Women s Access to their Rights and Entitlements

Abstract For the first time in Australian history a Paid Parental Leave Scheme (PPL) has been enshrined in law, commencing from 1 January 2011. The Paid Parental Leave Act 2010 (the Act) provides up to 18 weeks of payment at the minimum wage level and operates in addition to any existing employer schemes and the unpaid parental leave entitlement under the National Employment Standards (NES). The Fair Work Ombudsman is legislated to undertake investigations into allegations of non compliance with the Act by employer paymasters. The Act poses a challenge for regulatory Agencies who monitor and enforce its requirements. The compliance role and compliance tools conferred by the Act will influence the investigative mindset of the FWO processes and this paper/presentation seeks to identify a number of possible scenarios which will present both challenges and opportunities to current FWO compliance and enforcement processes. Regulatory challenges in the enforcement of Australia s first Paid Parental Leave Scheme For the first time in Australian history a Paid Parental Leave Scheme (PPL) has been enshrined in law, commencing from 1 January 2011. The Paid Parental Leave Act 2010 (the PPL Act) provides up to 18 weeks of payment at the national minimum wage level and operates in addition to any existing employer schemes and the unpaid parental leave entitlement under the National Employment Standards (NES). The PPL Act poses a challenge for regulatory Agencies who monitor and enforce its requirements. This paper examines the compliance role the Fair Work Ombudsman (FWO) has in the new regulatory scheme and some possible scenarios that may arise following the Scheme s full implementation on 1 July 2011 when eligible employers became the paymasters. The FWO is a statutory office established by the Fair Work Act 2009 (FW Act). It is located within the Education, Employment and Workplace Relations portfolio. The FWO is responsible for providing education, assistance and advice about the Commonwealth workplace relations system. In addition, the FWO is responsible for impartially enforcing compliance with the FW Act and fair work instruments. The FWO has been the industrial relations regulator since 2006, established by the Workplace Relations Act 2006 (WR Act) as the Office of Workplace Services and subsequently the Workplace Ombudsman. As a regulator the FWO s role in compliance and education activities is set down in the FW Act. The regulatory role of the FWO is to ensure compliance with the FW Act and its activities include undertaking investigations and compliance activities in regard to allegations of contraventions of the legislation. Australia s Paid Parental Leave Scheme With the introduction of the PPL scheme, Australia joined the majority of other OECD countries in enshrining paid maternity leave into legislation. The Paid Parental Leave Bill 2010 was passed by

the Australian Government on 21 June 2010 following over two years of policy development and public consultation1. Paid Parental Leave seeks to address specific employment related objectives and needs, for those parents within the workforce and is not part of a social welfare model 2. The Productivity Commission s Report3 states that evidence and theory suggest that a paid parental leave scheme will increase women s participation in the workforce prior to childbirth and maintain a woman s link to the workforce4. These policy drivers are evidenced in the processes of the PPL Scheme in particular through the paymaster system. From 1 January 2011 to 1 July 2011 employers were given an opt in provision for any employees eligible to receive Parental Leave Pay (an employer, with agreement from their employee, could opt to act as paymaster). Anecdotal evidence from Centrelink suggests this initial opt in provision was not heavily accessed by employers during the eligible time period. From 1 July 2011 the Department of Families, Housing, Community Services and Indigenous Affairs estimated 79% of eligible parents would be provided with their Parental Leave Pay entitlements via their employer as paymaster post 1 July 2011. The role of paymaster under the PPL Scheme is one of administrator. Part of the administration for a business is to ensure they are registered with the Centrelink Family Assistance Office. Upon registration of an eligible employee Parental Leave Payments are deposited into the bank account of the paymaster, either as part of the employer s identified usual pay cycle or over three six weekly instalments. The paymaster is responsible for keeping and providing financial and payment records. Unpaid Parental Leave funds not dispersed to an employee, in situations such as an employee returning to work during the Paid Parental Leave period, must be returned to Centrelink. The PPL Scheme is funded by the Australian Federal Government. Broadly, [t]he Scheme provides working mothers, and the initial primary carers off adopted children, with access of up to 18 weeks parental leave pay at the national minimum wage while they stay at home to look after their baby or adopted child 5 . The Scheme is intended to complement and supplement existing entitlements to paid or unpaid leave in connection with the birth or adoption of a child. Eligibility requirements include: o o o o You are the primary carer of a newborn child or initial primary carer of a recently adopted child; and Meet the Paid Parental Leave work test before the birth or adoption occurs; and You have an annual income of $150,000 or less; and You are on leave from the time you become the child s primary carer until the end of the paid parental leave period; and

Fair Work Amendment (Paid Parent Leave Bill) 2010 Explanatory Memorandum Australian Government Productivity Commission, Paid Parent leave: Support for Parents with Newborn Children. Productivity Commission Inquiry Report No 47, 28 February 2009 3 As per 2 4 As per 2 5 Memorandum of Understanding between Centrelink and The Office of the Fair Work Ombudsman
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You are living in Australia and you are a permanent resident or citizen6.

Generally, the work test requires the primary carer claiming the Parental Leave Pay to have worked 10 out of the preceding 13 months prior to the birth/adoption. It should be noted that the work period does not have to be with one single employer, compared with the National Employment Standard unpaid maternity leave requirements. Section 67 of the FW Act states the General Rule employee must have completed at least 12 months of service to gain an entitlement under Section 70 of the FW Act, the entitlement to unpaid parental leave. The requirements between the National Employment Standards and the PPL Scheme work test identify the first challenge for regulators. Consequently, a party may be eligible for payment under the Paid Parental Leave Scheme, but not eligible for unpaid parental leave under the National Employment Standards. However, this I would argue is a legislative challenge rather than a regulatory one and it is envisaged future amendments to the FW Act will resolve this. The FWO Compliance Role Part 4-2 of the PPL Act sets out the FWO s statutory functions in regards to the administration of the Paid Parental Leave Scheme. Section 141 of the Act details the Functions of the Fair Work Ombudsman as: (a) To inquire into, and investigate, any matter referred to the Fair Work Ombudsman under section 143; (b) To commence proceedings in a court in relation to a contravention of section 70 (which deals with unauthorised deductions from [Parental Leave Payment] instalments), or Part 3-2 (which deals with payment of instalments by an employer [paymaster]); (c) Any other function that is incidental to the function referred to in paragraph (a) or (b). Enforcement options available to the FWO where contraventions by a paymaster of the PPL Act have been established are the issuing of a Compliance Notice (section 157 of the PPL Act) or the issuing of Infringement Notices (section 159 of the PPL Act). In addition, as set out above, the FWO has the function to implement proceedings in court upon the identification and establishment of contraventions. Contraventions under the FW Act that are subject to FWO investigation are: y y y Non payment of a Parental Leave Payment instalment7; Unauthorised deductions from Parental Leave Payment instalments8; Record keeping obligations9

Fair Work Inspectors appointed under the FW Act may exercise their compliance powers to investigate and determine contraventions of the PPL Act. These investigative powers include requesting records, entering premises and undertaking interviews.

http://www.centrelink.gov.au/internet/internet.nsf/individuals/ppl_working_parents_eligibility.htm Paid Parental Leave Act 2010 Part 3-2 8 As per 7 Section 70 9 As per 7 Sections 80-81
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In order for the FWO to investigate alleged contraventions of the PPL Scheme a referral must be made by Centrelink to the FWO10. A Memorandum of Understanding (MOU) between the Fair Work Ombudsman and Centrelink was finalised in March 2011. The MOU details the processes for disclosure and exchange of information between the two Agencies for the purposes of ensuring compliance under the Paid Parental Leave Scheme. Prior to referral from Centrelink to the FWO, where possible non compliance by the paymaster has been identified, Centrelink undertake their own dispute resolution process. Following referral to the FWO the Centrelink Family Assistance Office (FAO) forms the role of Paid Parental Leave provider11 thus ensuring families are not continuously disadvantaged by a paymaster s actions. The FWO role is not one of a debt collector. The FWO will investigate and attempt to recover Parental Leave Pay from the date the recipient has first failed to receive Parental Leave Pay to the date the FAO has assumed the role of provider . Any remaining unpaid monies that fall due after this date will be dealt with through Centrelink s debt recovery processes. In addition to the FWO s role in the recovery of Parental Leave Payments, a referral may also be received for investigation into an employer s failure to: o o o Provide Parental Leave Pay in accordance with the claimant s normal payroll cycle; Provide an employee with reasonable access to a written record of their Parental Leave Pay; or Keep proper records of Parental Leave Pay funds received from Centrelink and Parental Leave Pay paid to claimants12.

These contraventions are viewed as technical contraventions of the PPL Act and may only come to the attention of Centrelink (and subsequently the FWO) where the contraventions of failing to provide Parental Leave Pay or unauthorised deductions from Parental Leave Pay have occurred. However, if these technical contraventions are identified during the course of investigations regarding contraventions of the FW Act (as opposed to the referral process), they will be pursued as would a direct referral from Centrelink. Where a record keeping contravention of the PPL Act is determined it is open to the FWO to determine the appropriate enforcement option and this may include the issuing of an Infringement Notice for 15 penalty units for a body corporate or 3 penalty units to a person other than a body corporate. This equates to $1,650 or $330 respectively13. The FWO may determine an Infringement Notice as the most appropriate enforcement option in situations where an investigation has determined a contravention in regard to a repeat offender, where an employer has refused to engage with the regulator or it is determined an employer s actions have been deliberate with no demonstrated action regarding rectification or future behaviour. Following a referral to the FWO from Centrelink identifying an alleged contravention of the PPL Act, the referral is registered on the FWO Case Management System and is subject to the FWO s Assisted Voluntary Resolution processes. These are undertaken by a FWI as a desk based investigation. The
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As per 7 Section 143 As per 5 page 5 12 As per 5 page 5 13 Crimes Act 1914 Section 4AA

Assisted Voluntary Resolution process is an informal form of dispute resolution with the FWI acting as a medium for information exchange between the parties in an attempt to seek resolution and compliance. No formal determinations are made by FWIs undertaking these processes and no enforcement correspondence (such as Compliance or Infringement Notices) are entered into. During the FWO PPL investigations the Assisted Voluntary Resolution stage of the investigation is relatively short - seven days. The short time frame in this phase reflects the opportunities previously afforded for resolution through the Centrelink resolution and review processes. Theoretically (as at August 2011 no referrals have been made to the FWO) the alleged contraventions referred for investigation appear uncomplicated. Evidence is not in dispute that the paymaster has received monies from Centrelink, thus creating a statutory obligation on the paymaster to pass Parental Leave Payments to the entitled party. Evidence has been provided to Centrelink by the entitled party that the Parental Leave Payment has either not been passed on or has been subject to unauthorised deductions. Consequently, it would not be appropriate for the FWO Assisted Voluntary Resolution process to be lengthened outside of the current seven day process. Following non resolution at the FWO Assisted Voluntary Resolution stage the allegations are referred to a field based Fair Work Inspector for full investigation. A full investigation includes gathering further evidence from both parties, most often through the service of a Notice to Produce, undertaking records of conversation and conducting interviews with relevant parties and witnesses. A FWI at the conclusion of the investigation makes a determination as to the contravention and identifies the appropriate enforcement action. The MOU between the Agencies provides for a two way exchange of information. Under sections 144 and 158 of the PPL Act the FWO is obliged to inform Centrelink of the outcome of any alleged contraventions referred. The exchange of information is subject to processes established in the Centrelink and The Office of the Fair Work Ombudsman Paid Parental Leave Guidelines. Hypothetical Paid Parental Leave Investigation Scenarios 1. The interaction between Paid Parental Leave entitlements, accrued leave entitlements, National Employment Standard entitlements and the entitlements and obligations of other applicable industrial instruments. The FWO s role in assessing and enforcing multiple entitlements is varied. A FWO investigation regarding PPL entitlements does not involve the assessment of whether an entitlement exists, having been previously determined by Centrelink as existing and consequently provided to the pay master for distribution to the intended recipient. This is divergent to the FWO s role in undertaking investigations and making determinations into entitlements accrued under the NES and other applicable industrial instruments. In FWO s traditional entitlement investigations a FWI begins with a blank sheet in regard to any determination, one of the initial enquiries a FWI must turn their mind to is whether an employment relationship exists before any entitlements can begin to be established.

During the course of a Paid Parental Leave investigation a Fair Work Inspector may be presented with a situation where a paymaster has received the parental leave payment but is in dispute with Centrelink as to the employer determination under the PPL Act. An employer determination is subject to a review/appeal through Centrelink processes. It is however, envisaged employer determination disputes would have been exhausted prior to any referral to the FWO. It is predicted that investigation referrals from Centrelink may be as a result of the paymaster failing to pass on the parental leave payment to an eligible employee on the basis of other leave entitlements accrued under applicable industrial instruments, such as, accrued annual leave and/or an industrial instrument providing for paid maternity leave outside of the PPL Scheme. Actions by a paymaster in this situation are contraventions, an employee s entitlement to Paid Parental Leave sits in addition to other leave entitlements. Consequently, the investigation may determine contraventions under both the PPL Act and contraventions relating to entitlements accrued in accord with the FW Act. Any complexity of the interaction of the relevant legislations will be identified through an investigation that is not limited to the Centrelink referral. 2. The enforcement options when undertaking investigations involving a paymaster who has entered into liquidation following receipt of Parental Leave Payment from Centrelink. However unlikely a particular scenario may appear it is always likely a regulatory agency such as the FWO has been or will be presented with it at some stage. This scenario envisages a multitude of payments from Centrelink to a paymaster who subsequently enters into liquidation and as a consequence fails to meet their compliance obligations in distributing the Parental Leave Payments to the eligible employees. FW Act entitlement investigations undertaken by the FWO are not immune to these situations. In some non PPL entitlement investigations complainants will be referred to the General Employee Entitlements and Redundancy Scheme as the most appropriate means of accessing any outstanding entitlements. However, in situations where an investigation has established an entitlement is outstanding and a person, such as a Director, has been involved in the contravention of a provision of the FW Act, the person will be treated in the same way as the actual contravention14. This makes the person involved in the contravention as equally liable as the company. Section 550 of the FW Act therefore, may provide an enforcement option to be considered as a PPL investigation outcome in scenarios where it can be established a paymaster has in any way by act or omission, directly or indirectly, knowingly concerned or been party to a contravention of the FW Act. In considering enforcement options the FWO must turn its mind to its litigation policy15. A key consideration in undertaking litigation enforcement is public interest. Public interest
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Fair Work Act 2009 Section 550 Fair Work Ombudsman s Litigation Policy Guidance Note One

includes the challenge to ensure public value the most appropriate expenditure of tax payer dollars. In consideration of a Section 550 litigation in a PPL investigation is applicable, where liquidation has occurred, there is a strong public interest case to be made for general and specific deterrence. In a scenario where it can be proven a paymaster has obtained parental leave payments from Centrelink with a prior knowledge that it was intending to enter into a liquidation scenario, or a paymaster s history reveals evidence of pheonixing the public interest argument is further enhanced. It should be noted the PPL Act requires the an employer determination be made subject to [m]atters relevant to whether an employer is a fit and proper person 16 . These requirements include consideration of whether an employer is insolvent. Thus, the above scenario should only present itself where an employer becomes insolvent post an employer determination by Centrelink. 3. The interaction of the keeping in touch provisions of the PPL Act and an employer s compliance obligations with the usual employment entitlements that are attracted to keeping in touch days, in comparison with the PPL time which attracts no usual employment entitlements. Paid Parental Leave must be taken as a continuous block of time and, with certain exceptions, work must not be undertaken in this time. A person is taken to have returned to work, and therefore no longer entitled to Parental Leave Payments, when they perform one hour or more of paid work other than for permissible purposes17. During the course of the Paid Parental Leave period entitlements commonly seen with other leave are not attracted to this period of time. For example, Paid Parental Leave time is not counted toward service and does not accrue annual or personal leave or superannuation entitlements. One circumstance in which a parental leave payment recipient can return to their workplace without breaking the continuum of parental leave is during a keeping in touch day18 (KIT). A KIT is a cornerstone of the public policy underpinning the PPL Scheme. It ensures a parental leave recipient is encouraged to maintain contact and connection with their workplace through exempting any KIT days from a return to work declaration. Consequently, any paid work performed on a KIT day for the purpose of maintaining engagement to facilitate a return to the employment at the cessation of the leave period will not attract the determination of returning to work. A parental leave recipient is entitled to ten KIT days during the course of the eighteen week parental leave period. It should be noted that until amendments are made to the FW Act there is a possibility a KIT day will break an employee s continuous period of leave under the NES unpaid parental leave entitlement.

Paid Parental Leave Act 2010 Section 101(5) As per 7 Section 48 18 As per 7 Section 50
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The entitlements attached to a KIT day are identical to those attached to a recipient s normal working day19. For example the KIT days attract superannuation, annual leave and personal leave accruals. Additionally, the KIT days attract all the normal pay entitlements. An allegation referred to the FWO for investigation in regard to a KIT day is not identified as a referral in accordance with Section 143 of the PPL Act, it does not relate directly to obligations on paymasters in regard to payments or unauthorised deductions of the Paid Parental Leave entitlement. A FWO investigation may be undertaken in relation to a KIT day where an employee alleges they have not been paid for the work undertaken on a KIT day or have not received their full payment entitlement for this day, for example, allegations of underpayment of hourly rate, or have not accrued entitlements such as annual or personal leave during a KIT day(s). Allegations such as these are treated as possible contraventions under the FW Act. In a situation where an employee in the usual course of their work receives above award payments, the FWO (in most instances) has the jurisdiction to enforce only the minimum entitlement in accord with the applicable industrial instrument(s). Therefore, where an employee receives their statutory entitlement for work undertaken on a KIT day the FWO would be unlikely to be able to enforce any above award payment. However, as an example, where it can be established that a contravention has occurred in regard to a National Employment Standard a FWI may apply to the Court20 to enforce the safety net contractual obligations of an employer, which may attract the jurisdiction of above award payments. Therefore, where a paymaster is identified as contravening an entitlement such as annual leave, the FWO may be able to seek enforcement of above award payment on a KIT day in line with an agreement/common law contract between the parties. 4. Investigating deductions in situations where monetary disputes between an employer and employee have not been settled prior to the commencement of PPL, possibly where an employer seeks to independently enforce the disputed amount through a reduction to an employee s Parental Leave Payment entitlement. There are limited situations in which deductions can be made to Parental Leave Pay instalments by a paymaster. These include deductions authorised by the payment recipient that are principally for the recipient s benefit (such as salary sacrifice), deductions for PAYG and deductions relating to child support21. In situations where a paymaster is referred to the FWO in accord with Section 143 of the PPL Act the FWO will investigate the allegations of unauthorised deductions. FW Act investigations undertaken by the FWO include situations where an employer has made unauthorised deductions such as an employer belief money is owed for uniforms,
http://www.familyassist.gov.au/payments/family-assistance-payments/paid-parental-leavescheme/parents---frequently-asked-questions/other-employer-provided-entitlements.php 20 As per 14 Section 541 21 As per 7 Sections 67-69
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alleged damage to property, training, alleged theft and under or poor performance. In accord with the FW Act a deduction may be made by an employer from an amount payable to an employee under permitted deductions only22. Therefore, based on investigative experience the FWO envisages the referral of matters in scenarios where a paymaster has determined there is an unresolved monetary dispute between the parties and the paymaster believes a monetary entitlement is owed by the Parental Leave Pay recipient. In addition, it is envisaged there will be situations referred from Centrelink to FWO for investigation where a paymaster has made unauthorised deductions in lieu of an additional leave entitlement. For example, where an employer based paid maternity leave scheme is in place and the employer paymaster makes a decision to deduct payments made to an employee under this scheme from an employee s Paid Parental Leave entitlement. A similar scenario may occur where an employee has accessed annual or long service leave entitlements during the course of the Paid Parental Leave period and rather than correctly pass on the Parental Leave Payment entitlement an employer paymaster deducts the annual or long service leave payment from the Parent Leave Payment instalment(s). The PPL Act is clear in regard to allowance and authorised deductions and consequently in all of the above scenarios the FWO will investigate these referrals as unauthorised deductions and view them as prima facie contraventions of the PPL Act.

Conclusion The Productivity Commission Inquiry Report (2009)23 found approximately half of all women in the workforce did not have access to a paid parental leave scheme. The submissions to the inquiry from stakeholder and interest groups identified many common themes and proposed objectives that legislation regarding paid parental leave should seek to enshrine, such as: o o o o o Improved health and wellbeing of the mother and baby; The value of care and the important impact it has on a child s development; Maintaining a woman s longer term attachment to the workforce; Women s increased participation in the workforce; and Gender equity within the workforce and increased retention of the female labour force.

A referral by Centrelink to the FWO for alleged contraventions of the PPL Act by a paymaster arguably does not indicate the presence of a successful future ongoing relationship between the parties (employer and employee). It is imperative that Centrelink ensure employer determinations involving questions of employment status and Paid Parent Leave eligibility are subject to an administrative process for the independent reassessment of determinations. This will contribute greatly to appropriate referrals to the FWO.

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As per 14 Section 324 Paid Parent Leave: Support for Parents with Newborn Children. No. 47, 28 February 2009 @ 1.5

The FWO s role in ensuring compliance with the PPL Act is to investigate alleged non compliance by paymasters (employers). The FWO s role is not one of reviewing determinations made by Centrelink in regard to a paymaster s obligations and disputes regarding employment relationships between the employer and employee and the disputed employment status of Parental Leave Payment recipients. While the FWO has a role in the provision of information to employers and employees in regard to their rights and obligations to unpaid parental leave under the National Employment Standards, the FWO s role is to test eligibility with the interaction of the FW Act. As identified in the course of this paper, a recipient s entitlement to parental leave payments through an employer determination made by Centrelink does not automatically enliven the recipient s entitlement to the rights regarding unpaid parental leave under the National Employment Standards. The issue of employer determinations is one that is subject to the PPL Act and Centrelink processes and as such does not currently present a scenario to be addressed through the FWO investigation process. However, the investigation scenarios outlined in this paper are firmly within the FWO jurisdiction. Investigations undertaken by the FWO will provide a source of data for review and analysis of matters undertaken in the realm of Section 143 referrals and will provide an information source as to whether the investigation referrals, processes and actions align with the public policy aims of the Paid Parental Leave Scheme.

Carey Trundle Director Regional Services & Targeting SA/NT Fair Work Ombudsman carey.trundle@fwo.gov.au (08) 8225 8261