THE TRANSFORMATION OF ENFORCEMENT OF MINIMUM EMPLOYMENT STANDARDS IN AUSTRALIA: A Review of the FWO’s Activities from 2006-2012 Associate Professor John Howe Tess Hardy Professor Sean Cooney Centre for Employment and Labour Relations Law Melbourne Law School 2 | Page TABLE OF CONTENTS ACKNOWLEDGEMENTS ........................................................................................................................ 7 ABBREVIATIONS .................................................................................................................................... 8 EXECUTIVE SUMMARY ......................................................................................................................... 9 1. INTRODUCTION ............................................................................................................................ 29 1.1 Other Studies and Commentary .............................................................................................................. 33 1.2 Methodology........................................................................................................................................... 37 1.3 Structure of the Report ........................................................................................................................... 38 2. THEORETICAL AND COMPARATIVE PERSPECTIVES ON GOOD PRACTICE IN ENFORCEMENT ..................................................................................................................................... 41 2.1 The problem of non-compliance with employment standards ................................................................ 41 Drivers of Non-Compliance in Australia .................................................................................................................. 45 2.2 Approaches to Regulatory Enforcement and Compliance ........................................................................ 51 Nature of Regulatory Framework and Rules ........................................................................................................... 52 Goals, Resources and Internal Organisation of Enforcement Agency ..................................................................... 55 Discretion and Professionalisation of Enforcement Officers .................................................................................. 56 2.3 Optimal Enforcement Approaches and Strategies ................................................................................... 58 Deterrence or Compliance ...................................................................................................................................... 59 Responsive Regulation and Smart Regulation ........................................................................................................ 60 Risk-Based Regulation ............................................................................................................................................. 62 Really Responsive Regulation .................................................................................................................................. 63 Strategic Enforcement ............................................................................................................................................. 65 2.4 Conclusion ............................................................................................................................................... 69 3. FEDERAL ENFORCEMENT OF MINIMUM EMPLOYMENT STANDARDS IN AUSTRALIA: HISTORY AND CURRENT STATUTORY FRAMEWORK ................................... 72 3.1 Regulation and Enforcement of Employment Standards in the Federal System 1904-1995 .................... 72 3 | Page 3.2 Federal Enforcement under the Workplace Relations Act 1996-2005 ...................................................... 75 3.3 Work Choices and the Reinvigoration of Employment Standards Enforcement ....................................... 79 3.4 Enforcement and compliance under the Fair Work Act 2009 ................................................................... 81 3.5 Investigative Powers of Fair Work Inspectors .......................................................................................... 87 Power of Inspectors to Enter Premises ................................................................................................................... 89 Power to Require Name and Address ..................................................................................................................... 90 Power to Require Production of Records or Documents ........................................................................................ 90 3.6 Overview of the FWO’s Enforcement Mechanisms and Procedures ........................................................ 90 AVR and Mediation ................................................................................................................................................. 91 Full Investigation ..................................................................................................................................................... 91 Administrative sanctions ......................................................................................................................................... 91 Court Based Enforcement Actions .......................................................................................................................... 92 3.7 Conclusion ............................................................................................................................................... 95 4 THE OBJECTIVES AND INTERNAL STRUCTURE OF THE FAIR WORK OMBUDSMAN 97 4.1 Introduction ............................................................................................................................................ 97 4.2 The FWO’s Enforcement Objectives and Priorities .................................................................................. 97 4.3 Internal Structure of the FWO and Professionalisation of FW Inspectors .............................................. 103 Internal Structure of the FWO ............................................................................................................................... 104 Recruitment and Training of Fair Work Inspectors ............................................................................................... 110 4.4 Conclusion ............................................................................................................................................. 113 5. COMPLAINTS, CAMPAIGNS AND COMPLIANCE ............................................................... 116 5.1 The FWO’s Detection Strategies ............................................................................................................ 117 Complaints ............................................................................................................................................................ 118 Audits: targeted campaigns and compliance audits ............................................................................................. 121 A focus on education? ........................................................................................................................................... 121 The structure of targeted campaigns .................................................................................................................... 123 Site visits and unannounced inspections .............................................................................................................. 128 Other forms of audits ............................................................................................................................................ 131 The Major Employers Branch ................................................................................................................................ 132 5.1 Balancing complaints and auditing campaigns ...................................................................................... 132 Strategic Enforcement ........................................................................................................................................... 136 How can the FWO best target campaigns? ........................................................................................................... 137 4 | Page Identifying industries in ‘Quadrant 2’ ................................................................................................................... 138 Using FWO data to target industries ..................................................................................................................... 141 Comments on the use of this data ........................................................................................................................ 143 5.2 Conclusion ............................................................................................................................................. 147 6. COMPLIANCE AND ENFORCEMENT ACTIVITIES AND OUTCOMES ........................... 149 6.1 Introduction .......................................................................................................................................... 149 6.2 Civil Remedy Litigation .......................................................................................................................... 151 An Overview of the FWO’s Litigation Activity ......................................................................................................