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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