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Fair Work Ombudsman clamps down on underpayments to foreign workers

August 31, 2015


Do you employ foreign workers? Are you playing by the rules?

After the publication of the independent review into the 457 visa program in April 2015, the Federal Government announced that the Fair Work Ombudsman (FWO) would be playing an increasingly prominent role in monitoring and enforcing compliance in relation to overseas workers.

This has proved to be accurate, and a number of recent cases demonstrate that the FWO is placing particular emphasis on ensuring that businesses comply with employment and visa conditions for foreign workers.

Largest-ever court fine imposed for breach of 457 sponsorship obligations

In June 2015, the Federal Court handed down a pecuniary penalty of $175,000 to Choong Enterprises Pty Ltd for systematic underpayment of Filipino workers. It was the largest civil penalty any court in Australia has imposed for a breach of sponsor obligations.

FWO has commenced over 50 legal proceedings involving overseas workers

The FWO has been busy in this area. It has commenced over 50 legal proceedings involving overseas workers, which represents more than 20 per cent of its litigation work.

It has recently fined a number of companies for underpaying foreign workers. Some examples include:

  • An underpayment claim totalling $35,900 of Chinese nationals on 417 visas in a fast-food takeaway shop in Adelaide.
  • An underpayment of $4,2000 to an overseas worker employed by a small retailer in New South Wales. Due to a history of underpaying claims, the business will face potential penalties of up to $51,000 for the company and $10,200 for the owner.
  • An underpayment of $5,573 by a Nando’s restaurant to a Korean worker on a 417 visa. The owners of the business will be required to undertake compliance training as part of an enforceable undertaking, in addition to back payment of the wages.
  • An underpayment of $440,000 by a Taiwanese company to construction workers based in regional New South Wales.
  • An underpayment of $28,000 by a restaurant owner to Korean backpackers working the Wide Bay area in Central Queensland over a period of six months.

FWO’s focus extends beyond the direct employment relationship, to both upstream and downstream of the labour supply chain

It is important for businesses to be aware that the FWO’s focus extends beyond the direct employment relationship, to both upstream and downstream of the labour supply chain in labour hire arrangements. The FWO can use the accessorial liability provisions in s 550 of the Fair Work Act 2001 (Cth) to prosecute parties it views as being ‘involved in’ contraventions of the legislation. This includes companies at the top of the supply chain.

FWO investigates Baiada Group

The Baiada Group is the largest Australian-owned poultry processing company. It produces the Lilydale and Steggles chicken brands, and supplies to customers including Coles, Woolworths, IGA, Aldi, McDonald’s, KFC, Red Rooster, Nando’s and Subway.

Baiada had verbal agreements with numerous contractors that provided a labour-hire service. These contractors, in turn, subcontracted to other companies, some of which contracted down a further two or three tiers. Most of the workers were on 417 working holiday visas, and were from Taiwan or Hong Kong.

In response to complaints from workers that they were being underpaid, forced to work long hours, and required to pay high rent for overcrowded and unsafe employee accommodation, an inquiry was launched by the FWO in November 2013.

A report into the company was released in June 2015 and found that:

  • the contractors and subcontractors failed to comply with a range of workplace laws
  • Baiada failed to implement adequate governance arrangements to monitor its subcontractors.

The FWO also concluded that the information obtained during the inquiry warrants further investigation into Baiada and its contractors.

FWO investigating other irregularities associated with hiring foreign workers

It is important for employers to be aware that the FWO is not just targeting underpayments to foreign workers but compliance with other visa conditions. Each visa that allows foreign visitors to work in Australia comes with its own unique set of conditions, which must be complied with.

What you need to know about visa conditions

If you hire foreign workers, you should be aware of the conditions that attach to those visas. Here are some general guidelines to point you in the right direction.

457 Temporary Work (Skilled) Visa

The holders of this class of visa must work in a position compliant with the nominated role they elected when applying for their visa and at their nominated salary. They must not cease work for a period of longer than 90 days.

417 Working Holiday and 462 Work and Holiday Visas

The holders of this class of visa must not work for one employer for more than six months. Employers need to be aware that this applies to workers retained on a casual on-hire basis. This means that even if a worker is strictly in the employment of an on-hire company, they are still prohibited from working for one business for longer than six months.

573 Higher Education Sector Visa

The holders of these visas cannot work more than 40 hours in any given fortnight while their educational institution is in session. However, they are allowed to work full-time outside the advertised teaching session.

The importance of compliance

If you are a business that hires foreign workers, it is important you are aware of the conditions that attach to your workers’ visas. In addition, you need to make sure you follow all the usual employment entitlements. As you can see from the above case studies, the FWO is taking its monitoring role very seriously, and any attempt to underpay workers or failure to comply with visa conditions is likely to be met with a heavy-handed response.

Are you an HR Assured client? Do you employ foreign workers? Are you unsure about their visa conditions or entitlements? If so, feel free to call our Telephone Advisory Service.