Luke Gosling (Solomon, Australian Labor Party) Share this | Hansard source

I think it's fair to say that what the member for Oxley was just saying points to the fact that this is not a government which puts the interests of workers first, generally speaking. He gave just one example around penalty rates. With this bill, the Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018, I am happy to say that there are some benefits for working people. The Prime Minister has been saying he wants to see people have a go and then they will get a fair go. Well, there are plenty of people working hard, putting in a hard day's work, having a go and contributing, as the Prime Minister likes to say, but those opposite have cut their pay. If they're on penalty rates, that is true to say. On this side of the House, we are concerned they're not getting a fair go, and we want to see that they do get paid what they're entitled to.

We've seen all too often companies structure their affairs to avoid paying their workers. In my electorate of Solomon, the Fair Work Ombudsman has found that several businesses are underpaying their workers. The ombudsman did an audit of 54 businesses in Greater Darwin and found that 25 were not paying their employees correctly and 16 were not keeping accurate records or providing pay slips. One example was a Darwin cafe that underpaid three workers almost $5,000 over 10 months and did not pay weekend penalty rates at all. As a result of these audits, the ombudsman recovered over $20,000 in unpaid wages. In another case, the Fair Work Ombudsman ordered an Adelaide transport company which transports bulk petroleum into the Northern Territory to pay 10 of their drivers $374,000 in outstanding wages.

This bill contains sensible reforms to the Corporations Act to better deter and punish directors and companies who deliberately avoid liability for employee entitlements. Labor have announced policies to crack down on abuse by directors and the real problems associated with phoenixing in this country. One of those measures is 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. We are pleased to see the changes to the Corporations Act contained in this bill that will hopefully see a greater degree of recovery for employees who are owed entitlements. We also hope the government will be able to use these new capabilities to recover more taxpayers' money to replenish the thousands—indeed, millions—of dollars currently being paid out under the Fair Entitlements Guarantee scheme.

This bill will strengthen the Corporations Act to better deter and reduce the incidence of dodgy companies and their associates structuring their arrangements in a way that evades paying employee entitlements and deliberately shifting liability for unpaid employee entitlements to the Commonwealth 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—that is, where a director or a company structures their company to avoid, or enters into an agreement 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, 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 act since 2000, there has never been a conviction under it.

Labor announced in May last year that we would reform this 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, more than a year later, adopted this Labor policy in this bill.

This bill will amend the Corporations Act to make it easier to prove the criminal offence of entering into an agreement to avoid paying employee entitlements, and to include recklessness as a mental element. It will significantly increase the maximum fine for the offence of entering into an arrangement to avoid paying employee entitlements. It will introduce a new civil penalty provision for avoiding paying employee entitlements, with an objective reasonable-person test. It will give the Fair Work Ombudsman, the ATO and the Department of Jobs and Small Business standing to commence compensation proceedings to recoup moneys paid out via the Fair Entitlements Guarantee. It will extend liability for unpaid entitlements to related corporate entities, and it will extend 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 to give registered organisations standing to commence civil proceedings under the new provisions for compensation and the recovery of unpaid entitlements. It is worth noting that the increase in the financial penalty for the criminal offence is significant. We agree that the substantial increase in the penalty will reinforce the serious nature of these crimes and will also act as a substantial deterrent to persons who may otherwise seek to engage in these types of evasive behaviours. It is also the case that the civil penalty provision will make it easier to hold directors and companies liable for avoiding liability for employee entitlements.

Labor established the FEG scheme because, when an employer's business fails, employees should not be punished by the loss of their legal entitlements, whether those be leave, superannuation or unpaid wages. It is even more egregious for workers to lose their entitlements where a company deliberately structures its arrangements to avoid paying them.

The average annual cost under the FEG scheme has more than tripled, from $70.7 million in the four-year period between 1 July '05 and 30 June '09 to $235.3 million in the four-year period between 1 July '14 and 30 June '18. According to the government, the startling fact behind these figures is that the increase in FEG claims can be attributed to a small number of corporations shifting liability. 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 have to wait for drawn-out processes before they received a cent. In 2012, Labor passed the Fair Entitlements—

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