March 28, 2018  |  

Long Service Benefits Portability Bill 2018

Ms HUTCHINS (Minister for Industrial Relations) (18:11:25) — I move:

That this bill be now read a second time.

Speech as follows, except for statement under section 85(5) of the Constitution Act 1975, incorporated into Hansard under standing orders:

It has often been said in this house that long service leave is a benefit that all workers should enjoy, as a reward for long and faithful service, and to allow workers to take a break from their jobs and spend time with their families.

As Members are aware, many workers, through no fault of their own, are never able to enjoy long service leave. This is because of the nature of the industry they work in.

Ordinarily, when a business transfers from one owner to another, the service the employee had with their first employer transfers, on the sale of the business, to the new employer. This is mandated in the state’s default long service leave legislation, the Long Service Leave Act 1992, as well as long service leave legislation in all other Australian jurisdictions.

However, with contract cleaning, community services and security, there is typically no transfer of business. What occurs instead is that the client, for example, the building owner, terminates a contract to provide a service, for example, cleaning or security, with employer A. A new contract is then entered with employer B to provide the same service. The security guard or cleaner typically will continue in their role, albeit with a new employer. Unfortunately for that worker, they do not retain their service with their previous employer as there has been no transmission of business. The practical effect of this is a security guard or cleaner could work in the same location, doing the same job their entire working life, but never serve the minimum period of seven years with the ‘one’ employer.

The community services sector has some different characteristics, but experiences a similar overall outcome the same. Typically, in the community services industry, an employee may be engaged by a service provider, and that service may transfer or the employee may change services. This means that the employee is then engaged by an alternative service provider, ostensibly performing the same work. The employee will lose continuity of service as there has not been a transfer of business in the strict legal sense as defined in the Long Service Leave Act 1992.

The Bill before you will address this anomaly for workers in the contract cleaning, security, and community services sectors.

This will not be the first time that the Victorian Parliament considered the situation of workers who miss out on long service leave due to the contract or project nature of the industry they work in. In 1953, the then Minister for Labour, the Honourable Archibald Fraser, in introducing the Factories and Shops (Long Service Leave) Bill said, and I quote, “The Bill does not cover any employee who, by virtue of his calling, may have served under a number of employers over a period of twenty years.” That is one problem which Parliament will have to tackle at some future time.”

The problem identified by the then Minister was addressed, at least with respect to workers in the building and construction industry, in 1975, through the Building Industry Long Service Leave Act. Workers in this industry have access to long service benefits, and because all jurisdictions provide portability of entitlements, it does not matter where you perform the work.

There have been some developments since then.

The Pre-School Teachers and Assistants (Leave) Act 1984 was introduced to provide a portability of leave entitlements to a limited group of employers/employees. Whilst not proclaimed, the relevant sector has adopted a ‘custom and practice’ application of the portability described in that act.

A Bill, the Community Services Long Services Leave Bill 2010 was introduced into Parliament but did not proceed beyond the second reading speech.

In 2015 the Victorian Parliamentary Economic, Education, Jobs and Skills Committee commenced an inquiry into the portability of long service leave entitlements. The committee recommended that the Victorian government commission studies into the creation of portable long service leave schemes for the contract cleaning and security industries, and also found merit in re-examining a portable long service leave scheme for the community services sector.

The Victorian Government has acted on those recommendations and following extensive consultation with industry stakeholders, a Bill to provide portability of entitlements to those workers most in need has been developed.

The Bill in detail

I now turn to consideration of the Bill in detail.

The Bill establishes a new statutory Authority, which will be responsible for managing the portable scheme.

There will be a Governing Board of up to nine persons, appointed by the minister. The Board will comprise at least one representative of an employee association with members in a covered industry, at least one representative of an employer association with members in a covered industry, as well as a Chairperson and Deputy Chairperson. The Chair and Deputy are to have no interest in any of the covered industries. The Registrar, as Chief Executive Officer, is a non-voting member of the Governing Board. The Board as a whole will be required to have relevant experience, for example, in financial management or governance.

Board members will be paid in accordance with Government guidelines.

The Chairperson will serve as the employer under the Public Administration Act 2004.

The scheme will apply to nominated ‘covered’ industries. Initially, these will be specified to be the contract cleaning, community services, and security industries. The legislation will be drafted in such a way as to allow for other industries to be included in the scheme in the future, should the Government so determine.

An employer for a covered industry will be required to register themselves, their employees, as well as contract workers, and failure to register will attract a financial penalty.

Employers will be required to provide a quarterly return that includes required information and an employee or contract worker will have access to their record.

The levy payable by an employer will be a percentage of the ordinary pay paid or payable by employers to employees. The levy will be set by the Governing Board, and may not be more than 3 per cent.

A worker in the contract cleaning or security industry with at least seven years’ service will be entitled to apply to their employer for either a period of leave. If granted, the worker then applies to the Authority for a payment. Should the employer reject the application for leave, the worker may seek a review by the Authority.

Workers in the contract cleaning and security sectors will be entitled to long service leave on the same basis as workers in other industries. That is, they will receive a period of leave, with a payment in lieu only available on leaving the industry, or in the case of death. Cashing out of a leave entitlement is not permitted.

The Bill has a number of different provisions relating to the community services sector that I will address shortly.

Service in the contract cleaning or security industries of up to 12 months before the commencement of the act is to be recognised. This needs to be seen in the context that some of the workers have worked in these industries for decades without ever having received long service leave. Due to the well-established long service leave arrangements in the community services sector, other than portability this prior recognition is unnecessary. If twelve months retrospectivity was provided this would mean that community sector workers would be paid twice for one year of their service. These industries have been anticipating the scheme for many years and it is expected that take up will be stronger. This does not mean that the levy will apply retrospectively. In setting or adjusting the levy the Governing Board will have to take future liabilities into account and limited retrospectivity will be one factor considered.

The period of long service leave will be calculated as 1/60th of the period of employment, available after seven years’ service, consistent with the arrangement in the Long Service Leave Bill 2017.

Cashing out of long service leave entitlements by employees in the contract cleaning and security sectors will only be allowed on exiting the industry.

For workers in the contract cleaning and security sectors, the definition of ‘ordinary pay’ will include shift allowances, but not overtime payments. This reflects current industry practice, as well as how the annual leave entitlement is defined in the modern award.

The rate to be paid to the worker is the rate of pay at the time that leave commences.

An employee will be able to go up to four years without working in the industry before their continuity of service is interrupted, although they would not be credited with any service during this period.

There is scope for recognition of service in other jurisdictions with similar arrangements, subject to the negotiation of an agreement with those jurisdictions.

The Bill includes penalties for certain acts and omissions, such as failure to provide returns, failure to register, and providing false information. The penalties in the Bill are consistent with those proposed in the Long Service Leave Bill 2017 and consistent with Sentencing Act principles.

Different arrangements for the community services sector

This Bill establishes different arrangements for the community services sector to that of the cleaning and security industries. It is necessary for a different arrangement to apply due to the operation of the Commonwealth Fair Work Act 2009, and to the different industrial instruments that apply in the community services sector.

For a worker in the community services sector, the application for payment will be made directly to the Authority as these organisations have different funding arrangements.

The scheme will apply to contract workers in the security and contract cleaning industries. The use of individual contractors is not prevalent in the community services sector for community services work so contract workers are not included within scope for that sector at this time. However, to allow for possible changes in the industry in the future, specific provision will be made in the Bill so that contract workers can be brought into the scheme by way of Regulations at a later time.

There were several Awards and Enterprise Agreements in place across the community services sector that prescribed long service leave entitlements when the FW Act came into operation and those entitlements were preserved under the terms of the FW Act. Pursuant to section 109 of the Commonwealth Constitution, where employees have an award-derived or agreement-derived entitlement to long service leave preserved as part of the national employment standards under the Fair Work Act, any state law that is inconsistent with these awards or enterprise agreements is inoperative to the extent of any inconsistency between state law and commonwealth law. The practical effect of this is that some employees in the community services sector would not be able to benefit from a Victorian government portable long service leave scheme.

The problem was recognised in the Community Services Long Service Leave Bill 2010. In the explanatory memorandum to clause 2 of the Bill (the commencement provision), it was noted that the Bill had no commencement date. For the Bill to operate in respect of all employees it was necessary for the commonwealth government to amend the operation of the Fair Work Act. The Bill therefore could not commence until after the necessary amendment to the federal Act.

It is now apparent that the Commonwealth has no intention of providing a legislative solution to this problem.

A solution is for the Victorian Government to legislate a scheme that provides for a payment to workers, in lieu of leave. This is the arrangement in the construction industry CoINVEST scheme.

This model has been found to be constitutionally valid.

This problem does not apply to the contract cleaning and security sectors because of the different awards and agreements operating in those industries.

There will also be a different arrangement for the community services sector in regards to the calculation of ordinary pay. The definition of ‘ordinary pay’ for that sector will not include shift allowances, as they are not included when calculating LS for workers covered by a federal award or agreement that includes LS benefits. Further, the 2010 Bill did not include shift allowances.

Independent contractors and for-profit organisations will not be included in the community services scheme as they are not a feature of this industry. An exception will be made for for-profit organisations involved in the disability services sector.

Summary

Workplace laws have generally evolved since 1975. We now have equal pay for work of equal value, parental leave, enterprise bargaining, and anti-bullying protections. Little progress, however, has been made in addressing the problem identified way back in 1953 by then Minister Fraser. This Parliament now has that opportunity.

Section 85(5) of the Constitution Act 1975

Ms HUTCHINS — I now wish to make a statement under section 85(5) of the Constitution Act 1975 of the reasons why a provision in the Bill alters or varies section 85 of that Act.

Clause 79 of the Bill states that it is the intention of clause 58 of the Bill to alter or vary section 85 of the Constitution Act 1975.

Clause 58(1) establishes the jurisdiction of the Industrial Division of the Magistrates Court to hear certain matters, including applications for the recovery of monies, disputes over the taking of leave, and prosecutions for alleged breaches of provisions of the legislation. Clause 58(2) provides that this jurisdiction is exclusive.

The reason for limiting the jurisdiction of the Supreme Court in this instance is to ensure that the Industrial Division of the Magistrates Court serves as the primary body for determining matters under the portable long service benefits legislation.

The right of any party to appeal to the Supreme Court on a question of law from a final order of the Industrial Division of the Magistrates Court is enshrined at clause 58(3)(b) of the Bill.

I commend the Bill to the house.

Debate adjourned on motion of Mr CLARK (Box Hill).