Emma McBride (Dobell, Australian Labor Party) Share this | Hansard source

I rise to speak in support of the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 and to support the amendment moved by the member for Gorton. I'm pleased to speak after my colleague the member for Herbert, a strong advocate for members of her community affected by the collapse of Queensland Nickel. What a shameful rollcall of unpaid entitlements we have just heard from the workers in Townsville. This bill will strengthen the Corporations Act to better deter dodgy companies and their associates from structuring their arrangements in a way that evades paying employee entitlements and deliberately shifts liability for unpaid employee entitlements to the taxpayer via the Fair Entitlements Guarantee scheme.

The Corporations Act currently contains a criminal offence provision which covers what is commonly known as illegal phoenixing activity. This is where a director or a company structures their company or enters into an arrangement with the intention of avoiding having to pay their employees' entitlements. Essentially, they walk away from their business leaving employees without what is owed to them—what they're entitled to—and, too often, the director or business just starts up again as a new company without any liabilities. While this criminal offence has been in the Corporations Act since 2000, there has never been—as the member for Herbert has noted—a single conviction under this Act. Labor announced in May last year that we would reform the criminal offence of deliberately avoiding employee entitlements to make it easier to prove and to make it easier to prosecute accessories. We are pleased that the government has in this bill adopted this Labor policy.

This bill will amend the Corporations Act to make it easier to prove a criminal offence of entering into an arrangement to avoid paying employee entitlements, by including recklessness as a mental element; significantly increasing the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements, introducing a new civil penalty provision for avoiding paying employee entitlements with an objective reasonable person test; giving the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup monies paid out by the Fair Entitlements Guarantee; extending liability for unpaid entitlements to related corporate entities; and extending ASIC's power 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 by giving registered organisations, such as trade unions, standing to commence civil proceedings on behalf of their members under the new provisions for compensation and the recovery of unpaid entitlements—after all, looking after members' interests is what these organisations do every day.

It is worth noting that the increase in the financial penalty for the criminal offence is significant. At the moment, the penalty is minor in comparison to the sums many of these individuals and body corporates are squirrelling away in complicated mechanisms. The current penalty is 10 years imprisonment or 1,000 penalty units, which equates to $210,000. The new penalties are as follows: for an individual, imprisonment for 10 years or a fine of the greater of 4,500 penalty units, or $945,000, three times the total value of the benefits obtained by committing the offence, or both; and, for a body corporate, a fine of the greatest of 45,000 penalty units, or $9.45 million, three times the total value of the benefits obtained by committing the offence, 10 per cent of the body corporate's annual turnover during the 12 months before the body corporate committed or began committing the offence. These substantial increases in penalties will reinforce the serious nature of these crimes and will also serve as a substantial deterrent for persons who may otherwise seek to engage in these types of evasive behaviours.

I'd like to turn to story of someone in my community whom I met in a local shopping centre. This woman, Abby—who had just found out that she was pregnant—was distraught. Her husband had been working as a subcontractor—I note this bill doesn't directly refer to subcontractors, but I know that our shadow minister, the member for Gorton, has mentioned subcontractors—and her husband's subcontracting company was not paid. The company just disappeared and set up locally again soon after. They were a young family struggling to get started, and this company deliberately avoided paying him and many others and set up very soon nearby in the same community.

These substantial increases in penalties will reinforce the serious nature of these crimes—and so they should—and, hopefully, serve as a substantial deterrent for persons who may otherwise seek to engage in these types of evasive behaviours. The civil penalty provision will also make it easier to hold directors and companies liable for avoiding liability for employee entitlements.

Labor established the FEG scheme because employees should not be punished, when an employer's business fails, by the loss of their legal entitlements: leave, superannuation and unpaid wages. Legitimate businesses do from time to time fail, but it is particularly disturbing that workers can lose their entitlements where a company deliberately structures its arrangements to avoid paying them. The average annual costs under the FEG scheme and its precursor, the General Employee Entitlements and Redundancy 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-year period between 1 July 2014 and 30 June 2018. According to the government, the increase in FEG claims can be attributed to a small number of corporations shifting liability.

Labor passed the Fair Entitlements Guarantee legislation in 2012, which delivered the strongest protections for workers' entitlements in this country. In contrast, this government tried to cut the FEG in 2014. It has no genuine commitment to protecting workers' entitlements. The FEG was always designed to be there as a safety net, as a guaranteed way that employees could be paid their entitlements in a timely manner and not wait for drawn-out processes before they receive a cent. It was not intended as a mechanism to allow unscrupulous employers to shift their obligations to pay workers' entitlements to the taxpayer.

While these reforms strengthen the legal regime to punish and deter dodgy employers and companies, they're only a start. On 24 May last year, the shadow minister for employment and workplace relations, the shadow Assistant Treasurer and the then shadow minister for small business and financial services announced a suite of Labor policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. One of those measures was that a Labor government would introduce an objective test for transactions depriving employees of their entitlements. We also announced that we would reform provisions for accessorial liability.

This government bill adopts and implements these measures. The government first announced its intention to address corporate misuse of the Fair Entitlements Guarantee scheme on 5 October last year. While we accept that the government engaged in consultations on the drafting of the bill, it nonetheless could be further improved. In the end, we support the premise and intent of the bill, as we see that it will benefit employees and, as an extension of that, taxpayers, who will have their valuable funds returned to them.

Labor is glad to finally see a bill which will have some benefit to workers come onto the government's agenda. This government needs to do so much more. This government should restore penalty rates. This government should do something about stagnant wages. This government should address underemployment. This government should address insecure employment and employers systemically underpaying employees.

In contrast to the abuses seen under this government, a Labor government will protect workers and ensure that they get a fair deal, by tackling unfair labour hire and cracking down on dodgy labour hire companies that rip off and exploit workers. Labor will restore penalty rates in our first 100 days of government and legislate so that they can never be cut again. Labor will ensure that collective bargaining is not undermined by corporate gaming of our industrial relations laws, including by preventing the use of sham enterprise agreements and employers simply terminating agreements instead of bargaining. Labor will abolish zombie Work Choices agreements. Labor will restore Fair Work by reforming the definition of 'casual' so that it is used for the purposes for which it was originally intended.

We will prevent employers forcing their workers into sham contracting arrangements to avoid direct employment, and we'll work to close the gender pay gap so that women don't work until February each year for free. Labor will address worker exploitation by introducing a national labour hire licensing scheme, reverse the onus of proof for franchisor liability for underpayment of wages and increase penalties for employers and dodgy directors who deliberately avoid paying their employees' entitlements. As I said earlier, Labor is committed to supporting the working people of this country.

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