Employment Non-Compliance in Australia in 2008-12

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Table of Contents

Introduction
Background
Causes of the Problem
Conclusion
Recommendations to Address Non-Compliance and Implementation
References

Introduction

Non-compliance with the standards creates the gap between norms and practice. One of the major problems is the non-payment of wages. The scale of unpaid salaries is enormous. Hardy and Cooney (2012) note that the recent “Survey of Income and Housing (SIH) data showed that 7.5 per cent of all adult employees earned below the FMW), including 3.6 per cent who earned well below the Federal Minimum Wage (FMW)” (p. 43).

Purpose

This report is addressed to the CEO of the Freedom Hub. It aims to reflect the current state of employment non-compliance and the subsequent provision of recommendations to resolve the problem.

Scope

The above indicators of non-payment of wages reflect the situation in the period between 2008 and 2012. To reveal the situation objectively, it is appropriate to consider the levels and nature of complaints received by the Fair Work Ombudsman (FWO) office

Method

This report is based on a descriptive method. It incorporates information collected from the National Employment Standards and non-payment of wages data. The recommendations are based on theoretical advancements in the field under consideration.

Limitations

The main limitation is that the timeframe of the research is between 2008 and 2012. It means that the data may have changed since 2012. Therefore, there are some risks of making irrelevant recommendations.

Assumptions

The report’s central assumption is the following: there are two methods to resolve the current non-compliance to employment standards: strategic enforcement and responsive regulation.

Background

Employers of cafes use various tricks that allow playing on insufficient awareness of employees and avoiding the costs associated with paying the dismissed employee the statutory payments. For example, “the former operator of an Alice Springs café has been fined $1500 for record-keeping failures discovered during a Fair Work Ombudsman campaign” (“Recent prosecutions,” 2017, para. 8).

In cases where layoffs are nevertheless inevitable, for example, the bankruptcy of an enterprise or compelled staff reduction, employees are offered to sign a dismissal at their own will in connection with a difficult economic situation, which is a direct violation of the standards of the labor law. Thus, it is possible to specify a range of unresolved problems in the labor legislation, which gives the ground for new research in this area.

Evidence shows that in violation of employment standards, which manifests itself in a delay in payment, tends to be relapsed. This state of affairs is usually associated with an unstable financial situation in an organization. At the same time, the organization does not necessarily reside at the bankruptcy stage (“Penalties,” 2017). Another common cause is non-payment by contractors, the situation of conflict with tax and customs authorities, which arose due to the underpayment of taxes and non-payment of customs remuneration.

This prevents timely settlement on labor payment without performing specific complex and long-term actions to get money from their account to pay employees. Despite the mentioned fact and its impact, employers’ economic position should not in any way impact their duty to pay promptly along with the liability, to which they may be called to account for this form of violation.

Causes of the Problem

As noted by the Office of the Fair Work Ombudsman (FWO) and research evidence, conformity to the employment standards is a great challenge caused by the change in production, increased competitiveness in the field of hospitality, and the complex manner of the legal structure. One of the causes is associated with legal foundations. For instance, small business employees cannot file complaints about unfair dismissal within the first six months after the adoption of obligations. However, if an employer complying with the Small Business Fair Dismissal Code dismisses an employee after the mentioned period, it is regarded as fair.

Employees of small enterprises who were laid off because of the business recession cannot file a complaint about unfair dismissal. However, the recession must have a fundamental basis, namely, genuine redundancy. Requirements for recognizing the reduction as true are contained in section 389 of the Fair Work Act. It is interesting to note that the Small Business Fair Dismissal Code is accompanied by a list of issues according to which the employer in a small enterprise can determine whether the reduction is true or not. Many employers tend to deceive their employees, leaving them without adequate pay and conditions.

The new Standard of Fair Work Act adopted in 2009 determined the lower limit of labor social standards, including salary levels, maximum adequate working hours, and a list of leave types for all employers, which increased the updated federal legislation’s effect. In the new phase of the reform of the labor law, the opportunities for employers to manage an organization were significantly expanded. In particular, employees’ rights to protect them from unfair dismissals have been cut: the period of work until the expiry of which workers are not entitled to file a complaint has increased from three to six months.

It should also be pointed out that the right to dismiss workers for economic reasons due to financial and other problems was established. In the course of the reform, the collective and contractual regulation of working conditions was also significantly reduced, and the sphere of the individual contractual law was expanded. Under the new requirements, employers were allowed not to extend separate agreements after their expiration.

Shortcomings in government enforcement present another cause. According to Hardy and Cooney (2012), the reform of labor law at the turn of 2005 – 2006 was the result of the coming to the authority of the liberal national coalition, which developed the main elements of the reform of labor legislation in the direction of empowering the employer and increasing the flexibility of contractual regulation of labor relations for several years.

It is possible to specify the critical points of this reform. The significant expansion of the subject sphere of the federal labor legislation occurred. Earlier, as the authors note, the national labor legislation extended mainly to workers in the public sector of the economy.

The work of employees in other industries was regulated primarily at the local level. The federal regulation was expanded by reforms. Some categories of employers (regional authorities, associations that have an officially authorized entity, individual entrepreneurs, and partnerships) were taken out of their competence. The complete centralization of labor regulation was limited merely by the regulatory powers of the regions in the field of labor protection and professional training.

The general departure from the Australian system of compulsory arbitration should also be noted. The Australian Fair Pay and Conditions Standard (AFPCS) adopted the lower standard of labor social norms, including wages, maximum regular working hours, and the number of vacations for all employers enumerated in the updated federal legislation. As Hardy and Cooney (2012) emphasize, the reforms practically “buried” the famous Australian system of compulsory arbitration, significantly narrowing the authority of the Australian Industrial Relations Commission (AIRC). In other words, the concept of soft negotiation procedures prevailed.

This also caused a gradual reduction in the collective and contractual establishment of working conditions with the simultaneous strengthening of support for their contractual regulation. Thus, employers were allowed to refuse to extend the expired individual agreements and form obligations under agreements and arbitration decisions grown to the acquired enterprise with its former owners. Also, the procedure for registration of concluded agreements was simplified.

Conclusion

In conclusion, it should be noted that consistent and balanced implementation of the policy of flexicurity as well as others suggested in this paper, will expand employment mechanisms in such an essential segment of the economy as the labor market. Namely, while maintaining a significant level of labor and social guarantees of employees, it is expected that the problem of non-compliance to minimal employment standards in Australian cafes will be addressed.

Recommendations to Address Non-Compliance and Implementation

It is possible to assume the two methods to resolve the current non-compliance to employment standards, including strategic enforcement and responsive regulation. The paramount goal is to achieve optimal regulatory enforcement.

Traditionally, there are accommodation model and punishment model that imply compliance and deterrence, respectively. However, it seems more practical to suggest implementing the responsive regulation that is also called smart regulation.

Established by Ayres and Braithwaite, the theory of responsive regulation may be used to “represent regulatory response on the part of state institutions, but a heuristic embracing greater complexity is needed to model contemporary regulatory system” (Grabosky, 2013, p. 7). The strategic enforcement pyramid implies that at the foundation, it is better to apply education, persuasion, and advice. If the mentioned methods do not provide the expected results, it is recommended to move to enforcement based on more formal mechanisms such as infringement notices. Furthermore, most punitive sanctions are to be implemented at the top of the pyramid.

Another potential way to enhance the current situation is to provide the so-called flexicurity. This is a form of labor law policy, namely, such a direction of activity of the state and organizations, which is expressed in a combination of flexibility in the regulation of labor and associated relations along with management of the labor market, ensuring the protection of the rights of subjects of labor law. The characteristic feature of modern flexicurity policy is prioritizing the protection of the rights and legitimatizing employees’ interests concerning flexibility (Vosko et al., 2017). Also, this policy strives to ensure the social responsibility of the state and employers to employees.

The protective regulation that is also called social function in the labor law should remain a priority in relation to the economic one, even in the financial and economic crisis conditions. Flexibility in the officially authorized regulation of labor relationships can be manifested in the following forms: expansion of the individually contractual regulation, use of local regulatory foundation of the collective-contractual nature, and the boundaries of unilateral changes in the employment relations initiated by an employer.

Considering the principles of compliance with National Employment Standards (2017), one may note that its most important integral feature is a systemic character. A special place among recent studies on the system of principles of law is occupied by the research of Grabosky (2013), who believes that the principles of labor regulation can be defined as ideas expressed in fundamental legal concepts, reflecting the existing level of notions of law, determining legal activity and the relations arising in the course of it.

According to Grabosky (2013), flexicurity includes several essential elements. The external flexibility provides the ease or difficulty of hiring and firing an employee and the use of fixed-term employment contracts. The internal flexibility ensures the simplicity or complexity of changing the amount of labor used by an employer without hiring new or firing existing employees by changing the working hours, using part-time work, overtime work, etc.

In its turn, the functional flexicurity implies the ease or complexity of changing the very organization of work or the ability (inability) of employees and organizations to adapt to new challenges by performing multiple tasks. The flexibility of labor remuneration relates to the level of costs concerning economic conditions.

It becomes evident that the mentioned option applies to the contract of employment and the possibility of dismissal initiated by employees because of the presence of valid reasons or the fact of violation by the employer of labor legislation and labor or collective contract. The flexibility of canceling the employment relations in this sense is rather liberal. Examples of flexibility in regulating labor relations can also be applied to institutions of pay, working time, rest time, and so on.

References

Grabosky, P. (2013). Beyond responsive regulation: The expanding role of non‐state actors in the regulatory process. Regulation & Governance, 7(1), 114-123.

Hardy, T., & Cooney, S. (2012). The transformation of enforcement of minimum employment standards in Australia: A Review of the FWO’s activities from 2006-2012. Web.

National Employment Standards. (2017). Web.

Penalties for blatant contraventions in popular Perth restaurant chain. (2017). Web.

Recent prosecutions – Fair work breaches. (2017). Web.

Vosko, L. F., Grundy, J., Tucker, E., Thomas, M. P., Noack, A. M., Casey, R.,… Mussell, J. (2017). The compliance model of employment standards enforcement: An evidence‐based assessment of its efficacy in instances of wage theft. Industrial Relations Journal, 48(3), 256-273.

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