Recent Fair Work Ombudsman (FWO) campaigns and prosecutions and media investigations into labour and employment practices in the horticulture industry highlight the importance for growers and farm operators of ensuring that contractors comply with employment law obligations.

Under the Fair Work Act 2009 (Cth) (FW Act), third parties (other than an employer) can be considered an accessory to breaches of employment laws.

These provisions carry maximum penalties of up to $54,000 for a corporation and $10,800 for an individual and can capture farm operators and growers as well as their directors and senior managers.

Supply chain issues have recently received extensive media and FWO attention in relation to growers and farm operators in the horticulture and agriculture sectors.

This article highlights some of the risks involved in engaging labour hire personnel without making necessary inquiries into their terms and conditions and without having appropriate contracts in place.

Harvest Trail campaign and media investigation

In August 2013, the FWO commenced its three year, national campaign into workplace practices in the horticulture industry, known as the Harvest Trail campaign.

The inquiry has targeted the Harvest Trail of ripening fruit, vegetables and other crops, with a focus on minimum wages and conditions (particularly piece rates) and record keeping.

A significant part of the campaign has involved the FWO meeting with growers and their representatives to ensure they are applying due diligence to the labour hire providers from which they are sourcing their workers.

For example, on 12 October 2016, the FWO announced the Federal Court prosecution of a labour hire provider, a farm operator and individual directors in Queensland for $650,000 in underpayments based on mushroom piece rates being set so that workers were not able to earn an award wage. The workers were allegedly also underpaid public holiday penalty rates and were not provided with paid meal breaks, as required under the award.

It is alleged that the farm operator was an accessory to the underpayments because it was aware of or was wilfully blind to the fact that the workers were being underpaid. One of the key factors in the FWO’s decision to commence proceedings was that the labour hire provider and the farm operator failed to take any meaningful steps to ensure pickers’ minimum lawful entitlements were being met, despite recommendations previously made by Fair Work inspectors.

In addition, an undercover media investigation by Fairfax and the ABC has resulted in extensive media coverage regarding the alleged exploitation of migrant workers supplied by labour hire contractors on farms supplying Coles, Woolworths and Costco. Coles has released a statement indicating that the supermarket has referred the allegations to the FWO.

Inquiry into backpacker farm work

Alongside the Harvest Trail campaign is a FWO inquiry into working holiday visa-holders in regional areas including in the agriculture industry.

On 15 October 2016, the FWO released its report on the inquiry after having surveyed more than 4,000 visa holders about their work experiences.

Highlights of the findings include reports of underpayment and non-payment of wages (including reports of workers being paid amounts which are equivalent to hourly rates ranging between $2.74 per hour to $4.79 per hour), exploitative workplace cultures (including reports of widespread sexual harassment), employers engaging in labour supply chains involving sham contracting and unlawful deductions from wages.

Among other recommendations, the report calls for the full utilisation of existing laws and penalties and a potential strengthening of sanctions and employer obligations. This may include collaboration between the FWO and the Australian Taxation Office to establish a publicly available “Employer Register” for employers of holiday visa holders.

The FWO has also highlighted the focus of its enforcement activities in respect of migrant visa holders in its 2015-16 Annual Report, which notes that a startling 76% of FWO court actions involved a visa holder.

Potential liability and damage

These examples demonstrate that growers, farm operators and their directors can be prosecuted for sham contracting and non-compliance with minimum legal entitlements, including where they are or have been aiding, abetting, counselling, procuring or inducing the contravention or knowingly concerned in or party to the contravention.

The FWO’s role in encouraging businesses to take responsibility for their supply chains and networks was also highlighted in its 2015-16 Annual Report, which notes that 92% of FWO court matters roped in a party other than an employer.

Supply chain issues also carry significant reputational risks, as highlighted by the recent investigation into fruit suppliers to the major supermarket chains.

Lessons

Growers and farm operators in the agriculture industry should take the following steps to minimise the risks of being liable for their contractors’ employment arrangements:

  • ensure that third party contracts require compliance with employment legislation and modern awards, allow external and internal audits to ensure such compliance and include indemnities and termination rights for non-compliance
  • ensure that senior management, contractors and their subcontractors understand the requirements of workplace legislation and modern awards, particularly in relation to piecework
  • immediately investigate all complaints received from workers concerning compliance with workplace laws and take appropriate action or implement FWO recommendations.