In addition to the primary and most important impact on employees and their families, underpayment of staff undermines community confidence in business. It causes significant reputational damage to firms and can lead to a decline in workforce morale, productivity and performance. The Australian government has said that it “considers it unacceptable that there is a persistence of underpayment and exploitation by a small number of employers” and is reviewing compliance and enforcement accordingly.
The Attorney-General is consulting on powers for the Fair Work Ombudsman (FWO) to ban directors and has flagged new federal criminal penalties for severe cases of systemic wage underpayment.
A separate Senate inquiry on wage underpayment is also underway.
States and Territories are also moving to act independently — Victoria is consulting on criminalising “wage theft”, proposing personal liability for directors and offences with prison terms of up to 10 years. Queensland recently flagged new “wage theft” laws for its jurisdiction, with up to 14 years’ imprisonment. This could be a rapidly changing and overlapping regulatory environment.
These proposals are in addition to existing accessorial liability provisions for directors. At a federal level, directors can already be personally liable for wage underpayment if they are found to have intentionally participated in the underpayment (actual cases have been rare to date).
New rules for record keeping on annualised salary employees, starting from 1 March, may also see a return of bundy time clocks across many workplaces in Australia.
The FWO has signalled that employers will no longer receive amnesty for self-reporting wage underpayment. It is increasing its focus on enforcement, auditing, contrition payments and public “naming and shaming” of entities breaching the law.
It is important all boards increase their focus on the governance and compliance frameworks in place for ensuring employees receive the appropriate payment for their work. How boards respond will depend on their sector, size of their workforce and complexity of their industrial arrangements.
Of course, compliance with the law should be non-negotiable, with the tone set from the top. Boards in sectors where there are specific risks — such as high reliance on labour hire, casual workforces or management overtime and/or known non-compliance risks — will need to bring a sharper focus to their challenge to management and assurance requirements.
Directors should satisfy themselves that management’s compliance and control systems operate effectively and are subject to regular monitoring and sampling across systems. Audits and assurance of practices should feature as part of the governance framework, appropriate to the needs of the organisation. Additionally, accountability should feature in the remuneration and KPI settings for senior management.
Phoenixing laws go live
A significant regulatory reform that impacts all directors has materialised with the passing of the Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 through federal parliament. The new laws form part of the Government’s insolvency law reforms and aim to counter phoenix activity or “creditor-defeating dispositions”.
In addition to measures specifically targeting phoenixing, the laws also:
- Restrict back-dating of director resignations — any late lodgement of resignation to the Australian Securities and Investments Commission (ASIC) will now be taken to apply from the date the notice was received by ASIC.
- Prevent directors from resigning if the resignation would leave the company without a director.
- Extend the director liability regime to cover a company’s GST liabilities in certain circumstances. We note that draft ATO guidance indicates these provisions will only be applied in limited circumstances including where there are reasonable grounds to believe the taxpayer/business or its related entities are involved in phoenix behaviour, or assets are being dissipated (or other action being taken) with the intention to defeat creditors.
Directors should be aware of these significant changes, and give thought to their organisation’s current processes and procedures, particularly in relation to ASIC lodgements.
The AICD has been closely engaged on these reforms — briefing political offices and providing submissions — including to the Senate committee that considered the bill in early 2019.
We strongly support the goal of deterring and disrupting phoenix activity, and acknowledge the significant harm phoenixing causes to creditors, employees and the broader economy. However, our consistent view has been that more proactive policing and enforcement of existing laws is more important in combatting phoenixing. This remains our view. More information is available here.
The introduction of director identification numbers or “director IDs” — perhaps late this year — will also help combat phoenixing activity. It is important, however, that the framework is robust and practical.
The AICD is a member of the ATO’s Business Advisory Group, providing input on the director ID framework, and representing the interests of the director community. We will keep members closely updated. The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, which introduces director identification numbers (DINs) is before federal parliament at the time of writing.
AUSTRALIA DAY HONOURS LIST 2020
- Helen Maree McDevitt PSM GAICD
- Major General Andrew William Freeman AM GAICD
- Air Commodore Kenneth John Robinson AM GAICD
- Air Commodore Gerald Anthony van Leeuwen AM CSC GAICD
- Dr Miles Gareth Jakeman AM FAICD
- Colonel Craig Anthony Lauder CSM GAICD
- Colonel Simon Clive Palmer CSM GAICD
- Colonel Stephen John Gliddon AM GAICD
- Brigadier Wade Bradley Stothart DSC AM
NEW SOUTH WALES
- Professor Peter McIntyre AO FAICD
- Ian Ross Donges AO FAICD
- Katherine Ruth Tollner PSM GAICD
- Christopher Mark Beatson PSM GAICD
- Justin Joseph Dowd AM GAICD
- Captain Warren James Bairstow AM CSC GAICD
- Kim Gillis AM MAICD
- Dr Joseph James Collins AM FAICD
- Jenni Mack AM GAICD
- Janine Louise Middleton AM MAICD
- Sister Monica Mary Cavanagh OAM AAICD
- Kerry A Robinson OAM GAICD
- Lisa Chung AM FAICD
- Dr Dedee Daryl Woodside AM GAICD
- Ilana Rachel Atlas AO MAICD
- Professor Bruce Gregory Robinson AC FAICD
- Violet Roumeliotis AM GAICD
- Lieutenant Glen Allan Billington CSC GAICD
- Colonel Michael Andrew Say DSC GAICD
- Craig Robert Gear OAM MAICD
- Christine Lois Simpson Stokes AM MAICD
- Christine Franks AM FAICD
- Anne Lorraine Trimmer AO FAICD
- Harry Kevin McCann AO FAICDLife
- Professor Edward Tuckseng Mah PSM GAICD
- Jennifer Mary Richter AM GAICD
- Vincent Tremaine AM FAICD
- Dr Helen Diana Mclean AM MAICD
- John Francis Lynch OAM MAICD
- Jan Sutherland OAM GAICD
- Jacqui Elizabeth McGill AO GAICD
- Simon Charles Cubitt OAM GAICD
- Jahna Cedar OAM GAICD
- Glenn Elliott Muskett OAM MAICD
- Peter John Hood AO FAICD
- Noelene Duff PSM FAICD
- Michael Kevin Malouf AM FAICD
- Rosemary Therese Langford Addis AM GAICD
- Elaine Cafferty Carbines AM GAICD
- Dr Lynne Maree Coulson Barr OAM MAICD
- Major General David John McLachlan AO FAICD
- Alana Therese Johnson AM GAICD
- Dr Colleen Georgette Pearce AM MAICD
- Colleen Debra Furlanetto OAM MAICD
- Dr Anne Marie Astin AM PSM MAICD
- Sabine Cornelia Phillips AM FAICD
- George Savvides AM FAICD
- Janet Patricia Matton AM GAICD
- Marion Albertje Saville AM GAICD
- Adira Yael Werdiger OAM GAICD
- Graham Burton Goldsmith AO FAICD
- Mark David Grant PSM MAICD
- David George Weil OAM GAICD
- Sally Anne McCutchan OAM GAICD
- Jane Caroline Hansen AO MAICD
- Professor Margaret Elaine Gardner AC FAICD
- Sarah Kate Davies AM MAICD
- Dr Robert John Edgar AM MAICD
- Dr Catherine Janet Brown OAM FAICD
- Simon Bloomer OAM MAICD
- Fiona Margaret McLeod AO SC GAICD
- Clare Frances Douglas PSM GAICD
- Kenneth Duncan MacDonald AM FAICD
- Marita Louise Cowie AM MAICD
- Lieutenant Dianne Grey CSC MAICD
- Helen Francis Ferguson PSM GAICD
- Georgina Jane Somerset AM FAICD
- Dr Barry Leonard Kelly AM FAICD
- Annabelle Chaplain AM FAICD
- Trina Coral Hockley AM FAICD
- Emeritus Professor Cindy Shannon AM GAICD
- Julie Ann Arthur OAM MAICD
- Mark Patrick O’Connell PSM MAICD
- George Cameron Fox AM MAICD
- Dr Peter William Riddles AM FAICD
- John Arthur Abbott AM MAICD
- Faiza El-Higzi OAM MAICD
- Nicholas James Marchesi OAM GAICD
- Lucas Brooke Patchett OAM GAICD
- Ian Duncan Stewart AO GAICD
- John Charles Batten AM GAICD
- Constance Kimberly Seagram AM MAICD
- Gillian Margaret Groom AO MAICD
- Captain Shane Andrew Craig AM AAICD (London)