The past few years have seen an increase in government and regulators’ focus on compliance with workplace laws when engaging overseas workers. In particular, the spotlight has been placed on companies which procure services via a labour supply chain, potentially implicating them in prosecutions for breaches of the Fair Work Act 2009 (Cth) via the accessorial liability provisions.

An increased focus on regulation

The increased focus on regulation of foreign workers is occurring on a number of levels, namely:

The Fair Work Ombudsman

The Fair Work Ombudsman ("FWO") is an independent statutory office established in 2009 pursuant to the Fair Work Act 2009 (Cth) ("Fair Work Act"). Part of its main role is to ensure compliance with Australian workplace laws and monitor certain 457 subclass visa arrangements. It does so both proactively and reactively:

  • in July 2012, the FWO launched a specialist Overseas Workers Team to service the needs of foreign workers;
  • it has dedicated significant resources to targeting industries that have historically failed to comply with workplace laws and have a large proportion of workers who are visa-holders, such as the horticulture and poultry processing industries;
  • the FWO has dealt with over 6,000 requests for assistance from foreign workers and has recovered more than $4 million in outstanding wages and other entitlements on their behalf; and
  • it has commenced over 50 legal proceedings involving overseas workers, which represents more than 20 per cent of its litigious work.

The Department of Immigration and Border Protection

The Department of Immigration and Border Protection, together with the FWO, are jointly leading Taskforce Cadena which commenced work on 1 July 2015. The assistant Minister for Immigration and Border Protection, Senator the Hon Michaelia Cash, has indicated that the taskforce will work with other agencies including the Australian Federal Police, the Australian Securities and Investments Commission and the Australian Taxation Office to ensure incidents of exploitation of foreign workers and visa fraud are dealt with appropriately.

Senate Committee

In March 2015, the Senate referred an inquiry into Australia’s temporary work visa programs to the Education and Employment References Senate Committee. The spotlight will be on the impact of Australia’s visa programs on both the Australian labour market and on the visa holders. The terms of reference include a focus on the wages, safety and entitlements of visa workers and the extent of any exploitation and mistreatment of visa holders, including for example, sham contracting.

How does this affect you: Accessorial liability

One may ask, ‘How does an increased level of regulation on the workplace rights of foreign workers affect my company?’

Notably, the regulators’ focus extends beyond the direct employment relationship to both upstream and downstream of the labour supply chain in labour hire arrangements. Specifically, the FWO is able to use accessorial liability provisions contained at section 550 of the Fair Work Act to prosecute parties it views as being ‘involved in’ contraventions of the Fair Work Act, which includes companies at the top of the labour supply chain. Natalie James, the Fair Work Ombudsman, has asserted that the FWO are using accessorial liability provisions more frequently to ensure that the head of the labour supply chain is held accountable for the role that they play in contraventions to workplace laws. 

One prime example that has received wide media attention involves the Baiada Group.

Baiada Group

The Baiada Group is the largest Australian-owned poultry processing company. It produces the Lilydale Select and Steggles chicken brands and supplies to customers including Coles, Woolworths, IGA, Aldi, McDonalds, KFC, Red Rooster and other fast food outlets. The company utilised a multi-level labour supply chain. It had verbal agreements with numerous contractors which provided a labour hire service. These contractors in turn subcontracted to other entities, some of whom further subcontracted down a further two or three tiers. Most of the workers sourced were on 417 working holiday visas from Taiwan and Hong Kong.

An inquiry was launched by the FWO in November 2013, in response to complaints from workers that they were being underpaid, forced to work long hours and required to pay high rent for overcrowded and unsafe employee accommodation. A report into the company’s practices was released in June 2015. The inquiry found that:

  • the contractors and subcontractors failed to comply with a range of workplace laws;
  • Baiada failed to implement adequate governance arrangements to monitor its subcontractors; and
  • the information obtained through the inquiry warrants further investigation into Baiada and its contractors.

Further investigations into Baiada are continuing and the FWO will direct the focus to the top of their supply chains, accessories to the contraventions, sham contracting and the provisions of false or misleading records to Fair Work inspectors.

Recommendations

The ramifications of being found liable under the accessorial provisions of the Fair Work Act are significant. The financial penalties can be up to AUD 51,000 per breach for corporations (AUD 54,000 after 31 July 2015, as the value of penalty units will increase). In the 2013/2014 financial year, of the 38 penalty decisions that were handed down in matters that the FWO put before the courts, 30 involved penalty orders against an accessory, totalling AUD 753,809. Financial penalties aside, the potential damage to reputation within industries and amongst consumers is extensive. For example, in May 2015, Aussie Farmers Direct announced that they would no longer be sourcing chickens from the Baiada Group as they believed the group had failed to adequately respond to the allegations publically made about their employment practices.

For businesses which are involved in procuring services, it is an opportune time to consider taking the following steps:

  • review the procurement structure;
  • consider if the procurement structure provides visibility and transparency surrounding contract arrangements both upstream and downstream;
  • ensure the procurement structure and processes are well-documented;
  • consider whether the procurement processes and subsequent governance of those arrangements are vulnerable to the exploitation and underpayment of workers of contractors and subcontractors;
  • question labour costs which appear lower than what is reasonable; and
  • consider if they are at risk of being ‘involved in’ exploiting workers through the accessorial liability provisions of the Fair Work Act.

Elizabeth Veljkovic