In the August edition of the Cranes and Lifting magazine, our article discussed the changes to the enterprise bargaining regime introduced by the Secure Jobs, Better Pay Act. In this edition, we take a look at a round of proposed reforms to Australia’s fair work laws, with a particular focus on changes affecting businesses that enter into labour hire arrangements.
Authors: Michael Selinger and Adrian Zagami
Further round of proposed reforms
Since the passage of the Secure Jobs, Better Pay Act in December 2022, the Federal Government has undertaken public consultation on a further round of proposed reforms aimed at addressing the following issues:
1. Labour hire loopholes.
2. Wage theft.
3. Characterising a person as an employee or independent contractor.
4. Discrimination.
This article focuses on the proposed reforms addressing ‘labour hire loopholes’ and implications of the reforms for businesses that enter into labour hire arrangements.
Labour hire in Australia
Labour hire is where a business has agreements in place with other businesses to supply workers. The business supplying the labour is the labour hire provider and the business being supplied with the labour is the host. The employment relationship is between the labour hire provider and the labour hire worker, and there is usually no direct contractual or employment relationship between the labour hire worker and the host.
The labour hire industry in Australia is rapidly growing and many businesses, particularly in construction, enter into labour hire arrangements and use externally sourced labour. For businesses, labour hire is predominantly utilised for its flexibility and to meet urgent demand for more labour in peak periods. For workers, labour hire provides additional flexibility to working arrangements, tailored working conditions and independence to determine work options.
Issues with labour hire
It is not uncommon for labour hire workers and directly engaged employees working for a host at a particular site to be performing the same or similar duties. Labour hire workers may earn less than, and may not have access to the same paid leave entitlements as, employees despite performing the same or similar duties. This is because the terms and conditions of employment may be set by different instruments.
For example, a labour hire worker may be paid pursuant to a Modern Award, while a directly engaged employee may be paid pursuant to an Enterprise Agreement. This means that the labour hire worker would not have access to the more generous bargained pay and conditions set out in the host’s Enterprise Agreement.
The Federal Government has concerns that some employers enter into labour hire arrangements and outsource labour to exploit this loophole – a term it has coined the ‘labour hire loophole’.
The Federal Government’s response
In a bid to address the labour hire loophole, the Federal Government is seeking to introduce legislation to ensure that, among other things, labour hire workers are paid at least the same as directly engaged employees.
Proposed reform – Same Job, Same Pay legislation
The Same Job, Same Pay legislation aims to strike the balance between protecting labour hire workers from exploitation while not affecting a business’ ability to access labour hire to meet genuine surges in demand for labour and short-term needs. Key considerations for the proposed legislation include:
• Establishing a criteria to determine when a labour hire worker and a directly engaged employee will be deemed to be performing the ‘same job’.
• Measures to calculate the ‘same pay’ payable to the labour hire worker.
• Amendments to the Fair Work Act 2009 (Cth) to introduce (a) a requirement for labour hire workers to receive at least the same pay as directly engaged employees and (b) a positive obligation on labour hire providers and hosts to take reasonable steps to ensure the direct entitlement is paid to the labour hire worker. This is subject to the ‘same job’ criteria being met.
The legislation is also proposed to include a mechanism for dispute resolution (including powers for the Fair Work Commission to deal with disputes), enforcement provisions (including for civil penalties and compliance to be enforced by the Fair Work Ombudsman) and anti-avoidance measures to apply to businesses.
Implications for crane industry employers and others
The proposed legislation, if passed, is likely to have significant implications for crane industry employers and other organisations that enter into labour hire arrangements as a host. We note the proposed legislation may not apply to all hosts as there may be exceptions, including based on the size of the host.
The significant implications include:
1. Potential increases to labour costs, limiting the flexibility benefits labour hire arrangements provide, particularly for those that utilise labour hire to respond to market fluctuations and to manage unexpected downturns in business.
2. From a practical perspective, the host will need to consider the actual steps to take to ensure the correct entitlement is paid to the labour hire worker, including how it will determine what pay and conditions are required. This may be challenging where the host does not have employees performing the same work.
3. There may implications for the contractual relationship between the labour hire supplier and the host, including how the parties will work together to ensure they both discharge the positive obligation.
4. The administrative implications and changes required in that regard to ensure labour hire workers are being paid appropriately.
What’s next?
Following public consultation on the further round of proposed reforms, on 4 September 2023, the Federal Government introduced the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth). In relation to the Same Job, Same Pay measures, the Closing Loopholes Bill empowers the Fair Work Commission to make an order that would require a labour hire employee to be paid at least the same as a direct employee of the host who performs the same work. For the Fair Work Commission to make an order of this kind, they must be satisfied that the labour hire worker would be covered by the host’s enterprise agreement (or other employment instrument) if the labour hire worker was direct employee of the host.
Recognising there are short periods where businesses require labour hire workers for surges in demand and/or to address temporary labour vacancies, labour hire workers engaged for a period of 3 months or less are exempt and parties can seek to extend or shorten that period with the Fair Work Commission. Small businesses (in this case the labour hire provider), being businesses who employ fewer than 15 employees, are also exempt from these changes.
The passing of the Closing Loopholes Bill has been delayed until early 2024, and, if passed, a labour hire provider could not be required to pay the protected rate of pay until on or after 1 November 2024.