Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

It gives me great pleasure this afternoon to rise to speak on the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017. First off, I would like to make the comment that the vast majority of employers in this country do the right thing when it comes to employing their staff, because they know that one of the things about having a successful and well-run business is to have staff that you value, that are motivated, that you trust and that you look after. In fact, many people who run small businesses treat their staff like family members.

One of the things, even for medium- to larger-sized businesses, that enforces that good relationship between employer and employee is simply the disciplines of the marketplace. Where you have a diversified marketplace with many different employees in each section, if an employer mistreats his employee or if he underpays them the employee then has the option of going to another business to take up employment that other business. That is why we must always fight for greater diversity in every industry. No business can succeed if they have unmotivated employees that are being underpaid the rates. But having said that, there have been recent examples—a very small number of cases—where some employers have been doing the wrong thing. Of course there was the well-documented case of 7-Eleven, where some employees were taken by their employer down to the ATM to give a rebate out of their salary. All members of the House agree that this is completely unacceptable.

The bill does five specific things. Firstly, it introduces a higher scale of penalties for what it describes as '"serious contraventions" of prescribed workplace laws.' Taking your employee down to the ATM to get a rebate out of his salary is clearly a serious contravention. Secondly, it increases penalties for record-keeping failures. Employers have to keep accurate records of the hours their employees work and the rates they are being paid. Thirdly, it makes:

…franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them. The new responsibilities will only apply where franchisors and holding companies have a significant degree of influence or control over their business networks.

In that third point, I think we have to acknowledge some of the concerns by the Franchise Council of Australia. They have legitimately expressed some concerns over the workings of this bill. They are concerns that we should recognise and that we should acknowledge, and we should monitor how they work. The franchise system is a system that can be very important. It can be very efficient and generate a lot of wealth for our nation. We cannot have a situation where we are putting copious amounts of red tape upon that sector, making franchisors liable in situations where they do not have any control. I would say the only upside is that all good franchise systems have a great responsibility to protect their good names and goodwill. It is in their interests to make sure that anyone that is using their names or franchise systems respects the workplace laws of this nation in doing so. We saw that the damage done to the 7-Eleven brand from the bad publicity from the recent case far outweighed any economic benefits that that franchisor, 7-Eleven, would have received.

Fourthly, it expressly prohibits employers from unreasonably requiring their employees to make payments which are rebates—that is, demanding a portion of their wages to be paid back in cash.

Fifthly, it strengthens the evidence-gathering powers of the Fair Work Ombudsman to ensure that exploitation of vulnerable workers can be effectively investigated.

Having said that, this debate has exposed the Labor Party's barefaced hypocrisy on the issue of penalty rates. We all agree that the 7-Eleven case that we saw, where the workers were forced to give cash back to the employer and therefore received about $8 less than they were entitled to under the award, is wrong. But compare that to the situation that has been exposed recently in the debate on Sunday penalty rates, where a KFC worker on a Sunday would get $29.16 per hour under the award. If a KFC worker got the award rate and were taken by their employer down to the ATM and told, 'We want $8 of rebate out of your Sunday pay,' I think everyone in this parliament would think that would be absolutely outrageous. But that is exactly—or almost exactly—what happens because of the grubby union deal that was done with KFC. Someone working for KFC does not actually get that $29.16 an hour. They get $21.19 an hour because their union has done them this favour by doing them this great deal. The member for Bendigo thinks this is okay and excuses this conduct, because she says, 'Oh, it is balanced out elsewhere.' How is it balanced out elsewhere if someone only works on the weekend? How does that happen? That person is clearly worse off overall. Another example is a McDonald's worker. Exactly the same thing happens to them. If we say it is wrong for someone at 7-Eleven to have $8 taken off their award rate and given as cash back to the employer, why is it correct for the unions to do a deal with McDonald's, where a worker would get $29.16 under the award on a Sunday but, because of the deal done by the union, is cut back by $8 to $21.08? If we are going to condemn one, we should also equally condemn the other.

The other thing that was interesting in the 7-Eleven case was the decision by Federal Circuit Court Judge Michael Jarrett. In his comments, he said he found that the 7-Eleven franchisee had 'systematically exploited' employees by implementing:

a business model that relied on … deliberate disregard of the employees' workplace entitlements.

He continued that it was 'also vital to recognise the importance of maintaining a level playing field for all employers in an industry, with respect to wage costs'. Hang on! The learned judge is correct. There should be a level playing field between employers that are in competition with each other with respect to wage costs. But that is not what is happening in the community at the moment.

Because of these dodgy union deals selling off Sunday penalty rates, we are seeing that large unionised firms that employ unionised workers are at a competitive advantage against small business. Let's just look at one example. The award rate for a weekend for a family-owned pizza shop is $28.48 an hour, but, in the union deal that was done where they sold off the penalty rates, someone working for Pizza Hut gets $20.35 an hour. So how can that small business compete if, because of those dodgy union deals, they are paying $8 more per hour for their labour? These are the dodgy deals that the unions have done. Another example is that someone working at David Jones, with their penalty rate, gets paid $29.53 an hour on a Sunday, but the small boutique across the mall that is competing against David Jones has to pay $37.05. Again, it is a dodgy union deal that gives that union a competitive advantage over the small business. If we are going to condemn one, we certainly must condemn the other. If we are going to say that these deals that are done by 7-Eleven, where workers have their penalty rates slashed, are unfair and unconscionable, we need to say exactly the same thing of these union deals that have sold off workers' penalty rates for greater union control.

There is another comment I would like to make on this. We think of the idea of someone earning some money and having their employer taking a big rebate—a big chunk out of it—but how is that different to the conduct that we have seen from our large supermarket chains, Coles and Woolworths, in relation to small employers? We had the recent case where Coles admitted that they had engaged in unconscionable conduct. After their suppliers had supplied them with goods and they had paid them the price under the contract, they went back and they said: 'No, we want more. We need more.' Justice Gordon said in that case, where the ACCC took Coles to court:

Coles' misconduct was serious, deliberate and repeated. Coles misused its bargaining power. Its conduct was 'not done in good conscience'. It was contrary to conscience. Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings. Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand. Coles withheld money from suppliers it had no right to withhold.

Coles' practices, demands and threats were deliberate, orchestrated and relentless.

How is that conduct any better than what we saw in the 7-Eleven case? It is abuse of their dominant position. It is abuse of their market power to extract an unjustified rebate or discount from someone that has supplied with a good, a service or their labour. We must condemn both.

There was a similar case involving Woolworths, and the court found that Woolworths did not engage in unconscionable conduct with its Mind the Gap program, where it systematically sought to raise as much as $60 million from suppliers. The court in that decision said that the ACCC failed to prove that Woolworths' conduct was unconscionable, and it accepted Woolworths' defence that demanding money from suppliers was 'consistent with the "ordinary nature" of retailer and supplier relationships' and is common practice in grocery retail—common practice.

It is one thing to have hard negotiations, to bargain or to ask for something like a special deal or a special rebate. There is nothing wrong with that. What makes it unconscionable is where the purchaser has a significant degree of market power over the supplier. Firms in our grocery retailing sector which would have 50 per cent or more of their business in supplying to one of those large retailers are not in a position to say no to any demand. They have long-term leases on plant and equipment. They have ongoing obligations to their employees which they cannot just turn off like a tap. They have overdrafts with their banks. They have contracts with their supply chain and subcontractors. They are not in a position to say no because if they lose 40 or 50 per cent of their business overnight it cannot be replaced. They are placed in a position where they cannot say no. If we are going to condemn one, we must stand and condemn both. I thank the House.

See this speech in context