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New laws to stop 7-Eleven type scandals

7-Eleven-11 copyNew laws to protect vulnerable workers have cleared the Senate, with tougher penalties for deliberate and systematic underpayment of workers.

The legislation follows a series of revelations about breaches of workplace laws in large well-known and industry-feted franchise systems such as 7-Eleven, Caltex, Pizza Hut and Domino’s Pizza.

The changes also make it illegal for employers to ask for cash back from employees, and makes franchisors liable for misbehaviour by franchisees where they are complicit or turn a blind eye to breaches.

The Fair Work Ombudsman’s powers will also be strengthened to make sure the exploitation of vulnerable workers can be effectively investigated.

The legislation passed on Monday night with amendments by Labor and will need to return to the lower house for approval.

Employment Minister Michaelia Cash said the ombudsman’s new powers were vital in tackling worker exploitation such as the 7-Eleven case.

“The strengthened penalties contained in this bill will act as a significant deterrent to unlawful practices,” she said.

“They will also ensure that the small minority of unscrupulous operators think twice before ripping off workers.”

Late last year, hidden footage emerged showing employees at a Brisbane 7-Eleven being forced to hand back their pay.

It followed a Fairfax-ABC investigation that revealed some franchisees systematically underpaid international students, who were threatened with deportation if they reported it.

Legislation changes in brief:

• introduces a higher scale of penalties (up to 10 times the current amount) for a new category of ‘serious contraventions’ of prescribed workplace laws.
• prohibiting employers from unreasonably requiring employees to make payments (ie ‘cash-back’ arrangements)
• strengthens the evidence gathering powers of the Fair Work Ombudsman (FWO) to ensure that the exploitation of vulnerable workers can be properly investigated.
• Introduces stronger provisions to make franchisors and holding companies responsible for breaches of the Fair Work Act in certain circumstances where they are culpable for the breaches.

According to Harry Hilliar, senior employment relations adviser from workplace relations firm, Employsure, the onus of proof has shifted – employers will be forced to prove they pay their staff correctly if they are investigated for underpayments.

“If an employer does not keep or provide correct payslips or accurate employee records and an employee makes an underpayment claim, the onus is on the employer to prove they have paid the employee correctly,” he said. “Failure to keep compliant records may incur newly increased fines in addition to exposing a business to significant back payments.”

Describing the bill as a shake up for the franchise sector, Hilliar said franchisors will be held responsible for underpayments by their franchisees where they knew or should have reasonably known of the contraventions and failed to act to prevent the practices. He said this will apply where a franchisor has a degree of influence or control over their business networks.

“The Bill was passed with amendments from Labor but still gives the Fair Work Ombudsman coercive questioning powers specifically for investigations into underpayments and exploitation with ‘proper oversight’.  We are interested to see how this plays out for employers and what is defined as proper oversight.”

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