Federal Election 2019 – key workplace issues 03: Labour hire and sham contracting

Targeting labour hire practices which disadvantage individual workers and unscrupulous sham contracting arrangements is high on the ALP's industrial relations agenda ahead of the upcoming federal election.  One of the ALP's key election commitments is its "same job, same pay" policy, and the party has promised to introduce new laws which guarantee labour hire workers will receive the same pay and conditions as people employed directly.  This policy has largely been endorsed by the Greens and the ACTU in their own campaigns. 

Both the ALP and the Coalition have separately proposed introducing a national labour hire registration scheme to reduce worker exploitation, and the Coalition has also announced that it will introduce new criminal sanctions, in addition to increasing civil penalties, in instances of serious underpayments of workers.

Sham contracting arrangements have also been at the forefront of the ALP's and ACTU's election agendas.  The ALP has proposed introducing an objective statutory test to determine if an employee is a casual, while the ACTU has endorsed various changes to the national employment standards (NES), including the right to convert from casual to permanent employment after six months of service.

ALP

Labour hire

The ALP has pledged to crack down on dodgy labour hire practices by legislating to ensure workers employed through a labour hire company will receive the same pay and conditions as permanent employees.

Although the ALP is yet to decide on the approach to be taken in formally implementing its "same job, same pay" agenda, shadow industrial relations minister, Brendan O'Connor, confirmed that one option may be to extend the application of enterprise agreements to cover labour hire employees engaged in the same workplace.  This suggestion has resulted in pushback from employer groups on the basis that contracts between labour hire companies and their clients are struck based on labour costs in existing enterprise agreements, and overturning agreements by legislative change could lead to widespread job losses.

Labour hire companies, employers, unions and other stakeholders will be consulted on the proposed drafting of the new laws, and a 12 to 18 month transition period will be imposed to give employers and labour hire firms time to accommodate the changes. 

The ALP has also announced that a national labour hire licensing scheme will be established that requires all labour hire companies to be licensed.  The scheme will also capture companies based overseas who supply labour to Australian firms, either directly or indirectly, through other companies.

In order to be granted and maintain a licence, labour hire companies will need to demonstrate compliance with the Fair Work Act and health and safety legislation, as well as meeting their superannuation, tax, and (if applicable) immigration law obligations.  It is proposed that licences will be issued for a period of three years but can be cancelled at any time in instances of non-compliance.

Sham contracting

The ALP has also promised to tighten existing sham contracting laws and introduce an objective statutory test to determine if an employee is a casual at law.  

Labor will also legislate to ensure that workers can't be forced to be "permanent casuals" and employers will not be able to avoid their obligations under the Fair Work Act, a modern award or enterprise agreement, by registering staff as contractors. 

Coalition

In its March 2019 response to the Report of the Migrant Workers' Taskforce, the Coalition also promised to finalise its own model for a national labour hire registration scheme that will reduce worker exploitation and crack down on unscrupulous labour hire practices in the following four high-risk sectors: horticulture, cleaning, security and meat processing.

The Coalition also announced that it would introduce new criminal sanctions, ranging from community service to prison time, as increasing existing penalties for employers who deliberately underpay workers. 

Employer groups have strongly opposed the imposition of criminal penalties as the amendments would mark a significant break from the longstanding bipartisan position not to criminalise industrial relations matters.  The ALP remains of the view that workplace relations matters should be determined in the civil law realm, except for extreme instances employer conduct such as modern slavery and human trafficking.

Greens

The Greens support reform to labour hire practices to prevent employees using contractors to avoid paying minimum wages and providing basic workers' rights, and have campaigned for equal pay and conditions for "gig economy" and labour hire workers.

The Greens have also called for action against job insecurity and legislation to give workers more control, including restricting casualisation and contracting out, and giving workers the right to work fewer hours.

ACTU

As part its "Change the Rules Campaign", the ACTU supports amending the NES to ensure labour hire workers receive the same pay and minimum conditions afforded to employees, including access to unfair dismissal and collective bargaining.

The ACTU has been vocal about the rise of sham contracting and the use of the ABN system to exploit workers, and also proposes changing the Fair Work Act to properly define casual employment and providing casual employees with the right to convert to permanent employment after six months of service. 

Related Insights

• Federal Election 2019 – key workplace issues 01: Minimum wages and penalty rates
• Federal Election 2019 – key workplace issues 02: Gender pay gap