3.2Employmentstatus:Labourhire,Casualisationandshamcontracting 7

LABOURHIREANDINSECUREWORK

TheneedforanewandfairerVictorianframework

November2015

1.ExecutiveSummary...... 4

2.Submissionintroduction...... 6

3.Whatislabourhire?...... 7

3.1Identifying responsibilities...... 7

3.2Employmentstatus:Labourhire,casualisationandshamcontracting...... 7

3.3Phoenixactivityinthelabourhireindustry...... 8

3.4Labourhireandtemporaryworkvisas...... 9

4.Consequencesoflabourhireandinsecurework...... 11

4.1Avoidingemployeeentitlements:Labourhireworkersreceivealowerhourly

rateofpaythancomparabledirect hireworkers...... 11

4.2Underminingwork:Labourhireweakensthepayandworkingconditionsofdirecthireworkers...... 12

4.3Theflexibilitymyth:labourhireworkersoverwhelminglywouldprefertobe

employeddirectlyratherthanworkforalabourhireemployer...... 13

4.4Noopportunities:precariousworkdoesnotprovideanopportunityformoresecurework...... 15

4.5Theproductivitymyth:Labourhireworkersareleastsatisfiedwiththeirjobs...... 15

4.6Poor OHS outcomes:Labourhireemployeesaremorelikelytobeinjuredat work...... 17

5.CurrentstateofregulationinAustralia...... 20

6.Recommendations...... 22

Recommendation1: Introduction ofalicensing system...... 22

Recommendation1.1:Thresholdcapital requirement...... 22

Recommendation1.2:Licensingbondandannuallicencefee...... 23

Recommendation1.3: Compliance unit...... 23

Recommendation1.4:Informingworkersoftheirentitlementsorrights...... 24

Recommendation2:Establishastatutorymaximumperiodfor

labourhireassignmentswithahostorganisation...... 24

Recommendation3:Labourhirefirmsshouldbeexcludedfromengagingworkerson417and462Visas...... 24

Recommendation4:Requirementtopayemployeesthemarketwagerate...... 25

Recentmediaexposésoftheexploitationofworkingpeoplein Victoria’slabour hireindustryhavehighlightedtheinsufficiencyofcurrentregulationanditsinabilitytoprovideprotectionforVictorian workers.

Theexistingregulation,whichpredominatelyrelatestothedirectrelationshipbetweenemployersandemployees,isinadequateforregulatingthecomplicatedtriangularstructureoflabourhire.LabourhireagenciesareunderminingAustralianworkingconditionsthroughtheincreaseduseofprecariousworkarrangementssuchascasualisationandengagingworkersundershamindependentcontractarrangements,aswellasexploitingvulnerabletemporaryforeignworkers.Thereisalsoaproliferationoflabourhirefirmsavoidingpayingemployeeentitlementsandtaxthroughphoenixactivities.

AppallingstoriesofexploitationfrompeopleworkingunderlabourhireagenciesinVictoriashowthatthenegativeconsequencesoflabourhireandinsecureworkarereal,disturbingandintolerablycommon.

Submissionsfrompeoplewhoarefacedwithprecarious workto theCFMEU, including throughlabourhireagencies,haveconsistentlyshownthatthey donotbelievethey arepaidfairly,theirworkplacesarenotalwayssafeandthatthey

cannotdiscusspayorsafetywithoutriskingtheirjobs.Workers’storiestoldofthenegative

personal,financialandhealthimpactsofalackofpredictabilityatwork.

“Ifyouspokeuptheymoveontothenextbloke.”“Youworryeverydayif youcanpayrent.”

“Ifitwasn’t forthem[theCFMEU]mychildrenwouldn’thaveevenreceivedXmaspresentsandwewouldn’thavebeenabletoeveneat.”

“CasualworkmightsuitSOMEpeople,but99%itdoesn’t…[youhave]extremelyhighstresslevelsduetotheunknownforyouandyourfamily,whichinturncreateslowself-esteem,depression,anxietyandfeelingsofnotbeinggoodenoughtoprovideforyourfamily.”

“[Ihave]noideaifI’mgettingmoneyatall weektoweek...Itisnotaprivilegetohaveajob!I wanttowork,Iwantsecurepayandconditions,whymustIfeelluckyifIcangetthat!!!!”

“If youevenquestionhealthandsafety,thebuilderyouareon-siteforwillcallyouatroublemaker,phoneyouremployer,anddemandnottosendyoubacktothatjob.”

“[I’m]alwaysstressedbecausesafetywasignoredandmenwithmyexperiencearetoldtoshutuporgetsacked.”

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Inadditiontothestoriesofworkers,researchdemonstratesthat;

•labourhireandcasualworkersareusedinordertoavoidpayingemployeeentitlements;

•peoplewhoworkunderlabourhirearrangementsreceivelowerwagesthanthecomparablepermanentpeopletheyworkalongside;

•theuseoflabourhireworkersunderminesthepayandworkingconditionsofdirecthireworkingpeople;

•theideathatlabourhirearrangementsprovide‘flexibility’for peopleisinherentlyfalse;

•peoplewhoworkunderlabourhirearrangementswouldoverwhelminglyprefertobedirectlyemployed;

•precariousworkdoesnotprovideopportunitiesforsecurework;

•theuseoflabourhireworkersdoesnotnecessarilyincreaseworkplaceproductivity,particularlyasitundermineslong-termskilldevelopmentand isdetrimentalto the worker’smotivation;and

•OccupationalHealthandSafetyoutcomesareconsiderablyworseforpeoplewhoworkforalabourhireagency.

Currentconditionsexperiencedbypeopleworkinginthelabourhireindustryin Victoriaareinadequateandexploitative.Toimprovetheseconditions,regulationneedstobeimplementedandadequatelyenforcedbytheVictorianGovernment.Toreducetheexploitationofworkers,theCFMEUrecommends theVictorianGovernment:

•Introducealicensingsystemwhichcreatesbarrierstoentrytoreduce thenumber ofunscrupulousoperatorsoperatinginVictoria.Thisregulationshouldinclude(butnotbelimitedto):

-Athresholdcapitalrequirement;

-Alicensingbondandannualfee;

-Acompliance unit;

•Establishastatutorymaximumperiodforlabourhireassignmentswithahostorganisation;

•Excludelabourhirefirmsfromengagingworkersonworkingholidayvisas/studentvisas.

TheMinisterforIndustrial Relations,the Hon.NatalieHutchinsMPannouncedinSeptemberaninquiryintothelabourhireindustryandinsecureworkinVictoriainorder toinvestigatethepracticesoflabourhirecompanies,insecure

work,shamcontractingandtheabuseofvisastoavoidworkplacelawsandundermineminimumemploymentstandards.

Aspartoftheinquiry,onOctober16,theInquiryreleasedabackgroundpapercallingforsubmissionsfrominterestedparties.

TheConstruction,Forestry,MiningandEnergyUnion(CFMEU)isAustralia’smain trade unioninconstruction,forestryandfurnishingproducts,miningandenergyproduction.We welcome theopportunitytosubmitourconcernstothe VictorianDepartmentofEconomicDevelopment,Jobs,TransportandResourcesinquiryintotheLabourHireIndustryandInsecureWork.

TheCFMEUsupportsthesubmissionof theVictorianTradesHallCouncilandreferstheinquirytotheadditionalindividualworkerstoriessubmittedbythecouncilonbehalf oftheCFMEUanditsmembers.

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Labourhirearrangementsareatriangularrelationshipwhereworkersarehiredaseitheranemployeeorindependentcontractorbyanagencywhichsuppliestheworker’slabourtoathirdpartyclient(thehost)for afee.Inthisarrangement,thereisnodirectemploymentcontractbetweenthehostandtheemployee.Whilstthehosttypicallyhasanemployer’scapacitytodirecttheworkoflabourhireworkers,othergeneralemploymentobligationsareremovedfromthehostwhosimplypaysafeeto thelabourhireagency.

Therearetwotypesoflabourhirearrangements:

1)where the worker isanemployeeofthelabourhireagency;or

2)wheretheworkerishiredunderacontractbythelabourhireagencywherenoemploymentrelationshipexistswitheithertheagencyorthehost.

‘Theproblemsoflabourhirearenotjusttheproductofcowboysintheindustry,butarealsorootedinthetriangular natureoflabour hirearrangements:thefactthatworkersarepaidbyoneemployerbutworkforanother.Confusionover linesofresponsibility …areevident,withseriousconsequencesforworkers’conditionsandentitlements.’

–Watsonetal.,FragmentedFutures:NewChallengesinWorkingLife

Brennanetal(2003)statethatmuchoftheconcernsurroundinglabourhirearrangementsstems

fromthedifficultlyindefiningrelationshipsandresponsibilities.Thisisconsistentwiththefindingsof the2004InquiryintoLabourHireEmploymentinVictoria interimreport thatfound thatarecurrentthemeintheevidencewasthelevelofambiguity

intherelationshipbetweenagency,hostandworker. Itfounddebateregardingwhatconstituteslabourhireasthereissomuchvariationinthebasesbywhichworkersareengaged:workers

maybehiredasemployeesor independentcontractors,employeesmaythenbecasual,fixedtermorongoing. Workersmayworkfor partsof ahostemployer thathavebeenpartlyorentirelyoutsourcedtoalabourhirecompany. Thereportstatesthatwhilemanyemployersandemployergroupsdisputetheargumentthatresponsibilities

areunclearandthatlegislationandcaselawclearlysetsoutobligations,itisapparentthatthisisnotthecasewiththerelationshipandresponsibilitiesmisunderstoodbymany.

Eventhetriangularrelationshipitselfissometimesasimplisticrelationshipof theemploymentstructuresthatexistinreality.Insomeinstances,labourhireagenciesthemselvesmayfurtheroutsourceorcontractouttheirlabourneeds,creatingamulti-tierrelationship.

Inatraditionalemployeremployeescenario,workerscanbehiredeitheraspermanentemployeesorascasuals.Labourhirehasresultedinamorecomplexsetofemployment

arrangements,whereworkersareemployedby thelabourhireagencyaseitheranemployee(casualorpermanent)or anindependentcontractor. Assuch,thereisanoverlapbetweenlabourhireandothernon-standardandprecariousformsofemploymentsuchascasualwork,andcontracting.

Watson(2005)notesconcernnotonlyfor theincreaseduseofcasualworkersintheworkforceandthealarminggrowthofcasualisationamongthefull-timeworkforcebuttheprocessofcasualisationandtheconversionofnon-casualworkintoprecariousandcasualwork.Hestatesthisprocessislinkedwiththe‘spreadofoutsourcingandrecruitmentofworkersthroughlabourhirefirms.’ Thiswasconsistentwiththefindingsof

the2004InquiryintoLabourHireEmploymentinVictoria interimreport thatfound thatarecurrentthemeintheevidencewasconcernregardingthehighlevelsofcasualemploymentinthelabourhireindustryanditscontributiontothecasualisationoftheworkforce.

WoodenandWarren(2004)statethatcasualemploymentiscommonamonglabourhirecompaniesandtemporaryworkeragencieswithsuchagenciesemployingapproximately9%ofallcasualemployees–Buchananetal,[2004),andcasualworkersaccountingforover60%ofalllabourhireworkers.ThisisconsistentwithasurveyconductedbyBrennanetal.(2003)whichfound75%ofon-hireemployeesreceivecasualloadings.TheHouseofRepresentativesStandingCommitteeonEmployment,WorkplaceRelationsandWorkforceParticipationInquiryintoLabourHireArrangementsandIndependentContractingdissentingreportfoundthattherateofcasualemploymentinthelabourhireindustrywasanywherebetween75-95percent.

TheABSusesworkerentitlements,particularlyentitlementtoformsofleave,asaproxyfor casualstatus.Basedonthismethodology,theABSsuggeststhatalmost80%oflabourhireworkers

areemployedonacasualbasis.Thisisconsiderablymorethanemployeesgenerally(labourhireworkerswereconsiderably morelikelytobewithoutpaidholidayorsickleaveentitlements79%comparedwith23%).Agreater proportionof labour hireworkerswereonafixed-termcontractbasis(15%comparedwith3%).

Buchanan(2004)statesthatalthoughtheABSmethodologywasinitiallyadoptedfor

pragmaticreasons,itrevealsthenatureofcasualemployment:‘itappearsthatmuchofthegrowthintheseformsoflabourarebeingdrivenbyeffortstoredefineworkers’entitlementstolabourstandardsratherthantochangesinthewaybywhichlabourisengagedinproductiononaday todaybasis.’ Consequently,muchoftheprecariousnatureofcasualworkappliestoworkershiredunderlabourhirearrangements.Assuch,thissubmissionalsoconsiderstheimplicationsofcasualworkarrangementsasitrelatestolabourhirearrangements.

Inadditiontotheuseofcasuallabour,concernhasalsobeenraisedaboutlabourhireagenciesuse

ofindependentcontractorsandshamcontractingarrangements.Shamcontractingoccurswheretheemployer(e.g.thelabourhireagency)disguises

anemploymentrelationshipasanindependentcontractingarrangementinorder toavoidtheirobligationsasanemployer.

InasubmissiontotheStandingCommitteeonEmployment, WorkforceRelationsandWorkforceParticipation’s2005inquiry intoindependentcontractingandlabourhirearrangements,theQueenslandDepartmentofIndustrialRelationsstatedthattheuseofcontractworkersinlabourhirearrangementsisacomplicatingfactorinto any investigationoflabourhireandthatithad‘graveconcerns’fortheuseofshamcontractarrangementstohideagenuineemploymentrelationship. Theystatedthatinthe1980sanumberofcompaniesbegantoengageworkersascontractorsrather thanemployeeswiththeaimofavoidingresponsibilityforemployeeentitlementssuchasleave,superannuation,workers

compensation,etc. TheDepartmentestimatesthataround20%to25%ofalllabourhireworkersareengagedascontractors.

Successiveinquirieshaveshownthatshamcontracting,includingthroughlabourhireagencies,isawidespreadproblemthroughoutAustralia

andVictoria.Onlyafew monthsago,aMelbournelabourhireoperatorFrancoCardamonefacedcourtforallegedlybreachingshamcontractinglaws.Lastmonth,retailiconMyer wasalsoaccusedofbeinginvolvedwithshamcontracting. Itisparticularlyprevalentintheconstructionindustry,asoutlinedbyCFMEU’sreport‘Racetothe Bottom’,whichfoundthatalthoughitaccountsforonly9%of totalAustralianemployment,theconstructionindustrycomprises33%ofallpersonsworking

asindependentcontractors. Thirtysixpercentof allpersonsworkingintheconstructionindustrywere workingas independentcontractors.Whilelegitimatecontractingarrangementsoccur,theCFMEUuncoveredwidespreadshamcontractingarrangementswiththenumberofshamcontractingarrangementsintheconstructionindustryatbetween92,000and168,000asatNovember2010.

3.3PHOENIXACTIVITYINTHELABOURHIREINDUSTRY

Phoenixactivityistheavoidanceofpayingoutstandingdebtsincludingemployeeentitlements,taxes,etc.byabusinessthroughthedeliberateliquidationof corporateentities.TheAustralianGovernmentdefinesphoenixactivityinitsmostbasicformasinvolving‘onecorporateentitycarryingonabusiness,accumulatingdebts

withoutany intentionofrepayingthosedebts(forthepurposeofwealthcreationortoboostthecashflowofthebusiness)andliquidatingtoavoid

repaymentof thedebt.Thebusinessthencontinuesinanothercorporateentity,controlledbythesamepersonor groupofindividuals.’

Itiscostlyonemployeesastheyloseincomeandsuperannuationthatis owingtothem.In 2012,PricewaterhouseCoopers(PwC)estimatedthetotalimpactofphoenixactivityisup to$3.19billioneachyear,includingupto$655millionincoststoemployees.Phoenixactivityhasbeenhighlightedasasignificantissueinthelabourhireindustry(PWC,2012).Typically,thefraudulentlabourhirephoenixarrangementwillbestructuredasfollows:

•aprivategroupissetupconsistingofseveralentitiesincludingalabour hireentity;

•thelabourhireentitytypicallyhasasingledirectorwhois notthe ultimate ‘controller’ofthegroup;

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•thelabourhireentityhasfew,ifany,assetsandminimalsharecapital;

•thelabour hireentity failstomeetitsliabilitiesand isplacedintoadministrationor liquidation;

•anewlabourhireentityissetupandthelabourismovedacrosstothisentity;

•theprocessisrepeatedwiththefinancialbenefitsfromtheunpaidliabilitiessharedamongstthegroup(AustralianGovernment,2009).

RECOMMENDATION

Inordertominimisetheprevalenceofphoenixactivity inthelabourhireindustryCFMEUrecommends theVictorianGovernmentestablishalicensingsystemwhichrequiresproofofthefinancialcapabilitiesofanagencyshouldbegivenintheformofaspecifiedminimumstart-upcapitalrequirement/thresholdcapitalrequirement.Asphoenixactivityprimarily

occursthroughtheliquidationofabusinesswithlittleornoassets,acapitalrequirementwouldpreventabusinessstructuringitsoperationstoholdallofitsassetsinotherbusinessentities(seeRecommendation1.1).

Inaddition,theCFMEUrecommendsaspartofthelicensingsystem,labourhirefirmsberequiredtopay abond,putupassecurity,todiscourageviolationofregulation.Thebondcanbeusedassecurityintheeventofalabourhirefirmfailingtomeetitsobligations,particularlytoworkers,orforunpaidfinesasaresultofbreachesoflicenseprovisionsandregulation(seeRecommendation3).

Unscrupulouslabourhirecompaniesareexploitingforeignworkersundertemporary workvisaprograms including417and462 workingholidayvisasand457temporarywork(skilled)visas,undercuttingexistingconditionsandworkerrights.Temporaryworkvisaholdersareparticularlyvulnerabletoexploitationasoftentheirabilitytostay inAustraliaislinkedtocontinuedemploymentwiththeir employer.Asaresult, theywilloftentolerateterribleworkingconditions.

TheissueofexploitationbytemporaryworkvisaholdersissoprominentthatinJanuarythis year,theFairWorkOmbudsmanissuedawarningtolabourhirecontractorsthat itwillnottolerate thedeliberateexploitationofforeignworkers,suchasbackpackersandseasonalworkers.Itrevealedithadreceivedcomplaintsagainstworkingholidayvisaholdersbeing‘luredtoregionalcentresbydodgylabourhireoperatorsallegedlytreatingthempoorly,bullyingandsexuallyharassingthemandripping themoffto the tuneofhundredsofdollars’,(FairWorkOmbudsman,2015).

Anecdotalevidencesuggeststheexploitationofforeignworkersbyblackmarketlabourgangswhocontractlabour tocompaniesorlargerlabourhirecompanies. Majorcompaniesthenusetheselabourhirecompaniestoavoidobligationstoemployees. AninvestigationbyFourCornersthisyearuncovered‘gangsofblackmarketworkersrunbyunscrupulouslabourhirecontractors’

whopreyedonvulnerableforeignworkers,manywithlimitedEnglish,particularlyinfarmandfoodfactories(Meldrum-Hanna,C.andRussell,A,2015).InOctober,Baiadalabourhirecompanieswerefoundtobeusinglabourhirecompanieswhowereallegedlyexploitingforeignworkers,payingthemconsiderablybelowtheminimumwageforlongshifts.

JoannaHowe,anexpertinmigrationandlabour lawattheUniversityofAdelaidestatedthat“wherethesituationgetsparticularlydifficultiswhenathirdpartygetsinvolvedlikealabourhirecompany… they fly undertheradarandtheDepartmentofImmigrationdoesn’tknowwhoare theselabour hirecompanies thatsend417visaholderstodifferentlocations.” (Meldrum-Hanna, C. andRussell,A, 2015). In itssubmissionto theinquiryon temporaryworkvisaholders,theLawCouncilofAustraliastatedthattheLawCouncilwasawareofrepeatedandseriousbreachesofstatutoryprotectionsandentitlements,particularlybylabour hirefirms.

Aswiththeunderpaymentoflabourhireworkersgenerally,theexploitationoftemporaryworkvisaholdersbylabourhireagencies,particularly thelowratesofpaytheyareforcedtoaccept,underminesthepayandworkingconditionsof workersinAustralia whoareforcedtocompete withthelowerpayandconditionsoftemporary workers.

RECOMMENDATION

TheCFMEUadvisestheVictorianGovernmentrecommendtotheFederalGovernment thatlabourhirefirmsbeexcludedfromengagingworkerson417and462visas.Thecurrentworkrights

attachedtothe 417and 462workingholidayvisasarenotconsistentwiththestatedpurposeofthevisaasan‘extendedholidaysupplementedbyshort-termemployment’(seeRecommendation3).

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“Allstudiesofwageoutcomesforlabourhireworkers,inAustraliaandoverseas,havefoundthattheyreceivealowerhourlyrateofpaythantheirdirecthirecounterparts.”

–Dr ElsaUnderhill,DeakinUniversity

Supportersoflabourhirearguethatworkersaregenerallyhappywithlabourhirearrangementsaslabourhireallowsworkerstoearnaconsiderablyhigher rateofpay.TheFairWorkOmbudsmanstatesthatcasualemployees(thelargemajorityoflabourhireemployeesmaybeconsideredcasual)are‘entitledtoahigher hourly pay ratethanequivalentfull-timeorpart-timeemployees.Thisiscalleda‘casualloading’andispaidbecausetheydon’tgetbenefitssuchassickorannualleave.’

May,CampbellandBurgess(2005)suggestthatwhilemanyadvocatesofprecariousworkstatethatcasualworkisnotsobadduetocasualloadings,theargumentis‘notbackedupbythefacts’.

Researchersfindthatthecasualloadingdoesnotfullycompensateforalltheforegonebenefits.

MariaAzzurraTranfaglia,ResearchFellowattheCentreforEmploymentandLabourRelationsLawat theUniversityof Melbournestatesthatunlike inmanyEuropeancountries,labourhireworkers“arenotdefinedbythelawasemployeesoftheagencyandthereisnogenerallegalprincipleofequaltreatment.”

BenM,acarpenteremployed throughalabourhireagencyinMelbourne,saysthathedidn’tfeelhecoulddiscusshispayandconditions withoutriskinghisjob‘Ifyouspokeuptheymoveontothenextbloke.’

DrElsaUnderhillarguesthatallstudiesofwageoutcomesforlabourhireworkers,inAustraliaandoverseas,havefoundthattheyreceivealowerhourly rateofpaythantheir directhirecounterparts(Underhill,2015).Houseman(2014)findsthattemporaryagencyworkisassociatedwithlowerearningswithworkersinsucharrangementsearningconsiderablylessthancomparabledirect-hireworkers.

Inasurveyoflabourhireagencies,Brennanetal.(2003)foundthat,onaverage,lessthanhalfofbluecollarnon-RecruitmentConsultingServicesAssociation(RCSA)memberlabourhireworkersreceiveequivalentratesofpaytothe

hostorganisation’spayrates.ForRCSAmembers,aroundathirdofworkersdonotreceiveequivalentratesofpaytothehostorganisation’spayrates.

UsingdatafromtheHousehold,IncomeandLabourDynamicsinAustralia(HILDA)dataset,Watson(2015)compareswagesofcasualandpermanentworkers.Hefindsthatafteraccountingforcasualloading,part-timecasualworkersarepenalised

forworkingascasualswithmenearning12%lessand women17%less.Heconcludesthatfromthepointofviewofearnings,casualjobsareinferiorjobs. TheresultsareconsistentwiththefindingsofBrennanetal.(2003)whofoundthatofAustralianlabourhiresurveyrespondentswhoareawareofminimumawardrates,7.5%claimtohavebeenpaidlessthantheminimumawardrate.Labour hireagenciessurveyedstatethatover50%of

bluecollarlabourhireworkersareonlypaid theirminimumawardentitlements. Almosttwo-thirdsofalllabourhireworkerssurveyedwouldexchangetheircasualloadinginreturnforreceivingpaidleaveentitlementssuchasannualleaveandsickleave. Thisindicatesthatthemajorityoflabour

hireemployeesseecasualloadingasinadequatecompensationforlosingbenefitssuchasleaveentitlements.

Thebackgroundpapertothe VictorianInquiryintotheLabourHireIndustryandInsecureWorkstatesthat‘labourhireworkersmaynotreceivethesameratesofpayandotherbeneficialconditionsasdirectemployeesofahost,forexamplebecause

acollectiveagreementcoveringtheenterprisedoesnotextendtolabourhirestaff.’Thismeansthatalabourhireworkermaybepaidlessthanadirectemployeeheorsheworksdirectlyalongside.Infact,Brennanetal.(2003)foundthat31%

ofhostcompaniesdonotrequireemploymentagenciestoprovidetheequivalentbasictermsandconditionsof employmenttheyprovideto theirownemployees.Ninepercentclaimthey only requirethissometimes.

Intermsofsuperannuation,whereworkersareengagedasindependentcontractors,employersarefarlesslikelytomakeprovisionforsuperannuation.Forworkersengagedasemployees,employersarerequiredtomake

superannuationcontributions.However,Buchanan(2004)findsthatwhilelessthanoneintwentypermanentsdidnothaveorwerenotcontributingtosuperannuation,40.5%ofcasualswereeffectivelynotcovered.

Thefactthatlabourhireemployeesreceivealowerrateofpaythantheirdirecthirecounterpartsisnotonlyunfairtotheworkersthemselves,butitalsounderminesthefairpayandworkingconditions

ofotherpermanentworkers.In aCFMEU reportintoshamcontractinginAustralia’sconstructionindustry,wenotedthattheuseoflabour hirenotonlyaffectslabourhireworkers,butalsothoseworkersdirectlyhiredby thehostemployer.

Labourhireworkersareusednottosupplementbutreplacedirectemployeesandastheirpayisoftenlessthandirectemployees,theycanbeusedasacost-cuttingmeasurewhichunderminestheworkingconditionsofdirectemployees.

Labourhireandcasualisationisproblematicbecause‘itexertsdownwardpressureonthewagesandconditionsevenofthoseemployeesthatcontinuetobeviewedaspermanent’.Processessuchaslabourhire,‘threatenthedirector indirectreplacementofpermanentworkersbycasualworkers’(Mayetal,2005).

TheFairWorkOmbudsmanhasstatedthaton-hireworkersarenotcoveredbyenterpriseagreementsmadebetweenthehostorganisationanditsowndirectworkers,unlesstheon-hirebusinessitselfisapartytotheagreement(FairWorkOmbudsman,2015).

Underhill(2015)arguesthatlabourhireemploymentcanundermineemployeebargainingpower.Shestates“Unlesscollectiveagreementsprovidescopeforprovisionsrelatingtotheuseoflabourhireworkers,thosecollectiveagreementsareatrisk

ofbeingunderminedbytheverysameemployerwhohasenteredintotheagreement.Thisisnotconsistentwiththeobjectiveofaworkplacerelationssystemproducingfairandequitablepayandconditionsforemployees,norconsistentwithgoodfaithbargaining.Prohibitingtheinclusionofrestrictionsupontheuseoflabourhireemploymentfromcollectiveagreementsprovidesemployerswithafreechoicetoside-stepthetermsandconditionsofcollectiveagreementswhichtheyhaveenteredinto.”

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TheDepartmentofIndustrialRelations,Queensland(2005)foundthat whilethedevelopmentofenterprisebargainingsincethe1980shasresultedinEBAsprovidingratesofpayandconditionsofworkthataresuperiortoawards,inthelabour

hiresector‘veryfewemployeesarecoveredbyEBAs.Mostarecoveredbybasicawardconditionsonly’.Thosewhoarecoveredbyagreementsareconcentratedinhighlyspecialisedprofessionalareas.

EvenintheinstanceswherelabourhireemployeesarecoveredbyEBAs,anecdotalevidencesuggestslabourhireworkersmaybeworkingonanEBA,whichpayslowerratesthantheagreementcoveringthepermanentcounterparttheyareworkingdirectlyalongside.

Labourhirenotonlyunderminesthepayandworkingconditionsofdirecthireworkers,butresearchhasalsofoundthatitunderminesthetrustandloyaltyofpermanentemployees(Hall,2000).AdetailedstudyoftheuseoflabourhireintheElectricityTrustofSouthAustralia(ETSA)Corporationfoundthattheuseof labourhireworkersasasupplementandsubstitutefor

permanentemployeeshadaverypronouncedandnegativeeffectonemployeeloyalty,commitmentandtrustwithlabourhireworkers,employeesandsupervisorssharingtheviewthattheuseoflabourhirehad‘destroyedanyloyalty intheorganisation’(Gryst, 1999in Hall,2000).

“Itisnotcorrecttosaythatmanypeopleinnon-standardemploymenthavepositiveviewsabouttheirjobs.Labourhireemployeeshaveparticularlynegativeviewsabouttheiremployment.”

–Dr ElsaUnderhill,DeakinUniversity

Advocatesoflabourhirearguethatnon-standardemploymentprovidesgreaterchoiceforworkerswithinthelabourmarket.Labourhirearrangementsaresupposedlybeneficialastheyprovideflexibilityforthosewishingtoworklimitedhours(Brennan

etal,2003). However,thisisnotthereality.ABSevidencefindsthatonly7%ofemployeesstateflexibilityasareasonforusingalabourhirefirmandthemajorityofworkerswho foundtheirjob

throughaLabourHireFirm/EmploymentAgencyweremorelikelytoworkfull-timehoursthanVictorianemployeesingeneral. (ABS,2010).

PatrickO,acasualrigger/dogmanhired throughalabourhire firm inthe

constructionindustryinMelbournesays‘Casual workmightsuitSOMEpeople,but99%itdoesn’t.Itcausedmanyargumentswithmy wiferegardingfinances,pickingupchildrenfromschoolandschoolholidays.... Mentally,theramificationsofcasualworkcanbeendlesslynegative.

Extremelyhighstresslevelsduetotheunknownforyouandyourfamily,whichinturncreateslowself-esteem,depression,anxietyandfeelingsofnotbeinggoodenoughtoprovidefor yourfamily.

Marriageproblemsbeginwhich neverexistedbefore.Tensionsbetweenspouses,arguments,sexlifeissuesandhappinessisreplacedbyconstanttension.Everyoneinthefamilyfeelsit,includingthechildrenastheyalsofeelthetensionandareaffectedbythefinancialconstraintsyounowsuffer.Physically,yourhealthdeclinesduetothementalissuesthatarise,noteatingwellbecauseI’vegonewithout

somy wifeandchildrencaneatwell,mystomachconstantlyfeelslikeit’sinatightknot,andifIdon’tendup withanulcer Iwill[be]stunned.Headachesforsomeonewhonevergotthembefore,arenowcommon.’

Theoverwhelmingmajorityofemployeesusedalabourhirefirmdue to theeaseoffinding workoraninabilitytofindwork.Thisincluded:71%whocitedtheeaseofobtainingwork;9%whostateditwasaconditionofworkingin thejoborindustry;7%whocitedaninabilityto find workintheirlineofbusiness;and2%whoselackofexperiencepreventedthemfromfindingapermanentjob.Bycontrast,only3%ofworkersstatedapreference

forshort-termworkand7%whostatedflexibilityasareason.

Seventysixpercentofworkerswhofoundworkthrough labour hireinVictoria,workfull-time.1Thisisaconsiderablyhigherproportionthanthe66.5%ratioof fulltimeemployeestototalemployees

inVictoriaaccordingtotheAustralianBureauofStatistics(ABS,2015b).2 Thissuggeststhat

findingpart-timeemploymentunderalabourhirearrangementmayactuallybemoredifficultthanfindingpart-timeemploymentasadirecthire.

Therealityisthatemployeespredominantlyenterintolabourhirearrangementsduetoalackofsecureemploymentopportunities. Forgrowingnumbersofbluecollarworkers,casualworkisthe‘onlyformof employmentavailable’(Buchanan,2004). MonashUniversity’sVeronicaSheenstatesthatformanypeople,casualjobs,likemanylabourhirepositions,are‘theonlyjobstheycanfindandareneithertransitionalnor alifestylepreference’.ThisisconsistentwithBrennanetal.(2003)whofoundthatapproximately onethirdoflabourhireworkersfeltthey hadnochoicebuttobealabourhired,oron-hiredworker,andtwo-thirdsofworkerswouldratherbe hireddirectly.

regimeofthemanagementoflabour. Itisnotoneofunlimitedchoiceandflexibilitythatismutuallyadvantageoustoworkersandemployers. Rather,itisaregimewhichfitsmany workersintotheneedsofproductionandserviceprovisionbyofferingonlyverylimitedchoicestoworkers.’

Intermsofcasuallabour,Buchanan(2004)foundthatwhilemanycasualshavepredictability intheirhoursofwork,manydon’t –andwouldlike it.Heconcludedthatitisclearthatgrowingnumbers

ofworkersareinaweakerpositiontoenforcetheirrightsorfulfil theirworking timepreferences.Employerdrivenflexibilityisnotsynonymous withcasualisation.‘Casualisationispartofanew

1.ABScategorisesfull-timevs.part-timebasedonthenumberofhoursworked,ascasualemploymentisbasedontheemploymentcontractanemployeecanbefull-timeandcasual,orpart-timeandcasual.

2.AccordingtoABSLabourForceStatistics,asofSep20152,935,800peoplewereemployedof which1,952,800wereemployedfulltime.

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“Researchfindslittleevidencethattemporaryagencieshelpworkersgainregularemployment;they may evenimpedeit.”

–SusanHouseman,W.E.UpjohnInstituteforEmploymentResearch

Brennanetal(2003)statethatanotherperceivedbenefitoftheon-hired,or labourhire,market isthatitcouldbeseentobeasteppingstoneforthosewishing togetintoorreturnto theworkforce.TheABSfoundthatonly3%ofemployeesrespondedwith‘gainingexperience’asareasonforusingalabourhirefirm.Thisisclearlynotasignificantmotivation.

Houseman(2014)suggeststhattemporaryagencyworkerscanbecometrappedinunstable,lowpayingjobsthatoffer‘fewopportunitiesforcareeradvancementanddevelopment’andthatratherthanprovidingafootintofuturemoresecurework,labour hireworkcanactuallybe‘detrimentaltoaworker’sfutureemploymentandearningsif

itcrowdsoutproductivejobsearchandleaveslittletimeto lookforotheremployment.Ifitfailstoenhanceskillsorprovidecontactswithotherpotentialemployers,a workercouldbebetteroffdeclininganofferfromanagencyandsearchingintensively forregularemployment.’

Shefindsthatseveralinternationalstudieshavefoundnoevidenceofastepping-stoneeffect.Onaverage,takingatemporaryagencyjobdoesnotimproveworkers’chancesoffindingmoreregularemploymentratheritmayimpede itandleadtomoretemporary jobs. ThisisconsistentwiththefindingsoftheBrennanetal.(2003)survey whichfoundonly19%to25%ofon-hireemployeesbecomepermanentswiththeirhostorganisation.

‘boostslabourproductivitybypushingmanyofthecostsandrisksofemploymentontoworkers’(Buchanan,2004).

Underhill(2011)statesthatthebenefitsoflabourhire,includinginthebuildingandconstructionindustry,includetheabilitytoaccessalargesupplyofsuitablelabourtomeetpeaksandtroughsandshort-termbusinessneeds,havinggreatercontrolover theamountoftimeemployerschoosetoemployworkers,etc. However,shefoundthatmanyofthesebenefitsstemfromthecasualnaturebywhichlabourhireworkersarehired;allowingagenciestohireandfireworkersaccordingtothedemandsofhostorganisations.

Productivityisanoft-usedjustificationforcostcutting.However,productivity isameasureofefficiencynotcost.Productivity impliesoptimaluse,thatresourcesareusedinthebestwaytoproducethegreatestoutputs.Itmeansthatsimplycuttingtheresourcesavailabletoservicesdoesnotimplyimprovedproductivity.Productivitycanalsobeachievedthroughincreasinginputcosts

wherefundingisusedtoimproveoutputbyanevengreateramount.

Reducingwagesandconditionsmayprovidegainsintheshortrun,butislikelytohavenegativeeffectsinthelongrunduetoanincreasinglyunskilledworkforceanddissatisfiedworkers.Jobinsecurityandpoorconditionscancausesignificantstress.WoodenandWarren(2004)useddatafromtheHousehold,IncomeandLabourDynamicsinAustralia(HILDA)Surveytofindthatfixed-termemployeeswerethemostsatisfiedwiththeirjobs,whilecasualsweretheleastsatisfiedparticularlythoseemployedthroughlabourhireagencies.

Researchshowsthatinsecureemploymentislinkedtonegativeeffectsincludingdemotivation,decreasedjobsatisfaction,etc.(McNamara,2006).Reducedwellbeingisassociatedwithdecreasedproductivity(Oswaldetal.2014).

Itiscommonlyassumedthatemploymentthroughlabourhireisa more‘efficient’or‘productive’wayofengaginglabour.Theideaisthatlabourcostscanbereduced,andproductivityincreased,byhaving

amore‘flexible’workforcetomatchfluctuationsinworkforceneeds. Itisanapproachtolabourwhich

A trafficcontrolleremployedcasually intheconstructionindustryin Melbournewhowishestoremainanonymousstated‘Clientexpectationsoftenignoresafetyof workers.MyemployerhasnoHSRonthepayroll. Duetotheirregularityofthework,onehastokeepone’spersonallifeonholdtoensureadequateearningsto

paythebills.Qualitytimewithmy family isinshortsupplyduetotheunpredictabilityofwork. Luxurieslikeholidaysareunaffordableduetotheinability topredictearnings.Whenthemoneyisearntit staysinthebanktoensurecostsof

livingcanbemet... Removecasualisedworkforceforallworkperformedon

adailyandpermanentbasis.Casualsshouldonlybeusedintopupsituations.Labourhireshouldnotbeusedexceptwhenexceptionalcircumstancesexistthatrequireshorttermtopupsof theworkforce.’

Levelsofproductivityforlabourhireandcasualworkersarelikely tobelowerasworkersknowtheyarenotpermanent;ifthereisnojobsecuritythisisreciprocatedwithlessconcernfortheoutcomesofthebusiness.

Allan(1998)statesthat, inanattempttoreduceemploymentcosts,manyemployersareoptingfornon-standardformsofemploymentasitallowsemployerstopaylabourasandwhenrequired.

However,hestatesthatoftenthedisadvantagesofa ‘flexible’workforceareoverlooked. ‘Theworkershavelesstimecommitmentandarguablylesspsychologicalcommitmenttotheorganisationwhichcanleadtoproblemsofmotivation,communication,confidentialityandturnover.

Furtherskillretentionproblemscandevelopastheseworkersmaynotbefully integratedinthehumanresourcetrainingsystemsinmany

companies...lackoftraining,lessexperienceandpoor motivationcanalsoleadtoadeteriorationinqualitystandardsofgoodsproducedorservicesprovided…thestatusdivisionbetweenatypicalandfull-timeemployeescanalsocreateanimositythatundermines teamwork andcooperation ’.

Decreasedlabourcostsdonotleadtoimprovedproductivityifitresultsinadecreaseinoutput.Allanstatesthattheseproblemsdonotapplyequallytoallcategoriesofnon-standardemploymentandthatitislikely thegreatest

problemswillexist‘wherethereisaverylooseemploymentrelationshipbetween the workerandthefirm;for instancecasualandagencylabour…’

Hall(2000)statesthatwhilethereareshort-termcostbenefitsassociatedwithlabourhire,therearelonger-termcostsintermsofdecliningemployer-fundedtraining,skillslosses,reducedemployercommitmenttohumanresourcesdevelopmentgenerally,anddecliningemployeeloyalty,trustandcommitment.

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Buchananstatesthatevenifthereareshort-rungainsinproductivitythroughtheuseofcasuallabour,theproductivitygainsare‘unsustainableinthelonger termbecausetheyareundermining

thereproductionof skillsneededforfuturegrowth’.Casualisationandlabourhireisnotconducivetoproductivitygrowththroughskillsdevelopment,rather itreducesbusiness’ability tomaintainahighperformingworkplace.Inasurveyoflabourhireagencies,Brennanetal(2003)foundthat50%ofagenciesdonotprovidetrainingtoon-hiredworkers,88%rarelyorneverengageapprentices.

Inorder toimproveproductivity,focusneedstobeoninnovationandtraining,includingthedevelopmentof workforceskills.

ThefindingsareconsistentwithasurveyofAustralianhostcompanies,whichfindsthat82%ofhostsfindthattheuseofagencyemployeesonlycontributeslightlyornotatalltotheorganisation’sproductivityandcompetitiveness–Brennanet

al.[2003).Seventy-threepercentofhostssaythatthelabourhireagencydoesnotprovideany

servicesthatenhanceproductivityotherthan‘basicrecruitmentservices’.

files,shefoundthatprecariousnesscontributestolabourhireworkers’adversehealthandsafetyoutcomesandthatthecomplexitiesassociatedwiththetriangularstructureoftheemploymentrelationshipheightens theirvulnerabilityfurther.

“AllstudiesoflabourhireworkersandoccupationalhealthandsafetyinAustraliaandoverseashavefoundthatlabourhireemployeesaremorelikely tobeinjuredatwork,comparedtodirecthireworkersinlikeoccupations”

–Dr ElsaUnderhill,DeakinUniversity

WorkSafeAustraliafoundthatin2012-13,therewere1,865seriousinjuryclaims foremployeesinthelaboursupplyservicesindustry3 andfourfatalities.In2014-15,thenumberoflabourhirebusinessesregisteredforWorkCoverpremiumserviceswas933.

Underhill(2002,2011)hasnotedthatinternationalstudiesfindthattemporaryagencyorlabour

hireworkersaremorelikelytobeinjuredintheworkplacethanother typesofemployees. ThesameistrueforVictoria,withlabourhireworkersbeingmorelikelytobe injuredandwithinjuriesmoresevere. Usingworker’scompensationclaim

Inareportprepared forWorkSafe in2002,Underhill

foundthattheincreasedlikelihoodofinjuriesisexplainedby“theintensityoftasksinunfamiliarsettings;insufficientexperience,trainingandsupervisionforthetasksperformed;insufficientinformationexchangebetweenemployer,clientandemployees;lackofdiscretioninthewaytasksareperformed;andthepotentialoffloadingof highrisktaskstolabourhireemployees.”

McNamara(2006)foundthatcharacteristicsofprecariouswork,includinggreaterinsecurity;economicandrewardpressures;lowlevelsofsocialsupport;imbalanceofdemandsandcontrol;disorganisedworkprocessesorsettingsandlack ofinductionandtraining;andregulatory failurecontributetoadverseOHSoutcomes.Shestatesthat‘Jobinsecurityandespeciallythefear thatabsencefromworkorevenrefusaltodoovertimemightincreasethelikelihoodofredundancy,meansthatsomeworkersmayavoidtakingtimeoffeven

3.Aseriousclaimisanacceptedworkers’compensationclaimthatinvolvesoneormoreweeksawayfromworkandexcludesallfatalities,andallinjuriesanddiseasesexperiencedwhiletravellingtoor fromworkorwhileonabreakaway fromtheworkplace.

whenill…Casualworkersreceivenopaidsickleave,annualleave,carersleaveorpublicholidays.Thusbeingsickisarealproblemorhazardforthemajority ofcasualworkers.”

ThefindingswereconsistentwiththoseofaProductivityCommissioninquiryreport

whichidentified areviewof188Australian andinternational studies conductedbyQuinlan(1999)thatfoundalmost90%ofstudiesdiscoveredprecariousemploymentresultedininferior OHSoutcomeslikehigherinjuryrates,hazardexposures,diseaseandstress.

Thedissentingreportof theHouseofRepresentativesStandingCommitteeonEmployment,WorkplaceRelationsand WorkforceParticipation’sinquiry

intoLabourHire ArrangementsandIndependentContractingfoundcredibleevidenceof diffiinidentifyingtheresponsibilitiesofpartiesunderlabourhireagreements:‘thetriangularrelationship,involvingthelabour hireagency,thehost firmandthelabourhireworkerhasledto a blurringof legalobligationsandentitlementsinanumberof areas,suchasoccupationalhealthandsafetyandreturnto workpolicies.’

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Underhill(2002)concludedthat“thecharacteristicsofclaimsforVictorianlabourhireemployees...suggeststheseemployeesareoverlookedwithrespecttoinjurypreventionbothbylabourhirecompaniesandhostemployers.”Brennanetal.foundthatapproximately40%to50%oflabourhireagenciesdonotconsistentlyprovidesafetyinductionsfortheiremployeesand34%to39%

oflabourhireagenciesdonotevenassessthehostorganisation’sOH&Ssystemsandworkplacespriortoassigningemployees.Almost50%ofhostsstatethatlabourhireagenciesneverconductOHS

assessmentsoftheirworkplace,afurther19%sayitoccursonlysometimes.

Whileregulationmeansbothpermanentandcasualworkersshouldbecoveredbyworkers’compensation,inpracticeitisnotthecase.

Buchanan(2004)foundthatwhilelessthanthreepercentofpermanentworkersarenotcoveredbyworkers’compensationarrangements,overoneinfivecasuals(21.7%) werefoundnot tobecovered.Brennanetal.(2003)foundthisisparticularlyimportantfor labour hireworkers whoarehiredascontractors,withonly35%oftheseworkersholdingworkers’compensationcoverage.

Corruptpracticeshavebecomethenormintherecruitmentindustry,andthoseagenciesthatwillnotentertainthemfaceahardstruggletosurvive,ascomplicitend-usersdrivepriceseverlower… Themassexploitationofhundredsofthousandsofworkerscouldeasilybestoppedbyagovernmentthathadthewilltodoso.Recruitmentagenciesshouldbelicensed,withthehigheststandardsset,andlossoflicencesforthosethatfailtomatchthem.Itshouldnotonlybeunacceptablefor

agenciestoexploittheveryworkerswhoearnthemmoney:itshouldbeimpossible.’

–Adrian Gregory,Director,ExtramanRecruitmentUK.

TheregulationoflabourhireinAustraliaiscomplicatedcomprisingbothFederallegislationandStatebasedlawswhichimpactondifferentformsofworkingarrangements.TheprimarysourceofemploymentrightsandconditionsforVictorianemployeesisoutlinedbythefederalFairWorkAct2009,whichappliestoallworkersandincludesNationalEmploymentStandards,ModernAwards,EnterpriseAgreements,protectionsfromunfairdismissalandadverseactionandprotectionsagainst‘shamcontracting’.

AttheFederalLevel,MariaAzzurraTranfaglia,ResearchFellowattheCentreforEmploymentandLabourRelationsLawattheUniversityofMelbournestatesthat inAustralia, thereareno

regulatorymechanismsforlabourhire(suchasthejointliability regimesor joint-employmentdoctrinesadoptedbypartsofEuropeandtheUnitedStates,whichdivideresponsibilitiesbetweentheagencyandthehost)orregulatoryrequirements,such

asfinancialguarantees,limitationtoactivitiesorauthorisation.

Intermsof jointemployment,wheretheagencyandthehostwouldbothhaveresponsibilityandobligationstowardsthelabourhireworker,thestatusofsuchjointemploymentinAustraliais“unclear”(PointonPartners,2014).However,a2014decisionbytheFairWorkCommissionrejectedtheconceptofjointemployment.ThecaseinvolvedTooheysinNSW,whoentered intoalabour hireagreementwithFeymanPtyLtd(FP)forelectricaltradesmen.ThearrangementwasimplementedbyTooheys whoterminated 19 electricaltradesmen(employeesofTooheys)whocontinuedtowork

atthebreweryemployedbyFPunderthelabourhireagreement.Tooheyslater terminateditsrelationshipwiththeFPgroupandreplacedit

withanotherlabourhirecompany.Thedismissedemployeeslodgedtwounfairdismissalapplications,oneagainstTooheysastheiremployerandtheotheragainstFP.Bothcompaniesarguedthattheother wastheactualemployerof theemployees.

TheFairWorkCommissionruledthatFP,notTooheys,wastheemployer,andthatFPdidnotactasanagentofTooheysinemployingtheworkers.TheFairWorkCommissionrejectedtheargumentthatTooheysandFPwerejointemployers,statingtherewerenoAustraliandecisionswhichsupportedtheexistenceofthejointemploymentdoctrineinAustralian Law(Elleryet al.,2014).

TheFairWorkOmbudsmanhasstatedthattheon-hire(labourhire)business,‘astheemployer,isresponsibleformeetingalloftheemployeeentitlementsoftheemployee’(FairWorkOmbudsman,2015).

Assuch,thelawsthatexist,primarilyrelatetotherelationshipbetweentheemployeeandthe

labourhirefirm.Asstatedinthebackgroundpapertothisinquiry“thecentralrelationshiptheselawsregulateisthatofanemployerandanemployee.Moreover,manyrightsandconditionsareaffordedonlytoongoingemployeesorlong-servingcasualemployees.Fewerrights,conditionsandprotectionsareextendedtoindependentcontractors”.

Asmentionedinprevioussections,aslabourhireemployeesareoftennotcoveredby thecollectiveagreementorEBAcoveringdirectemployees

atahostorganisation,theirratesofpayandotherworkingconditionscanbe,andoftenare,

substantiallyworse.Thisdoesn’tevenstarttocoverthe proliferationofworkerswhoarehiredundershamcontractingarrangements.

IntermsofStatebasedregulation,Victoriaprovidesgeneralrightsentitlementsforworkersinrelationtolongserviceleave,OccupationalHealthandSafety (OHS),equalopportunity,workers’compensation,etc.

However,thecurrentregulatoryframework isvisiblyscarcewhenitcomestoregulatingthedistincttriangularrelationshipthatexistsinthelabourhireindustry.Notonlyarejointemploymentdoctrineslacking,butthereisnosufficientregulationfor theindustryitselfintermsoflicensing,restrictionsonscopeofservice,authorisation,monitoringandcompliance,etc.

Whilelabourhireagenciesmayarguetheyareregulatedbyfederalandstatelawsinrelationto

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minimumwage,workers’compensationinsurance,etc.,thelargeandgrowingnumberofdodgyoperatorsexploitingworkers,andtheconditionsmentionedinprevioussections,hasproventhatthissystemalonesimplyisn’tworking.Labourhireworkersareparticularlyvulnerabletoexploitationduetothetriangularworkrelationshipandtheprecariousnatureoftheirwork.

TheRecruitmentandConsultingServicesAssociationAustraliaandNewZealand(RCSA)hasestablishedaCodeforProfessionalConductand

aproposedRCSAEmploymentServicesIndustryCodeastheyhaverecognisedandacknowledgedtheexploitationofvulnerableworkersthatexistsinthelabour hireindustry.

Theysupporttheinquirystating“Thisinquiryisanopportunitytosignificantlyimprovetheprotectionsavailabletovulnerableworkers…Theexistingpatchworkofstatelicensingschemesisfailing

toeradicatethepoorconductofasmallnumber ofillegalandunscrupulousoperators.WebelieveanESIC[EmploymentServicesIndustryCode]couldprovideaspecific,coherentandnationallyconsistentregulatoryframeworkthatisrelevanttothe contemporarylabourmarket”(RCSA, 2015).

Theproblemwithindustryself-regulation,aseconomistswillagree,isthatitdoesn’twork.Itisobviouslyintheself-interestofsomeproviders

toactunscrupulously fortheirownbenefitattheexpenseof theirworkers.Immoralprovidersareunlikelytovoluntarilycommittoanindustrycode.Evenifthey do,they areunlikelytofollowit whentheyhavenoincentivetodoso.Infact,astherearecostsassociatedwithfollowingthecode(suchaspayingworkersappropriately),thosebusinesseswhodochoosetofollowitwillnotlikely survivetheincreasedcompetitionfromthoseproviders, withlower costs, whodonot. TheInternationalLabourOrganization(2007)hasstated‘mindfuloftheirnegativeimage,insomequarters,leadingprivateemploymentagencieshavedevelopedmechanismsofself-regulationtopromotegoodbusinesspracticeandreceiverecognitionaslegitimateplacesalongsidepublicemploymentservices.

Self-regulation,however,cannotreplacetheroleofnationallegislatorsandlawenforcementagencies.’

Asaconsequence,theCFMEUbelievesthatanyeffectiveregulationneedstobeimplementedatboththefederalandstategovernmentlevels.Itcannotbevoluntaryanditneedstobeenforceable.While thereisstillsignificant work tobedone inrelationtofederalworkplacelaws,includinginrelationtoEBAs,thisisbeyondthescopeofthisinitialsubmission. Therecommendationsinthissubmissionshouldbeviewedasastartingpointforstatebasedregulation. Itshouldnotbeviewedasanexhaustivelist.

“Ifcurrenttrendscontinue,wearelikely towitnessthefurthererosionofsafetyandtrainingstandards–aswellasgrowingnumbersofworkingarrangementsthatdonotreflectworkers’preferences. Whilethismaybesustainableinthe

shortrun–inthelongertermitimpliesaprofounddropinworkinglifestandardsformanypeople.

Inequalitydoesnotjustconcernwagesandincome

–itgoestothewholeexperienceoflifeandthecharacterofjobscreated.”

–ProfessorJohnBuchanan,UniversityofSydney

Currentconditionsfor workersintheLabourHireindustryareinadequate.Toimprovethese

conditions,regulationneeds tobeimplementedandadequatelyenforcedbytheVictorianGovernment.CFMEUbelievesthatthisisbestachievedthroughtheuseofalicensingsystemwhichcreatesbarrierstoentrytoreducethenumberofunscrupulousoperatorsandincludesasystemofenforcementwhichresultsinadequatepenaltiesandremoval

oflicensingwhenlicensingrequirementsarebreached. LicensingrequirementscurrentlyexistinWesternAustralia,SouthAustraliaandtheAustralianCapitalTerritory.

Underhill(2013)hasstated that inthepastdecade,anumberofcountrieshaveintroducedlicensingarrangementsandstrengthenedexistingschemes.

Clearly,theyrecognisethenecessityofdoingso. MostEUcountrieshaveintroducedlicensing

schemesalongsidetheimplementationoftheEUDirectiveonTemporaryAgency Workers,whichseekstoguaranteethosewhoworkthroughemploymentagenciesreceiveequalpayandconditionswiththeemployeestheyworkalongside.CountriesincludingJapan,SingaporeandSouthKoreahavestrengthenedtheirexistinglicensingarrangementsasthecurrentsystemswereviewedasineffective.

Theexperienceofthesecountriesindicatethatnotonlyisalicensingsystemrequiredtoensureadequateconditionsfor labour hireworkers,butthat‘licensingisregardedonlyasameansto anend,notanendinitself.Itseffectivenessis

intricately relatedtothenatureofthelabour lawswhichthelicensingsystemsupports’

(Underhill,2013).

TheILO(2007)suggestedthatthe‘startingpoint’forallregulationonlabourhire isthedeterminationofthelegalstatusandconditionsgoverningtheiroperation.‘Thelegalstatusshallbedeterminedaccordingtonationallawandpracticeanditsoperation,accordingtoasystemoflicensingorcertification.’

Itstatesthattheadvantageofcompulsorylicensingisthatitallowsforapre-screeningofapplicants’capabilitiesandprofessionalexperienceinthejobagencymarket.Italsohelpscreatetransparencyandcanbeusedasameanstoimprovethefunctioningofthelabour market.

Thelicensingsystemweproposeshouldbeviewedasastartingpointforreducingtheexploitation

oflabourhireworkersbyunfairemployersandlabourhireagencies.Itshouldnotbeconsideredacompletesolution.Thereisstillsignificantworktobedoneinrelationtofederal workplacelaws whicharebeyondthescopeofthisinitialsubmission.

Beforeadoptinganylicensingregulationsandprovisions,itisappropriatethattheVictoriangovernmentsconsultthemostrepresentativeorganisationsofemployersandworkersastheinclusionofsocialpartnersgivesusefulreferencesto the‘preciseneed inthelabour marketfortheoperationofprivateemploymentagencies’andbringsforwardspecificconcernse.g.‘referring

tocertaingroupsofworkersthatareparticularlyvulnerabletoexploitationandabuse’(ILO,2007).TheCFMEUappreciates theopportunitytoprovideconsultationonalicensingsystemasdescribedbelow,andwelcomesanyfurtherconsultation intothespecificdetailsofaVictorianlabourhirelicensingscheme.

CFMEUrecommendsproof ofthe financialcapabilitiesofanagencyshouldbegivenintheformofaspecifiedminimumstart-upcapitalrequirement/threshold capital requirement.Alicencethresholdforaminimumamountofrequiredcapitalensuresthatonlyagencieswithsufficientassetsand/orrevenuewouldbeabletoobtainalicence. Assuch,thethresholdrequirementactsasabarriertoentry forfirms withinsufficientcapitaltooperate in the industry.

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ThisrequirementwouldhelpminimisetheproblemsassociatedwithphoenixactivitymentionedinSection2. Asphoenixactivityprimarilyoccursthroughtheliquidationofabusiness withlittleornoassets,acapitalrequirementcoupledwiththelicensingrequirementreferredtoaboveforthesameentity,wouldpreventabusinessstructuringitsoperationstoholdalltheirassetsinotherbusinessentities.

RECOMMENDATION1.2:LICENSINGBONDANDANNUALLICENCEFEE

CFMEU recommends that firmsbe required toputupalicensingbondinordertobelicensedasalabourhireagencytobeusedassecurityintheeventof alabourhirefirmfailingtomeetitsobligations,particularlytoworkers,or forunpaid

finesasaresultofbreachesoflicenceprovisionsandregulation.

TheILOhasstatedthatabond,putupassecurity,can‘serveasasafeguardtoensurethat[theagency]complieswiththeprovisionsofthelegislation...Inaddition,anylossordamageoccasionedtoanyperson,duetoanyfailuretocomply,canberepaidfrom thedeposit’.

Theyfoundthatsuchapolicyseemstobeeffectiveindiscouragingviolationsofregulations,ifthey

are‘basedonclearrulesandregulationsguardingtheprocedureofconfiscatingthedepositin

casesofmisconduct’includingpayingworkersforamountsowing. Inadditiontothethresholdcapitalrequirement,bondscanalsobeusedasproofof thefinancialcapabilitiesoftheagency. Forexample,

inSingaporeemploymentagenciesarerequiredtopayasecuritydepositwiththeamountdependingontheirtrackrecordandvolumeofplacements,rangingfromS$20,000to$S60,000

(Underhill,2013).

Inaddition to thebond,anannuallicencefeeshouldalsobecharged.Underhill(2013)states thatmostlicensingarrangementsrequirethelicenceholdertopayanannualfee,whichassistsincoveringtheadministrativecostsofthelicensingscheme. ILO(2004) hasstatedthatitiscommontocollectaregistrationfeefromagencies‘Thepaymentofaregistrationfeecoverstheadministrativeprocedureofthelicensingagencyandcanalsobeseenasaproofofthefinancialcapacityof[theagency]wishingtoenter

themarket.’

Foralicensingschemetobeeffectiveitneeds tobeproperlyenforced.Withoutenforcement,agenciescansimplychoosetoignoreregulation.

Aneffectivecomplianceunitwillapprovelicences,monitorlicenseesandconductinvestigationsofbreachoflicencesandotherlawswiththeabilitytorevokeorsuspendlicences.Penaltiesneedtobeadequatelyimposedsotheyactasaneffectivedeterrentforbadbehaviour.Theseshouldincludesignificantfinesandimprisonmentinthecaseofintentionalbreaches. Thecomplianceunitcanbefundedwiththesupportoftheadministrationof alicencefeeasmentionedabove.

TheILOhasstatedthataspartoftheirlicenceconditions,labourhireagenciesshouldbemadetocomplywithallrelevantlabourlaws‘althoughthisrequirementseemstobeself-evident,itis, forvariousreasons,ofcrucialimportance.’ Theholdingofthelicencemustbesubjecttoongoingcompliancewithstateandfederallawsandregulations.Asdemonstratedbyrecentexamples,

therearesignificantfailuresbyagenciestoensureworkersreceivetheirlegalentitlements.Alicensingschememust,inparalleltoappropriatefederalregulation,eliminatethisexploitation.

InSouthKorea,penaltiesforoperatingwithoutalicenceorbreachingregulationcanbesevereandareinadditiontolicencecancellation.A licence canbecancelledforreasonsincludinggainingthelicenceunder falseconditions;failingtomeetthelicensingrequirements;breachingtheconditionsondispatchingworkers(suchasdurationandoccupationofplacements,etc.).Oncealicencehasbeencancelledorsuspended,publicsignagecanbeplacedattheagencyindicatingthebusinessisillegal(Underhill,2013).

Inadditiontoenforcingthecomplianceof labourhireagencies,thecomplianceunitwouldalsoinvestigatebreachesbyhostorganisationsinrelationtorelatedoffences.This wouldincludebreachessuchasengaginganunlicensedlabourhireagency. InSingapore,in2011,penalties(finesandimprisonment)wereintroducedforhoststhatknowinglyengageunlicensedemploymentagencieswiththepenaltyincreasingbasedon

whetheritisafirstoffenceorsubsequentoffence(Underhill,2013).

INCREASEDTRANSPARENCY

Thecomplianceunitshouldalsohaveresponsibilityforestablishingapublicregisterofalllicensedlabourhireagencies.TheILOhasstatedthatifalicensingsystemfortheoperationoflabourhire

isinstalled,aregisterofalllicensedagenciescanbemadepublic.‘Suchapublicregister(with

informationonlicensedagencies,theiraddressesandpossibly theexpirationdateofthelicence)ensuresthatanyonecanverifywhetherthe[agency]theywishtoconsultisactuallylegitimate.Illegallyoperating[agencies]canbemuchmoreeasilyidentifiedifitisknownwhichagenciesarelicensedornot.’(ILO,2007). Theystatethatahighdegreeoftransparencyisadvisableparticularlyinmarkets,likeAustralia,wheremanyagenciesareactive.

TheregisterwouldalsofacilitatethecollectionofinformationbytheVictorianGovernmentinrelationto thecurrentenvironmentofthelabour hireindustry operatingin Victoria,includinginformationonparticularlabourhireagenciesasneeded.TheIFOhasstatedthatrequiringagenciestoregularlyinform(inthiscase, thecomplianceunit)ontheiractivitiesprovidesabetterpictureof theindustry. Itstatesthatsomecountriesrequireagenciesreportontheiractivitiesmonthlyorquarterlywhilemanyothersrequireagenciestokeeprecordsonrecruitedworkerstobemadeavailableonrequest.

Inthe2005finalreportoftheInquiryintoLabourHireEmploymentin Victoria,theEconomicDevelopmentCommitteeacknowledgedthelackofunderstandingof labourhireworkersinrelationtotheiremploymentstatusandworkingconditions,recommending“aninformationcampaignfor labourhireworkerswiththeobjectiveofprovidingeasilyaccessibleinformationontheemploymentstatusandentitlementsoflabourhireworkers.”

Casestudieshaveindicatedthatworkerexploitationoccursinworkplaces,andamonglabourhireagencies, wherethereislittleunionpresenceandwhereworkersaredeterredfrominteracting withtheunion. Forexample,inarecenthighprofilecaseofMyerandSpotless,it wasreportedthat workerswerehiredunderindependentcontractsandwerecompletely

unawarethattheyneededtobecoveredby their

own WorkCoverpolicy. Theworkerswerefiredafteroneweekofworkwhichtheyasserthadsomethingtodowiththepresenceofaunionorganiseronsite,askingabouttheirworkingconditions:‘puttwoandtwotogether: theunioncome inandthenIget thearselateronthatday’(McGrath,2015).

Asarequirementfor alicence,CFMEUrecommendslicenseestoberequiredtoeducatenewlabourhireworkersaboutthenatureoftheiremploymentaswellastheirentitlementsandworkplacerights.Thiswouldbestbefacilitatedthroughaninformationsheetorapprovedtrainingbyarelevanttradeunion.Itshouldincludeaunionrightscomponentwhichoutlinestheworker’srighttojoinaunion.

Thepurportedbenefitoflabour hire is toprovideflexibility for firmstomeetfluctuationsinworkforceneeds.Thisisnothow itisbeingused.Labour

hireagenciesareincreasinglybeingusedtoreplaceapermanentworkforcewithaprecariousone.Inordertoensurelabourhireisnotused

toundermine Australia’sworkingconditions,astatutorymaximumperiodforlabourhireassignmentsisrequired.

InJapanandSouthKorea,regulationplacesalimitonthemaximumperiodofplacementof adispatchedlabourhireworker(Underhill,2013).However,anyregulationneedstobecarefullyexaminedfor theabilityforfirmstosidestep.Forexample,inJapan,lawshavebeenignoredor

evadedbychangeofjobtitleormovingtheagencyworkertoanotherdivisionof theorganisation.

Suchregulatorymeasureswhichsetlimitsonthedurationandlocationofplacementscanbeintegratedwithinalicensingsystem.

AsstatedintheCFMEU’ssubmissiontothesenateinquiryintotemporaryworkvisas. Thecurrentworkrightsattachedto the417and462 workingholidayvisasarenotconsistentwiththestatedpurposeofthevisaasan‘extendedholidaysupplementedbyshort-termemployment’.Bothvisaspermitwork

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for theentirelengthofstay inAustraliaaseitheradirect employee, ‘independent contractor’orABNworker,withtherestriction that theholdermustnotbeemployedbyany1employerfor morethan 6months. TheDepartmentofImmigrationandBorderProtection(DIBP)allowsanexceptiontothe6monthruleforthose workingas‘independentcontractors’ orwithlabour hirefirms. Thesearrangementsarenotconsistentwiththeshort-termpurposeofholidayvisasandareeasilyabused–ashasbeenshownrecentlythrough

thenumerouscasesoflabourhireexploitationofworkingholidayand457visaworkers.

Assuch,theVictorianGovernmentshouldmakearecommendation to theFederalGovernmentthatlabourhirefirmsshouldbeexcludedfromengagingworkersontemporaryworkvisas.

Allstudiesofwagesforlabourhireworkershavefoundthattheyreceivealowerhourlyrateofpaythantheirdirecthirecounterparts.Peoplewhoworkforlabourhirecompaniescanbepaidlessthan

apermanentworker theyareworkingalongside.Inordertopreventlabour hireworkersbeingunderpaid, the VictorianGovernmentshouldmake

arecommendationtotheFederalGovernmentthatrequireslabourhireemployerstopaythemarketrateforemployees,wherethemarketrateisdeterminedby theEBAatthatlocation.

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