of questions to 7-Eleven since the recent Four Corners report and associated publicity. I would say that the jury is out. I would say that I am not buying my newspapers or water bottles from 7-Elevens at this point in time because I am not satisfied that the workers behind those counters are receiving their lawful entitlements.

Senator RICE: So, basically, you are doing your investigation and you will reach a judgement after that investigation.

Ms James : That is right. There is a lot that has happened in the last few weeks. We have not had the opportunity yet to engage with 7-Eleven. We look forward to that opportunity.

Senator RICE: With the lack of follow-up, you have now started this investigation, but you did have experience in 2009-2014 where it seemed to me that, having uncovered a little bit, there could have been a lot more that was uncovered. Was a lack of resources an issue in you not following up on other franchisees? For example, there was a store in Parkville that underpaid staff. You ordered them to pay back $90,000 in wages but you did not investigate another store that was owned by the same person.

Mr Campbell : I do not know that that is true. I do not know the case you are referring to so I cannot comment on it.

Ms James : We act on the information, intelligence and complaints that come to us. I do not want to comment on that particular one because I am not sure. I might just go back to that first body of work that we did between about 2009-2011. In the first set of audits, we had some pretty bad results. We recovered over $160,000 for about 170 workers in Sydney and Melbourne. Then head office came to us and said they wanted to do something about it, so we carried out a second round of audits in Melbourne and Geelong. We did find underpayments there but they were less. We thought that there were improvements going on. We thought that the work we had done with them, and the education, gave them the opportunity to work with their franchisees to make sure that they understood their obligations. So it is disappointing that we invested so much at that point in time to find, in moving forward into 2014, that we are seeing the same kind of conduct—and perhaps even on a larger scale. That is disappointing. It is very frustrating for my inspectors and my lawyers who work very hard to put matters into court and investigate these matters. I cannot emphasise enough how difficult it is to get evidence acceptable in a court of law when the records have been fabricated. It is very difficult. The point I made in my opening statement about the penalties around record keeping—

Senator RICE: It is extraordinary.

Ms James : is that: on one level the system is complex. For business, it means a lot of red tape. I am not going to drag someone to court because they have left a small thing off a pay slip. We work with people but we have been finding more and more—particularly in the last financial year—extreme conduct where there are no records or fabricated records. That is a very serious. Absent an employee having kept quite detailed diary notes, it is very difficult to provide evidence that is acceptable in a court with certainty of what hours they worked and what their underpayment actually amounts to.

Senator RICE: Do you think if the workers who have been underpaid were to be granted an amnesty, would that encourage more of them to come forward?

Ms James : It is a tricky question. What my people find when they are in the field is that there are lots of things that impact on whether a person will engage with us on the record or off the record or what have you, particularly when they are still employed. I have had conversations with people who I know are in work situations and they have said, 'I don't think I want to rock the boat. Maybe I'll talk to my boss.' And so there are many factors at play.

There is no doubt that visa holders have an extra layer of vulnerability due to a range of reasons—cultural barriers, language barriers and not knowing enough about us. I think there is more that we and the Department of Immigration can do to make sure that these visa holders do know that they should come to us. There can be a suspicion of government—just generally not wanting to work with government. I think questions around a broad amnesty are quite complex. The Department of Immigration would no doubt have to weigh up a range of different imperatives there when making a decision about that.

What I would say is that we work cooperatively with the Department of Immigration where we have matters involving a current visa holder. For example, we have worked with them to ensure that they can be here to give evidence in a court and that they have the right visas and the right status. We work with them reasonably successfully. There is no doubt that people's concerns about their visa status can contribute to whether they want to engage with us or not.

Senator McKENZIE: A couple of things have been raised that I just want to check on. You are working closely with immigration, I understand?

Ms James : We are.

Senator McKENZIE: You are. How does that go, then? There is their 1,000-point penalty and your penalty—do we add them up and get a total penalty? In practice, what happens?

Ms James : In practice—I might ask—

Senator McKENZIE: Or in reality—practically.

Mr Campbell : Practically and in reality, what we tend to do where we identify a contravention of the migration framework during the conduct of our investigations is that we will refer that to a contact point in the immigration department or to Australian Border Force, depending on what the issue is at hand. We do not look to have two proceedings or two investigations on foot about the same issue. It is a record-keeping issue.

Senator McKENZIE: So with a franchisee who is encouraging, promoting or enticing a student visa holder to work absolutely in breach of their visa: would that be your bag or theirs?

Mr Campbell : It would be the immigration department. That would be aiding and abetting a crime, or a contravention of the Migration Act—

Senator McKENZIE: Absolutely.

Mr Campbell : So we would seek to have the immigration or Border Force—

Senator McKENZIE: Do you think we need to amend the franchise code to include employment standards? You would think you would not have too, but—

Ms James : It has been a while since I looked at the Franchising Code of Conduct. I am aware of it. As I said before, what we had in the 7-Eleven scenario was a number of different settings and systems all coming together and creating a scenario where deliberate exploitation was possible. All I would say—

Senator McKENZIE: It sounds like deliberate exploitation of two entities within the supply chain, potentially.

Ms James : Potentially. I guess that there is probably room for us to work with the ACCC on that factor. Franchise arrangements can be very controlling. There are a number of factors at play there.

Senator McKENZIE: Well, I think that controlling in this area would be quite good, wouldn't you, Ms James?

Ms James : It depends. For example, we have an arrangement called a 'compliance partnership' which we enter into with businesses which want to ensure they have good practices in place. We often say to them, 'Include a clause that enables you to terminate your contract with any supplier that is not paying its workers properly.' Of course, you need a bit of due process—time to fix it et cetera. I would be very concerned if there were anything in the franchising arrangements that protected a scenario where someone was underpaying and the franchisor could not deal with that.

Senator McKENZIE: Yes. The evidence we heard from 7-Eleven essentially said that they could not terminate. I would like you to have a look at the franchising code and, on notice, go to exactly the question you just asked yourself then, Ms James.

Ms James : I am happy to do that. Personally, I find it surprising that something in a code prevented them or made it unlawful for them to—

Senator McKENZIE: I would really appreciate your opinion on his evidence around termination of contracts, the franchising code.

Ms James : We might have a look and talk to the ACCC perhaps about that.

Senator McKENZIE: That would be great and then we can talk to them as well. I was going to go to franchisees going bankrupt. We had Mr Thodi this morning who has been chasing that money for a hell of a long time, and he will not be the only one. Is that frustrating for you?

Ms James : Very frustrating. I think Mr Thodi was involved in the Bosen matter. The Bosen matter was the first litigation we put in. We achieved penalties of $120,000 against the company, but the company was wound up. The two directors did pay their penalty and their penalty of $30,000 between the two of them was distributed amongst the six employees, but, obviously, that amount fell well short of the $85,000 underpayment.

Senator McKENZIE: Are you concerned with subsequent audits and dealings that you have had with this entity over subsequent years that that is going to be quite a typical response of any action that is taken on behalf of employees?

Ms James : I am concerned and that is why we put in our Productivity Commission submission about the deliberate use of the corporate veil to avoid employee entitlements and the ease with which that can be done. It does not mean every employer who becomes insolvent is doing it deliberately. There are a number of pressures on businesses today—

Senator McKENZIE: Particularly in this model. Finally, some of the employees this morning talked about brokers whom they were speaking to in India and in Pakistan—'Plenty of jobs; really easy to get a job; come out here.' I know that with 417s and 457s we ensure that they are very, very aware of their rights and responsibilities. But I am wondering about the role that is being played from your end in making sure that this group of visa holders are similarly aware. We got a great suggestion this morning about having the universities be involved, 'because nobody is going to read anything you send them' I think was the direct quote. How do we engage with this cohort of workers and how do you engage with them?

Ms James : That is a really great question. I agree that working with universities is a good idea. We have done that a little. In May 2015, interestingly, around the same time we were meeting with 7-Eleven head office, we ran a digital communication campaign aimed at international students. We used Facebook, Twitter and social media to guide people to the material is in 27 different languages on our website that is targeted at visa holders to help them understand their rights and entitlements. We had a huge increase in people going to our website at that point in time. There is no doubt we can do more—

Senator McKENZIE: They all knew their 20-hour limit. They all knew their visa obligations.

Ms James : This is also true. Their visa obligations are made clear to them and I know that then Minister Assisting the Minister for Immigration, Minister Cash, recently made some improvements to the material that is provided to visa holders in the course of applying for their visas. I think maybe there is more we can do there. The workplace relations system has its complexities and we have some great material on our website, including in a number of different languages. Our info line has a translation service as well. If people call us with concerns—

Senator McKENZIE: Just a complaints button on the front page. It was a good suggestion this morning.

Senator O'NEILL: Have there been any fines of $180,000 or 10-year imprisonments for any person that you have identified to Immigration and Border Protection as a result of your investigations?

Ms James : Could I clarify something. Those figures were penalties under the Migration Act, and I was using them as much as anything as a reference point compared with our own. In relation to any penalties under the Migration Act, you would need to ask the department of immigration that. Certainly under our act, we have not sent anyone to prison, though we do have a matter on foot involving possible contempt proceedings and a freezing order involving an employer where we are concerned about the treatment of assets of that company after we secured penalties. Ms Webster is giving it a red-hot go.

Dr Webster : Just to clarify, we have had one person arrested and brought to court for not adhering when they were required to.

Senator O'NEILL: My question was that in light of the fact that there is a perception in the community that if anyone contacts Fair Work, you will be in touch with the Department of Immigration and Border Protection. There is concern amongst 457 and other visa workers that once they contact you, their visa will be cancelled immediately. Given that that fear is in the community and you have been handing this material on to Immigration and Border Protection, have they taken any of your evidence and prosecuted and secured that sort of an outcome for the breaching of visa conditions?

Ms James : Perhaps if I could talk about how we work in the field. It is true that we have a challenge in that in some of our work we are actually working as immigration inspectors on behalf of the department of immigration. Our 457 monitoring we do on behalf of the department of immigration. One of the things my inspectors do when they are investigating Fair Work matters is they make it really clear that we are not interested in their visa status. We do not require them to tell us if they are on a visa. We enforce the act irrespective of people's visa status or the basis on which they are in the country. But we do provide information to the department of immigration on a regular basis and under our 457 monitoring.

As we represent government and work together with the department of immigration on a number of matters, I can understand why people might be concerned about that. But it is a 'don't ask, don't tell' approach from our point of view in the field, if you like. When we find a worker who has been underpaid, our only interest there is talking with them about how we can help them rectify that. That is the focus of our inquiries. My inspectors are quite experienced at building trust with the people they work with. But, in the end, it is individual's choice as well. As I said before, there are a number of things that affect your motivation about whether you want to work with us or not.

Senator O'NEILL: The $2.4 million wage bill that we heard about that was last week's wage payout for the 7-Eleven franchise group means that there is a lot of money moving through those accounts. You talked about amounts of $180,000 being recovered. This seems like a very small percentage of what is going through that company annually. I have had information that indicates that if you went through this systematically there could be as much as $40 billion to $60 million a year in underpayment. What is your view of that sort of commentary?

Ms James : I could not comment on that. Without having the detail in front of me, I am not really able to comment.

Senator O'NEILL: I will try to get that to you on notice in a clearer form. Could I ask you about your interaction with the independent panel chaired by Mr Fels. Have you had any communication with Mr Fels?

Ms James : I met with Mr Fels on 10 September.

Senator O'NEILL: Did he provide you with the names of franchise owners who were not compliant?

Ms James : No.

Senator O'NEILL: Did he indicate that he would be providing you with all that information at any point in time?

Ms James : No.

Senator O'NEILL: What did he communicate to you on that occasion?

Ms James : I do not want to go into great detail. All I would say is that 10 September was not very long after the panel had been set up. Generally, what we talked about was the work of the panel. There are still a number of things that are unclear. For example, it was unclear whether head office would be accepting the recommendations of the panel or whether they were simply going to treat them as suggestions or ideas. It was unclear as well what sort of evidence the panel would require, or 7-Eleven would require, before it paid out amounts. There were a number of things that were not clear, and I think they were working their way through establishment issues. We gave them an overview of where we were at with our investigation and undertook to come back to them if they wanted to talk further in the future. We certainly noted that as an independent process, and not being government, it would be open to them to, for example, recommend that payments be made even where there was not evidence of hours worked. In other words, they are not a court; they do not have to apply the same rules as a court. So, we observed that. There are still I guess a number of questions I have about the panel as well, and that was early days at that point.

Senator O'NEILL: Is one of the questions you have about their responsibility—I know they are a panel that is independent of 7-Eleven, but they are not a panel that is independent of Australian law—isn't it really incumbent upon them to advise you of franchises that are in breach of the work legislation of this country?

Ms James : I do not think so.

Senator O'NEILL: Would you appreciate them doing that? Is that a request that the committee could make on your behalf that they provide the Fair Work Ombudsman with notifications of any franchises that are in breach of their employment requirements under Australian law?

Ms James : They would need to think about the integrity of their process. I think they have made undertakings to 7-Eleven employees about how they will deal with the information that comes before them. This is a process that has been set up by a business. And yes, the panel is at arm's length from the business, but in the end it is a privately run process. I actually think that public interest in this case is served primarily by helping the panel to put 7-Eleven head office money back into the hands of workers. That could be potentially compromised, I think, if employees felt that information was going to be handed to us.

Senator O'NEILL: Isn't that the issue at every level for employees—that they are caught in this protection racket of no information being transferred about franchisors? We cannot get the information out of head office. It looks like their independent focus is going to get the information, but you are not requiring them to share it with you.

Ms James : We cannot require them to share it with us, I do not think. These might be questions best put to the panel. As I said, when I met with Professor Fels it was very much in the early days and they were still establishing their processes and working out the process that was going to operate. Based on that conversation, I feel that it is very preliminary for me to be making comments about their process, their motivations, their objectives. All I would say is that of course we welcome any steps by 7-Eleven head office that will result in wages being put back into the hands of underpaid workers.

Senator O'NEILL: Will you be putting a submission to the independent panel for all the cases you are aware of to ensure that they have the most fulsome information, that they can make redress to people over many years who might not even be in the country?

Ms James : I do not know that that is the intention of the panel. The panel is a process that has been set up by the business to enable it to make good the underpayments that have happened in its network. So, that is not something that we have talked about.

Senator O'NEILL: For example, Mr Thodi spoke very eloquently about the whole scarring experience he went through. You have given evidence this afternoon that you are aware that he remains underpaid in terms of his entitlement based on the evidence that you were able to get at that time. To ask Mr Thodi to go to 7-Eleven and seek redress as another process seems to me to be an extraordinary impost on him given what he has already experienced when you already have that information and 7-Eleven would already have that information, too. I ask you to think about the way in which the Fair Work Ombudsman, with the information you do have, can make claims on behalf of people without them having to actually go through the process and suffer any further harm.

Ms James : I am happy to do that.

Senator O'NEILL: Dr Hardy and Professor Tham gave evidence today; I am not sure whether you heard their evidence.

Ms James : I was unable to. I had some technical errors with my computer this afternoon.

Senator O'NEILL: I wonder if I can ask you on notice to make comments on their submission, particularly the accessorial liability, which you did mention at one point. What is the legal liability of people? You indicated that there were some people beyond the franchisee that you were indicating would be liable. Who are those people, in the matters you have on foot?

Ms James : I think what I said is that we will look for anyone who is knowingly involved in any breach of the act, as we always do.

Senator O'NEILL: But do you believe, on the evidence you have, that that could be a 7-Eleven head office?

Ms James : We have an ongoing inquiry and I am not able to comment on that at this point in time.

CHAIR: And we will have to leave it there.

Senator PERIS: I have just one last question, because most have been asked already. Ms James, you said earlier on that you had several site visits to stores and you were very concerned about a number of issues there. Were they just about the payroll? Or was there additional stuff?

Ms James : Perhaps rather than commenting on those stores I will just comment more generally that generally what we have found and what our concerns have gone to is underpayment of minimum wages, underpayment or nonpayment of penalty rates and shift loadings, and the fabrication of employee records.

Senator McKENZIE: What about superannuation and tax?

Ms James : I could not comment on that.

Mr Campbell : Often the consequence of an underpayment is nonpayment of appropriate amounts of tax or superannuation, particularly if it is cash payment.

Senator McKENZIE: Did you find that it is the franchisees who are paying super? Or is that super coming off the total payroll at the other end?

Mr Campbell : The super would be payable by the employer, so it would be the franchisee.

CHAIR: I have just one last question: 7-Eleven head office today, I think Mr Wilmot, invited the Fair Work Ombudsman to join the Allan Fels panel. Is that correct?

Ms James : That is correct.

CHAIR: That concludes today's proceedings. Thank you, FWO, for coming again. No doubt if Four Corners does another program we will be back again! I thank all the witnesses who have given evidence to the committee today. Thanks also to Hansard, Broadcasting and the secretariat.

Committee adjourned at 16 : 42