Too Soft Or Too Severe? Enforceable Undertakings and the Regulatory Dilemma Facing the Fair Work Ombudsman
| DOI | 10.22145/flr.41.1.1 |
| Author | John Howe,Tess Hardy |
| Date | 01 March 2013 |
| Published date | 01 March 2013 |
| Subject Matter | Article |
TOO SOFT OR TOO SEVERE?
ENFORCEABLE UNDERTAKINGS AND THE REGULATORY
DILEMMA FACING THE FAIR WORK OMBUDSMAN
Tess Hardy
and John Howe
ABSTRACT
This article reports on the use of enforceable undertakings by the Australian
employment standards enforcement agency, the Office of the Fair Work Ombudsman
(FWO), and its predecessor, the Workplace Ombudsman. Enforceable undertakings are
used by the FWO as an alternative enforcement tool to court litigation in relation to
breaches of the Fair Work Act 2009 (Cth), which regulates wages, working hours and
other minimum employment conditions. Proponents of enforceable undertakings
argue that they deliver value to regulatory agencies as a responsive alternative to
traditional, punitive enfor cement action. On the other hand, critics have raised
concerns about the accountability and effectiveness of this enforcement tool. The
authors provide a critical analysis of the FWO’s use of enforceable undertakings,
including c onsideration of the decision-making pr ocess, c ontent, m onitoring and
enforcement of undertakings. The analysis is based on a review of all enforceable
undertakings concluded in the period from 1 July 200 8 to 30 June 2012, a s well as
qualitative interviews with approximately 60 inspectors, managers and lawyer s of the
FWO, and a number of specialist workplace relations lawyers. The article reveals that
the FWO has made limited but promising use of enforc eable undertakings in the
review period. Throug h deployment of enforceable undertakings, the FWO has
demonstrated that it has a mix of regulatory approaches available to it that are
consistent with the key principles of responsive regulation. The number of enforceable
undertakings accepted by the FWO, h owever, remains fairly limited. We set out a
number of ways in which the regulator may maximise the utilisation of enforceable
undertakings, and more fully realise the regulatory benefits of this particular
compliance tool.
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RMIT University, Australia.
Centre for Employment and Labour Relations Law, University of Melbourne, Australia.
The research carried out for this article has been supported by a grant from the Australian
Research Council (LP099990298) and is part of a wide research project on the activities and
influence of the Fa ir Work Ombudsman (FWO). This project is partly funded by the FWO.
The authors would like to than k the FWO and the anonymous interviewees and
participants for cooperating with this research. We would also like to thank Jack Lang for
providing research assistance.
2 Federal Law Review Volume 41
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I INTRODUCTION
The Office of the Fair Work Ombudsman (FWO), the federal statutory agency
responsible for minimum employment standards regulatio n, is the m ost recent
Australian regulator to ma ke use of enforceable undertakings as a c ompliance tool. An
enforceable undertaking is a statutory agreement between a re gulator and an alleged
wrongdoer which sets out a number of promises or commitments intended to rectify
past co ntraventions and encourage f uture compliance. Failure to meet these
commitments can lead to the enforcement of the undertaking in court.
1
The FWO and its predecessor, the Workpla ce Ombudsman, are probably best
known for being active in bringing litigation against employers in breach of mi nimum
employment standards, such as wage and leave entitlements.
2
In this article, we
provide a critical analysis of both agencies' use of enforceable undertakings as an
alternative to litigation. The FWO was statutorily empowered to use enforceable
undertakings by the Fair Work Act 2009 (Cth) ('Fair Work Act'), which commenced on 1
July 2009, although the Workplace Ombuds man made three enforceable undertakings
framed as common law deeds between January and June 2009. As of 30 June 2012, the
Workplace Ombudsman and the FWO have accepted approximately 26 enforceable
undertakings.
3
The analysis in this article is based on our review of the content of all
these undertakings, as well as qualitative interviews with approximately 60 inspectors,
managers and lawyer s of the FWO, and a number of specialis t workplace relations
lawyers, to explore some of the practicalities with using this particular tool of
enforcement.
4
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1
It should be noted, however, that contravention of an enforceable undertaking does not
itself attract a civil penalty.
2
From 2006, the federal agency responsible for enforcement, now called the Office of the Fair
Work Ombudsman (FWO), was given substantially increased resources along with new
powers for labour inspectors, coupled with an earlier, significant increase in the penalties
that courts ar e able to impose for breach of these standards. See Tess Hardy, 'A Changing
of the Guar d: Enforcement of Workplace Relations Laws since Work Choices and Beyond'
in Anthony Forsyth and Andrew Stewart (eds), Fair Work: The New Workplace Laws and the
Work Choices Legacy (Federation Press, 2009) and Tess Hardy and John Howe, 'Partners in
Enforcement? The New Balance between Government and Trade Union Enforcement of
Employment Standards in Australia' (2009) 23 Australian Journal of Labour Law 306.
3
Technically-speaking, the FWO has entered into 29 enforceable undertakings, however, this
includes four enforceable undertakings with the same individual — Mr Sadamatsu
Katsuyoshi — in his capacity as director of four separate companies all of which were in
liquidation at the time the enforceable undertaking was made. It also includes the three
enforceable undertakings made prior to the commencement of the Fair Work Act.
4
Our research involved semi-structured qualitative interviews with Fair Work Inspectors
(and former Inspectors) in capital cities and some regional areas, as well as with senior
managerial staff and lawyers at the FWO with responsibility for decision-making and/or
policy in relation to the agency's use of sanctions such as enforceable undertakings. The
FWO assisted in the selection of these interviewees. The interviews, carried out in 2010,
2011 and 2012, adopted a semi-structured format using a common set of questions. In
addition to reviewing the content of enforceable undertakings, we have researched both
internal and publicly available FWO documentation, in cluding relevant FWO Guidance
Notes. This research was supplemented by a small number of interviews with legal
2013 Regulatory Dilemma Facing the Fair Work Ombudsman 3
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In conducting our evaluation, we draw up on scholarly analysis of the use of
enforceable undertakings in other policy areas. Although enforceable undertakings are
somewhat new in the context of employment stand ards regulation, they have been
used extensively in other spheres of business regulation in Australia since the early
1990s. For exa mple, enforceable undertakings have featured in the closely related a rea
of occupational health and safety, and in consumer, competition, corporation, financial
and media regulation.
5
While statutory regulatory agencies share a number of important features, the FWO
is operating in a unique context and has a distinct ap proach to many other regu lators.
Perhaps the most notable difference is the political vulnera bility and sensitivity of the
FWO as the regulator overseeing compliance with the legal framework of Australian
labour relations, a jurisdiction which has been a t the forefront of public debate in
recent years.
6
These distinct characteristics render the FWO's use of this particular
sanction an interesting case study in its own right. However, the lessons learned from
other jurisdictions are valuable for assessing the FWO's use of enforceable
undertakings, and our analysis may have implications for other regulators, in
particular the Fair Work Building Industry Inspectorate (formerly the Australian
Building and Construction Commission).
7
In particular, the existing literature and ex perience in other jurisdictions has
highlighted a number of issues with the use of enforceable undertakings. Proponents
of enforceable undertakings argue that they deliver value to regulatory agencies as a
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practitioners with experience in advising clients in relation to FWO enforcement activity.
We located practitioners through a variety of sources, including professional contacts,
participation in court cases, profiles at law firm websites and publications. Our
interviewees were either employment law specialists in large national law firms or partners
in boutique workplace practices and traditional labour law firms.
5
See, eg, Marina Nehme, 'Enforceable Undertakings in Australia and Beyond' (2005) 18
Australian Journal of Corporate Law 68; Christine Parker, 'Restorative Justice in Business
Regulation? The Australian Competition and Consumer Commission's Use of Enforceable
Undertakings' (2004) 67 Modern Law Review 209; Richard Johnstone and Michelle King, 'A
Responsive Sanction to Promote Systematic Compliance? Enforceable Undertakings in
Occupational Health and Safety Regulation' (2008) 21 Australian Journal of Labour Law 280;
Richard Johnstone and Christine Parker, Enforceable Undertakings In Action — Report of a
Roundtable Discussion with Australian Regulators (Workin g Paper No 71, National Research
Centre for Occupational Health and Safety, February 2010).
6
Bennett has argued that historically, federal governments have maintained considerably
more direct influence over the employment standards enforcement agency than other
institutions within the federal labour relations system, such as the courts and the
conciliation and arbitration tribunal: Laura Bennett, Making Labour Law in Australia:
Industrial Relations, Politics and Law (Law Book Co, 1994) 146. Moreover, the establishment
of the Workplace Ombudsman in 2007 was somewhat controversial due to allegations that
the agency it replaced, the Office of Workplace Services, had been subject to political
influence. See Glenda Maconachie and Miles Goodwin, ‘Does Institutional Location Protect
from Political Influence? The Case of a Minimum Labour Standards Enforcement Agency
in Australia’ (2011) 46(1) Australian Journal of Political Science 105.
7
The Director of the Fair Work Building Industry Inspectorate now has the same functions
and powers, in relation to a building matter, that the Fair Work Ombudsman has under s
715 of the Fair Work Act. See Fair Work (Building Industry) Act 2012 (Cth), s 59D.
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