Fair Work Amendment (Textile, Clothing and Footwear Industry) Act 2012

The Fair Work Amendment (Textile, Clothing and Footwear Industry) Act 2012 amended the Fair Work Act 2009 by inserting a new Part 6-4A with special provisions about TCF outworkers. The guide to that Part says Division 2 provides for TCF contract outworkers to be taken to be employees in certain circumstances for the purposes of most provisions of the Fair Work Act. Division 3 provides for TCF outworkers, whether employees or contractors, to recover unpaid remuneration from entities that are indirectly responsible for work done by the outworkers. Division 4 allows regulations to prescribe a code dealing with standards of conduct and practice relating to TCF outwork.

The objects of Part 6-4A are also important. The Act says the objects are to eliminate exploitation of outworkers in the textile, clothing and footwear industry and to ensure those outworkers are employed or engaged under secure, safe and fair systems of work. It does that by providing nationally consistent rights and protections regardless of whether the outworker is an employee or contractor, by establishing a mechanism to recover amounts owing from other parties in a supply chain, and by providing for a code dealing with standards of conduct and practice in the supply chain.

For businesses, this is not a narrow amendment about one type of contract wording. It changes how worker status, supply chain exposure, records and agreement drafting can operate in the TCF sector. If your business is involved in making, arranging, sourcing or retailing TCF goods, you need to check where you sit in the chain and which parts of the Fair Work Act are engaged.

The amendments focus on TCF work, which the Act defines as work in the textile, clothing or footwear industry. They also use the concepts of TCF outworker and TCF contract outworker. A TCF contract outworker is a TCF outworker who performs work other than as an employee.

A central concept is the Commonwealth outworker entity. The Act defines this as an entity that is an outworker entity otherwise than because of section 30F or 30Q. The note to the definition says those sections extend the meaning of outworker entity in relation to a referring State. That means businesses should use the statutory definition carefully rather than assuming the term covers every participant in every arrangement in the same way.

The regime can affect the direct engager, but it can also reach other parties in a chain or series of arrangements for the supply or production of goods produced by TCF work. In practice, that means the legal analysis often goes beyond the worker's immediate contract and looks at the broader production and supply structure.

The Act inserts section 17A to explain when TCF work is performed directly or indirectly for a person. If there is a chain or series of 2 or more arrangements for the supply or production of goods produced by TCF work performed by a worker, the work is taken to be performed directly for the person who employed or engaged the worker. That person is the direct principal.

The same work is taken to be performed indirectly for each other person who is a party to any arrangement in the chain or series. Each of those persons is an indirect principal. The Act also says this rule does not limit the circumstances in which TCF work is performed directly or indirectly for a person, or in which a person arranges for TCF work to be performed directly or indirectly for that person.

This matters because a business may be legally connected to the work even if it never signed the worker's contract. If your business is one of the parties in the chain, the work may be treated as performed indirectly for you. That can affect both deemed employee status under Division 2 and unpaid amount exposure under Division 3.

The Act also says section 17A does not apply for the purposes of Divisions 2A and 2B of Part 1-3. That is one example of the amendments not applying uniformly across the whole Fair Work Act.

Division 2 of Part 6-4A contains the core deemed employee rule. For the purposes of the provisions covered by that Division, a TCF contract outworker is taken to be an employee, within the ordinary meaning of that expression, and to be a national system employee in relation to particular TCF work if the work is performed directly or indirectly for a Commonwealth outworker entity. If that entity is a constitutional corporation, the work must also be performed for the purposes of a business undertaking of the corporation.

The person who engages the outworker is taken to be the employer, within the ordinary meaning of that expression, and to be the national system employer of the outworker in relation to the TCF work. This is a key practical point. The engager may be treated as the employer for covered Fair Work Act purposes even where the formal arrangement is a contract for services.

The Act also includes an interpretive direction. When interpreting covered provisions of the Fair Work Act and any relevant instrument, an interpretation consistent with the statutory objective is to be preferred. That objective is that a TCF contract outworker who is taken to be an employee should have the same rights and obligations in relation to the work as an employee would have if employed by the engager to do that work.

For businesses, the message is straightforward. A contractor label does not settle the issue. If the statutory conditions are met, the law can treat the outworker as an employee for the covered provisions.

The deemed employee rules do not apply to every part of the Fair Work Act. Section 789BA says Division 2 covers the provisions of the Act other than the listed exclusions and regulations made for the purposes of those excluded provisions. The exclusions include Division 1 and Division 2 of Part 6-4A itself, Divisions 2A and 2B of Part 1-3, Part 3-4 on right of entry, Part 3-5 on stand down, Part 6-3, Part 6-4, and Part 1 of Schedule 1.

The Act goes further and says provisions not covered by Division 2 are to be interpreted disregarding the effect of Division 2 in relation to other provisions of the Act. It also says references in covered provisions to matters dealt with in excluded provisions are to be interpreted having regard to the fact that Division 2 does not apply for the purposes of those excluded provisions.

In practical terms, businesses should not assume that once a worker is deemed an employee for one purpose, that status automatically carries across the whole Act. The first compliance question is not just whether the worker is a TCF contract outworker. It is also whether the specific Fair Work Act provision you are dealing with is one of the provisions covered by Division 2.

Division 3 creates a separate recovery regime for unpaid amounts. It applies if a TCF outworker performs TCF work for a responsible person, either as an employee of that person or under a contract for the provision of services to that person, and the responsible person does not pay an amount that is payable in relation to the work on or before the due date.

The unpaid amount must be payable under a contract, the Fair Work Act or an instrument made under or in accordance with it, another Commonwealth law, a transitional instrument continued by Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, or a State or Territory industrial law or State industrial instrument. The Act says the unpaid amount may include remuneration or commission, leave, contributions to a superannuation fund, and reimbursement for expenses incurred.

An indirectly responsible entity is, subject to the Act's limits, a Commonwealth outworker entity for which the TCF work was performed indirectly and, if the entity is a constitutional corporation, for the purposes of a business undertaking of the corporation. If only part of the work meets that test, the entity is only indirectly responsible in relation to that part, and the unpaid amount is limited to the amount attributable to that part of the work.

Each indirectly responsible entity is liable to pay the unpaid amount. If there are 2 or more indirectly responsible entities, they are jointly and severally liable. The responsible person remains liable as well, subject to the Act's specific provisions. This means businesses higher up the chain can face direct payment exposure even where they were not the worker's immediate engager.

The Act contains an important retailer carve-out, but it is narrower than many businesses expect. A Commonwealth outworker entity is not an indirectly responsible entity if, as a retailer, it sells goods produced by the TCF work and it does not have any right to supervise or otherwise control the performance of the work before the goods are delivered to it.

This is not a blanket exemption for all retailers. The statutory test turns on whether the retailer has any right to supervise or otherwise control the performance of the work before delivery. If the retailer has approval rights, production oversight rights, quality control rights or other contractual rights that amount to supervision or control before delivery, the carve-out may not apply.

Retail businesses dealing in TCF goods should review their purchasing terms and sourcing arrangements carefully before assuming they are outside the supply chain liability regime.

A TCF outworker, or a person acting on the outworker's behalf, may give an apparent indirectly responsible entity a written demand for payment of the amount the outworker reasonably believes the entity is liable for under section 789CB. An apparent indirectly responsible entity is one the outworker reasonably believes is an indirectly responsible entity in relation to the TCF work.

The demand must specify the amount and identify the responsible person. It must also include particulars of the TCF work to which the amount relates, explain why the amount is payable by the entity receiving the demand, and state that proceedings may be commenced if the specified amount is not paid by the specified time. The specified time must be at least 14 days after the demand is given.

If the amount is not paid in full by that time, proceedings may be commenced by the outworker, by an organisation entitled to represent the outworker's industrial interests, or by an inspector. The proceedings may be brought in the Federal Court, the Federal Magistrates Court, or an eligible State or Territory court.

For businesses, a written demand should be treated as a serious legal event. You should check the supply chain facts, the basis on which the work is said to have been performed indirectly for your business, whether the amount claimed is one the Act recognises, and whether any retailer carve-out or partial liability argument may apply.

The amendments changed the definition of employee record in section 12 of the Fair Work Act. For a TCF contract outworker who is taken to be an employee by Division 2 of Part 6-4A, an employee record includes something that would be an employee record for the purposes of the Privacy Act 1988 if the outworker were an employee for the purposes of that Act. Businesses should not assume record obligations only matter for workers they already classify as employees. If Division 2 treats the outworker as an employee for covered provisions, the employee record concept is extended accordingly.

The Act also inserted a rule about enterprise agreement flexibility terms. If an enterprise agreement includes terms that would be outworker terms if they were included in a modern award, the flexibility term must not allow the effect of those outworker terms to be varied. Businesses using enterprise agreements in the TCF sector should check whether any outworker-related terms are protected from variation through the flexibility mechanism.

There were also related amendments to right of entry provisions, including replacing references to TCF outworkers with TCF award workers in that context and adding a definition of TCF award worker for section 483A. That fits with the broader point that the 2012 amendments do not apply in exactly the same way across every part of the Fair Work Act. Businesses should read the specific provision they are relying on, not just the general policy of the amendments.

Part 6-4A says Division 4 allows the regulations to prescribe a TCF outwork code. The objects section explains that the code is intended to deal with standards of conduct and practice to be complied with by parties in a supply chain.

The amending Act itself does not set out the detailed content of the code in the text summarised here. What it does make clear is that the Fair Work Act framework was expanded so regulations can prescribe supply chain conduct standards for TCF outwork. That means businesses should not stop at the Act itself. They should also check the current regulations to see whether a code has been prescribed and whether any additional conduct standards or compliance expectations apply.

The Act also allows regulations to deal with how covered provisions apply to deemed employees and deemed employers, including specified modifications, but it does not allow regulations to modify a provision that creates an offence or imposes an obligation which, if contravened, constitutes an offence, and it does not allow new offence provisions to be created in that way.

The Act received Royal Assent on 15 April 2012. Sections 1 to 3 and anything not otherwise covered by the commencement table commenced on that day. Schedule 1 commenced on a day fixed by Proclamation, and because it did not commence earlier within the 6 month period, it commenced on 1 July 2012.

The legislation is listed as in force. Because this is an amending Act, businesses should also check the current consolidated Fair Work Act 2009 and any regulations made under it before relying on a summary. That is especially important for the operation of the TCF outwork code and any regulations dealing with deemed employees and deemed employers.