‘Unsustainable’ $5 pizzas: Fair Work boss Sandra Parker chases higher penalties for dodgy retailers

Australia’s banking reckoning is cause for regulators across the country to reflect on their enforcement approach, Australia’s fair work ombudsman says.

As the dust settles on the revelations contained within Kenneth Hayne’s banking royal commission, Fair Work cop Sandra Parker has a small team combing through the recommendations to analyse what went wrong and how those tasked with enforcing Australia’s laws can do better.

“The Hayne royal commission was a really good exercise for every regulator around Australia in saying: ‘What does this mean for us?’” Parker tells SmartCompany.

“We need to ensure that we’re using all our enforcement tools appropriately, so I’m having a look at that now.”

It’s been a turbulent 18 months for regulators. Corporate watchdog ASIC has been dragged over coals for being weak at the knees in the face of financial services misconduct, while the ACCC was last week criticised for its approach to the franchising sector.

The ATO has submitted to numerous reviews in the wake of allegations it has been heavy-handed towards small business, recently being cleared of systemic wrongdoing.

Now eight months into a five-year term enforcing the Fair Work Act she helped create, Parker is facing the prospect of a root-and-branch review of her own, following recommendations made by the Migrant Worker Taskforce.

It highlights the difficulty of the job — the Fair Work Ombudsman (FWO) has actually just finished a capability review, kicked off as a house cleaning measure when Parker started, probing everything from compliance to culture.

“They may not be aware we’ve just done one,” Parker says. “We’re still implementing the recommendations.”

The FWO even secured a 48% spike in court penalties during 2017-18, prosecuting $7.2 million in fines across 35 cases.

Nevertheless, with in-principle support from the government, everything from enforcement to the FWO’s name could be under the microscope in the coming months.

Worker exploitation rife

The taskforce, led by former ACCC boss Allan Fels, found the exploitation of visa workers is widespread and entrenched in Australia, recommending criminal penalties for wrongdoing.

Advising the government to consider whether the FWO needs more funding and stronger powers, Fels took the view that enforcement action to date hasn’t sufficiently stymied migrant underpayment.

Noting the link between cheap food and worker exploitation, Parker says the fast-food, retail and cafe industries are particularly poor, plagued by dodgy operators exploiting workers to undercut competitors.

“We are making a difference, but we also need our consumers thinking about it,” Parker says.

“I was walking through town a couple of days ago and saw five dollar pizzas. How is that sustainable?”

The precise scale of Australia’s worker exploitation problem — migrant or otherwise — is hard to discern, but as media attention on underpayment has increased so have the number of complaints streaming into FWO hotlines.

Over 15,000 anonymous complaints were made in 2017-18, while a total of $29.6 million was recovered for over 13,000 workers — a decent hit rate.

Fast-food, retail and cafes (dubbed FRAC by the ombudsman) represented 14% of the more than 28,000 disputes lodged, despite employing just 5% of workers.

The FWO’s so-called “FRAC strategy” has seen it send inspectors through Sushi businesses in NSW and Queensland, as well as cafes on popular Degraves St in Melbourne over the last year, chasing allegations worker exploitation is rife.

“There’s a problem,” Parker says.

“The community is tired of it … Parents want their teenage kids to be paid properly when they go and get part-time work.”

Complex conundrum

Taking down dodgy operators is good for business too, at least for those eating the cost impost of paying workers properly — but the rise in compliance action has put the FWO in a difficult position with small business.

Employing over five million people, smaller firms are a massive chunk of the private sector but are also less sophisticated, with Fair Work Act non-compliance as high as 46%, according to recent audits.

Small business ombudsman Kate Carnell has reported a stream of complaints about the complexity of the law, including awards which varied numerous times last year and ongoing political uncertainty over penalty rates and casual workers.

As the cop on the beat, Parker, whose father was a small-business owner, concedes keeping up can be difficult.

“It’s this big, massive Fair Work Act, and the font is tiny,” she says.

“[My father’s] view was just give me the stuff I need to do, and I’ll do it.”

It’s getting easier for businesses to navigate workplace law complexities as the FWO builds out its education function for business owners, launching a raft of online tools and information packages.

But workplace myths pervade, including the fraught practice of paying workers flat rates or annualised salaries, which often results in the underpayment of loadings and entitlements.

In cases where businesses inadvertently do the wrong thing and are keen to backpay workers, Parker says inspectors are trained in proportionate enforcement, but that doesn’t mean being soft.

“We know business has difficulty understanding and complying with law, but we have all these tools,” Parker says.

“They don’t really have an excuse not to comply.”

Tough, but measured

With tougher laws for worker exploitation passed by parliament last year, Parker is expecting another increase in penalties through 2019-20.

“We’ll use our powers and we’ll ask the court to award the penalties,” Parker says.

Meanwhile, the government is set to consider expanding the use-case for on-the-spot fines beyond just payslip and record-keeping breaches to broader exploitation.

The FWO issued 615 on-the-spot infringement notices in 2017-18 totalling just under $400,000, while enforceable undertakings were used seven times, recovering $2.1 million in wages.

Malicious operators have taken to shoddy record-keeping in an attempt to keep the FWO at bay, often not issuing payslips and keeping incomplete, or even non-existent, worker records.

A crackdown is looming though thanks to reverse onus of proof laws passed by parliament over a year ago.

The reforms, currently being tested by the FWO for the first time in court, force business owners who are found not to have kept adequate records to prove they haven’t underpaid workers in court.

Parker says the FWO will make reverse-proof a regular part of its toolkit if it successfully prosecutes its test case.

“We’ll definitely look for opportunities to use that legislation, the parliament said it was important, so we need to use it,” Parker says.