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Workplace Update: New Whistleblower Laws

Recent events such as the raids on the ABC and other journalists have brought into focus the risks faced by whistleblowers who leak evidence of corruption or other serious crimes.

It is therefore somewhat timely that the federal parliament recently passed the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2019, which substantially bolsters whistleblower protections within the private sphere.

Who do the new laws apply to?

The Bill amends the Corporations Act and other legislation (new laws) by imposing strict whistleblowing protection obligations on the following regulated entities:

  • companies or constitutional corporations
  • certain financial institutions
  • insurers (including life insurance companies)
  • superannuation entities and trustees
  • any associated entities of the above

The new laws do not apply to government departments, nor do they increase the whistleblower protections for commonwealth employees.

Key Effects

In essence, the new laws:

  • allow the making of protected disclosures about a wider range of misconduct such as corporate corruption, fraud, bribery and money laundering, as well as other serious criminal offences that pose a danger to the public or financial system

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Fines and Prison – Tougher Personal & Company Penalties

The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act came into effect on 13 March 2019.  It is a response to the Banking Royal Commission which called for increased penalties for corporate wrongdoing.

The new Act amends the Corporations Act, the National Consumer Credit Protection Act, the Australian Securities and Investments Commission Act and the Insurance Contracts Act 1984.  Below we focus on the changes to the Corporations Act.

What are the new maximum penalties for individuals?

The new maximum pecuniary penalty for individuals is the greater of:

  • $945,000; or
  • 3 times the benefit gained/detriment avoided.

The new maximum prison penalties for serious criminal offences (including breaches of director’s duties) have been increased to 15 years.

The new maximum civil penalty for individuals is the greater of:

  • $1.05 million; or
  • 3 times the benefit gained/detriment avoided.

What are the new maximum penalties for companies?

The new maximum pecuniary penalty for companies is the greater of:

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Franchising – Is It For Me?

Franchising has been in the news a lot lately and not always for the right reasons.

Is a franchised business a good investment, and is it right for you?

A franchise means you are not required to build up a business from scratch and the franchisor will take care of a lot of marketing and training.

However, there are often many costs in acquiring a franchised business, such as:

  • an initial upfront franchise fee payable to the franchisor
  • ongoing royalty fees, which are usually a percentage of gross revenue
  • training fees
  • marketing and advertising fees
  • fit-out costs for any premises, plus rent and outgoings
  • costs of acquiring stock, plant and equipment, and inventory (such as uniforms, training manuals, marketing materials etc.)

Franchise agreements typically include many restrictions on your right to operate the business. For example:

  • you must comply with their operations manual and directions (such as pricing and services offered)
  • your right to operate the business will be for a limited period of time and restricted to a certain geographical area

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New Laws to Punish ‘Shady’ Employers

The Federal Government has passed news laws designed to punish employers (and their directors) who evade their employer obligations by engaging in shady business practices such as ‘phoenixing’ and asset-shifting.

The laws also seek to curb ‘corporate misuse’ of the Fair Entitlements Guarantee scheme (FEG) and thereby reduce the ballooning financial burden on taxpayers arising from it.

The Fair Entitlements Guarantee

The FEG is a legislative safety net designed to provide statutory employment benefits to employees (eg, unpaid wages, payment in lieu of notice, redundancy and leave entitlements) who lose their job as a consequence of the liquidation or bankruptcy of their employer.

Increased reliance on the FEG has resulted in the scheme’s costs more than tripling from $70.7 million in the four year period ending 30 June 2009, to $235.3 million in the four year period ending 30 June 2018.

The New Legislation

The new laws which came into effect on 6 April 2019 amend the Corporations Act to:
Continue reading…

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New laws to limit non-disclosure agreements in consumer disputes

Businesses often require customers who make a complaint about their products or services to sign a non-disclosure agreement as a precondition to receiving compensation or a refund.

However, legislative changes in New South Wales have imposed greater restrictions on businesses which use such non-disclosure agreements.

What is a non-disclosure agreement and why do businesses use them?

Non-disclosure agreements are used by parties to settle disputes and to prevent disclosure of confidential or sensitive information.

In the context of consumer disputes, they typically provide that, in return for the payment of a sum of money, the consumer will not disclose information about the product or service to any person (such as other consumers) or make disparaging remarks about the business. The business is essentially buying the silence of the consumer to protect its brand name and reputation.

What are the new changes?

Section 86AB of the Fair Trading Act 1987 (NSW) came into effect on 28 February 2019 (Commencement Date).
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Are your Contracts Properly Signed?

Contracts are a part of every day commercial life and it is vital that they be properly signed to reduce challenges about whether they are legally binding.

How do individuals sign?

An individual signing:

  • an agreement needs to sign under their own name
  • a deed needs to sign under their own name and have their signature witnessed by a third party adult who is not a party to the deed and that witness should print their name and address

It is also good practice for an individual’s signature on any contract to be witnessed by a third party as this will be helpful in case there is a subsequent dispute about the authenticity of the individual’s signature. If the document is especially important, the individual’s signature should be witnessed by a solicitor or a justice of the peace.

How do companies sign?

Section 127(1) of the Corporations Act provides that a company may execute an agreement by any of the following methods:
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Restrictions on Your Right to Terminate a Commercial Contract

An “ipso facto” clause is essentially a clause in a commercial contract which allows a party to enforce a right, or terminate or amend a contract, where the other party experiences an insolvency event such as having an administrator appointed.

Clauses of this nature are commonly found in commercial contracts including commercial leases.

Under the new laws (which apply to contracts entered into after 1 July 2018), there is an automatic stay on the enforcement of ipso facto clauses where:

  • a company enters into a scheme of arrangement (or announces it will enter into a scheme of arrangement) to avoid being wound up in insolvency
  • a managing controller or receiver is appointed over all or substantially all of the company’s assets
  • a company goes into administration

Consequently, a party cannot terminate a contract due solely to any of the above reasons and must continue to supply goods and services to the financially distressed company (provided the company continues to perform its obligations and is not otherwise in breach of contract).
Continue reading…

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On the Horizon – Equal Pay for Female Employees

Labor has announced that if elected to government in 2019, it will move to enshrine equal pay within the Fair Work Act. 

Labor has signalled an intention to:

  • lower the bar for applications for equal pay orders (so as to expand the industries in which such orders may be made – eg, early childhood, aged care and disability services)
  • restructure the Fair Work Commission and appoint a second Commission President who will preside over a pay equity panel to decide on equal pay cases guided by a new equal remuneration principle

This announcement follows previous promises for a $400 million boost for woman’s superannuation and a ban on pay secrecy clauses.

With workplace/IR issues being a hot-button election topic and a Federal election tipped for May 2019, it is increasingly likely that further substantial changes may be made to Federal workplace laws in the second half of 2019.