Who’s the boss when it comes to labour hire agreements?
In May 2015, ABC’s Four Corners ran a story called ‘Slaving Away’, centred around a group of Australian-based companies taking advantage of foreign workers. Touted as ‘the dirty secret of Australia’s food industry’, the piece outed several labour hire companies who were exploiting workers on 417 Visas, subjecting them to “slave like conditions, prolonged working hours and underpayment. These companies were providing workers to several high profile producers.
The workers were fruit pickers and farm workers, and the Four Corners report focused on the food producers even though the labour companies were the employers (who provided the workers for a fee) and responsible for the exploitation of the workers. The result was a public relations disaster, with damages extending well beyond the financial. So why were the food producers held to account when it was the labour hire company that subjected the workers to these conditions?
LABOUR HIRE COMPANIES ARE NOT LEGAL LOOPHOLES
Ultimately, when utilising contractors and third party contracting arrangements, the onus is on companies to ensure they are dealing with a reputable third party provider – a critical component of supply chain management. This involves scrutinising all contracts with employees/contractors and employment arrangements.
If the labour hire company your business engages makes a mistake, you could be held to account, as in the case of the Four Corners story.
IF YOU’RE NOT CAREFUL, YOU COULD END UP IN A SHAM CONTRACT
Misuse of third party labour providers, whether intentional or not, can lead to legal trouble. For example, if the labour hire provider has labelled the workers independent contractors and this is found to be a misrepresentation of the relationship, it can be found to be a sham contract under the Fair Work Act 2009 – and could lead to litigation by the Fair Work Ombudsman.
Businesses have to be really careful when engaging contractors either directly or through a third party such as a labour hire firm. The Fair Work Ombudsman has proven her office is actively pursuing anyone who is involved in sham contracting and has clearly stated companies cannot hide behind their procurement processes and claim they are not responsible for the worker arrangements.
SO WHO IS THE EMPLOYER, REALLY?
This is a tricky one, and will vary depending on the agreement you have with your provider, as well as the type of provider you use. A Contractor Management Service, like the ones in the Four Corners programme, are often not the legal employers of staff, which means the ‘host employer’ (that is, your business) is likely to be held responsible if any laws, rights or entitlements are not honoured.
Conversely, a Workplace Management Provider is the legal employer of contract staff, managing the day to day work, payroll, HR functions and much more. Using a solution of this kind mitigates risk of future liability, particularly in cases where your business uses a large number of on-hired workers to cater to seasonal or project-based needs (a common issue in the food and beverage industry).
Many companies fall into the trap of mistakenly assuming that staff provided by a Contractor Management Service are not their employees and, as such, they will not be at risk of legal action if any breaches occur.
As the Four Corners programme proved, this is not the case – for your business’ reputation, or its bottom line.
HOW DO I KNOW WHAT TYPE OF LABOUR HIRE PROVIDER TO CHOOSE?
If you’d like to know more about the difference between Workplace Management Providers and Contract Management Services and what they can mean for your business, we’ve put together an information pack, titled Avoiding the Common Pitfalls of Contingent Employment, which you can download free.
It covers issues like sham contracting (a common and costly mistake), the types of labour hire agreements common in Australia and what to look out for when using contract staff.
To get your copy, click here.