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Asia employment law bulletin 2020

Australia

In response to a range of business scandals and the aftermath of the Royal Commission into Misconduct in the Banking Superannuation and Financial Services Industry, Australia has seen an increased focus on regulation designed to hold businesses accountable and introduce transparency, a trend that can be expected to continue in 2020.

Director duties and climate change

Of particular poignance given the ongoing bush fires in Australia, has been the recent focus on impact on climate change should shape the duties of directors, who are under a duty to act with care and diligence and act in the best interests of the company. A coordinated engagement by regulators and an opinion expressed by former High Court judge Kenneth Hayne AC QC, has suggested that climate change-related risk is a real and measurable financial risk that needs to take a more prominent place in directors' decision-making.

Hayne has indicated that, given the expert consensus on climate change is clear, climate risk is a matter of fact which boards can no longer disregard. It is argued that to avoid breaching their duties, more directors will need to consider the potential impact of climate change on their respective companies' operations, respond appropriately and report material findings to shareholders.

Introduction of enhanced whistleblower protection regime

Off the back of a parliamentary inquiry which recognised the importance of whistleblowing for deterring and exposing misconduct, fraud and corruption, a significantly expanded private sector whistleblower protection regime has recently come into effect.  The regime operates so that where disclosures meet certain requirements, whistleblowers are afforded a range of protections, with corresponding significant penalties where a company or individuals fail to protect whistleblowers from suffering a consequential detriment.  The complexity and novelty of the regime means employers are expected to implement new and comprehensive procedures for dealing with disclosures to ensure they do not risk breaching the new laws.  From 1 January 2020, public companies, large proprietary companies and trustees of superannuation entities must have a whistleblower policy in place outlining, among other things, the legal protections available to whistleblowers and how a company will investigate disclosures and protect whistleblowers from detriment.

Potential reform for the gig economy

Earlier in 2019, the Fair Work Ombudsman determined that Uber drivers were independent contractors, rather than employees, having noted that “there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer”.  While the decision relates solely to Uber, it builds on a growing legal framework for how courts and tribunals are to determine other gig economy relationships. 

This and other recent decisions have raised the question of whether the legal principles currently used to determine distinctions between employees and independent contractors are sufficiently adaptable to new forms of work.  Unions are lobbying for reforms to address the unique issues generated by the gig economy and further claims are being brought by gig economy workers claiming that they are employees, rather than contractors. As a result, this area remains one to keep a close eye on in 2020.

Underpayment sanction reform

In 2019 there was an increasing number of employers being named and shamed for underpayments of employee entitlements, with even some of Australia's most well-resourced companies failing to comply with minimum legal entitlements. Recently, the restaurant business fronted by celebrity chef, George Calombaris, entered into a deal with the Fair Work Ombudsman in which an AUD 7.8 million (c.USD 5.4 million) underpayment attracted a “contrition” payment of AUD 200,000 (c. USD 140,000).  Australia's largest supermarket chain, Woolworths, has also been caught up in an underpayment scandal, having recently admitted to underpaying workers up to AUD 300 million (c. USD 209 million) over the last decade.  While penalties for corporate and financial misconduct have increased significantly over recent years, there is general concern that the sanctions for breaches of employment laws remain too low to effectively encourage compliance. 

In light of this, the Commonwealth Government of Australia has commenced work on drafting legislation to criminalise serious instances of underpayment and has given in-principle support to increasing the general level of penalties in line with those applicable to other business laws.  While several unions are pushing for a strict liability test to apply to criminal penalties for underpayment, there is a clear balance to be struck between the use of penalties to encourage compliance and ensuring that penalties are not excessive so as to lead to genuine mistakes being crushingly punitive for businesses. New laws are unlikely to be seen until later in 2020 but companies will need to ensure that they are aware of not only the potentially increased legal risks, but also reputational risks associated with failing to provide employees with their legal entitlements.

Enterprise bargaining reform

Under Australia's current enterprise bargaining system, employers must establish that employees are better off overall than under the award (i.e. the government drafted document which sets out minimum terms and conditions of employment (including pay) for employees covered by the Australian national workplace relations system) applicable to that employee. This current approach has seen the proportion of private sector workers covered by enterprise agreements (i.e. an agreement between one or more national system employers and their employees) halved from 2013 levels to roughly 11%.  Unsurprisingly, there have been calls from the business community to reform the system and prevent the “rigid” and “absolutist” approach from constraining productivity.  Various proposals have been put forward, including to alter the enterprise bargaining approval test so that employers are only required to establish that a class of employees are better off than under an applicable award.

With the Commonwealth Government's review into the industrial relations system expected to be released in the middle of 2020, legislative reform in this area is expected. 

Aaron Goonrey, Lander & Rogers

Luke Scandrett, Lander & Rogers