Labour Market Testing Update

On the last sitting day before the federal election was called, the Australian Parliament passed a raft of changes to the 457 program. Of all the changes introduced by the Migration Amendment (Temporary Sponsored Visas) Act 2013 (Amending Act), the one of principal concern to the business community is the introduction of Labour Market Testing (LMT). The Department of Immigration and Citizenship (DIAC) advises this is likely to start in November 2013.

What is Labour Market Testing?

Very simply, LMT means that before a work visa can be granted to an overseas worker, the employer must demonstrate that there is no suitable local candidate for the position. The Amending Act provides a broad range of ways that employers may satisfy the LMT criteria.

This is not the first time that LMT has been used in Australia. In the early 2000s, LMT was applied in a subclass 457 visa context and, at that time, DIAC case officers had broad discretion in how they could apply its requirements. LMT is also a requirement of work visa applications in many economies similar to Australia including New Zealand, Canada and South Africa.

Exemptions from LMT

The Amending Act allows for exemptions in the case of highly skilled occupations, but these have to be determined by the Minister for Immigration. Only occupations that require qualifications of at least Diploma level will be eligible, and these will only be exempt if the Minister so specifies.  

Exemptions are also provided for certain transfers to Australia of staff from an overseas office of a business to the Australian branch of the same business. The transfer will be exempt if imposing LMT would be inconsistent with Australia’s obligations under various international free trade agreements.

Compulsory LMT

The new laws mandate LMT in all nursing and engineering occupations. This is a significant impediment to  the recruitment of non-Australian staff across many industry sectors. As well as new recruits, the LMT measures will affect nurses and engineers currently on subclass 457 visas when their visas come due for renewal.

How LMT might work

All non-exempt visa nominations lodged after the LMT commencement date will require evidence that the employer has tested the Australian labour market to demonstrate that a suitable qualified and experienced Australian citizen or permanent resident is not readily available to fill the position.

The minimum LMT evidence required is:

• Information about the sponsor’s attempt to recruit an Australian for the position and for any similar positions; and
• Evidence of any advertising for the role and the cost of that advertising.
• The laws also list other types of evidence that may be provided including:
• Participation in job and career expositions;
• Expenses relating to recruitment;
• Research about labour market trends; and
• Expressions of support from the relevant state or territory government(s).

The Amending Act does not necessarily require advertising to have occurred, although this is the most obvious example of how to prove labour market testing. DIAC does not intend to prescribe a particular advertising medium or specify a minimum advertising period. It is unlikely that advertising will be required where a 457 holder is incumbent in the role.

Labour market testing must have occurred within the four months prior to the 457 application, though not necessarily throughout that four-month period. Importantly, where a business has made redundancies or retrenchments, LMT must have occurred after the retrenchments. This may introduce additional administrative and logistical difficulties for businesses whose skills demands are seasonal and/or which vary as projects are completed and new contracts are won.

The impact of the federal election

Regardless of the outcome on 7 September, LMT will commence in November 2013, unless parliament passes an amendment to the Migration Act. If there is a change in government in early September, the removal of LMT from the 457 visa program is unlikely to be a legislative priority. Even if legislation to amend the Act was introduced to parliament before November, it is unlikely to pass into law without a change in composition of the Senate, which will not occur until July 2014.

The new laws require the Minister to specify exemptions by Ministerial instrument. Until such exemptions are specified by the Minister, all 457 applications will be subject to LMT. The timing of the federal election may prevent the incoming Minister from releasing the legislative instrument before the commencement date of the LMT provisions. The incumbent Minister Tony Burke took over the portfolio in July 2013 and has reserved making comments about his intentions during the ‘caretaker’ period prior to the election.

Nonetheless, the current ‘caretaker’ operation of the federal government has provided DIAC with an opportunity to consult with the business community about which occupations should be exempt, and how LMT would operate for the rest of the 457 program. It is clear from DIAC’s consultations that there is a genuine willingness to listen to employers as to how LMT should be implemented. DIAC appears to be starting from the assumption that LMT is a natural part of the recruitment process that will not be difficult for businesses to demonstrate.

If there is a change of government, a new minister may be more sympathetic to arguments in favour of broader exemptions to LMT, and measures which do not add excessive red tape and delays to business’ existing recruitment processes.

Fragomen lobbying

Fragomen is concerned by the impact of LMT on our clients’ business and has made extensive submissions to DIAC to assist with the formulation of DIAC policy in this area of the 457 program.

In our submissions we advocated:

• a broad range of occupations to be exempt from LMT, incorporating all executive, managerial and professional occupations;
• minimal evidentiary requirements when positions are not  exempt from LMT; and
• interpretation or amendment of the legislation so that exemptions apply in the case of 457 ‘renewal’ applications, and for all engineering occupations.

Our submissions are currently under consideration as part of DIAC’s community consultations.

Advice for business

The hiatus created by the federal election means that there is no guarantee of legal exemptions and policy changes before November 2013.

As there is now less than four months before the intended commencement date of the legislation, businesses need to start preparing and planning for the introduction of LMT. This includes:

• early identification of 457 holders in the business whose visas are due for renewal, so that the LMT and visa processes can be finalised before visa expiry; and
• documenting internal recruitment procedures, and keeping records of all recruitment attempts and expenses.