Victorian Inquiry into the Labour Hire Industry and Insecure Work: A submission from the UK
Professor David Whyte, University of Liverpool
Introduction
The most significant recent UK reform which regulates the most insecure sectors of the labour market was the Gangmasters (Licensing) Act, introduced in the wake of the Morecambe Bay disaster in the UK which killed 23 Chinese migrant workers as they were gathering cockles in the Bay on 5th February 2004. The Act stipulated that ‘gangmasters’ (employers that organise gangs of casual labourers, normally paid on a piece-work basis) must register with a new Gangmasters Licensing Authority (GLA) before they can operate. In so far as the Act created a skeleton regulatory structure for gang labour, it did not specify any new legal standards for general working or living conditions (for example safety conditions, training or housing for immigrant workers). The Act’s scope, and the responsibility of the GLA was limited to the food harvesting and processing industries. The Agency Workers Regulations, introduced in 2010 sought to establish limited parity of rights between regularized workers and workers who are employed on a temporary basis.
This submission focuses upon the impact of the Gangmasters (Licensing) Act, since this legislation introduced a new national licensing scheme that looks similar to that indicated in the Victorian consultation. This submission thus primarily addresses the second two questions asked at the end of Chapter 5 of the consultation document:
- What would be the impact of a statutory licensing scheme for labour hire operators in Victoria, including requirements for licensees to comply with minimum standards for the fair treatment of workers?
- What evidence or experience do you have of regulatory models in other jurisdictions for addressing the issues raised in the Terms of Reference?
Conflating Worker Safety with Immigration Control
Although the legislation makes no distinction between workers who are UK nationals and migrant workers, the GLA has become very closely associated with the regulation of migrant workers. Indeed, the commentary accompanying the Immigration Bill that is currently progressing through the UK Parliament effectively envisages GLA as part of an extended system of immigration control. If the practical effects of extending the powers of the GLA under the Immigration Act 2015 are yet to be seen, Prime Minister David Cameron has made the intention of the Bill clear in a statement ahead of the last Queen’s Speech:
“Uncontrolled immigration can damage our labour market and push down wages. And working people want a government that is on their side. Uncontrolled immigration means too many people entering the UK legally but staying illegally. And people are fed up with a system that allows those who are not meant to be in our country to remain here.” (Cameron, 2015)
The major danger of this type of legislation is that rather than aiming to raise the bar on working conditions and ensuring the law is being upheld by employers, it becomes reduced to a new form of policing workers. Leaving aside any discussion of the politics of immigration control, the problem that occurs as immigration control measures encroach into the workplace is that workers are disempowered as workers. When workers are treated as objects of suspicion by the authorities, regardless of whether they are documented or undocumented, migrant workers are less likely to trust state or civil society organisations, since they perceive such organisations as a potential threat to their survival.
I have gathered detailed case evidence on this problem in the UK in a report co-authored with my colleague Dr. Jon Burnett, published in 2010 (Whyte and Burnett, 2011). In this research, we found a reported correlation between the intensity of immigration policing measures and the reluctance of migrant workers to report significant health and safety problems – even those involving serious injury and serious breaches of the law. The report found that two-thirds of undocumented workers interviewed had experienced injuries whilst working and that almost all of the workers interviewed had either experienced or witnessed a serious injury caused by work. In a significant minority of those cases, the injured party had declined an ambulance or any form of medical treatment for serious injuries as they were scared of being reported to immigration authorities.
In order to ensure that the issue of worker protection and employer responsibility is not reduced to an issue of policing immigration, any system of registration must explicitly be distanced from authorities that deal with immigration. Such a system must also ensure that measures are in place the avoid any ‘creep’ towards the criminalization of workers and, indeed, the implicit blaming of migrant workers for deteriorating working conditions.
Limited Enforcement
The GLA essentially operates as a licencing body, with its enforcement powers generally limited to issues relating to breaches of licence, or operating without a licence. It does not have powers prosecute employers for committing offences beyond those licencing issues, or beyond the narrow range of sectors it has responsibility for (farming, food processing and shellfish). Yet the GLA itself estimates that approximately 15% of regulatory breaches they encounter in investigation and inspection could have been considered for criminal prosecution if it had wider powers. The UK government is currently extending powers of criminal investigation and prosecution available to the GLA, and extending its remit beyond the farming, food processing and shellfish gathering industries (HM Government, 2015; UK Parliament, 2015).
In recent years, resource pressures have forced prosecution and investigation rates down dramatically. Recent reports based on UK Government Home Office data have demonstrated a clear and steep decline in both investigations and prosecutions over the past 4 years (Travis, 2015). The GLA reported a 20% reduction in resources in its most recent Annual Report (GLA, 2015) and is projecting further significant cuts that will, it reports, “inevitably result in headcount reduction consequently disrupting our ability to discharge our statutory duties.” It is austerity-driven cuts that have had the effect of dramatically reducing levels of enforcement activity.
In order to ensure that regulators can adequately conduct the job they are charged with, they must be properly funded, and this funding must be ring-fenced.
Resourcing of regulatory agencies
A key problem with the UK GLA has been it resourcing. At the moment, the GLA is estimated to have 30-40 front-line inspectors to keep track on workplaces, spread far and wide across the UK and employing at least 500,000 workers (GLA, 2015). It is, however, crucial to note that those sectors are typified by a lack of accurate information about the scale and nature of employment in the sector. The lack of this data is itself a function of under-resourcing of the regulatory system. The GLA itself does not have the resources to ‘know’ exactly the scale and spread of the sectors of work covered by the legislation.
Declining resources for all regulatory authorities involved in protecting workers, consumers and communities has been a serious problem in the current public funding climate in the UK. Some previously regulated sectors, such as local consumer safety has, in some places, wholly disappeared (those sectors are documented empirically in Tombs, 2015). Moreover, under the present and the previous government, an excessively crude political will to promote business interests by cutting ‘red tape’ has meant routine inspection of the majority of UK workplaces has now been withdrawn (Tombs and Whyte, 2015). The situation is clearly not the same in Australia. But, the issues of political priority and political will are exactly the same.
If it is the case that there is some public demand in Victoria to commission a new agency to deal with the problems associated with Labour Hire, then this will needed to be reflected in the political will to do something about it. It is not unreasonable to expect similar levels of resource commitment that are currently in place to protect the public in other ways. In a recent initiative, Victoria Police Protective Services Officers, were introduced to police 170 train stations used by 5.7 million Victorians. The published cost of this initiative wasestimated to be $212 million, or around $37 per Victorian. The public may well expect a similar level of commitment to deal with a problem that directly affects the lives of a growing proportion of Victorians. Up to 40% of a total of 2.7 millionVictorian workers are employed in insecure work. In order to resource a regulatory agency to help eradicate exploitation at the hands of labour hire contractors, at the same ballpark level of $37 dollars per insecure worker, we would expect to see 177 investigators on the ground. Of course, there a also major costs that will be incurred by the start up and running of a new agency, but this ballpark provides a rough projection of the level of coverage and resource the public might reasonablyexpect from a new agency.
Enforcement in the supply chain
One of the effects of the system of enterprise bargaining in Australia is that it passes responsibility for contractual conditions down the labour supply line. Without entering into a discussion about the rights and wrongs of the system itself, modern structures of business are increasingly reliant upon complex sub-contracting and supply chain relationships. A danger in the creation of a registration regime is that they can consolidate the ability of the largest players to pass the risks of business down the line and the accountability for decisions that have been made at the top of the chain.
In the UK, legislators failed to address this difficult issue, even though it was staring them in the face in the aftermath of the Morecambe Bay tragedy. Following Morecambe Bay is a case in point. Lin Liang Ren, the ‘gangmaster’ who employed the cocklers directly was convicted for their manslaughter and given a 14 year jail sentence. Two others involved in their employment, Zhao Xiao Qing and Lin Mu Yong were also convicted of facilitating contraventions of immigration law. They were sentenced to two years and nine months, and four years and nine months respectively. The two owners of the Liverpool Bay Fishing Company, the company that bought the cockles from Lin to sell on to larger producers were cleared of facilitating the crime due to a lack of evidence. All of the larger market players: the canning factories, the exporters and the corporations marketing and selling the cockles were sufficiently distanced by the supply chain to be exempt from any questions about their role at any point in the legal process. Yet the evidence shows that top end buyers were deliberately forcing conditions down, whilst wilfully ignoring the source of the cockles (Bernat and Whyte, 2015).
Any system of labour hire regulation will therefore need to ensure that accountability is placed not merely at the bottom end of the supply chain. It will need to find mechanisms of accountability that takes account of the levels where key decisions are taken to deliberately drive conditions down and where the risks are created. One way of doing this is to incorporate a reporting mechanism inthe supply chain that obliges the principal buying companies to demonstrate awareness of the origins of produce, and of labour conditions in firms they contract, and to use this mechanism to trigger liability when the knowingly allow regulations to be breached.
Regulation stimulates the market
The collective historical experience of advanced industrial nations indicates that raising regulatory standards stimulates rather than hinders innovation and economic development. The creation of new legislation and new agencies to regulate markets is a process that always reconstitutes markets. The stimulus to markets in relatively unsecured labour promised by the introduction of the Gangmasters (Licencing) Act 2004 meant that the Act was enthusiastically supported across political parties, all of the major supermarkets and the National Farmers Union (which counter-intuitively to its name represents many employers in the sector). The projected effect was clear: the gangmaster structure was able to shed its ambiguously legal status and at the same time avoid any added costs of provision for workers. At best, the new licensing regime removed some of the more unscrupulous employers from the market and brought others to the attention of HMRI and other regulatory authorities. Yet, evidence indicates that the Act has stimulated the supply of casualised migrant labour generally with a small minority of unscrupulous employers being removed from the market. Indeed, in 2014-15, more than 2,000 gangmaster licences were issued whilst only 23 were revoked (GLA, 2015).
It is also likely that a substantial, if unknown number of these people in the wider labour market remain concentrated in grey markets. The process of stimulation and reconstitution of markets created by new forms of regulation always creates the possibility for new markets to grow on the periphery. The process of market reconstruction often creates pressures on the availability of goods or services that makes them more expensive. Illegal markets and illegal market relationships therefore often emerge paradoxically as a response to regulation of markets (Gill, 2002). Any future regulation on this issue therefore runs the risk of both legitimising and stimulating ‘grey’ markets and at the same time legalising and encouraging markets in casual labour.
Social costs
Corporations are generally not required to pay the costs of the most damaging effects of their activities. In general, corporate balance sheets only reflect particular costs. Many of the costs associated with the long-term harms and damage caused by corporate activity simply do not appear in the annual accounts because more often than not, corporations will not have to pay those costs. The costs that typically are counted are the standard inputs of commercial or productive activity: the costs of raw materials, of processing these through energy and using technologies, the costs of building or renting and maintaining premises or the costs of labour power. However, industrial injuries and diseases, or social problems caused by low incomes (poor health, poor housing and so on) create a major cost burden for workers themselves, and for taxpayers. Corporations therefore are financially liable generally for only a proportion of the harmful costs of their activities.
A key question, then for any legislator seeking to reduce the social costs of doing business is: how are businesses made to pay rather than taxpayers for the burdens they create?
There are many examples of companies evading social costs in the Australian context, a phenomenon that is likely to be exacerbated when labour hire contractors operate on their worksites. To take one example of a case I have followed from the UK, Baiada, one of Australia’s major poultry producers, has continued to avoid liability for the death of Surel Singh, a contract cleaner at the company’s Laverton site in 2010. Baiada isstill fighting in the courts to escape any liability. The company’s main line of defence is thatresponsibility lies with Mr Singh’s hire contractor, not the operator of the processing line. The basis of Baiada’s argument in this case is neither unique to this case or Australia. In the UK, companies are able to avoid their liabilities for worker injuries and deaths using the supply chain in precisely the same way, leaving workers to ultimately pay the costs of their own victimisation (Whyte, 2009).
This is a problem that will not necessarily be addressed by a new licencing regime. One way to begin to address this unequal redistribution of costs is to ensure that fines for breaches of licencing conditions are indexed in a way that is reflective of the true social costs of flouting the law, and that criminal penalties for both individuals and organisations are attached to more serious offences.
Executive summary and summary recommendations
-This submission focuses upon the UK experience of the Gangmasters (Licensing) Act, introduced in the wake of the Morecambe Bay disaster in the UK which killed 23 Chinese migrant workers on 5th February 2004. The Gangmasters Licencing Authority has become very closely associated with the regulation of migrant workers and as an extension to immigration control. In order to ensure that the issue of worker protection and employer responsibility is not reduced to an issue of policing immigration, any system of registration must explicitly be distanced from authorities that deal with immigration.
-The GLA is under-resourced, with an estimated 30-40 front-line inspectors to protect a minimum of 500,000 workers (GLA, 2015). GLA resource pressures have forced prosecution and investigation rates down. In order to ensure that regulators can adequately conduct the job they are charged with, they must be properly funded, and this funding must be ring-fenced.
-In the UK, legislators failed to address the asymmetrical distribution of power and responsibility in the supply chain. One way of doing this is to incorporate a reporting mechanism inthe supply chain that obliges the principal buying companies to demonstrate awareness of the origins of produce, and of the labour conditions in firms they contract, and to use this mechanism to trigger liability when they knowingly allow regulations to be breached.