Inquiry into the Workplace Relations Framework actu submission to the Productivity Commission

Performance and role of the labour inspectorates

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Performance and role of the labour inspectorates

The FWO is regulatory agency of substantial value in the industrial relations system. Its core functions are essentially education and enforcement, both of which it executes well in an objective sense, notwithstanding that we and our affiliates could point to examples of where we consider the advice given by the FWO is not correct. Even in those outlying cases, the FWO have engaged with us to discuss the areas of disagreement or how standard advice might be revised. We have good lines of communication with them which is essential given that, in some measure, our affiliates’ regulatory functions overlap with theirs.

The FWO 2013-14 Annual Report indicates that it received 12,376,395 telephone or written inquiries and website visits and that it finalised 25,650 complaints for 2013-14 through dispute resolution initiatives (62%), compliance and enforcement (21%) and assessment (17%). The most common complaints were not being paid for work (32%), underpayment (26%) wages and conditions (17%), leave entitlements (16%) and payment in lieu of notice (9%). The FWO issued 116 infringement notices, 65 compliance notices and 15 enforceable undertakings for the period 2013-14. 733 Its compliance and enforcement policy indicates it applies a sensible triage and management process to the inquiries it receives, save perhaps in relation superannuation matters which it perplexingly refers to the ATO notwithstanding that agency’s poor track record of action on such matters. The FWO has also shown initiative in driving responsible compliance through supply chains, as evidence by its action against the Coles group and by entering into Proactive Compliance Deeds734. Again, whilst there might be room for disagreement on the detail, the substance and intent is overwhelmingly positive.

We note the PCs tendency to refer to “dispute resolution” in the context of a discussion with FWO. We construe this as a reference to the FWO’s mediation service735. This is a function that the FWO has evolved to assume and, in our view, it may be a symptom of the gaps in the functions of the FW Commission or a poor awareness about its existing functions and the lack of accessibility to the Court system. Mediation is inaccessible through the court system until proceedings have been issued and other steps taken in litigation, which can present up-front costs. The process of commencing a matter in the FW Commission is less complex and conciliation generally happens very early in the process. However, as discussed in Chapter 12, the FW Commission does not have the ability to preside over all disputes, and it does not have the capacity to arbitrate all of the disputes that are brought before it. It may be the case that one present advantage of the FWO’s mediation service is that it carries with it the implied threat that if the matter is not resolved, a further step may be taken independently of the will of the parties involved. It is somewhat perverse from a resource allocation perspective that some of the functions of the FW Commission are duplicated in the result. In our view, it would be a far more efficient outcome if the FW Commission were formally able to assume the mediator role for the core wages and conditions complaints that FWO is seemingly inundated with (particularly at a safety net level) and that the mediation take place under a framework where active involvement (such as making recommendations) and ultimately arbitration were a real prospect.

Another and perhaps more glaring issue of inefficiency and waste is the fact that there are two separate and separately funded, statutory agencies enforcing one set of industrial laws – the FWO and the FWBC. Although the FWBC is confined in its role to laws applying to ‘building work’ as defined, its statutory mandate is in virtually identical terms to that of the FWO736. Moreover, since the introduction of the FW(BI) Act in 2012, there is no difference in the laws that they enforce and the penalties which apply to any contraventions of those laws. There are really only a couple of significant differences between the operations of the two inspectorates.

Firstly, the FWBC has at its disposal coercive information gathering powers which include a criminal sanction of up to six months imprisonment for failure to comply with those powers.737 The FWO has the power to compel the production of records or documents738, however contravention of this provision results in a civil penalty and is not a criminal offence. Both sets of provisions override the common law privilege against self-incrimination. The most recently published report of the FWBC shows that the FWBC’s coercive notices have only been relied on 4 times in the 2013-14 period and twice in the period 2012-13739. In any event this distinction is set to fall away in less than 3 months’ time when the sunsetting provision in the FW(BI) Act takes effect and the FWBC is no longer able to apply to issue these coercive notices740. At that point, FWBC inspectors will have the same powers in respect of building matters as those available to inspectors of the FWO under the FW Act741.

The other point of distinction between the two agencies is that whilst the FWO carries out the full range of functions that would ordinarily be expected of a labour inspectorate, and does so in a way that is consistent with Australia’s international obligations as a signatory to ILO Convention 81, Labour Inspection, (namely by  securing ‘the enforcement of the legal provisions relating to conditions of work and the protection of workers while engaged in their work, such as provisions relating to hours, wages, safety, health and welfare, the employment of children and young persons, and other connected matters,’742 the FWBC has made a policy decision not to perform that role itself - notwithstanding that it is clearly a part of its statutory responsibilities to do so. Instead, in relation to the enforcement of employee entitlements under industrial instruments, the FWBC has ‘outsourced’ this responsibility to the FWO to perform and has done that on the basis that the FWO is better equipped to carry out this work. This failure to carry out the proper role of a labour inspectorate has drawn strong condemnation from the ILO’s Committee of Experts on the Application of Recommendations and Conventions. In 2011 that body said of the ABCC (now FWBC):-

“Noting with concern that the manner in which the ABCC carries out its activities seems to have led to the exclusion of workers in the building and construction industry from the protection that the labour inspection system ought to secure for these workers under the applicable laws, the Committee urges the Government to ensure that the priorities of the ABCC (or the Fair Work Building Industry Inspectorate) are effectively reoriented so that labour inspectors in the building and construction industry may focus on their main functions in full conformity with Article 3(1) and (2) of the Convention.”        

The effect of this ‘policy’ decision by the FWBC not to secure and enforce employee entitlements but to abdicate that responsibility to the FWO makes the case for disbanding the FWBC and allowing the FWO to function as the sole federal labour inspectorate even more compelling. The fact is the FWO is already performing the most basic function of enforcing the legal rights and entitlements of employees in the construction industry and there is simply no need for another inspectorate to cover that industry.

The only time where the question of the existence of a separate statutory agency for the construction industry was considered was during the course of the Wilcox Inquiry in 2008-09. In his final report Mr. Wilcox QC dealt with the argument about the administrative and structural context in which any specialist agency would operate in the construction industry. He said:-

“As I understand the position, the Australian Government is keen to reduce the present proliferation of Commonwealth workplace relations agencies. It would be consistent with that objective for it to make the Specialist Division part of the OFWO. Efficiencies and costs savings should result from amalgamation of what is now the ABCC, with what is now the Office of the Workplace Ombudsman. The amalgamated units could then share not only accommodation and other infrastructure, such as computer and other communications systems, but also expensive supporting services, and financial, human resources, legal and IT personnel.

..I considered whether it is possible, without making the new Specialist Division a separate statutory body like the ABCC, to ensure it receives earmarked resources, sufficient to enable it to provide high standard, focussed services to the industry. I raised with DEEWR the possibility of the Specialist Division, although within the OFWO, having its own one-line Budget allocation. I was informed this would not be unprecedented but was probably unnecessary.”

Ultimately, the very first recommendation of the Wilcox Inquiry was that any new agency for the construction industry be established within the FWO, not separate from it.

Funding of the ABCC/FWBC costs the Australian taxpayer in the order of $30m per annum. That has meant a total outlay of around $250m since its establishment in 2005. The FWBC was set up at a time when the Fair Work Ombudsman did not exist and the Commonwealth inspectorate, such as it was, was nowhere near as active, efficient and well-resourced as the current FWO. The continued existence of the FWBC amounts to unnecessary duplication and inefficiency. There is no reason for a second agency to exist for the construction industry. Nor is there any doubt that the FWO has the capacity, powers and resources to carry out all of its function in the construction industry along with every other industry. The FWBC should be disbanded and its operations absorbed into the FWO.    

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