The Fair Work Ombudsman has recently targeted a principal contractor and one of  its sub-contractors for underpayments to security personnel working 12 hour shifts over a 7 day roster.   

The sub-contractor has been pursued as the employer of the security personnel directly responsible for the underpayments.   

In an interesting twist, the principal contractor is being pursued under the provisions of section 550 of the Fair Work Act 2009.  Section 550 provides for accessorial liability for a third party who is “involved in” a contravention of a civil remedy provision.  The section, as we have reported before, allows the court to impose a civil penalty on a third party (i.e. someone other than the employer) as well as ordering them to pay compensation.  

This is an interesting application of section 550 in so far as it appears to be based on the allegation that the principal contractor must have been aware that the hourly rates being charged by the sub-contractor would be insufficient for the sub-contractor to meet its obligations to its employees under the relevant award.   

If this prosecution of the principal is successful, it is likely to open up more avenues for prosecuting companies that engage labour through labour hire agencies in order to avoid award conditions of employment.  It will no longer be permissible to turn a blind eye.  

This will likely result in audits of those industries with a high labour content such as security, cleaning and farm picking where labour hire arrangements are common.  

It has recently been reported that the Fair Work Ombudsman will be carrying out an audit of security companies providing services to Local Government. We suggest that now is a good time for Local Governments who contract out security services to review the rates being charged by their contractors to ensure that they meet minimum award entitlements.  Other users of labour hire agencies are also advised to review their arrangements.