Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Hansard source

I rise to speak on the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 and I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House notes that:

(1) this Government has previously tried to cut the Fair Entitlements Guarantee scheme and has no real commitment to protecting employee entitlements;

(2) in May 2017 Labor proposed a suite of measures to combat illegal phoenix activity; and

(3) under this Government wages are stagnant, underemployment is stubbornly high, worker exploitation is rife, and work is increasingly precarious”.

Labor is pleased to see this bill come onto the agenda. The reforms in the bill are sensible and, in some cases, the bill adopts announced Labor policy.

I note that the government first announced its intention to address the corporate misuse of the Fair Entitlements Guarantee Scheme, or FEG, on 5 October last year. So this has taken some considerable time to come before the parliament. Interestingly, the government released an exposure draft of the bill and gave stakeholders the opportunity to comment, in stark contrast to the way it engages in drafting the union-busting bills that have been and continue to be the main focus of this government. In those instances, there was not consultation or, if there was consultation, it was lip-service paid to consultation not genuine efforts to engage with stakeholders affected by those proposed bills. Again, we support the introduction of this bill and we do support the fact that there was some sensible consultation.

We're pleased to support the changes to the Corporations Act in this bill, which will hopefully see a greater degree of recovery for employees who are owed entitlements, and successful prosecutions of directors and corporations who deliberately avoid liability for these entitlements. The provisions of this bill will also give the government new options to recover from liable companies and directors at least some of the taxpayers' money which is paid out under the Fair Entitlements Guarantee scheme and will enable employees to seek compensation from liable companies and directors.

This bill will amend the Corporation Act to, firstly, make it easier to prove the criminal offence of entering into an arrangement to avoid paying employee entitlements by including recklessness as a mental element; and, secondly, increase the maximum fine for that offence. The current maximum penalty is 10 years imprisonment or a fine of $210,000. This bill increases the fine for an individual to whichever is greater of $945,000 or three times the total value of the benefits that are obtained through the offence and, for a body corporate, to whichever is the greater of $9.45 million or three times the total value of the benefits that were obtained through the offence or 10 per cent of the body corporate's annual turnover during the 12-month period before the offence. Further, it will introduce a new civil penalty provision for avoiding paying employee entitlements and will give the Fair Work Ombudsman, the Australian Taxation Office and the Department of Jobs and Small Business standing to commence civil compensation proceedings. It will extend liability for unpaid entitlements to related corporate entities and extend ASIC's powers to disqualify directors and other officers, either directly or on application to the court, where they have a track record of corporate contraventions and inappropriately using the Fair Entitlements Guarantee scheme to pay outstanding employee entitlements.

Labor believes this bill could be improved to give registered organisations standing to commence civil proceedings, as they currently have under the Fair Work Act, and standing to make applications for compensation on behalf of the employees they represent. Where a union is entitled to represent the industrial interests of an employee or group of employees, they should have standing to represent those people to assist them in obtaining compensation for loss of entitlements. We have informed the government that it's our intention to move amendments in the Senate to make these improvements, and we do hope to receive the government's support. I've had discussion with the minister and the minister's office, and I believe, in those conversations more broadly about this and other matters contained in the portfolio, that the minister was open, at least, to engaging with the opposition and reconciling the differences between the opposition and the government wherever possible. I say that sincerely. We do hope we can engage on more substantive amendments that we moved in the other place that would look to improve this bill to strengthen the protections for employees, to ensure that we can go after those directors who deliberately seek to effectively steal public moneys by using a scheme designed for companies that collapse, not ones that are contrived in a manner to avoid obligations to creditors or, in this case, to employees. So, whilst I won't be so naive as to think that we can reach agreement on all of these matters, we will go into the negotiations with the government with respect to the amendments we'll be moving in the Senate with a view to finding common ground to improve this bill.

It's no surprise to Labor that some companies and directors are specifically structuring their arrangements to avoid paying employee entitlements. We established the FEG scheme when last in government because employees should not be punished, when an employer's business fails, by the loss of their legal entitlements—leave, superannuation, unpaid wages. The premise of the Fair Entitlements Guarantee scheme is simple: when a company goes bust and employees lose their jobs, through no fault of their own, employees should receive what is owed to them. They are the innocent parties to those practices.

It is particularly egregious when workers lose their entitlements because a company has deliberately structured its arrangements to avoid paying them. It has been a crime to do so for 18 years now, yet no-one has ever been successfully prosecuted for it. That's why, to make it easier to prove, Labor announced in May last year that a Shorten Labor government, if elected, would introduce an objective test to the offence of deliberately avoiding employee entitlements. We also announced that we would reform provisions for accessorial liability. So we are pleased that in this bill the government has, after almost 18 months, effectively adopted Labor policy.

There is no doubt that corporate activity has led to the Fair Entitlements Guarantee scheme being used more in the last four years. The average costs under the Fair Entitlements Guarantee scheme have more than tripled, from $70.7 million in the four-year period between 1 July 2005 and 30 June 2009 to $235.3 million in the four years between July 2014 and 30 June this year. That's a very considerable increase in the expenditure of a very important scheme. According to the government, the startling fact behind these figures is that the increase in FEG claimants can be attributed to a small number of corporations shifting their liability. In fact, the former member for Fairfax has some level of responsibility for this cost blowout, with nearly $70 million paid out to former employees of his Queensland Nickel company.

The FEG was always designed to be a safety net, as the guaranteed way in which employees could be paid their entitlements in a timely manner and not have to wait for drawn-out processes before they received a cent. There's nothing worse than losing your job other than losing your job and not knowing whether you are going to be paid the entitlements owed to you. It's just not right when the owner of a particular company says: 'Sorry, folks. I know you've been working hard for me. I know you've helped produce profits. I know you've helped make millions of dollars, which I can donate to a political concern. But, by the way, now that it's your turn there's nothing there for you.' With respect to that company, you'd have to say it was a disaster for those workers in terms of losing their jobs, but the scheme at least, though it didn't pay all the entitlements owed to those workers, paid a very significant proportion of them. That was as a result of this scheme.

It is true to say that this government has not always supported this scheme, and I think it's important to note that. Whilst, as I say, we're in broad support of the provisions of this bill, I think it's important to note the history of fair entitlements. The first entitlements scheme, GEERS—a very bare, stripped-back scheme very different to the FEG scheme—was established, under the Howard government, off the back of the collapse of National Textiles. There was some scuttlebutt, of course, that one of the directors of the company was Stan Howard, the brother of the then Prime Minister, but the government was right to introduce a scheme to at least, in a very minimal way, underwrite and protect some of the entitlements owed to those employees in the face of that collapse, namely the collapse of National Textiles. The Labor opposition supported the then government, the Howard government, to introduce that scheme. To that extent, it was the beginning of at least some capacity for workers who'd been deprived of what could have been a very significant proportion of their own personal wealth, people who were not very rich and who had worked hard. I applaud the then government for at least introducing that scheme at the time.

When Labor were last in government, we built upon that scheme. We introduced the Fair Entitlements Guarantee scheme, which afforded a greater level of protection. So instead of, for example, 16 weeks as a maximum payout, it allowed for 52 weeks of the redundancy payout—so a maximum of 12 months. That might have meant that some workers on very good redundancy schemes did not receive their full entitlement. They might have worked for 30 years and had 18 months or two years owing to them. But 12 months compared to 16 weeks and compared to nothing before the GEERS was certainly the right direction to look after those workers. That's why we introduced the scheme to build on the original scheme.

This government made an awful error in the 2014 budget by seeking to cut this scheme back to the original minimalist scheme. The effect of the 2014 budget when introduced into this place in May 2014 was to strip away the building upon the original scheme so it would go back to the 16 weeks maximum. Labor could not abide that. We did not abide that. We did not support that proposition and we fought it and fought it until this government dropped its inclination to cut away those potential entitlements to those who were victims of corporate failure. I made comment about people's support for that at the time, and I did make comment about the former member for Herbert, who was memorably standing next to the then Minister for Employment, Senator Cash, up in Townsville, crying about the loss of jobs for those workers. I said, 'You don't get to cry in Townsville and come to Canberra and vote against those workers without someone saying something.' I did say something because he did vote, as a member of the government, to cut away the entitlements, which would have left those QNI workers a lot worse off if the 2014 budget had passed the House and the Senate unamended with respect to the Fair Entitlements Guarantee. I think that has to be noted.

The government have taken a different position or, at least, haven't pursued reducing the scheme in recent times. It may still be formally the policy of government, but there have been no efforts to test the parliament in relation to that. They failed when the then Prime Minister Tony Abbott, the member for Warringah, and the then Treasurer, the then member for North Sydney, were pushing hard for a very austere, pretty brutal budget which of course was the beginning of the problems that beset this government, I would contend. So I am glad to say that the FEG is still standing. It's a good scheme.

I do agree with the government and the minister to this extent: we have a generous scheme, but that doesn't mean that corporate directors or companies get to game the system to steal taxpayers' money by contriving arrangements to get access to that scheme. It should be for genuine corporate failure. When that occurs, when everything has been done to prevent that happening and everything has been exhausted to prevent taxpayers having to underwrite such entitlements, only then should the scheme come into effect. We should not have a situation where a contrivance and potential crime is committed and the taxpayers exposed and yet the directors are not held to account or not charged, convicted and, if necessary, imprisoned or, for that matter, sufficient fines contained within the bill are not imposed on individuals or, indeed, on a company that acts in a manner to effectively steal from the public in order to get access to this scheme. That cannot be. We cannot allow that to happen. To that extent, the motivation behind the government's action is right. The government's motivation is right to stop that corporate misconduct or that corporate criminal behaviour, as it would be in some of the instances we've seen. Therefore, that's why, of course, in the main we support this bill, but we do move amendments to broaden out this debate.

The FEG was always designed to be a safety net as the guaranteed way, as I said before, that employees could be paid their entitlements in a timely manner. But the fact is that the FEG means that workers can receive their entitlements in a timely manner, move on to find another job and get on with their lives. We have seen the problems when the government started to think about slashing these entitlements contained within this scheme. As I've said, we were right in 2012 to pass the Fair Entitlements Guarantee legislation.

On this side of the House, we know that employees who lose their jobs through insolvency or the bankruptcy of their employer have enough to worry about. They have to worry about paying their kids' school fees, buying children's clothes, helping even grown-up kids at university, paying the mortgage or paying the rent, and putting food on the table and petrol in the car—the usual household pressures that many families experience. Therefore, I think it is fitting that the government seeks a way to prevent this scheme being gamed. We also believe that these employees should not have to worry about being paid what their entitlements are under law and has now lost through no fault of their own.

As I say, it's really a warning to this government. If they are genuine about protecting the interests of employees who may be able to access this scheme, then we say to this government: we do not want to see a repeat of an effort to take away many of the provisions of the FEG scheme that have been improvements since the original scheme. Of course, it's not just about that. Under this government, as we've said—and I said it when I moved the amendment—wages are stagnant. There's no point suggesting otherwise. We've got the lowest wage growth in 25 years. For over the last three or four years, the wage growth has been low. The government likes to welcome improvements in employment, and so do I—any new job should be welcomed—but underemployment is still a challenge and something we need to tackle. Wage stagnation is a challenge, and we need to tackle that too.

It's not just a phenomena of this nation—that's true too. We're seeing it in other parts of the world where the usual course of events is you see some decline in unemployment leading to some commensurate increase in employment, a reduction of underemployment or, indeed in this case, an increase in wages. That hasn't happened. We haven't seen an increase. There hasn't been a correlation between any reduction in unemployment and a consequential increase to wage growth, and that is a concern to us. This is the legacy for Australian workers from this government, I would contend.

As I mentioned, on 24 May last year I announced, accompanied by Andrew Leigh, the member for Fenner, Labor's policy to crackdown on abuse by directors and the problems associated with illegal phoenixing activity. While this bill adopts and implements some of our policy initiatives, unfortunately there's more for the federal government to do. We put to this government that we want to negotiate with this government and consider substantive amendments in the Senate.

For example, the government has dragged its feet on implementing the director identification numbers to stop directors going from failed company to failed company, wreaking havoc as they go. Despite making promises to the crossbenchers in order to get the crossbenchers' vote for the ABCC bill, this government has done nothing to reform security of payments to make sure that subcontractors on major projects aren't left unpaid when contractors go bust. So there's plenty of work in this policy space. Indeed, there were commitments made to a number of crossbench senators, and, as yet, they have not been fulfilled. They have not been realised. I do think the government could also look at some of the other areas where we're seeing corporate malfeasance and misconduct by companies.

As is the case far too often with this government when it is dragged kicking and screaming to do something to help working Australians, it is, sadly, too little, too late. Having said that, when it comes to the provisions of this bill, we do see that it will benefit employees and, as an extension of that, taxpayers, who will have their valuable funds returned to them.

So this is an important bill. I have to say, of all the bills I have had to rise and speak to in this place since I have been shadow minister, this is one of the better bills. I give a pass maybe—yes, I give the government a pass.

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