Fair Entitlements Guarantee Regulations 2022

TCF contract outworker is defined by cross‑reference to the Fair Work Act 2009: an individual who does or has done work as an outworker in the textile, clothing or footwear industry otherwise than as an employee (reg 4). The same definition is inserted into the Act for the purposes of the scheme (Sch 1 item 1). The term “outworker” in the Fair Work Act 2009 is itself defined to include a person who performs work for another person under a contract that is not a contract of employment, but where the work is performed at a place not on the other person’s premises. The regulations therefore capture a broad class of home‑based or remote workers in the TCF supply chain who are formally self‑employed or contractors.

Specified person is the counterparty who owes the outworker for work performed directly, and who is insolvent or reasonably expected to become insolvent (reg 6(2)). The critical requirement is that the work was performed “directly” - using the test in s 17A of the Fair Work Act 2009, which looks at whether the outworker performed work personally for the person, not through intermediaries. This limits the scheme to those with a direct contractual relationship with the insolvent debtor, excluding, for example, outworkers deeper in the supply chain who contract through a labour‑hire firm or a factoring entity.

TCF contract outworker entitlements are the five categories of entitlement listed in Sch 1 item 1: annual leave, long service leave, payment in lieu of notice, redundancy pay, and wages. These mirror the employment entitlements under the Act, but are sourced from the outworker’s “governing instrument” - presumably the contract or industrial instrument that gives rise to the obligation. The regulations do not define “governing instrument”, which introduces interpretive risk. For example, an outworker’s wages entitlement may be set by a contract, a modern award that covers outworkers, or an enterprise agreement. Disputes may arise over whether a particular entitlement is recognised under the governing instrument and whether it matches the Act’s definition.

Scheme modifications are the heart of the regulations. Part 2 (reg 6) sets out that the scheme consists of Parts 1 to 7 of the Act, modified by Sch 1 and the general deeming provisions in reg 6(5). The general deeming provisions treat the outworker as an employee, the specified person as an employer, the work as employment, and the entitlements as employment entitlements. The specific modifications in Sch 1 then override certain sections. For example, new s 10 sets out eligibility conditions tailored to outworkers: they must have ceased work, an insolvency event must have happened at or after the repeal of the 2012 regulation, they must be owed debts for work done as an outworker, they must have taken reasonable steps to prove debts and to be paid before insolvency, and they must hold Australian citizenship or a relevant visa. Subsection (2) of new s 10 also addresses partnership scenarios, requiring the outworker to prove debts against each partner individually if work was done for two or more partners.

Saving provision (reg 7) preserves the 2012 regulation for insolvency events that occurred before its repeal. This creates a dual regime for a transitional period: outworkers whose debtors became insolvent before 25 March 2023 (the commencement date) are dealt with under the old regulation, while those with insolvency events on or after that date fall under the new scheme. This adds complexity for advisers and administrators who must determine which version applies.

The Regulations directly affect three groups: TCF contract outworkers, the persons (natural or corporate) who owe them money and are insolvent, and the government officials who administer the scheme. Indirectly, they affect insolvency practitioners, administrators under Part 5.3A of the Corporations Act 2001, and the Commonwealth Department administering the Fair Entitlements Guarantee.

TCF contract outworkers are the intended beneficiaries. They gain a statutory right to apply for an advance of unpaid entitlements when the person they worked for directly is insolvent. However, they must satisfy the Secretary of several conditions: they must have ceased work, the insolvency event must have occurred after the repeal of the 2012 regulation (unless the saving provision applies), they must have taken reasonable steps to prove their debts in the winding up or bankruptcy and to have been paid before the insolvency event (new s 10(1)(d), (e)). These conditions impose a compliance cost and a timing risk. Outworkers who do not act diligently may be ineligible. They also must be Australian citizens or permanent visa holders (new s 10(1)(f)), excluding temporary visa holders and undocumented migrants, which may capture a significant portion of the TCF outworker workforce.

Specified persons - those who owe the outworker for work performed directly - are the subjects of the scheme. Their insolvency triggers the outworker’s eligibility. The regulations do not impose any new duties on them; the existing duties under insolvency law continue. However, the scheme’s operation depends on the Secretary determining that the specified person is insolvent or reasonably expected to become insolvent (reg 6(2)(c)). This test is subjective and may be contested. The specified person is also the subject of information‑sharing provisions under new s 45, which allows the Department to disclose personal information about the specified person, its officers, and its insolvency practitioner to agencies exercising functions under the Corporations Act 2001, Bankruptcy Act 1966, or relating to outworker entitlements. This is a broad disclosure power that could affect the privacy of directors and others.

Insolvency practitioners and administrators are affected because they become the contact point for outworkers claiming the advance. Under new s 49 (extended operation for administration), the Minister may declare that the scheme applies to former outworkers of a person under administration under Part 5.3A of the Corporations Act 2001. If that declaration is made, the administrator is treated as if they were a liquidator appointed at the time of the administrator’s appointment. This accelerates eligibility for outworkers before the company is wound up, but it imposes an obligation on the administrator to cooperate with the scheme. The declaration is discretionary and may be revoked (new s 49(4)). This creates uncertainty for administrators who cannot predict whether the Minister will make a declaration.

Government - the Department of Employment and Workplace Relations and the Minister - administer the scheme. The Secretary must assess claims, apply the eligibility criteria, and calculate advances. The Minister can make declarations for companies under administration and can revoke them. The regulations also repeal s 51 (appropriation) and s 52 (recovery) as they apply to the scheme, but the notes indicate that the Act’s appropriation and recovery provisions continue to apply to payments under the scheme because s 51 and 52 of the Act are not limited to the scheme. This is a subtle point: the scheme itself does not have its own appropriation or recovery provisions; it relies on the Act’s provisions for those purposes. The effect is that outworkers are paid from the Consolidated Revenue Fund under the Act’s appropriation, and the Commonwealth can recover overpayments under s 52 of the Act.

The Regulations confer on TCF contract outworkers a right to apply for an advance of unpaid entitlements, but that right is conditional on meeting the eligibility criteria in new s 10. The primary duty lies on the outworker to make an effective claim (s 14 applied with modifications). The outworker must also take steps, so far as reasonable, to prove debts in the winding up or bankruptcy (new s 10(1)(d)) and, if any debts were owed before the insolvency event, to take reasonable steps before that event to be paid (new s 10(1)(e)). These are duties of diligence, not just eligibility conditions; an outworker who fails to take such steps is ineligible. The “reasonable” standard is objective and will be assessed by the Secretary, creating uncertainty and potential for dispute.

The Secretary has a duty to be satisfied that all conditions are met before making an advance. This is a subjective administrative decision, but one that must be made lawfully under the Act and the regulations. The Secretary also has power to obtain information and to disclose personal information to certain agencies under new s 45. That provision permits disclosure for the purpose of facilitating the exercise of powers or functions relating to the Corporations Act 2001, the Bankruptcy Act 1966, or outworker entitlements. The classes of persons whose information may be disclosed are broad: specified persons, officers, insolvency practitioners, current or former employees of the specified person, and outworkers. This creates a privacy risk for individuals, although the disclosure is limited to government agencies (as defined in the Privacy Act 1988). The Department has a duty to comply with the Privacy Act in making such disclosures.

The Minister has a power under new s 49 to declare that the scheme applies to former outworkers of a person under administration under Part 5.3A of the Corporations Act 2001. This power is discretionary but is conditioned on the Minister being satisfied that creditors are expected to resolve for winding up and that it will be practicable to administer the scheme in relation to the identified person. Once a declaration is made, the administrator is deemed to be a liquidator, and the eligibility condition regarding insolvency event is replaced by the making of the declaration. This effectively allows outworkers to claim before the company enters liquidation, but it is not a duty on the Minister.

The Regulations also import a duty on the Secretary to calculate the basic amount for wages entitlements correctly, taking into account any PAYG withholding agreement under the Taxation Administration Act 1953 (new s 24). If the outworker has such an agreement, the basic amount is reduced by the amount to be withheld. This prevents double recovery but may reduce the advance significantly, especially for outworkers who have agreed to have tax withheld at source even though they are not employees.

There is no explicit right of review or appeal in the regulations, but the Act itself (as applied) would provide for internal review and likely merits review under the Administrative Appeals Tribunal or equivalent. The regulations do not modify the Act’s review provisions, so they presumably apply.

The Regulations themselves do not create criminal penalties or civil pecuniary penalties. Enforcement of the scheme relies on the underlying Act and general law. The key enforcement mechanism is the recovery of overpayments. The note to Sch 1 item 15 explains that s 52 of the Act provides for recovery of payments made under the scheme (as well as other payments under the Act), and because there is no equivalent in the scheme, s 52 of the Act continues to apply. This means that if an outworker receives an advance to which they are not entitled, or if circumstances later show they were ineligible, the Commonwealth can recover the amount as a debt due under s 52. There is no modification to this recovery power, so it operates fully.

The disclosure provision in new s 45 is not itself penal, but misuse of disclosed information could attract liability under the Privacy Act 1988. The regulations do not create an offence for false or misleading information given in a claim; however, general criminal law would apply, such as offences under the Criminal Code (Cth) for obtaining financial advantage by deception or providing false information to a Commonwealth official.

The Minister’s power to make a declaration under new s 49 is subject to legislative instrument requirements and can be disallowed by Parliament. There is no penalty for non‑compliance by a specified person because the scheme operates only after insolvency. The specified person is already subject to the legal duties of an insolvent debtor; the scheme does not impose additional obligations.

One notable enforcement gap: the regulations do not expressly provide for the Secretary to require information from the outworker or the specified person beyond usual administrative requests. The Act’s information‑gathering powers may be modified or limited. New s 45 only permits disclosure to agencies; it does not create an information‑gathering power. Outworkers are incentivised to provide accurate information because an overpayment must be repaid, but there is no explicit penalty for non‑compliance with a request for information, other than that it may hinder the Secretary from being satisfied of eligibility.

The Regulations interact with several Commonwealth statutes, often by express cross‑reference or by incorporation of definitions.

Fair Work Act 2009: The key definitions - “outworker” and “TCF contract outworker” - are drawn from the Fair Work Act 2009. Reg 4 and Sch 1 item 1 adopt the Fair Work Act 2009’s meaning of “outworker” and also incorporate s 17A for determining whether work was performed “directly”. This means that interpretation of these terms depends on Fair Work Act 2009 case law and any amendments to that Act. If the Fair Work Act 2009 definition of “outworker” broadens or narrows, the scope of the scheme automatically changes. The Fair Work Act 2009 also regulates outworkers through award provisions and national employment standards; the scheme supplements rather than replaces those protections.

Corporations Act 2001: The scheme is triggered by an “insolvency event” under the Act. The regulations do not redefine “insolvency event”; they rely on the Act’s definition, which includes insolvency events under the Corporations Act 2001 such as winding up, administration, or appointment of a receiver. New s 49 specifically addresses companies under administration under Part 5.3A of the Corporations Act 2001, allowing the Minister to declare that the scheme applies before the company enters winding up. This interacts with the duties of administrators under the Corporations Act 2001 and may affect the timing of claims.

Bankruptcy Act 1966: For insolvent individuals (sole traders or partners), the scheme interacts with bankruptcy. New s 10(1)(d) requires outworkers to have taken reasonable steps to prove debts in the bankruptcy. The disclosure provision in new s 45 permits the Department to share information with agencies that administer the Bankruptcy Act 1966.

Migration Act 1958: Eligibility under new s 10(1)(f) is limited to Australian citizens and holders of permanent visas or special category visas. This incorporates the Migration Act 1958 definitions. Temporary visa holders, including many TCF outworkers on skilled or working holiday visas, are excluded. This creates a gap in coverage for a potentially significant part of the workforce.

Taxation Administration Act 1953: The calculation of the basic amount for wages entitlements under new s 24 depends on whether the outworker is subject to a PAYG withholding agreement under Sch 1 to the Taxation Administration Act 1953. If such an agreement exists, the basic amount is reduced by the amount to be withheld. This is a pragmatic adjustment to avoid over‑compensation, but it adds complexity because the outworker must demonstrate the agreement and the withholding amount.

Privacy Act 1988: New s 45 permits the Department to disclose personal information to agencies that have functions under the Corporations Act 2001, Bankruptcy Act 1966, or relating to outworker entitlements. The term “agency” has the same meaning as in the Privacy Act 1988. This means the disclosure must be consistent with the Privacy Act’s Australian Privacy Principles, but s 45 itself authorises the disclosure for a specific purpose. The scope is broad, covering information about the specified person, its officers, insolvency practitioners, employees, and outworkers.

The Regulations do not interact with state laws directly, but the underlying entitlements (annual leave, long service leave etc.) may be governed by state industrial laws if they apply. The scheme does not override state law; it simply provides a Commonwealth advance for those entitlements if they arise under the outworker’s governing instrument.

The Regulations are a new instrument that replaced the Fair Entitlements Guarantee Regulation 2012. They were made on 24 November 2022 and commenced on 25 March 2023, the day after the last day on which a disallowance resolution could be passed (reg 2). The repeal of the 2012 regulation is effected by Schedule 2. There have been no subsequent amendments. The Regulations are relatively young, so amendment history is limited to the making and parliamentary disallowance period. The explanatory statement accompanying the Regulations (not provided) would have outlined the rationale: extending coverage to non‑employee outworkers. The Regulations are a legislative instrument subject to disallowance under the Legislation Act 2003.

There is no litigation history cited in the Regulations. Because they commenced only in 2023, there has been limited time for challenges. However, several potential grounds for judicial review exist. An outworker denied eligibility may challenge the Secretary’s satisfaction that they did not take reasonable steps to prove debts or to be paid. The “reasonable steps” requirement in new s 10(1)(d) and (e) is vague and likely to be litigated. A specified person or its officers may challenge a disclosure of personal information under new s 45 if they argue it exceeds the purpose or is not for a listed agency. An administrator may challenge a ministerial declaration under new s 49 if they argue the Minister was not satisfied properly or that it is impracticable to administer the scheme. The scheme’s modification powers may also be challenged as beyond the regulation‑making power of the Act, though the Act was likely drafted to permit such schemes.

Several provisions create traps for the unwary.

Saving provision (reg 7): The old 2012 regulation continues to apply to insolvency events that occurred before the repeal. Outworkers or their advisers must determine the date of the insolvency event to know which set of rules applies. The 2012 regulation may have different eligibility criteria, definitions, or advance limits. Getting this wrong could lead to a claim being rejected or paid under the wrong framework.

Reasonable steps before the insolvency event (new s 10(1)(e)): To be eligible, the outworker must have taken reasonable steps before the insolvency event to be paid debts that were owed before that event. This is a temporal requirement that may catch outworkers who were not aware of their debtor’s financial difficulties or who believed they had time. What is “reasonable” is unclear; a court may find that making a few phone calls or sending an email is insufficient, while engaging a debt collector may be required. Outworkers who thought they were protected by the scheme may lose eligibility if they did not pursue the debtor pre‑insolvency.

Partnership scenarios (new s 10(2)): If the outworker worked directly for two or more partners, they must prove debts against each partner individually, not just the partnership. This multiplies the compliance burden and may be impractical if the partners are uncooperative or cannot be located.

PAYG withholding reduces the basic amount (new s 24): Outworkers with a PAYG withholding agreement will have their wages advance reduced by the amount to be withheld. This may come as a surprise to outworkers who thought they were claiming the gross amount. They must provide evidence of the agreement and the withholding amount. The regulation does not specify what happens if no agreement exists but the outworker is required to withhold tax - presumably the full amount is payable, and the outworker must deal with the ATO separately.

No recovery provision in the scheme: The regulations repeal s 52 of the Act as it applies to the scheme, but the note clarifies that s 52 of the Act continues to apply because it covers payments under the scheme as well. This is potentially confusing: a reader might think there is no recovery power, but there is. The Commonwealth can recover overpayments as debts due under the Act.

Ministerial declarations under new s 49 are discretionary: Outworkers cannot compel the Minister to make a declaration. They may have to wait until the company is wound up before they can claim, unless the Minister decides otherwise. This creates uncertainty and may delay payments.

Limited visa classes: Only Australian citizens, permanent visa holders, and special category visa holders are eligible. This excludes a large cohort of temporary workers, including those on humanitarian or bridging visas, who may be equally vulnerable.

Compliance for TCF contract outworkers centres on the claim process. The outworker must first ensure they meet the eligibility criteria in new s 10(1). They should document the following:

• Evidence that they have ceased doing work for the specified person.
• Evidence of the insolvency event (e.g., notice of winding up, bankruptcy order, or administrator appointment).
• Evidence of debts owed, such as invoices, timesheets, or contracts showing unpaid wages, leave, or redundancy amounts.
• Records of steps taken to prove those debts in the winding up or bankruptcy (e.g., proof of debt form, correspondence with the liquidator or trustee).
• Records of steps taken before the insolvency event to be paid any debts that were then owing (e.g., payment demands, emails asking for payment, evidence of legal action or debt collection).
• Proof of citizenship or visa status (passport, visa grant letter).
• Completion of an effective claim under s 14 of the Act (as modified).

The outworker should submit the claim to the Department as soon as possible after the insolvency event. Given the reasonable‑steps conditions, it is prudent to act promptly and to keep a paper trail from the time the debtor first falls behind. The Secretary may request further information, and the outworker should respond promptly.

For specified persons (debtors), there is no compliance obligation under the scheme. However, once insolvent, the insolvency practitioner should cooperate with the Department’s requests for information about outworker debts. The practitioner should also be alert to the possibility of a ministerial declaration under new s 49, which deems them a liquidator and may require them to calculate entitlements.

For administrators, if a declaration is made, they must administer the scheme as if they were a liquidator. They should ensure they are familiar with the Act’s provisions and the modifications in Sch 1. They may need to provide information to the Department for disclosure under new s 45.

For the Department, compliance involves establishing procedures for assessing claims, verifying insolvency events, and making advances. The Department should also maintain a register of ministerial declarations and ensure that disclosed information is handled in accordance with the Privacy Act 1988.

The Regulations do not impose a specific time limit for claims, but the Act (as applied) may have a limitation period. Outworkers should not delay. Given that the scheme is discretionary and the Secretary must be satisfied, it is advisable to seek legal or professional advice if the eligibility conditions are unclear, particularly the “reasonable steps” requirements. The partnership scenario is particularly complex and may require separate proofs against each partner.