The Human Toll: Is the Nature of Regulation Under the Australian Skills Quality Authority Destructive? An Extract.

The following three (3) scenarios where the details have been redacted provide examples of how the impact of vicarious liability and its implied use under the NVR Act is clear and plain for all parties. The Regulator is unambiguous in its approach to the liability of the officers, agents and particularly of CEOs of RTOs irrespective of the proof or otherwise of liability by other actors within the business. 

 SCENARIO 1

 In this scenario, the Provider operated in the Trades Sector. The college was a very successful national provider and offered over 20 funded and unfunded VET courses. During the time that the Provider was operating, it had trained nearly 15,000 people in various qualifications. Graduates of the college were running very successful businesses within their chosen vocational profession and they spoke strongly in favour of the practices of the Provider. 

The problems began when some students began complaining that a few of the trainers of the Provider were not delivering correctly. In some cases, students transferred during their course to either TAFE or to other Providers and their training and assessment was not fully recognised by the new Provider for RPL. The main Provider, and importantly, its CEO, were well resourced and had the correct Training and Assessment Strategy (TAS), training and assessment materials, resources, trainers and assessors and also prided itself on maintaining compliance at all costs. The issues stemmed from poor training practices of individual trainers.

There was never any indication until well into the matter before the Tribunal, that the CEO of the Provider that has been referred to, was anything other than diligent in their approach to the compliance of the business. Unfortunately, what occurred was a significant problem because a cancellation decision was made by ASQA.

 The Tribunal initially rejected the legitimate evidence of the Provider which said that it was ‘not poor practices but unsanctioned and inappropriate training by individual (rogue) trainers which caused the critical non-compliances’. This did not prevent the cancellation taking place. It also did not prevent the CEO being held personally liable in various debt recovery matters of disgruntled students seeking to recover their fees.

 SCENARIO 2 – CRICOS

The CRICOS scenario is what many of my clients call ‘the horror circumstance’. Often in VET, one is dealing with individual students who sometimes do not have their qualifications recognised appropriately in their mind. However, for CRICOS colleges, the ESOS Act is unambiguous on the obligations of the Provider and the subsequent obligations of the High Managerial Agents, and in particular, the CEO/PEO of the Provider with respect to the status of students and their visas. 

In this scenario, the Provider's student agencies were recruiting students and making certain promises with respect to Australian visas. Effectively, the students were being offered work-related visas in Australia if they commenced courses with this Provider. Not only was that fundamentally incorrect, but it was something that was entirely unsanctioned and unknown by the RTO. The RTO was cancelled as a result of non-compliance and in the appeal, a swathe of student complaints emerged and the beginnings of a debt recovery claim. There were claims in some cases, that students had been misled into coming to Australia on the promises that at the conclusion of their studies, they would be able to seek Australian permanent residency. Irrespective that the claims were made by agents of the RTO without the knowledge of the business, it was held that the RTO and more importantly the CEO, were liable and responsible for the impact of those statements. 

 SCENARIO 3 – WIND UP

 What happens when an RTO is wound up? Not cancelled, but suspended or sanctioned by ASQA but actually liquidated? There are specific elements within the NVR Act that deal with this, but the appointment of a liquidator constitutes an event of default and effectively an immediate cancellation kicks in. In this scenario, the Provider had two business partners. One business partner (the Director but not the CEO), issued Confirmations of Enrolment (CoEs) for students while ‘the business’ was aware that it was going to close. The business was liquidated as a result of non-viability and the Provider was faced with a huge outstanding debt to students. In certain circumstances, students sued the Provider, sued the CEO and sued the two Directors. It was found that both Directors were liable. This is irrespective of the fact that one of the Directors was completely unaware of the further enrolments until after the liquidation. It was found that the innocent Director knew, or ought to have known, of these enrolments and in any event, stood to benefit from it. Students affected in this way would be in a different category to students affected by the regular enrolment or otherwise of students of an RTO that believes it’s going to continue operating.

 For this reason, the question of vicarious liability in the context of registered providers is one that requires very specific attention. The RTO business is a business that is granted through its licence issued by ASQA’s significant powers. The private training, assessment, certification, and qualification of students effectively acts as a giant billboard to the world that this person is trained according to certain standards and to a certain level of quality. The Executive Officers, and most importantly the CEO of the RTO business, are unable to fall back on Australian corporate principles to try to protect themselves in the event that something goes wrong. Responsibility (and liability) rests on them.

It is for this reason that it is strongly recommended that RTOs have adequate Directors and Officers Liability Insurance and/or Management Liability Insurance, as well as a good governance framework in place such as having a Board structure which meets regularly to try and address these questions. It is imperative that these matters are dealt with on a day-to-day basis in a way that is acceptable and that is recorded and known by all members of the business. 

Good and open communication with ASQA is also vitally important for this purpose. The future of VET colleges in Australia will put even more onus on the CEOs, executive officers and high managerial agents. It is also likely that further reforms will extend the vicarious liability on those agents in a bid to close a long-practiced tradition of outsourcing the role of CEO to a shadow or interim foreman option. The CEO of a Registered Training Organisation is a position defined under the NVR Act and is one of trust, both in the student/college relationship as well as in the relationship between the college and its regulator; for this reason, it should be taken very seriously.   

 In addition to implementing a solid governance system which includes a Board, another way to mitigate the potential risks of vicarious liability for CEOs should be to compel CEOs and Executive Officers to undertake certain training courses so that they properly understand their responsibility and their liability. These should be part of any future reforms going forward.

Disclaimer:

This is 'general advice' however, readers are encouraged to see their RTO Lawyer as soon as possible. If you would like to be referred to an RTO legal specialist, please contact me for a discreet referral.

RTO Doctor

The first choice for RTO sanction management and compliance assistance.

RTO Doctor assists VET & international education providers around the country to ensure their compliance with their regulatory requirements; a critical issue for RTOs around the nation currently experiencing a very hostile and punitive regulatory environment. Raelene Bartlett, Founding Director of RTO Doctor published the book CRICOS CPR: Top 5 Tips to Rescue Your RTO as a way of supporting providers in navigating this minefield. She has also published the number 1 international bestseller in 3 categories "National Vocational Education and Training Regulator Act 2011 (Cth): An Investigation Into Merits Review" and 'The Human Toll: Is The Nature of Regulation Under The Australia Skills Quality Authority Destructive?'