The "same job, same pay" framework introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) amends the Fair Work Act 2009 (Cth) to empower the Fair Work Commission to order that labour hire workers engaged by a host company receive the same pay as the company's employees if certain requirements are met. The first application has been made in the Fair Work Commission by the Mining and Energy Union and we're hopeful this will provide useful guidance on how these applications will proceed. The union is seeking orders that labour hire workers employed by Workpac Pty Ltd and Workpac Mining Pty Ltd are paid the same as the employees of the host employer, Batchfire Resources, who are paid under an enterprise agreement.
Although any regulated labour hire arrangement order made by the FWC won't take effect until 1 November 2024, the related provisions commenced on 15 December 2023. This means companies who use labour hire workers, the company's employees or labour hire workers, and unions, can apply for, and the FWC is able to make, a regulated labour hire arrangement order as of now.
We encourage labour hire agencies and companies who use labour hire workers to familiarise themselves with these new rules so they understand and can comply with their obligations and be prepared to deal with disputes as they arise.
Until the first "same job same pay" application is decided, a recent dispute in the FWC provides insight into the complexities of this new framework – which will see labour hire workers paid the same as employees if they are subject to a "regulated labour hire arrangement order". The dispute was between the Australian Manufacturing Workers' Union and paper company Opal Australian Paper which arose from a requirement under Opal's enterprise agreement that Opal pay its contractors "wages and conditions" that are no less favourable than those provided to its employees. This requirement is akin to the "same job, same pay" framework.
This dispute – although heard before the new laws were enacted – demonstrates the practical issues likely to arise for companies who use labour hire workers when subject to an order requiring they be paid the same as an employee, and how the FWC might resolve these.
Calculating "same job, same pay" proves to be a difficult task
In the Opal dispute, the union alleged that the wages paid to a labour hire worker engaged to work for Opal were less favourable than those paid to an employee for equivalent work, meaning Opal had contravened its enterprise agreement.
Between October 2020 and February 2021, the labour hire worker in question was paid $54.99 per hour, which the union claimed was $4.99 less than the supposed employee rate of $59.98 per hour. Opal argued that the union's calculations were incorrect because the Union had used the overtime rate instead of the base rate and the correct employee rate was actually $51.15 per hour.
After much consideration, the FWC decided that neither party was correct and the actual rate payable to an employee was in fact $55.24 per hour. In reaching this conclusion, the FWC had to unpack the effect of overtime rates, ordinary hours of work, allowances, and bonuses to ascertain the correct weekly wage and then to calculate the hourly rate payable to an Opal employee.
The FWC went on to find that the 25-cent wage discrepancy (ie. employee rate of $55.24 vs the worker's rate of $54.99) was adequately offset by the other benefits the labour hire worker received (being a travel allowance, safety bonus, and a higher overtime rate of pay) so that the worker's 'wages and conditions' together were no less favourable than that of an Opal employee, and Opal did not contravene the enterprise agreement.
This case shows the complex and time-consuming legal and mathematical analysis companies should expect to undertake when calculating the rate of pay payable to an employee and a labour hire worker – with reasonable minds likely to differ and calculations disputed in the FWC.
Same job same pay for labour hire in the Fair Work Act
Under the new laws, the FWC must make a "regulated labour hire arrangement order" when:
- a labour hire entity supplies its employees (labour hire workers) to perform work for another company (host company); and
- an employment instrument (including an enterprise agreement or workplace determination) applies to the host company and would apply to the labour hire workers if they were employed directly by the host company.
When an order is in force, the labour hire company must pay labour hire workers at no less than the full rate of pay that the labour hire worker would receive if they were employed directly by the host company and paid under the enterprise agreement/ workplace determination.
We provide a broad overview of the framework here:
FWC to make regulated labour hire arrangement orders to mandate same job same pay
A host company or its employees, labour hire workers or a union can apply to the FWC for an order mandating that labour hire workers engaged by a host company be paid the same as its employees.
Exceptions
This framework does not apply if:
- the host company employs less than 15 employees;
- the labour hire workers are providing a service rather than their labour; or
- it is not fair and reasonable in all circumstances to do so.
Labour hire workers who are covered by a training arrangement or working for a host company for a short period (generally 3 months or less) are not entitled to employee-like pay.
Meaning of the "full rate of pay"
If an order is made, labour hire workers will enjoy the same "full rate of pay" as employees of the host company, which includes incentive-based payments and loadings, monetary allowances, and overtime or penalty rates. However, non-remuneration conditions such as rostering will not apply to labour hire workers.
Information sharing
Host companies must give labour hire entities any information required to determine the "full rate of pay" owed to labour hire workers under the company's enterprise agreement/ workplace determination.
Anti-avoidance
Labour hire entities and host companies cannot avoid "same job same pay" by entering into an arrangement to specifically avoid the operation of these provisions. Labour hire entities are also prohibited from engaging other types of workers for the purpose of avoiding paying the employee rate of pay.
FWC can make alternative protected rate of pay orders
Civil penalties can be ordered against labour hire entities if they pay less than the protected rate of pay, or against a party for breaches of the anti-avoidance provisions.
Penalties
Civil penalties can be ordered against labour hire entities if they pay less than the protected rate of pay, or against a party for breaches of the anti-avoidance provisions.