FAIR WORK ACT

Adjourned debate on motion of Hon. R.D. Lawson:

That the regulations under the Fair Work Act 1994, concerning clothing outworkers, made on 18 October 2007 and laid on the table of this council on 23 October 2007, be disallowed.

(Continued from 13 February 2008. Page 1676.)

The Hon. R.D. LAWSON (20:49): On a previous occasion I outlined that we were seeking the disallowance of these regulations, the Fair Work Clothing Outworkers Code of Practice Regulations of 2007. The ground then given was that Business SA had brought to the attention of members (and I read into the record its concerns) that there had been insufficient consultation regarding this measure.

However, today I wish to enlarge upon the reasons that these regulations ought be disallowed, and I do so under several headings. First, the regulations are too broad, and they impose unreasonable—indeed, quite draconian—burdens on small business; in other words, more red tape, more regulations and more form filling for, importantly, no demonstrable good reason.

Secondly, despite the title, Code of Practice for Clothing Outworkers, these regulations will not provide protection for outworkers at all. Thirdly, as I will explain in a moment, these regulations are an unprecedented and unprincipled form of regulation. They are unprincipled and unprecedented because what the regulations do is impose apparently draconian requirements on, in this case, small business (the particular small business being retailers of clothing) but then say that you can avoid all these serious consequences if you agree to sign up to an agreement with a union in New South Wales. That agreement itself contains very offensive provisions.

It has not been demonstrated that these regulations are necessary in South Australia. No study has been undertaken and no evidence has been presented to suggest that there is a serious problem with outworkers in this state. We believe that these regulations, the publicity that surrounded them and the material that has been presented to the parliamentary committee and to the public are quite misleading. Indeed, the regulations have been sold in a devious manner.

Finally, these regulations, which, as I say, will not actually assist anybody in South Australia, will be counterproductive in that they will further drive clothing manufacture offshore. Already, as we know, some 95 per cent of clothing sold in retail in Australia comes from China, Indonesia and other markets. As a result of changes in the industry and the removal of tariffs and the like, that process has been ongoing for a number of years.

There is very little manufacture of clothing in Australia. If you wanted to sell clothing made in Australia and had to comply with this code, you would say, 'Forget it. I won't buy the Australian: I'll take the easy step. I'll speak with the distributor and take the Chinese product.'

First, can I say that these regulations impose a very onerous burden on South Australian retailers. Unfortunately, I regret to say that the way in which these regulations have been implemented is rather complex and convoluted. It is certainly not the straightforward way in which we would normally make regulations.

They are said to be for the benefit of clothing outworkers. Everybody has visions of women with sewing machines in airless rooms with no windows being paid a pittance to sew handkerchiefs or knit babies' booties and getting 55¢ per piece. That vision, obviously, excites sympathy; and we in the Liberal Party have no truck with any person who organises their business in that way—runs a sweat shop. There are industrial laws which ought to be policed. That is against the law here. There are provisions in the Fair Work—

The Hon. Sandra Kanck: What is a fair rate of pay for them?

The Hon. R.D. LAWSON: The rate of pay is that rate of pay under the award. Whether or not they comply with it is another question. They are required to pay the clothing workers' rate of pay. I have the figures here. The South Australian award for clothing workers is very similar to the federal award. There is a scheduled rate. There are all those requirements about lunch breaks being provided. You must provide 70 hours a fortnight work for people who are employed. So, you must comply with all the provisions of the award.

What the union and the proponents of this campaign say is, 'Well, we don't know where all these people are. We might have laws that say they have to pay but we don't know where they are. What we want the retailers to do is to tell us where they are buying their stuff from so that we can then follow a trail and find [as they describe them] the rogue employers.' Our answer to that is that if you want to protect outworkers you do it by the normal method, that is, pass a law which requires the employer to comply with the law and to meet his obligations; and if he does not he will be prosecuted.

The Hon. Sandra Kanck: Haven't we got those laws already?

The Hon. R.D. LAWSON: We do have those laws already. We have those laws. However, notwithstanding the fact that this government is proud of the fact that it has employed many more inspectors in SafeWork SA, those inspectors somehow or other do not seem to be able to find anyone. No-one is prosecuted. What they want to say now is, 'Rather than legislate, rather than enforce our legislation, we will impose on the retailers of clothing a requirement that they give us information which enables us to identify where the outworkers are.' I will explain to the honourable member the mechanism by which these regulations apply. Regulation 10 is headed 'Responsibility of retailers'. These are retailers only of clothing, although clothing is very widely defined to include garments, wearing apparel, handkerchiefs, serviettes, pillow slips, pillows, mosquito nets, valances, bed curtains, clothing ornamentations, labelling, etc. So, it is very widely defined.

All retailers will be required before entering into any agreement with a supplier to ascertain from the supplier whether the services of an outworker were or will be engaged under an award. So you impose that particular obligation. Then the retailer—and this applies to all businesses—is required to ask its supplier to provide certain details. The details include the place where these goods are being manufactured; the factory number; and a description, including the size, style, image, sketch, drawing and any other relevant information in order to identify the clothing products to be supplied. You have to get all this filled out. The retailer is required to provide a description of the nature of the work to be provided, for example, overlocking or machine fusing.

They must obtain a copy of the order and the date of the commencement of the agreement. A supplier is to provide to the retailer the address where the work is to be provided, as well as the name and address of every outworker. If it is a subcontractor or a chain of contractors, the name of every subcontractor, the address of every subcontractor and the name and address of every outworker who the subcontractor has employed must be provided. Let me stop on this particular obligation. For a retailer to say to a wholesaler, 'You tell me where you are getting your goods. You tell me the name and address of the person who is making your goods', is commercially unrealistic. No wholesaler ever tells his retailer exactly where he is getting his goods and who is making them because, of course, the retailer will ring up the worker and say, 'Will you do it for me directly and we'll cut the wholesaler out?'

It is an entirely commercially nonsensical proposition to expect any wholesaler to truthfully answer particulars of this kind. These particulars are to be supplied, not to some government official but, rather, to the union, to a private organisation which happens to be an industrial association. It used to have some members in this industry, but because most work has gone offshore it has lost most of its members. I will refer hereafter to the Textile, Clothing and Footwear Union of Australia as the union.

The little retailer, a lady in a strip shop in the suburbs, is required to ask her supplier to provide all this information. The obligation is to ascertain whether or not the supplier will use workers engaged under a relevant award. How on earth can a retailer ascertain whether someone in some supply chain is strictly enforcing the conditions of a particular award? It is an unnecessary and inappropriate burden to be placed upon a retailer. The fact that a copy of every order for supply has to be obtained and be available for inspection by the union is an extraordinary imposition. The retailer has got to obtain an undertaking from each supplier. In our view that is commercially unrealistic.

Under this code the retailer has to lodge quarterly returns with the union and also with SafeWork SA. They have to lodge the returns, listing all these names, addresses and ABNs, and so on. That is a serious imposition imposed by a government which is claiming to be reducing red tape and making it easier for people to conduct business by removing all the form filling that is required. People complain about GST forms, ABN forms and taxation returns, and to add yet another requirement on small business is unjustified, especially when it is not demonstrated that there is an issue in South Australia with this particular problem. This is simply part of an ideological campaign by a union to join a campaign that was started some years ago in New South Wales.

The outworkers code also contains a provision in clause 28, which is an entirely appropriate provision. It requires the provisions of the state award to be enforced on the outworker regime. We have no problem at all with the regulations insofar as they contain that, because that is a code of practice and it is perfectly reasonable. Members know that procedurally we cannot amend regulations. We cannot delete portions and include others; we have to disallow the whole regulation. Our suggested solution to the current problem is that we disallow these regulations in order to enable the government to come back with a code of practice which protects outworkers rather than one which attacks retailers.

There is a curious outlet in this particular regulation. Regulation 8 provides that one does not have to comply with this code at all provided one becomes a signatory to a thing called the Homeworkers Code of Practice.

The Homeworkers Code of Practice is a document that was developed between the union and others in New South Wales some years ago—and we also take exception to the New South Wales code. However, we do object particularly to this mode of regulation, which says, 'Here is a South Australian law. You comply with it. There are fines if you do not comply with it'—up to $2,500, I think—'But you do not have to comply with that if you sign up to some other agreement in some other place.' It is a form of extortion: 'We've got this thing in New South Wales, and we want everyone in Australia to sign it. You will sign it; it is called a voluntary code.' As I said, it is an unprincipled form of regulation and a form of extortion.

In reality, this code is trying to force retailers to police the industrial laws, or to aid the union in enforcing industrial laws, and that is an inappropriate imposition on one sector of the community. It is not the job of businesses to be policing organisations, regulations and so on—their job is to employ people to get on with their business—but the job of government officials, inspectors and the like, appointed to enforce those laws.

Next I move on to the 'no business case has been made out for these regulations'. I accept that, if there was a major problem in South Australia—if we had teeming outworkers, if people were being exploited unnecessarily, if there were clothing shops living off the fat of the land—you might say, 'Well, let's implement it.' If that is the case, let us see the evidence. None has been provided. The Business SA letter (which I think was circulated to members previously, and I am happy to provide copies to others) shows that there was no consultation in relation to this matter.

The Hon. B.V. Finnigan: Why are they turning up to the outworker group?

The Hon. R.D. LAWSON: True it is. There was a committee. Business SA, unfortunately, attended this. It does not have any members who are small retailers—or not many. The Australian Retailers Association, which purports to represent them, is an organisation that no longer has any office or, so far as we know, members in South Australia at all. It undertakes no activities. It has closed its Adelaide office and moved out of town. It is based mainly in New South Wales and on the eastern seaboard. However, the fact is that no case was made; there was no consultation.

I have counted them and, if one looks in the Yellow Pages, one will see that there are a couple of hundred small retailers in South Australia selling women's clothes and about 100 selling menswear. That is not a large number, but it is a large number of businesses who actually comply with some meaningless exercise of filling in forms, giving details and seeking information from their suppliers.

There is no exercise to undertake the regulatory impact statement. What would be the cost of supplying it? How many hours are spent filling in this form, asking your suppliers and checking these details; ascertaining the regulations, ascertaining whether your supplier is using outworkers somewhere down the chain; ascertaining whether those outworkers are being paid in accordance with the award; and ascertaining whether they are being given appropriate lunch hours and all the other provisions of an award? It is an outrageous imposition.

I spoke to John Brownsea of the State Retailers Association, who told me that he has members in the clothing retailing industry. This is a dedicated South Australian organisation which actually does represent small business. He says he was entirely unaware of the fact that this particular code was to be imposed; he was not aware of it until I called him last week.

I also believe that the code has been sold in a devious manner. All of the material that has been provided by the union—look at the websites and the like—discusses the fact that there is a major issue with outworkers in Australia. It states that there are 300,000 outworkers in the garment industry in Australia. It actually bases that, if you dig into it, on an estimate made in 1995. Maybe that was true in 1995, but it is certainly not true now.

The Productivity Commission, in a detailed inquiry in 2003, estimated that there were 25,000 outworkers. That is a lot fewer than 300,000. Obviously, that is 300,000 or 25,000 over the whole of Australia. We know that the clothing and footwear industry is largely based interstate. Even on that estimate, we would not have a large number of outworkers here, but there does not seem to have been any study undertaken to ascertain the precise figure.

The material discusses 'rogue employers' and 'unscrupulous employers', but it does not provide any evidence of exploitation of outworkers in this state at the moment. If this code was simply about protecting outworkers, the only thing you would need in it is clause 28, which states that the award applies to them.

You might say, 'Well, what's all this fuss about? They ought to just sign up for the New South Wales homeworkers code and they will not have to bother about this one.' The Homeworkers Code of Practice actually constitutes an agreement between the union, the Australian Business Association, Australian Business Limited, the Chamber of Manufacturers group, the Council of Textile and Fashion Industries of Australia and, as I said, the Australian Retailers Association. It is an agreement that they have signed between themselves, and there is provision for any particular retailer to become a party to that agreement by signing it.

There are serious inconsistencies between this homeworkers code, which is called the 'voluntary code', and what is called the 'mandatory code' that is being imposed. The most significant one is that the mandatory code applies only to goods manufactured in Australia. As I said, most clothing retailers do not sell goods made in Australia, and if this provision comes in in South Australia and they are required to sign this particular code, they will make sure that they do not buy anything that is sourced in Australia.

The voluntary code applies to all goods, whether manufactured in Australia or outside of Australia. So, you actually do have to fill in quite significant information. Under the voluntary code, a retailer who signs it is required to keep records about the names and addresses of suppliers, the date of delivery, the number of goods and the wholesale price paid by the retailer for goods. It has to supply to the union information about the wholesale price of the goods, and the description, including the size, style, image or sketch or any information about the garments. Once again, it is a very onerous obligation.

Each retailer must send to the national secretary of the union the name and address of each supplier contained in the records within 14 days of signing the agreement, and it has to update that list twice a year. Each retailer agrees to use its best endeavours to amend the standard terms of contract trading entered into so that each contract already entered into will be changed so that there will be a term imposed upon the supplier in relation to the use of outworkers.

Once the retailer has signed this particular code there is an obligation; each retailer will enter into a separate deed of agreement with the union whereby all these obligations will be listed. In other words, the union can enforce against a retailer the obligation to supply this information, and the retailer will take all action reasonably required by the union to remedy any exploitation. So here it is: the union can direct a retailer to take steps. If a supplier does not comply with the steps that the retailer, at the direction of the union, is taking in relation to any contract, the retailer will terminate the contract at the union's direction.

We believe this is an outrageous imposition on small business. There has been a soft sale of this whole code of practice, and it is on the basis that it applies in New South Wales. Perhaps it does apply New South Wales, and perhaps a number of retailers in that state have thought the easy way out was to sign up, 'The union and the retailers association say we ought to sign it so we will sign it.' Forget it; we ought to deal with these issues on principle and this is wrong in principle. The Employee Ombudsman is promoting this, and it is interesting that the South Australian Employee Ombudsman is a former secretary and/or organiser of the particular union. His immediate past prior position was to work with this particular union but he is now the Employee Ombudsman, and he is out there promoting this code to members of parliament and other groups.

It is suggested that the code will come into force on 1 March, and what was proposed (this is in the literature but is not actually contained in the regulation) is that there will be a six-month moratorium. So, no-one would be enforcing it for six months; they will simply be going around to retailers—and I suspect to selected retailers, they will choose who it is they actually want to pick off—and say, 'Well, unless you sign up within six months the full letter of this law will apply to you.'

The Fair Work Act always envisaged that there would be provisions and a code of practice for outworkers. We agree with that; it is reasonable. However, this is not about outworkers; it is actually an imposition on retailers and it unnecessarily interferes with the conduct of a retailer's business. I imagine members have seen the blue circular that has been prepared to advertise this, which shows that it is supported by SA Unions (that is no surprise). Business SA, which is uneasy about these regulations, seems to have allowed its name to go forward but, frankly, the fact that unions and bosses all agree to some code of practice which affects retailers does not mean they care about these small retailers. Coles, Myer and Kmart are all signatories to this code of practice but why would it worry them? They import most of their material. It is simply a way of harassing small retailers.

It is said here, in the publicity, by the proponents, the Working Women's Centre and others, that you are exempt from the code if you sign up to the national homeworkers code of practice. Frankly, the national homeworkers code of practice is not all that easy to obtain; you have to search a website (not specified here) to find out what it is. What you actually have to do is sign an agreement with the union that you will supply them with information, including prices, lists of suppliers and all the rest of it. I think people would be a lot more wary that that material has not been placed to the forefront of this regulation.

What we are urging the council to do is to disallow these regulations and invite the government to bring back another form of regulation which is more acceptable and which does not have the offensive provisions contained in this measure and which will provide some real protection to our workers in South Australia, insofar as there are any.

Debate adjourned on motion of Hon. I.K. Hunter.