Labour Hire & Contracting Across the ASX100
Dr Katie Hepworth
May 12, 2020 accr.org.au Contact us: [email protected] accr.org.au.au
ABOUT ACCR ABOUT THIS REPORT The Australasian Centre for Corporate This report has been prepared by Dr Katie Responsibility (ACCR) is a research and Hepworth, ACCR’s Director of Workers’ shareholder advocacy organisation. We Rights, with additional support from the publish research and analysis on the ACCR research team. Dr Hepworth has environmental, social and governance worked extensively on workers’ rights in practices of corporate Australia. We have global supply chains across a range of a small portfolio of shares that we hold for academic, international development and the purpose of engaging with companies, trade union roles. including through the filing of shareholder ACCR would like to acknowledge the resolutions. ACCR is philanthropically feedback from academics, companies, funded, not-for-profit, and independent. investors and trade unions at various ACCR’s workers’ rights program has four stages of the research and preparation of streams: decent worker, worker-driven the report. social responsibility, safety at work, and climate equity.
© Australasian Centre for Corporate Responsibility 2020 Design: Kristelle De Freitas FORWARD
The COVID-19 crisis—and the accompanying In producing this report, ACCR set out to recession—has both illuminated and intensified investigate the particular risks to companies - divisions in the Australian workforce. and investors - of this workforce transformation. Many of these risks have been acutely Workers in essential sectors such as health care, highlighted by the pandemic. cleaning, transport, logistics, education, energy and resources are being relied upon to produce Suppliers, contractors and labour hire workers and provide for us all in extreme and often are—in most cases—acutely exposed to the dangerous circumstances. Many workers on the health and economic impacts of the pandemic. ‘front lines’ are being poorly paid or underpaid, These indirect workforces are exposed to and lack access to adequate health and safety economic hardship through the cancellation equipment (PPE). of supplier contracts in industries affected by shutdowns. Labour hire and contracting workers Many are experiencing an intensification of their face greater health risks due to their exclusion workloads, but without being compensated for it. from pandemic sick leave provisions. In addition, Many of these workers are employed in insecure temporary migrant workers face particular and precarious situations. vulnerabilities—including heightened risk of They lack job security and have no access falling into slavery-like conditions. to paid sick leave. There have already been COVID-19 is a whole-of-economy crisis numerous reports in Australia and globally of requiring a whole-of-economy response. While workers unable to properly self-isolate, due to governments are leading with stimulus, there is a a lack of wage and welfare payments or other role for investors in ensuring companies adhere entitlements, along with reports of workers to strong social, labour rights and human rights feeling unable to raise virus-related OHS standards. issues due to the precarious nature of their employment. The pandemic is an opportunity for investors to bolster their engagement on the “S” in ESG. Millions of other workers, of course, have lost By advocating for an economic recovery based jobs or shifts. on decent, safe and secure work, investors can Australia’s labour hire workforce is a crucial part ensure that we “build back better” after the of this picture. Labour hire and contracting is crisis. no longer just used to manage short-term and seasonal fluctuations. As this report highlights, in some sectors, labour hire has been used to substitute large sections of the permanent workforce. TABLE OF CONTENTS EXECUTIVE SUMMARY 05 Key Risks 06 Key Findings 06 Structure Of The Report 07
METHODOLOGY 08 Note On Terminology 08
SECTION ONE BACKGROUND: LABOUR HIRE IN AUSTRALIA 10 What Is Labour Hire? 10 Contemporary Labour Hire Arrangements In Australia 11 The Extent of Labour Hire in Australia 11
SECTION TWO LABOUR HIRE: BUSINESS, OPERATIONAL AND WORKFORCE RISKS 12 Occupational Health And Safety (OHS) 12 Modern Slavery, Labour Exploitation And Wage Theft 13 “Two-Tier” Workforces And The Loss Of Human Capital 15 Diminished Investor Oversight Of Workforce Composition, 16 Including Diversity
SECTION THREE COMPANY REPORTING ON LABOUR HIRE ACROSS THE ASX 17
SECTION FOUR LABOUR HIRE IN KEY SECTORS 23 Mining 23 Commercial Construction 28 Contract Services in the Mining and Construction Sectors 30 Commercial Cleaning Services 31 Emerging Sectors: Large-scale Solar Installation 33
SECTION FIVE COMPANY REPORTING AND INVESTOR ENGAGEMENT GUIDE 35
Understanding The Employment Model 35 Occupational Health And Safety (OHS) 35 Modern Slavery And Labour Exploitation 36 A Two-Tier Workforce 36 Management Of Human And Intellectual Capital—Turnover 37 Workforce Composition—Diversity 37
APPENDIX: COMPANY SELECTION 38
Labour Hire and Contracting Across the ASX100
Executive Summary
Over the last three decades, one • to adapt to volatile labour markets labour hire, involve significant of the most profound changes to • to outsource particular segments non-compliance by labour hire the structuring of the Australian of their operations (e.g. providers with employment and other workforce has been the expansion recruitment and HR) legislation, and/or due to the severity of labour hire employment of risks in a sector. • to gain access to specialised arrangements, particularly in workforces specific industries and sectors. • to undermine or circumvent union Originally used primarily to manage COMPANIES REVIEWED WERE: short-term or seasonal fluctuations presence in demand, in some sectors labour • to avoid employer obligations AWS Alumina hire now constitutes a significant • to exert greater control over a BHP BHP proportion—or even the majority— workforce CHC Charter Hall of the regular workforce. • to shift risks and liabilities away CIM CIMIC Labour hire is broadly defined as a from an employer.1 DXS triangular employment arrangement Dexus However, in doing so, they may also involving three parties: a worker; a DOW Downer increase their exposure to a range of host company; and an intermediary, EVN Evolution Mining workforce, business and operational such as a labour hire agency. In the FMG Fortescue risks. ‘standard’ form of this triangular GMC Goodman arrangement, the host company The report describes the key workforce GPT GPT contracts an intermediary labour hire and operational risks associated with ILU Iluka agency to provide them with labour. triangular working arrangements, LLC Lendlease The labour hire agency then contracts analyses how ASX100 companies in MGR Mirvac a worker to provide that labour, and is selected sectors are exposed to these NCM Newcrest responsible for paying the worker. risks, and how they are reporting on NST Northern Star Fundamentally, labour hire their use of these arrangements. RIO Rio Tinto arrangements split contractual and It focuses on three key sectors: control relationships: the labour SCG Scentre mining, construction, and commercial hire worker has a direct contractual S32 South 32 cleaning.2 As large scale property relationship with the labour hire SGP Stockland owners have some of the highest agency, but it is the host company exposure to cleaning related business VCX Vicinity who oversees their day-to-day work. risks (including modern slavery), WHC Whitehaven The introduction of sub-contracting the cleaning section focuses on both arrangements can further complicate cleaning providers and property the contractual and control services companies. The report has While this report focuses on publicly relationships. also highlighted risks in an emerging listed companies within selected “high-risk” sectors, the risks discussed Employers may choose to use labour area of the construction sector: large- in the report are common to public hire workers for a number of reasons, scale solar installation. companies across the index and to including: These sectors were chosen because private companies which engage • to reduce costs they demonstrated high rates of labour hire services.
1. R Hall, Labour Hire in Australia: Motivation, Dynamics and Prospects, Sydney, University of Sydney, April 2002. 2. The oil and gas sector was originally included in this report, as this sector has also seen a dramatic expansion of the labour hire industry in recent years. However, due to rapid and significant changes in the sector due to COVID-19, it has been excluded from the report, and will be released as a follow-up briefing paper later in 2020. accr.org.au 05 Labour Hire and Contracting Executive Summary Across the ASX100
employment models and overall of the labour hire/contractor KEY RISKS workforce strategy. workforce. Most companies do not report While there are a number of reasons In response, ACCR has developed • on the size of their labour hire why companies may choose to use a reporting framework, to guide and/or contractor workforce, labour hire, the triangular nature of companies in providing investors in either their Australian or thse arangements also introduces with reliable material and global operations. All companies significant risks, including: materiality-based disclosures, and analysed have operations • Poorer Occupational Health and to support investors to engage with in Australia, but only 42% Safety (OHS) outcomes companies on their management reported the total number and/ and performance in relation to • Increased possibility of or percentage of contractors these risks (see Section Five, pp. involvement in modern slavery, and/or labour hire in these 35-37). labour exploitation and wage theft operations. Of the companies • Lower levels of worker analysed with global operations, engagement and loyalty 64% reported the total number KEY FINDINGS • Loss of human and intellectual and/or percentage of contractors capital ACCR analysed the workforce and/or labour hire in their global reporting of 19 “host companies” in • Reduced visibility of workforce operations. the mining, construction and property composition, including diversity • While most companies report service sectors, with a focus on • Reduced workforce development, some numerical health disclosures regarding the labour hire and safety data, very few due to less access to training, skills and contract workforce. This analysis acquisition disaggregate this for their found: contractor and/or labour hire COVID-19 has illustrated specific • Company disclosure on labour workforce. 84% of companies risks associated with the fissuring of hire and/or contractors is very reported at least some numerical the workforce and the outsourcing of limited. Very few companies information on health and safety responsibility from host companies to publicly report any information outcomes. However, only 26% labour hire agencies and contractors. about their use of labour hire and companies provide any safety data For example, the failure to extend sick contractors. Of the companies disaggregated by direct employees leave and other entitlements to this analysed, 42% made no material and contractors. segment of the workforce can put the disclosure about their labour hire This analysis is presented in Section 3. whole workforce at risk - including and/or contracting workforce direct employees. There have been in annual reporting documents. numerous examples in Australia Only one company provided data and globally of workers unable to relating to the size of their labour Sectors properly self-isolate, due to a lack of hire and/or contracting workforce wage and welfare payments or other in all operations (in Australia and, entitlements, along with reports of if applicable, globally), as well as Mining workers unable to raise virus-related disaggregated data on health and OHS issues due to the precarious safety outcomes for their labour Commercial Contruction nature of their employment. hire and/or contracting workforce specifically. Investor engagement on these risks Contract Services in is currently being hampered by poor • Most companies do not define Construction and Mining company reporting on workforce ‘labour hire’ and/or ‘contractor’ issues. Although labour hire workers as terms in their reporting. Property Services/ make up a substantial proportion Only two companies define these Commercial Cleaning of the workforce in certain sectors, terms, and their definitions Services most companies only report on their capture different sections of their ‘direct’ workforce. Generally speaking, respective workforces. Without Emerging: Large Scale Solar company reporting across the ASX these definitions, it is impossible Installation is insufficient to allow investors to to tell whether company engage with companies about their disclosures reflect the entirety
accr.org.au 06 Labour Hire and Contracting Executive Summary Across the ASX100
STRUCTURE OF THE REPORT This report is divided into five sections:
01 Section one provides a background on the use of labour hire in Australia, outlines the diverse range of triangular employment arrangements that are broadly considered to be labour hire, and identifies key sectors that are significantly exposed to labour hire related risks.
02 Section two outlines the range of business and operational risks associated with the use of labour hire.
03 Section three presents the results of ACCR’s analysis of company reporting on labour hire.
04 Section four details the specific risks in each of the high-risk sectors, using case studies from ASX100 companies to highlight the relevance of these risks to investors. Sectors featured in this section are: mining, construction, commercial cleaning, and the emerging sector of large-scale solar farm installation.
05 Section five is a guide for improved reporting and engagement on this issue, for companies and investors.
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Methodology
This report identifies key workforce this analysis (e.g. meat processing and In preparing this report, ACCR also risks associated with the use of horticulture). In both these sectors, consulted with companies, unions, labour hire. It combines analysis of ASX100 companies are exposed to investors, and government agencies. academic literature, government labour hire related risks through inquiries, media reporting and their supply chains, and have a company reporting on labour hire degree of control of their suppliers to NOTE ON TERMINOLOGY in Australia. address these risks. However, it was determined that they were beyond the ACCR’s desktop review identified a To identify key workforce risks related scope of this report. number of terms to describe triangular to labour hire working arrangements, employment relationships, including: ACCR completed a desktop analysis To identify the relevant subset of labour hire, contingent workforce, of state and federal government ASX100 companies for each sector, contractors, and particularly in inquiries3 covering labour hire ACCR used both IBISWorld and Global the case of the property services matters over the last five years, and an Industry Classification Standard (GICS) and cleaning sectors, suppliers. academic literature review on the use industry codes to draw from a list of These terms were often used of labour hire in Australia. Additional ASX100 companies (see Appendix). interchangeably, and unless defined, information was then gathered The ASX100 list was current as of 30 provide limited information regarding from media reportage, statements December 2019. the nature of the employment by the Fair Work Ombudsman, relationship. court documents, and enterprise ACCR reviewed relevant company agreements. documents—including Annual As discussed in Section One of Reports, Sustainability Reports, this report, each of these terms This report focuses on three Corporate Governance statements may encompass quite different industry sectors where labour hire or appendixes, and/or ESG Analyst relationships between the host is particularly prevalent, or where toolkits. Company documents were company, direct employer and the the risks associated with the use of reviewed for the fiscal year ending 30 individual worker. These differences labour hire are considerable: mining, June 2019 or the calendar year ending often relate to whether a worker is construction, and commercial 30 December 2018, depending on a required to perform their work onsite cleaning. The report has also company’s reporting cycle. The cut-off or offsite, and whether their work is highlighted risks in an emerging date for information to be included in required daily or almost daily for the area of the construction sector that our analysis was 30 December 2019. routine operation of that site. evidences specific risks: large-scale solar installation. In identifying Case studies have also been used to In this report, we use the term “labour the sectors to be analysed in this illustrate labour hire related risks hire” and “contractor” interchangeably report, ACCR took into account the in each sector. The case studies are to refer to all types of triangular rates of labour hire in sector, non- illustrative only and are not intended employment arrangements, unless compliance by labour hire providers to provide a comprehensive picture otherwise specified for clarity. with employment and other relevant of all labour hire related risks in every We note that “contractors” may be legislation, and the severity of risks in sector. Case study information was used to refer to individual workers each sector. prepared by reviewing government and to companies providing contract inquiries, media reportage, and services. Sectors where there are no ASX100 materials from corporate regulatory host companies were excluded from bodies.
3. Since 2015, several state and federal government inquiries have examined the dynamics of labour hire and other third party contracting arrangements in Australia, or discussed labour hire as a dimension of other industrial relations matters, such as wage theft. These inquiries include: Inquiry into the Labour Hire Industry and Insecure Work, Victoria (2015 - 2016); Inquiry into the Practices of the Labour Hire Industry in Queensland (2015 - 2016); Black Economy Taskforce (2016 - 2017); Corporate Avoidance of the Fair Work Act (2016 - 2017); Inquiry into the Extent, Nature and Consequence of Insecure Work in the ACT (2017); Select Committee on the Future of Work and Workers (2017 - 2018); Inquiry into Wage Theft in Queensland (2018); Migrant Workers’ Taskforce (2016 - 2019). accr.org.au 08 Labour Hire and Contracting Methodology Across the ASX100
GLOBAL REPORTING INDEX (GRI)
Employees The GRI (2018, p.8) defines an employee as “an individual who is in an employment relationship with the organization, according to national law or its application.”
Workers The GRI (2018, p.22) defines a worker as “a person that performs work.” It specifies:
1. The term ‘workers’ includes, but is not limited to, employees. 2. Further examples of workers include interns, apprentices, self-employed persons, and persons working for organizations other than the reporting organization, e.g., for suppliers. 3. In the context of the GRI Standards, in some cases it is specified whether a particular subset of workers is to be used.
Contractors The GRI (2018, p.19) considers contractors to be a subset of suppliers, specifically: “Persons or organizations working onsite or offsite on behalf of an organization. A contractor can contract their own workers directly, or contract subcontractors or independent contractors.” Using this definition, contractors could also include labour hire providers and/ or agencies.
Sub-contractors Persons or organizations working onsite or offsite on behalf of an organization that have a direct contractual relationship with a contractor or sub-contractor, but not necessarily with the organization. A sub-contractor can contract their own workers directly or contract independent contractors.
accr.org.au 09 Labour Hire and Contracting Across the ASX100 1
BACKGROUND Labour Hire In Australia
• Labour hire workers performing Each of these employment WHAT IS LABOUR HIRE? long term work for a host, arrangements represents diverse alongside permanent direct risks to the company, and may Labour hire is broadly defined employees of the host have different impacts on the as a “triangular employment host company’s long-term value. arrangement”, involving three • The staffing of a host’s entire Investors engaging companies on parties: a worker supplying labour; business, or a specific business their use of labour hire must seek to a host company or entity; and an unit, with labour hire workers understand the types of employment intermediary, such as a labour hire • A host contracting out a arrangements used by a company, agency (see Figure 1). particular business function (e.g. and their potential impact on a maintenance) to a labour hire company’s overall value creation. In the ‘standard’ form of this agency 4 arrangement, the host company contracts an intermediary labour hire agency to provide them with labour. The labour hire agency then contracts a worker to provide that labour and is FIGURE 1. STANDARD LABOUR HIRE ARRANGEMENT responsible for paying the worker.
Fundamentally, labour hire arrangements split contractual and control relationships: the labour Labour Hire hire worker has a direct contractual Agency relationship with the labour hire agency, but it is the host company who oversees their day-to-day work. The introduction of sub-contracting arrangements can further complicate Work Commercial thesecontractual and control Contract Contract relationships. There are considerable variations in the contractual and control relationships that are broadly defined as labour hire, including: • Labour hire workers filling short Worker Performance Host Firm Of Work term vacancies for a host • Labour hire workers performing seasonal work for a host on a short-term basis
4. Department of Premier and Cabinet, Inquiry into the Labour Hire Industry and Insecure Work (2015 - 2016), Melbourne, Victorian Department of Premier and Cabinet, 2016, p. 52,
accr.org.au 10 Labour Hire and Contracting Background Across the ASX100
CONTEMPORARY LABOUR HIRE THE EXTENT OF LABOUR HIRE IN ARRANGEMENTS IN AUSTRALIA AUSTRALIA
Triangular or intermediary working It is difficult to ascertain the exact arrangements are not a recent size of the labour hire workforce in innovation and have existed since at Australia. Researchers argue that least the 1950s.5 However, the use of existing datasets may significantly labour hire has grown rapidly since under-report numbers of labour the 1990s. This growth has been hire workers in Australia for various accompanied by a transformation of reasons, including confusion on the the role of labour hire employment in part of labour hire workers regarding the labour market, from a model that their employment relationship, and predominantly involved the use of whether they are “being paid by a “short term, supplementary or ‘top up’ labour hire firm or the organisation labour” to one that “increasingly takes they are on-hired to”.9 in a variety of work arrangements The use of labour hire varies which may extend through to considerably between different longer-term supplementation of sectors. According to ABS 2019 data, the workforce or substitution of the sectors with the highest proportion permanent workers”.6 of non-employees (both independent There are a number of reasons why contractors and other business employers may choose to use labour operators) were agriculture, forestry hire workers: to reduce costs, to and fishing (56%) and construction adapt to volatile labour markets, (39%), while the sectors with the for specialisation, to undermine or highest percentage of independent circumvent union presence, to avoid contractors were construction (27%), employer obligations, to exert greater administration and support services control over a workforce, or to shift (17%) and professional, scientific and risks and liabilities away from an technical services (14%).10 employer.7 Furthermore, particular types of labour The contemporary labour hire industry hire arrangements are more prevalent includes many different types of in particular sectors. For example, labour hire agencies, spanning from the Queensland Mining Inspectorate large, multinational corporations (QMI) reports that 50% of the QLD with thousands of staff (e.g. CIMIC), mining workforce are labour hire, with through medium-sized and mid-tier some mining operations being staffed labour hire providers, to operators almost entirely by labour hire workers consisting of an individual (or a few (see Section Four). individuals) “with a van and mobile phone”.8 Different types of labour hire agencies are often specific to individual sectors and represent a diverse range of risks to host companies and investors.
5. Hall, p. 4. 6. Inquiry into the Practices of the Labour Hire Industry in Queensland, Brisbane, Queensland Government, 2016, p. 9,
accr.org.au 11 Labour Hire and Contracting Across the ASX100 2
LABOUR HIRE Business, Operational and Workforce Risks
This section draws on a range of workforce, including both direct A growing body of research highlights academic literature, government employees and labour hire or the occupational health and safety risks inquiries and reports to outline the contract workers, in order to make associated with precarious workplace most significant risks associated judgements on the sustainability and arrangements, including labour hire.16 with the growth of labour hire. appropriateness of their employment Studies have shown that labour hire model.11 workers face greater health and safety Key risks include: risks than other workers undertaking 17 • Poorer Occupational Health and equivalent work. Significantly, “all Safety (OHS) outcomes studies of labour hire workers and OCCUPATIONAL HEALTH AND occupational health and safety in • Increased possibility of SAFETY (OHS) Australia and overseas have found that involvement in modern slavery, labour hire employees are more likely to labour exploitation and wage theft The International Labour Organisation be injured at work, compared to direct • Loss of human and intellectual (ILO) defines OHS as: “the promotion hire workers in like occupations”.18 capital and maintenance of the highest degree of physical, mental and social well-being of The increased vulnerability of labour • Reduced visibility of workforce workers in all occupations by preventing hire workers to occupational injuries, composition, including diversity departures from health, controlling risks accidents and poor health is due to a • Reduced workforce development, and the adaptation of work to people, and range of interrelated factors affecting due to less access to training, skills people to their jobs”.12 contingent workers, including: acquisition • Contested or disarticulated A poor OHS record can erode company and responsibility for health and ACCR’s analysis of company shareholder value. It can lead to increased safety management between compensation premiums, decreased documents found that insufficient and/ host companies and labour hire productivity and delays,13 absenteeism, 19 or inconsistent reporting also limited agencies. higher health care costs, potential lawsuits, investors’ oversight of workforce • Labour hire workers receiving poor negative publicity, reputational damage, induction, training and/or having diversity. 14 and a loss of investor and consumer trust. reduced familiarity of the rules Given these risks, investors should It may even decrease access to external governing OHS on each job site, as 15 engage companies on their whole capital.
11. NAPF, Where is the workforce in corporate reporting?, London, NAPF, 2015, p. 14,
accr.org.au 12 Labour Hire and Contracting Section 2: Labour Hire, Business, Operational and Workforce Risks Across the ASX100
compared to direct hire workers.20 commercial cleaning, non-compliance • Labour hire workers are often MODERN SLAVERY, LABOUR with labour law is endemic and often reluctant or unable to raise OHS EXPLOITATION AND WAGE THEFT severe, and is linked to a range of issues, due to their vulnerability to factors including: 21 termination. Wage theft and modern slavery • A predominantly migrant • Additional complexities for the anywhere in a company’s value chains workforce, often with low English implementation of effective can lead to negative publicity, public language competency and Occupational Health and campaigns, and a loss of consumer knowledge of Australian workplace Safety Management Systems confidence that can have a negative laws, and precarious—or no—visa (OHSMS), imposed by temporary impact on shareholder value. This can rights and precarious forms of be seen from growing public attention • Significant downward price 22 employment. and even boycotts by consumers in pressures by lead companies, • Occupational health and safety response to several high profile “wage particularly in sectors where lead risks can be more difficult to theft” cases. companies have significant market monitor and identify, particularly There are an estimated 15,000 people power 23 for workplace inspectors. living in slavery-like conditions in • Complex and informal sub- Australia. In high-risk sectors, like contracting and labour hire arrangements, often involving sophisticated pyramid structures Over-representation of labour hire workers in OHS incidents and multiple sub-contracting arrangements • The 2015 Victorian Inquiry • Since 2001, contractors on • Low barriers to entry for labour 28 into the Labour Hire Industry QLD mines have been over- hire providers and Insecure Work found represented in fatalities Modern slavery exists on a spectrum higher injury rates for labour involving vehicle interaction of labour exploitation and abuse. Wage hire workers than for direct and tyre management, relative theft and excessive working hours employees.24 to the proportion of the can quickly deteriorate into modern ACSI found that contractors workforce they represent.26 • slavery through threats and coercion, were significantly Labour hire workers • with some workers particularly overrepresented in workplace represented 64% of serious vulnerable to falling into slavery-like fatalities, making up 70% of accidents in Queensland coal conditions. 29 all reported fatalities across mines in 2018/19 and 67% in the ASX200 in 2018. Note: that 2017/18,27 despite only making A number of legal and other labour hire workers may be up approximately 50% of the compliance initiatives have included in these figures.25 workforce. emerged in recent years, in order to address modern slavery and labour exploitation risks in supply chains,
20 M Quinlan & P Bohle, ‘Over-Stretched and Unreciprocated Commitment: Reviewing Research on the OHS Effects of Downsizing and Job Insecurity’, in International Journal of Health Services, vol. 39, 2009, 1–44. 21.E Underhill & M Quinlan, ‘Beyond statutory enforcement - alternative approaches to improving OSH in the temporary agency sector’, in Policy and Practice in Health and Safety, vol. 9, 2011, 109–131 (pp. 109–111). 22. Gallagher, Underhill and Rimmer, 67–81 (p. 78). 23. Quinlan, Johnstone and McNamara, 557–573. 24. Department of Premier and Cabinet, p. 22. 25. ACSI, The Future of Health and Safety Reporting: A Framework for Companies, p. 15. 26. State of Queensland, Queensland Mines and Quarries Safety Performance and Health Report 2016/2017, Brisbane, State of Queensland, 2017,
accr.org.au 13 Labour Hire and Contracting Section 2: Labour Hire, Business, Operational and Workforce Risks Across the ASX100 and to prevent lead companies company assesses the actions they • a degree of oversight over their from “outsourc[ing] their non- take.32 ACSI has produced detailed supply chain, and therefore a legal, compliance”.30 These include: guidance for companies and investors ethical or moral responsibility to • The Modern Slavery Act on the Act and its implications for promote compliance. 35 reporting and engagement.33 • The Fair Work Ombudsman (FWO) using accessorial liability Labour hire licensing schemes Accessorial Liability and provisions and proactive Labour hire licensing schemes were compliance agreements to hold Proactive Compliance Agreements recently established in Victoria, the top of the chain accountable Queensland and South Australia to • Labour hire licensing schemes, in The FWO has paid increasing attention increase barriers to entry for labour different state jurisdictions to the responsibility of lead companies hire providers, and reduce rates of • Multi-stakeholder agreements that in a supply chain for labour rights non-compliance. The schemes include include lead companies, suppliers, violations by their suppliers and significant penalties for providers who trade unions, and which include an labour hire providers. They have two operate without a licence and for host active role for workers mechanisms at their disposal: companies who utilise the services of 1. Accessorial Liability: this allows unlicensed labour hire providers. Each The Modern Slavery Act parties other than the direct employer state-based scheme defines labour hire to be considered an accessory to any services, and outlines who or what is The Commonwealth Modern Slavery contraventions of workplace laws, considered a labour hire provider. 36 Act (MSA) came into effect on 1 and be held liable for any penalties All three schemes capture a variety of January 2019. The MSA requires and compensation that stem from intermediary working arrangements, Australian businesses with a revenue this contravention.34 The Fair Work including different types of service of at least AU$100 million to submit Act includes accessorial liability providers such as contract cleaners. annual reports on the risks of modern provisions. These were increased via slavery to their supply chains and the Protecting Vulnerable Workers Act Multi-stakeholder agreementss operations to a central, public register. in 2017. For companies reporting on a financial Reviews of workplace compliance 2. Proactive Compliance Deeds: year, their first reporting period will initiatives in global supply chains have these are legally binding enforcement end on 30 June 2020, and they will be found that voluntary self-regulation mechanisms between the FWO and required to report by 31 December and “private compliance initiatives” a company or companies accused of 2020. 31 (codes of conduct, auditing, etc.) are non-compliance with the Fair Work insufficient to effectively manage There are seven mandatory criteria Act. Companies at the top of the business and operational risks from that must be included in a reporting supply chain and/or host companies labour violations in supply chains.37 entity’s modern slavery statement. can be parties to a deed if the FWO Research has found that workplace These include a description of the believes they have legal, ethical or audits alone are insufficient for risks in the entity’s operations and moral responsibility to promote identifying and understanding supply chains, the actions taken by compliance, due to their: workplace issues such as harassment, the entity, including any due diligence • significant power over suppliers wage theft, excessive overtime, and and reporting processes, and how the and/or contractors, or freedom of association violations, and
30. S Kaine & M Rawling, ‘Strategic “Co-enforcement” in Supply Chains: The Case of the Cleaning Accountability Framework’, in Australian Journal of Labour Law, 2019, 305–331 (p. 329). 31. Parliament of Australia, ‘Modern Slavery Bill 2018: Explanatory Memorandum’, Parliament of Australia, 2018,
accr.org.au 14 Labour Hire and Contracting Section 2: Labour Hire, Business, Operational and Workforce Risks Across the ASX100 that auditing can capture “distort[ed]... to extend the same conditions to undermine the skills development of realities of a workplace”.38 Audits are labour hire workers and contractors, the company’s permanent workforce. also limited in identifying modern in practice this is rarely done. As When particular skills are siphoned slavery.39 discussed in detail in the mining away from the permanent workforce section, labour hire workers can earn in this manner, a company’s workforce By contrast, multi-stakeholder as much as 30% less than permanent loses opportunities to upskill, and to initiatives, which actively involve employees working side-by-side in the progress into higher skilled roles. workers and their representatives same job on the same site. in compliance measures, have been shown to be effective in addressing A two-tier workforce may have Labour hire, sick leave and COVID-19 labour risks.40 These initiatives often negative, material impacts on a 24.4% of Australian employees have support workers to raise workplace company. It may impact on: no access to paid sick leave as they issues early, allowing businesses to ...the ability to generate a are employed on a casual basis. resolve them “before they escalate into positive culture throughout an 37% of self-employed people also more lengthy and complex disputes organisation. Subsequently, this have no access to paid sick leave. that may come at a high cost”. 41 risks having a damaging impact It is argued that casuals receive a An example of a multi-stakeholder upon staff morale, potentially loading to compensate them for agreement that includes an active resulting in higher attrition rates their lack of leave. However, analysis role for workers, the Cleaning and thus higher recruitment costs finds that casual workers in many Accountability Framework, is discussed for employers.42 industries routinely earn 30% less than 44 in Section Four (p. 31). permanently employed workers. If the creation of a two-tier workforce undermines a company’s ability to While casual work and labour hire are retain human and intellectual capital, distinct categories of precarious work, any immediate cost-benefits that stem there is significant overlap between “TWO-TIER” WORKFORCES AND these categories. In the commercial THE LOSS OF HUMAN CAPITAL from this structure may be outweighed by the broader impacts to productivity, cleaning sector, most - if not all - and costs associated with recruitment contract cleaners are also casual. The use of labour hire can result in Similarly, an increasing proportion of the creation of a “two-tier” workforce, and retraining, with impacts on long- term value creation.43 contract mine workers are hired on where labour hire workers do not casual contracts and have no access to receive the same wages and conditions Furthermore, where equivalent sick leave. as the directly employed workforce. training is not extended to the labour Conditions that are not extended to hire workforce, this will result in The COVID-19 crisis has highlighted the labour hire workforce may include long-term deskilling of the overall the risks to individual workers, holiday leave, access to training, workforce—particularly in sectors communities and businesses of a security of employment, and even such as mining, that require a significant percentage of workers wage rates. relatively skilled workforce and where having no access to paid sick leave. labour hire makes up a majority of Many workers without sick leave Under Australian law, enterprise cannot afford to self-isolate, or to take agreements that cover direct the workforce. Additionally, where companies choose to engage workers other necessary precautions to protect employees do not apply to the labour themselves and others. In early March, hire or contractor workforce. These on short-term contracts (either through labour hire, or individual newspapers reported on a hospitality workers must negotiate a separate worker who had gone to work at the agreement with their direct employer. contracts) to carry out specialised or skilled work, this can erode or Hobart casino, despite being told While host companies can choose to self-isolate awaiting tests for the
38. ILO, Workplace Compliance in Global Supply Chains, Geneva, ILO, 2017,
accr.org.au 15 Labour Hire and Contracting Section 2: Labour Hire Across the ASX100 virus.45 As a low paid casual workerthis person stated that he could not afford Case Study to quarantine without having access to DIVERSITY IN THE MINING SECTOR paid leave. A number of employers have In the Australian mining sector, of either their labour hire or contract recognised the risks to their entire labour hire and contractors make up workforce. As labour hire workers workforces if all staff cannot afford 60% of the entire workforce in some are estimated to earn up to 30% less to quarantine due to a lack of paid companies, and almost the entire than permanent employees, the sick leave and have extended paid workforce on some sites (see Section failure to report on gender diversity sick leave provisions to casual staff.46 Four). in permanent and labour hire roles However, in almost all cases these means investors are unable to schemes have not been extended to ACCR reviewed the reporting adequately judge a company’s gender labour hire workers and contractors.47 documents of 10 mining companies pay gap. (see Appendix). While 80% of companies analysed provided Additionally, while 50% of companies reporting on the gender division reported data on their Indigenous DIMINISHED INVESTOR OVERSIGHT of their employees, only 20% workforce, only 10% provided data on OF WORKFORCE COMPOSITION, of companies provided any their Indigenous labour hire and/or INCLUDING DIVERSITY information on the gender division contractor workers.
Diversity is an “essential component of sound corporate governance and critical to a well-functioning FIGURE 2. MINING COMPANIES REPORTING ON DIVERSITY organisation”.48 Companies with strong gender and racial diversity Doesn't report tend to outperform peers on a range of financial metrics.49 Furthermore, Reports figures for employees only. a failure to adequately implement Provides combined figure for employees and LH. Contractors excluded. sound Equal Employment Opportunity Provides a breakdown for contractors and employees. LH not included. (EEO) policies may lead to increased recruitment, reputational and legal risks.50 GENDER ACCR’s review of company reporting on gender and Indigeneity found that 20% 60% 10% 10% reporting was focused on employees only. This diminishes investor oversight of the overall workforce INDIGENEITY composition, hindering engagement and the mitigation of risks associated 50% 40% 10% with a lack of diversity. It also impacts investors’ ability to assess the efficacy of a company’s diversity policies and targets.
45. L Shannon, ‘Hotel employee went to work while awaiting coronavirus test results’, in ABC News, 8 March 2020,
Company Reporting on Labour Hire Across the ASX100
Given the risks and challenges use of labour hire and contractors. workforce in annual reporting associated with the use of labour Improved reporting across a number documents. hire employment, investors should of key indicators that would allow Where companies do disclose, seek comprehensive disclosures investors engage companies on the they typically provide only general on a company’s entire workforce, extent to which their employment statistical data, which gives limited including direct employees and model exacerbates or mitigates these insight into a company’s overall labour hire workers, in order to risks. These indicators are: employment model and the total make reasonable judgements • Clear definitions of labour hire make-up of its workforce. about the appropriateness and and/or contractors. sustainability of a companies’ Overall, it is impossible to deduce if • Disaggregated workforce numbers employment model. Reporting and how companies are using labour for direct employees AND labour should be sufficient to allow investors hire and/or contract workers in hire and/or contractors. to ask questions about whether a their operations, or to make useful company’s workforce strategy is based • Disaggregated OHS data for direct comparisons between companies. on low labour costs or maintaining employees AND labour hire and/or It is fair to say that in reporting on and developing its human capital, and contractors. their workforces, companies are only whether it will deliver long-term value • Disaggregated diversity data for providing ‘part of the picture’. for the company.51 direct employees AND labour hire and/or contractors. Finding 2: Very few companies ACCR conducted a review of reporting define what they mean by • Disaggregated turnover data for by 19 ASX100 companies with a 'contractor' or 'labour hire'. direct employees AND labour hire significant exposure to labour hire or and/or contractors. See Table 1 contractor related risks in key sectors Even where there was some reporting identified in this report: mining, Finding 1: Company disclosure on on these issues, it is not clear which construction, and commercial cleaning labour hire and/or contractors is part of the workforce was captured (property services). The two ASX100 very limited. in the data, given differences in the listed contracting companies, CIMIC See Table 1 terms used, and a lack of clarity about and Downer, were not included in Company reporting on labour hire how these terms were defined by each this analysis as they are not strictly and contract workers is very limited. company. Without these definitions, “host companies”. See Appendix Very few companies publicly report it is impossible to determine whether for the full list of companies, and any information about their use of company disclosures reflect the Methodology for how companies labour hire and contractors.52 Of entirety of a company’s workforce. were selected. the companies analysed, 8 (or 42%) Only two companies (11%) defined Section Two identified a number of made no material disclosure about their use of the terms labour hire risks associated with the increased their labour hire and/or contracting and/or contractor in their company documents: Rio Tinto and Fortescue.53
51. NAPF, p. 14. 52. As part of our engagement, ACCR asked companies if they did use labour hire and/or contractors over the reporting period, but did not disclose this in reporting documents; or b. did not use labour hire and/or contractors over the reporting period, and could therefore not be expected to report any information. No company responded to say that they did not use labour hire workers and/or contractors over the reporting period. 53. In their feedback Evolution Mining provided ACCR with definitions for labour hire (staff who are sourced from a labour hire company to carry out specific programs of work and whose work is directed and managed by an Evolution manager) and contractors (staff who work for a subcontracted business who carry out work on behalf of Evolution and whose work is directed and managed by the contractor).
accr.org.au 17 Labour Hire and Contracting Section 3: Company Reporting Across the ASX100
RIO Tinto (2019, p.83) their relationship to the permanent Total Recordable Injury Frequency “Contractor is a person or workforce NOT on the type of contract Rate (TRIFR), Medically Treated Injury organisation providing services they are employed under. Frequency Rate (MTIFR), ‘near miss’ to an employer at the employer’s As these two definitions make clear, or High Potential Incident (HPI), workplace in line with agreed company reporting on labour hire injury severity rates, and/or recordable specifications, terms and and contractors is variable, and occupational illness rates. conditions. In the context of may include a range of different 3 of 19 (16%) of companies provided our Rio Tinto’s health, safety employment relationships. Secondly, no numerical data at all. and environmental standards, where companies do not define the we classify contractors in three terms they are reporting on, the data Only 5 of 19 (26%) companies reported categories: presented may not reflect the true any disaggregated OHS data for their labour hire and/or contractor Category 1: Individuals working numbers of workers employed under • workforce.54 on temporary contracts within triangular employment relationships. existing operations For example: Fortescue only reports Overall, OHS information disclosure on its labour hire workers (provides a • Category 2: Companies or varied substantially among companies, number), but not contractors. individuals hired for a discrete and was selective and limited. project which will be carried out Companies used inconsistent OHS Finding 3: Company reporting on indicators, and were not clear or in a designated area separate from the size of their labour hire and or / forthcoming about why particular existing operations contractor workforce is poor. indicators were used, or how numbers Category 3: Companies or • See Table 2 and percentages had been calculated. individuals contracted to carry All 19 companies analysed have As SafeWork Australia has noted, out specific tasks or provide operations in Australia. Of these, many commonly used indicators, specified services within existing only 8 (42%) companies reported the including LTIFR (“Lost Time Injury operations.” total number and/or percentage of Frequency Rate”), are not valid or Fortescue (2019, p.124) contractors and/or labour hire in their reliable measurements of injury or wellbeing, and tell us little about Labour hire workers are defined as: Australian operations. health and safety risks and controls, or “Contractors backfilling permanent Of the 19 companies analysed, 11 about the frequency or consequences Fortescue roles and not hired in a have global operations. Of these, 7 of injuries.55 service contractor capacity.” (64%) reported the total number and/ or percentage of contractors and/or Contractors are defined as: “non- Finding 5: No companies provide labour hire in their global operations. Fortescue employees, working with turnover data for labour hire or contractors. the company to support specific Finding 4: While most companies business activities”. report some health and ACCR acknowledges the difficulty in safety data, very few provide Each of the categories defined above providing turnover data for labour disaggregated data for their hire and contract staff, given that a describe third-party employment contractor and or labour hire / percentage are employed on short relationships. All Rio categories workforce. may include workers employed term contracts to meet very specific See Table 3 via labour hire arrangements. To and/or fluctuating needs. However, complicate matters, while Fortescue Most companies reported at least where labour hire is used to replace does distinguish between contractors some numerical information on large sections of the workforce, and and labour hire workers, their health and safety outcomes. ACCR where workers are employed on definition of contractors could interpreted this very broadly— ‘some regular and long-term rosters, this include workers employed through numerical information’ could include data should be available to investors labour hire agencies, as the primary any combination of data on, for the as it would provide better visibility of distinction between “contractors” reporting period: numbers of fatalities, why workers are employed on repeated and “labour hire” is determined by All Injury Frequency Rate (AIFR), fixed term contracts.
54. Similarly, ACSI found that: “in 2018 only 19% of ASX200 companies disclosed whether contractors were included in their LTIFR or TRIFR (or both) figures. The rest did not disclose contractor injury rates or did not indicate whether contractors were included in their data.” ACSI, p. 16. 55.SafeWork Australia, Safe Work Australia, SafeWork Australia, 2019,
accr.org.au 18 Labour Hire and Contracting Section 3: Company Reporting Across the ASX100
TABLE 01: ANY MATERIAL DISCLOSURE ON LABOUR HIRE AND/OR CONTRACTING Sectors
Company Defines “labour hire” Provides any material Mining and/or “contractor” in disclosure on labour reporting documents hire and/or contracting workforce56 Construction Alumina (AWS) Property Services (cleaning)
BHP (BHP)
Evolution Mining (EVN)
Fortescue (FMG) Both
Iluka (ILU)
Newcrest (NCM)
Northern Star (NST)
Rio Tinto (RIO) Contractor only
South 32 (S32)
Whitehaven (WHC)
Charter Hall (CHC)
57 Dexus (DXS)
Goodman (GMG)
GPT (GPT)
Lendlease (LLC)
Mirvac (MGR)
Scentre (SCG)
56. Includes: reporting on total number and/ or percentage of contractors and/or labour Stockland (SGP) hire in Australian and, if applicable, global operations (See Table 2); reporting on OHS data, disaggregated for the company’s labour Vicinity (VCX) hire and/or contractor workforce, as well as direct employees (See Table 3). 57. Company providers some reporting on Notes: Companies were considered to have provided material disclosure if they provided its ‘contingent’ workforce, which includes quantitative, disaggregated data on any of the following: numbers of labour hire and/ contractors. contractors in either their global or Australian operations, OHS data. accr.org.au 19 Labour Hire and Contracting Section 3: Company Reporting Across the ASX100
TABLE 02: DISCLOSURES ON THE SIZE OF THE LABOUR HIRE WORKFORCE
Company Operations Reports total Percentage of Reports total Percentage of number and/ contractors and/ number and/ contractors and/ or percentage of or labour hire in or percentage of or labour hire contractors and/ global operations contractors and/ in Australian or labour hire in or labour hire operations global operations in Australian operations
Alumina (AWS) Australia and global
BHP (BHP) Australia and 60% 54% global
Evolution Australia and NA NA 30% Mining (EVN) global
Fortescue (FMG) Australia and 16% global
Iluka (ILU) Australia and 29% 40% global
58 Newcrest (NCM) Australia and 55% 60% global
Northern Star Australia and 33% (NST) global
Rio Tinto (RIO) Australia and 68% global
South 32 (S32) Australia and global
59 60 Whitehaven (WHC) Australia only NA NA NA
Charter Hall (CHC) Australia only NA NA
61 62 Dexus (DXS) Australia only NA NA 11%
Goodman (GMG) Australia and global
58. Footnote next: Note: this figure is for the two Australian sites (Telfer and Cadia) as Newcrest disaggregates contractor numbers by individual sites, exploration (total) and corporate offices (total). 59. Only reports total number of FTE contractors. 60. A percentage was not able to be calculated, as Whitehaven provided a total number of employees plus the total number of FTE contractors only. 61. For ‘contingent workforce’: Contractors, agency temps or consultants that performed work on a time and materials basis (e.g. a project with a defined beginning and end date). Note: this does not include cleaners, who are classified as “critical suppliers”. 62. FTE only.
accr.org.au 20 Labour Hire and Contracting Section 3: Company Reporting Across the ASX100
TABLE 02 (continued)
Company Operations Reports total Percentage of Reports total Percentage of number and/ contractors and/ number and/ contractors and/ or percentage of or labour hire in or percentage of or labour hire contractors and/ global operations contractors and/ in Australian or labour hire in or labour hire operations global operations in Australian operations
GPT (GPT) Australia only NA NA
Lendlease (LLC) Australia and global
Mirvac (MGR) Australia only NA NA
Scentre (SCG) Australia and 60% 61% global
Stockland (SGP) Australia only NA NA
Vicinity (VCX) Australia only NA NA 5%
Sectors
Mining
Construction
Property Services (cleaning)
accr.org.au 21 Labour Hire and Contracting Section 3: Company Reporting Across the ASX100
TABLE 03: DISCLOSURES ON THE SIZE OF THE LABOUR HIRE WORKFORCE
Company Reports on OHS Reports on OHS data, (any data) disaggregated for labour hire and/or contractor workforce
Alumina (AWS)
BHP (BHP)
Evolution Mining (EVN)
Fortescue (FMG)
Iluka (ILU)
Newcrest (NCM)
Northern Star (NST)
Rio Tinto (RIO)
South 32 (S32)
Whitehaven (WHC)
Charter Hall (CHC)
Dexus (DXS)
Goodman (GMG)
GPT (GPT)
Lendlease (LLC)
Sectors Mirvac (MGR)
Mining Scentre (SCG)
Construction Stockland (SGP) Property Services (cleaning) Vicinity (VCX)
accr.org.au 22 Labour Hire and Contracting Across the ASX100 4
Labour Hire in Key Sectors
As noted elsewhere in this report, Labour hire in the mining sector MINING there is considerable differentiation The mining sector has some of among sectors in terms of: the Sector Overview the highest rates of labour hire in extent of the use of labour hire, the Australia. In some mining operations, The mining sector includes companies type of labour hire arrangements, labour hire and contract workers that extract naturally occuring mineral and the risks involved. For these constitute almost the entirety of solids, including bauxite, iron ore and reasons, investors should have an operations.64 understanding of the risks associated other precious metals and minerals. with the use of labour hire in general, Activities include underground or While labour hire has always been as well as more specifically in relation open cut mining, dredging, quarrying, used in the mining sector, since 2012 to a given sector or subsector of the well operations or evaporation “many mining operators have moved to labour market. pans, recovery from ore dumps or predominantly labour hire workforces tailings, and other preparation work in recent years with the stated aim of The report focuses on key sectors: customarily performed at a mine site, reducing overheads and increasing mining, construction, commercial or as a part of mining activity. Mining workforce flexibility”.65 In 2017, Rio cleaning, and large-scale solar processes are often incorporated into Tinto announced that they will only installation.63 These sectors were Australian mining activities. use labour hire workers in their iron chosen because they evidenced ore operations.66 Deloitte notes that ASX100 companies in the high rates of labour hire, significant 88% of new hires to BHP in the two mining sector non-compliance by labour hire years to 2019 were labour hire, while providers with employment and other Alumina Ltd. (AWS), BHP Group Ltd. 50% of new workers at Fortescue in the legislation, and/or due to the severity (BHP), Evolution Mining Ltd. (EVN), same period were indirect hires.67 of risks in a sector (see Methodology Fortescue Metals Group Ltd. (FMG), A recent Queensland government for further information). In this Iluka Resources Ltd. (ILU), Newcrest labour hire inquiry identified four section of the report, we discuss each Mining Ltd. (NCM), Northern Star types of labour hire arrangements sector in more detail, and outline some Resources Ltd. (NST), Rio Tinto Ltd. in the mining sector. Each of these more specific, sector-related risks (RIO), South 32 (S32), Whitehaven arrangements is “triangular” in some involved in the use of labour hire. This Coal Ltd. (WHC). Two ASX100 way, although there are significant section also reviews two ASX-listed service contractors in the mining differences in the relationship contractors. industry - Downer Edi Ltd. and CIMIC Group Ltd. - are discussed below in between the three parties involved ‘Contract Services in the Mining and (the host company, labour hire agency/ Construction Sectors’, on p. 30. contractor, and workers).
63. The oil and gas sector was originally included in this report, as this sector has also seen a dramatic expansion of the labour hire industry in recent years. However, due to rapid and significant changes in the sector due to COVID-19, it has been excluded from the report, and will be released as a follow-up briefing paper later in 2020. 64. Queensland Government, p. 11. 65. Queensland Government; see also Commonwealth of Australia, Keep it in the Regions, Canberra, Commonwealth of Australia, 2018,
• Contract-run mining Deloitte summarises the companies workers is in the provision of safety operations: where a labour hire in the above arrangements into two equipment. The Queensland Mining organisation is contracted to run predominant groups: “labour hire Inspectorate (QMI) also found that in the mining operation on behalf agencies” and “service contractors”.70 many cases labour hire workers and of a lease holder. This gives an Service contractors are companies contractors were asked to provide overall appearance of permanency, engaged to undertake specific, often their own safety equipment.72 This and workers may even have an specialised tasks and will often have is in breach of Queensland OHS Enterprise Bargaining Agreement their own workforces and equipment, legislation, which states that the (EBA) with the labour hire while labour hire workers are company in charge of a worksite must organisation. However, the “employed by a labour hire company provide equipment for the entire leaseholder will still exert a but undertake work for the host onsite workforce, irrespective of degree of control over employees minerals company”, typically under whether workers are direct employees - employees can be terminated the direction of the host company. This or contractors. The lack of protective if the leaseholder terminates the distinction corresponds to feedback equipment is just one factor in poorer contract of the labour hire agency, provided by companies profiled in this safety outcomes for labour hire and and have their conditions changed report. contract workers (see below). by the leaseholder. Risk: A two-tier workforce The implementation of a two-tier • Long-term contracting: long- In the Australian mining industry, workforce can be an explicit company term contracted workers are labour hire employees are often strategy. At BHP’s Mt Arthur coal considered “full-time” employees employed on significantly different mine in the NSW Hunter Valley, the of a labour hire company, conditions to their directly employed workforce is a mix of employees employed on contracts over 6 counterparts on the same site. The hired directly by BHP, and casual months. They usually have skills federal parliamentary inquiry Keep labour hire workers employed by that direct employees at a mine it in the Regions found significant Chandler McLeod on the Chandler site do not. The mine operator can differences in the conditions of labour Macleod Northern Districts of NSW remove their rights to work at any hire workers and permanent staff in Enterprise Agreement 2015. These time. 68 the mining industry: labour hire workers reportedly earn 40% less than their directly employed • Short-term contracting: where Labour hire workers are paid • counterparts.73 The shift to a two workers are employed for short- on average 30 percent less than tier workforce at the Mt Arthur mine term tasks such as repairs. They permanent workers (even taking is detailed in a 2015 internal BHP generally work full-time for the into account casual loading, report. That report outlined a strategy length of the task. and considering unpaid leave to reduce the percentage of direct, arrangements); • Casual, temporary permanent employment to 60% by supplementary labour: this is the • 72 percent of workers on labour 2017, with the remaining workers most prevalent form of labour hire hire contracts reported they are employed as casuals via a third party in the industry. These are non- worse off than their previous labour hire provider. This was despite permanent workers, who receive a employment in regards to pay and the report acknowledging significant 71 flat rate of pay. While technically conditions. short-comings in the use of labour ‘casual’, many of these workers will hire, including that permanent staff 69 Another area of difference between be on regular, long-term rosters. have better safety records and bring direct employees and labour hire ‘‘greater productivity to the table’’. 74
68. Note: in some cases the majority of functions can be contracted to different companies, with only a small core workforce who are directly employed. The Queensland Mining Inspectorate noted that on some of the mine sites they monitor, the directly employed workforce can be under 10% of the total workforce. 69. Queensland Government. 70. A Ponsonby, Economic effects of changes to labour hire laws, Deloitte Access Economics, 2019, p. iv,
accr.org.au 24 Labour Hire and Contracting Section 4: Labour Hire in Key Sectors Across the ASX100
As discussed below (p. 25), this Fortescue and Newcrest Mining (see Risk: Increased litigation and can increase litigation and other company reporting, pp. 17-22). compensation risk from wrongly compensation risks for companies. defined casuals The lack of equivalent training Additionally, Deloitte has argued that offered to labour hire workers also has A significant proportion of workers a shift to contract labour in the mining negative OHS implications. Workers’ employed by labour hire agencies in sector may undermine the loyalty of representatives in this industry have the mining industry are employed 82 workers, which is necessary for “safety, reported that: as casuals. Another recent and 75 well-publicised court case involving collaboration and innovation”. … labour hire has led to more WorkPac, the 2018 WorkPac Pty Deloitte cites differential rates of pay, workers entering mining worksites Ltd v Skene case, led by the along with employment agreements without proper training. It’s CFMMEU, introduced litigation and that allow contracts to be terminated certainly something that has led compensation risks associated with with as little as four hours notice, as to a lot of inexperienced people casual employment in the mining factors that may impact on loyalty and coming in, not being trained or sector. performance. not mentored right, and has led to a culture of behaviour where the In this case, the Full Federal Court Risk: Poorer OHS outcomes employer just thinks they can do found that Fly-in Fly-out (FIFO) for labour hire employees and whatever they like and get away labour hire worker, Paul Skene, was service contractors with it.79 an employee entitled to annual leave payments under the National The Queensland Mining Inspectorate Additionally, the presence of multiple (QMI) is one of the few sources Employment Standards (NES). Skene labour hire agencies and service was employed as a truck operator on a of publicly available OHS data contractors can stymie the flow of in Australia that disaggregates continuous roster arrangement - seven information between workers and days on, and seven days off - but was information for contractors and companies, undermining site safety 76 categorised as a casual worker in his direct employees. QMI reports and risk management. Groups of that since 2001, contractors have contract. He worked for nearly two workers may be isolated from each years, before being dismissed. been overrepresented in fatalities other, with different start and finish involving vehicle interaction and times, break times, meal locations, The court determined that Skene was tyre management, relative to even parking arrangements. not a casual worker, based on a number the proportion of the workforce of factors, including that he was 77 they represent. Contractors also The correlation between extensive available on an ongoing basis and had represented 64% of serious accidents use of labour hire and poorer OHS a stable and regular roster or hours.83 in coal mines in 2018/19 and 67% in outcomes has been posited as a It found that it is the substance of 78 2017/18, despite only making up factor in the spate of mining deaths the employment relationship that 80 approximately 50% of the coal mining in Queensland, with eight fatalities determines whether someone is a workforce. reported in the two years to January casual, not whether they are simply 2020.81 Academic studies indicate similar described as a casual or paid a casual trends. Given this, it is concerning loading. Factors identified as defining that only three ASX100 mining a casual employment relationship companies report any safety data include: that is disaggregated by employees • the absence of a firm, advance and labour hire: Evolution Mining, commitment as to the duration of
75. Milne, p. 7. 76. Labour hire workers are included in their contractor statistics. 77. State of Queensland, Queensland Mines and Quarries Safety Performance and Health Report 2016/2017, p. 12. 78. State of Queensland, Queensland Mines and Quarries Safety Performance and Health Report 2018/2019, p. 36. 79. K Gregory, ‘“It should have been a wedding, not a funeral”: Jack Gerdes went to work at a coal mine and never came home’, in ABC News, , 2019,
accr.org.au 25 Labour Hire and Contracting Section 4: Labour Hire in Key Sectors Across the ASX100
the employee’s employment or the days (or hours) the employee will work; Case Study • no advance commitment from UNFAIR DISMISSAL OF LABOUR HIRE WORKER FOR the employer to continuing and RAISING SAFETY ISSUES AT BHP MITSUBISHI ALLIANCE indefinite work according to an (BMA) MINE: MS KIM STAR V WORKPAC PTY LTD T/A agreed pattern of work; and WORKPAC GROUP [2018] FWC 5745 • irregular work patterns, uncertainty, discontinuity, Due to their relative job insecurity, Ms Star refused to complete a task labour hire workers may be less until sufficient lighting, that accorded ntermittency of work and i willing or less able to raise health and with the relevant standard operating 86 unpredictability. safety issues with their employer or procedure (SOP), was provided. host company. The Fair Work Commission (FWC) ruled This case has increased litigation and This issue was demonstrated in the that Star’s dismissal was unfair, and compensation risks for labour hire Ms Kim Star v WorkPac Pty Ltd ordered that she be reinstated on the providers. Relatedly: T/A WorkPac Group case.84 WorkPac basis that it was “more probable than is a major labour hire supplier, not” that her notification of dismissal • The CFMMEU has brought a class particularly in the mining and was related to this incident. The FWC action against WorkPac on behalf construction industries. directed WorkPac to reinstate Ms Star to her position at BMA. of a mineworker who worked for Kim Star had been supplied as a casual three years as a casual on a flat employee by WorkPac at BHP Billiton This case raises questions about the hourly rate at the Mount Thorley Mitsubishi Alliance (BMA)’s Goonyella extent to which casuals and labour hire workers can raise safety issues at work. Warkworth mine in the Hunter Riverside mine, for a period of four It is particularly concerning given that Valley. years. BMA then directed its client, WorkPac, to demobilise Ms Star from BMA’s own internal investigations into • Law firm Adero has launched the worksite. Ms Star was not assigned major safety incidents found that the class actions against Hays and any further or alternate work. company had a culture of favouring productivity over safety, which had led Stellar Recruitment,87 and are On the shift immediately prior to this to significant near miss incidents and considering further class actions at notification, Star had been involved in even the death of a worker.85 Mt Arthur Coal Mine in NSW and a safety incident. During that incident, with Glencore and its contractors Programmed and Skilled, and at Coal & Allied and its recruitment company SubZero.88 • The Electrical Trades Union (ETU) is currently signing up workers to Given the significance of the decision pursue potential underpayment for the organisation of work on claims in the Federal Court for mining sites, ACCR has concerns that workers wrongly classified as no mining companies reported on casuals.89 the impact of this decision on their business in their annual reporting In the Skene case the Court did documents. It is unclear how not award “pecuniary damages”, listed companies in this sector are as the company’s actions were not addressing these risks and taking steps knowingly deliberate. However, future to bring their employment practices settlements may include penalties in in line with the Workpac v Skene addition to damages and interest.90 decision.
84. Fair Work Commission, ‘Ms Kim Star v WorkPac Pty Ltd T/A WorkPac Group (U2017/12786)’, 2018,
accr.org.au 26 Labour Hire and Contracting Section 4: Labour Hire in Key Sectors Across the ASX100
Case Study BHP AND OPERATIONS SERVICES & THE CREATION OF “IN-HOUSE” LABOUR HIRE
Shortly after the Skene decision, • Significantly lower wages work on Christmas Day - with BHP registered two new subsidiaries and conditions than current some OS rosters requiring as part of a move to internalise a employees, including lower workers to spend six of the next portion of their contract labour rates of pay, no accident pay, no seven Christmases working.93 force.91 These subsidiaries will payment for FIFO flights home. By comparison, workers on the operate under a new group: BHP union BMA agreement only Operations Services. Prior to the • OS employees are hired on an work Christmas Day if they creation of Operations Services, OS enterprise agreement with agree to do so. BHP reported that 54% of its significantly lower rates than workforce was contractors. the current BMA agreement, These conditions are set out in the and the payment of FIFO flights Operations Services Production BHP has stated that this change was is at the discretion of the Agreement 2018 and the Operations made in recognition of the impact company. Services Maintenance Agreement of the growth of contractor numbers 2018. At the time of writing, these on the company’s social licence, • OS employees have minimal agreements were yet to be approved and that through this change they control over their deployment by the Fair Work Commission, will be able to: “promote permanent between BHP sites and even and had been appealed by the employment opportunities, in line regions, beyond being provided CFMMEU.94 with expectations of governments, with “reasonable notice”. Under communities and employees”.92 their employment agreement, BHP reports that they have brought workers may be transferred to their workforce in-house due to However, the creation of Operations any BHP site in Australia. high turnover in their labour hire Services (OS) may not address workforce. Given that BHP only community expectations or the • OS employees have less control provides turnover rates for its direct loss of social licence, and creates over shift rostering. At BHP’s employees, ACCR was unable to a second-tier BHP workforce. OS FY19 AGM, the CFMMEU put confirm this, nor is it able to assess employees wear BHP-branded questions to the company about whether there has been a significant uniforms and are employed on why projected rosters for OS drop in turnover in the workforce BHP sites. However, their contracts employees indicated that these brought in-house under OS. stipulate: workers could be required to
91. M Stevens, ‘BHP forms its own labour hire firm to make casuals permanent’, in Australian Financial Review, 6 December 2018,
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As with the mining industry, the may expose them to further risks, like COMMERCIAL construction industry heavily modern slavery. These companies must CONSTRUCTION relies upon labour hire, with host therefore take steps to mitigate this companies contracting out a range exposure through the implementation Sector Overview of activities from the provision of rigorous supplier and contractor The commercial building and of labour, to the management of procurement processes. construction industry in Australia independent contractors, and even the Risk: Illegal Phoenix Activity includes companies involved in heavy contracting out of core operations see and civil engineering construction, Contract Services in the Mining and ASIC defines illegal phoenix activity as residential and non-residential Construction Sectors, p. 30.). Having where: fast and flexible access to a casual building construction, and other … a new company is created workforce is attractive to companies construction services such as land to continue the business of an wanting to manage the volatility of development and installation. existing company that has been the industry, by shifting workers onto deliberately liquidated to avoid project-based employment to manage paying outstanding company ASX100 Companies in the fluctuations in demand. Commercial Construction Sector debts, which can include taxes, Labour hire and subcontracting trade creditors and employee Charter Hall Group Ltd. (CHC), arrangements in the construction entitlements.98 Goodman Group Ltd. (GMG), GPT industry share many similarities to In the construction industry, phoenix Group Ltd. (GPT), Lendlease Group those in the mining sector. They range companies are often labour hire Ltd. (LLC), Mirvac Group Ltd. (MGR), from the provision of casual/temporary providers and or subcontractors. Scentre Group Ltd. (SCG), Stockland supplementary labour, short-term Highlighting the scale of this problem Ltd. (SGP). Two ASX100 service contractors, long-term contractors, in the construction industry the contractors in the construction and contract service providers Australian Tax Office (ATO)99 found industry - Downer Edi Ltd. (DOW) and contracted to run whole segments of a that of 19,800 potential phoenix CIMIC Group Ltd. (CIM)- are discussed project. below under ‘Contract Services in the groups, 72% contained at least one Mining and Construction Sectors’ on However, there is a significant building or construction entity. p. 30. difference between the commercial The sector-wide risks of illegal construction and mining sector — phoenixing activity were highlighted the proliferation of two illegitimate Labour hire in the in a 2019 inquiry into the NSW and illegal subcontracting practices: construction sector building industry that was called phoenixing and sham contracting.97 after a series of high profile building The Australian construction industry failures.100 The inquiry found that is highly fragmented and characterised ACCR is not alleging that any of illegal phoenixing heightened the risk by short term contracting, informal the ASX100 companies analysed of defects, by allowing companies to employment practices, and layers of here are directly engaged in these avoid the responsibility of having to subcontracting.95 Many contract and activities. However, due to the lack of rectify defects. The inquiry highlighted labour hire firms in the construction consistent and transparent reporting a number of cases of developers: industry are small-scale, and requirements on this issue there is no provide services to primary building way to tell. However, these are illegal ...creating special purpose contractors, property developers and practices that they may be exposed to companies that they can wind building and infrastructure owners. 96 through their supply chains, and which
95. H Lingard, T Cooke & N Blismas, ‘Safety climate in conditions of construction subcontracting: A multi-level analysis’, in Construction Management and Economics, vol. 28, 2010, 813–825. 96. A Kelly, Industry Report E - Construction in Australia, IBISWorld, IBISWorld, September 2019. 97. Commonwealth of Australia, Black Economy Taskforce Final Report, Canberra, Commonwealth of Australia, 2017,
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up after they have completed the Risk: Unlicensed trades work, and therefore there is no subcontracted to the party that people can go to legally construction industry to seek recompense for defective Another issue that has emerged 101 works. through various government inquiries A number of reforms have been and media reports, is the hiring of proposed to address illegal phoenixing unlicensed tradespeople to complete activity, however, this process has skilled, often dangerous work. This stalled. work is typically in the electrical industry. For example, in NSW, electricians are required to be licensed Risk Sham contracting : to carry out electrical work. However, Sham contracting is rife in the there is substantial evidence that Australian construction industry.102 unlicensed electrical work is taking Sham contracting is the illegal place in the construction industry.104 practice of mischaracterising a In some cases, this overlaps with the genuine employment relationship as issue of sham contracting, with the a contracting relationship, shifting Black Economy Taskforce hearing risks and obligations away from evidence of “unscrupulous labour hire employers and onto workers.103 It firms organising ABNs for backpacker is used by employers to shirk their workforces on various high-rise legal obligations under the Fair Work construction sites”.105 Act 2009, such as paying workers minimum wage and penalty rates, leave and redundancy. The use of sham contracting also frustrates workers’ access to legal regulatory regimes intended to protect and support them, such as workers compensation, occupational health and safety laws, and superannuation provisions.
101. NSW Legislative Council, p. 59. 102. Senate Standing Committee on Education and Employment, Corporate Avoidance of the Fair Work Act, Canberra, Parliament of Australia, September 2017,
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proportion of their income comes from services to other companies, they also CONTRACT SERVICES contracts for services (e.g. cleaning). engage subcontractors and labour IN THE MINING AND hire agencies. In fact, both Downer CONSTRUCTION SECTORS Both Downer and CIMIC have a and CIMIC note that their largest number of subsidiaries who are Sector Overview expense is subcontractors, with their contracted to provide various services: subcontractor expenses comparable to A significant and growing proportion • Downer: Downer, KHSA, Spotless their direct personnel expenses. 107 of contracting in the mining and • CIMIC: CPB Contractors, Sedgman, construction industries relies Downer and CIMIC are used by mining Thiess, UGL on “service contractors”. In this and construction companies to provide arrangement, a host company UGL and a number of Downer’s labour to host companies on inferior contracts a “service contractor” to subsidiaries are licensed under the conditions to the general workforce. manage and deliver core operations Queensland Labour Hire Act to provide For example, in 2014 CIMIC subsidiary on their behalf. A service contractor labour hire services in Queensland.106 Thiess put in a bid to BHP to replace is a company that will have their directly employed workers with lower- own workforce composed of Downer’s subsidiary, Spotless provides cost contractors at their Norwich Park direct employees and labour hire cleaning, maintenance and security mine site. Internal documents showed workers. Service contractors will services. that BHP intended to “leverage off the typically provide their own labour, success of this model to introduce it to machinery and materials to deliver Risks associated with contract other operations”.108 contracted operations for the host. services Both companies have also used A service contractor may also Downer and CIMIC are exposed to the subsidiaries to hire workers on engage subcontractors to perform industry wide risks that were detailed conditions substantially below particular operations and/or provide above in the mining and construction conditions in the parent company’s supplementary labour. sections. While both Downer and enterprise agreement. If the host company terminates the CIMIC are predominantly known contract with the service contractor, as service contractors who provide the service contractor can then terminate the contracts with its workforce and subcontractors.
There may be multiple service Case Study contractors on a given site, each CARRAPATEENA CONSTRUCTION PROJECT contracted to deliver specific elements of a project. In 2017, the Downer—Ausenco accepted the job and received their JV partnership were awarded a contract, the contract was not with Key ASX100 Companies contract by Oz Minerals for works Downer EDI. Instead, the contracting on the Carrapateena copper gold party was Maclab Services, and the There are two ASX100 companies mine project in Port Augusta, South contract specified that workers who contract and provide services to Australia.109 Work began in 2018. would be paid in accordance with the mining and construction sectors: The recruitment process for the site the Maclab Services Enterprise Downer Edi Ltd. (DOW) and CIMIC was managed by Downer and job Agreement, which included lower Group Ltd. (CIM). Both companies’ advertisements carried the Downer rates of pay than the Downer core business is providing services brand. However, when workers Enterprise agreement. to the mining, oil and gas, and construction sectors (with a focus on infrastructure). However, a small
106. https://ols.oir.qld.gov.au/licence-register/. 107. Subcontracting expenses represent 32% of CIMIC’s total expenses. Subcontracting expenses in CY18 were $4,391,500, personnel expenses in the same year were $3,634,000. Subcontracting expenses represent 36.88% of Downer’s total expenses. Subcontracting expenses in FY18 were $4,193,700, while personnel expenses in the same year were $4,340,400. 108. E Bagshaw, ‘BHP, Thiess wanted to pick a fight with the unions to drive down wages’, in Sydney Morning Herald, 20 February 2018,
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levels of non-compliance in this and to work with suppliers whose COMMERCIAL sector is the complexity of labour values are consistent with ours.113 CLEANING SERVICES hire and contracting relationships, Cbus Property Sector Overview often involving multiple layers subcontracting. As Kaine and Rawling ACSI argues that the high-risk of Commercial cleaning services involve note: slavery-like practices flourishing the cleaning of large residential and In this sector, owners of large in services procurement, including commercial buildings, including buildings and their tenants cleaning, can only be addressed via supermarkets, hospitals, and offices. outsource work to cleaning a “cross-sector approach between companies who may engage business, property owners and ASX100 Companies in the workers and/or outsource the work managers, unions and statutory Commercial Cleaning Services 114 to smaller cleaning businesses, agencies”. Sector creating a structural pressure that The Cleaning Accountability There is only one ASX100 provider contributes to low pay and poor Framework (CAF) is an example of of commercial cleaning services in working conditions (and often poor a multistakeholder approach, and Australia: Downer EDI (through its quality cleaning for clients and involves lead/host companies (e.g. subsidiary Spotless). unsustainable cleaning contractor property owners), investors and business models).111 However, several other companies asset managers; cleaning companies; across the ASX100 procure and The same structural issues that employee representatives, industry manage commercial cleaning services. have led to widespread legal associations, and the Fair Work 115 Property owners often manage non-compliance have significant Ombudsman. CAF advocates for a number of services - including implications for OHS, with rates of responsible contracting practices. cleaning - for their clients, and are work-place injuries increasing to more Participants involved in this scheme, particularly exposed to risks due to than twice the national average in including investors, have described their contracting of cleaning services. recent years.112 how it assists in ensuring that labour ASX100 companies whose primary practices in the cleaning industry are ethical, fair, and high-quality.116 business is property ownership and Accessorial Liability, Proactive management are: Charter Hall Group Compliance Agreements and There are two elements which Ltd. (CHC), Dexus Ltd. (DXS), Goodman the Cleaning Accountability distinguish CAF from most other Group Ltd. (GMG), GPT Group Ltd. Framework compliance initiatives: (GPT), Lendlease Group Ltd. (LLC), This game-changing initiative aims • Cleaners are given a formal role in Mirvac Group Ltd. (MGR), Scentre to support ethical labour practices the certification of buildings, and Group Ltd. (SCG), Stockland Ltd. (SGP), in the cleaning industry – for in the ongoing compliance with and Vicinity Ltd. (VCX). cleaners and cleaning companies, labour standards. property owners, tenants and Labour hire and other forms of • CAF has determined benchmarks investors. [...] Once approved, for productivity rates and on-costs contracting in the Commercial certification can be displayed, Cleaning Services Sector to assess whether the contract letting tenants and patrons know is sufficient to enable cleaners Commercial cleaning services has been our conduct with cleaners is (including employees of any identified as one of the Australian ethical and fair. This aligns with subcontractors) to work within sectors at highest risk for modern our commitment to maintaining safe productivity levels and be paid slavery.110 As detailed in Section high ethical standards on all Cbus at least legal minimum wages and Two, a significant factor in the high Property projects and investments, entitlements.
110. ACSI, Modern Slavery, Risks, Rights and Responsibilities. 111. Kaine and Rawling, 305–331 (p. 309). 112. Kaine and Rawling, 305–331 (pp. 316–317). 113. CBUS Property: Sustainability Report 2018, CBUS, 2018,
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The CAF Advisory Group includes: AustralianSuper, United Workers Union (UWU), ISPT Super Property, COVID-19: modern slavery and maintaining oversight of the cleaning AMP Capital, JLL, CBRE, BIC, ISS exposure risks for cleaners contractor workforce to ensure that reductions in hours are spread between Facility Services, and Property Council There is a risk of significant job losses workers, and the redirection of any in the commercial cleaning industry due of Australia (PCA). The Fair Work government support payments to to the shutdown of some commercial Ombudsman is also a member of the workers.118 committee, and was actively involved buildings. CAF warns that job losses in developing CAF. and workplace shutdowns related to the COVID-19 crisis may increase COVID-19: intensification of work, In selected cases of significant modern slavery risks for those currently OHS risk and ensuring tenant and widespread exploitation, the employed in the cleaning industry, confidence in building hygiene including contractors. Already, cleaners FWO has included participation are reporting a significant loss of shifts Following the relaxation of COVID-19 in building certification via CAF due to COVID-19 related shutdowns. restrictions, commercial business in their legally-binding proactive tenants who have moved to working At the time of writing, temporary compliance agreements. For example, from home arrangements for their migrant workers are not eligible for in August 2018, FWO entered into a employees will need assurance from either the JobSeeker or JobKeeper building owners that cleaning services legally binding, proactive compliance payments if they are stood down or are sufficient to meet the additional agreement with Woolworths about the terminated due to the virus. Temporary hygiene requirements, before any company’s cleaning supply chains. The migrant workers make up a significant employees return to work. agreement requires regular audits of proportion of the industry workforce. cleaning contractors and strengthens These low paid workers live paycheck Building owners may also have to reassess their cleaning contracts to contracting requirements. to paycheck, and have minimal or low savings. Job losses puts these workers at ensure that they are sufficient (in greater risk of falling into slavery-like terms of staff and hours) to cover the conditions as they are likely to seek out: additional cleaning required to meet ...even more precarious work and new hygiene and safety standards and expos[e] themselves to a greater risk advice. Lead or host companies which do of exploitation. … As work dries up, need to increase or update their supplier desperation among workers grows. contracts to reflect these new standards In such circumstances working must ensure that contracted cleaners are conditions can quickly deteriorate not working unpaid to keep buildings at the hands of unscrupulous safe. Companies must also ensure that their contractors are providing employers.117 workers with satisfactory safeguards As companies respond to the (including fit-for-purpose personal COVID-19 crisis, their focus has been protective equipment), implementing predominantly on their direct workforce. recommended social distancing It is crucial that companies also take and hygiene policies, and providing responsibility for their labour hire and sufficient training in how to carry out contracting workforce - particularly their work safely. Building owners have where those workers perform core a responsibility to ensure that keeping functions for a company, as in the case their buildings safe for all tenants does of cleaners. not occur at the expense of workers.
CAF has outlined a set of best practice Similarly, host companies in sectors that principles and ethical business conduct have seen an intensification of cleaning guidelines for building owners, requirements due to COVID-19 (e.g. including steps that they can take to aged care and hospitals) must revise minimise impacts on contract cleaning their cleaning contracts to reflect this, workers who are currently vulnerable and ensure that cleaners are paid for due to job losses and a lack of social all additional cleaning hours worked to security support. The advice includes stop the spread of the virus.
117. Boersma and Nolan in CAF, ‘Cleaners are our frontline defence’, in Cleaning Accountability Framework Inc., 2020,
Risk 1. Exploitation of migrant particularly vulnerable to falling EMERGING SECTORS: labour and the potential for into slavery-like conditions due to LARGE-SCALE SOLAR modern slavery language barriers and precarious visa INSTALLATION conditions. This is exacerbated by In their submission to the Senate the remoteness of most solar farms, Large-scale solar installation Inquiry into the Effectiveness of the which significantly limits oversight by Current Temporary Skilled Visa system Large-scale solar installations are regulators and unions. commonly known as “solar farms”. in Targeting Genuine Skills shortages, the Electrical Trades Union (ETU) Keeping groups of workers separated stated that they had evidence of ASX100 companies in the large- also increases OHS risks on a site. scale solar installation sector Filipino and Thai workers employed As discussed in Section Two, the on subclass 400 “specialist” visa presence of multiple, isolated work There are currently 16 large-scale arrangements, earning only $40 per groups on a site increases OHS risk, as solar installations being funded by the day, on a site in Collinsville, North incidents and lessons are not able to Australian Renewable Energy Agency Queensland. These workers were be effectively communicated between 119 (ARENA). No ASX100 companies eating plain white rice for every meal, different groups. are listed as lead organisations. as “it was the only sustenance they Two ASX100 companies are primary could afford”.120 There is also evidence that labour contractors on four solar farms: exploitation in the solar industry is CIMIC Group Ltd. and Downer Edi Ltd. The ETU also presented evidence undermining the social licence of (DOW). of 115 Bulgarian nationals who had renewables projects more broadly (see been flown in to complete work on p. 34). Labour hire in the large scale a different site. These workers were solar industry kept separate to the local workgroup. The Collinsville solar farms discussed They had their own accommodation, at the hearing were all managed by Large scale solar installation can be canteen, shift patterns, and Edify Energy. Downer EDI provided considered a subset of the construction communicated with management via a some contract labour to the site, but it industry, however the nature of the translator. is not alleged that they employed the installation and the remoteness of the migrant labour discussed here. sites, means that there are unique risks These wages are significantly below associated with this emerging sector. legal minimums and substantially Risk 2. Unlicensed labour There have been a number of media below the typical wage for even undermining OHS and reports, inquiry submissions, and unskilled labourers on solar sites. workmanship Worksafe audits which all highlight a Nevertheless, there is some evidence There is substantial evidence of range of significant risks in the sector, that free trade agreements, which contractors using unlicensed workers including: Australia is signatory to, have created to perform electrical work on solar • Migrant workers are being the requirement for classes of visas to be created to employ temporary farms in contravention of various employed on wages significantly state legislations and regulations, and below Australian legal minimums, foreign workers on country of origin wages and conditions. with potentially deadly consequences and who are vulnerable to falling for the workers on a site. It also into modern slavery. While the practice of hiring workers has implications for the ongoing • Unlicensed labourers being used to on wages below Australian minimums performance of the installation and perform electrical work, in breach is therefore - in many cases - legal, the overall longevity of the project. of OHS legislation. it is exploitative, and leaves workers vulnerable to falling into modern • Labour hire workers told to provide For example, in September 2019, slavery. As noted in Section Two, their own protective equipment, in WorkCover Queensland released modern slavery exists on a spectrum breach of OHS legislation. their report on their audit of of labour exploitation and wage • Use of subsidiaries and contractors Queensland solar farms with the theft, with migrant workers who are to undercut wages and conditions. Electrical Safety Commission. As
119. For a list of current projects see: https://arena.gov.au/projects/?project-value-start=0&project-value-end=200000000 120. ETU, Submission to Senate Standing Committee on Legal and Constitutional Affairs Inquiry into the effectiveness of the current temporary skilled visa system in targeting genuine skills shortages, ETU, 2018,
accr.org.au 33 Labour Hire and Contracting Section 4: Labour Hire in Key Sectors Across the ASX100 part of those audits, they visited 30 farm installation, its conclusions and farms over 12 months and issued recommendations are relevant to this 67 improvement and infringement sector. notices, for issues including: unsafe isolation and securing and protection The risks outlined above are of cables, earthing, marking and immediate and significant risks to labelling, and testing. They also the workers, projects, companies and found unlicensed people performing investors. They also have the potential electrical work, including carrying to undermine the social licence of out cable installation (including on large-scale solar installations in rural high voltage installations), making communities, and impact on broader connections for the earthing system, acceptance of the need to shift to and making the plug-in connections of renewable power generation. This the interconnecting wiring between PV puts the expansion of the renewable panels.121 sector at risk, and slows - or may even halt - necessary and urgent action to In Victoria, the ETU reported that transition to a low-carbon economy UGL (CIMIC) had hired unlicensed and prevent climate catastrophe. backpackers to perform electrical work on a site in Bannerton, Northern The transition to a low-carbon Victoria.122 In response, Energy Safe economy is a “whole-economy Victoria released advice clarifying who challenge” that involves governments, was eligible to work on large scale investors, companies, workers and electrical installations.123 Job ads for unions. Investors have a role in these workers show rates substantially integrating social and workforce below those for licensed electricians. dimensions in all their climate engagement actions.126 As the examples above make clear, there is Risk 3 Undermining the social : an immediate role for investors to licence for the expansion of the renewables sector play in engaging companies on decent work in their clean energy projects, [F]ailing to take account of the and promoting high labour standards social dimension will give rise and inclusive growth in all their clean to pressures to delay, dilute or energy projects. abandon climate policy. This will make the shift to a low carbon economy less likely, thereby placing investors at risk from rising climate costs.124
The Keep it in the Regions Inquiry highlighted how the use of labour hire to undercut labour conditions risks undermining a sector’s social licence in the communities where projects are based.125 While the inquiry didn’t explicitly look at large-scale solar
121. WorkCover Queensland, ‘Electrical safety on solar farms’, in WorkSafe Queensland, 2019,
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Company Reporting and Investor Engagement Guide
This report has highlighted general shortcomings in the reporting by UNDERSTANDING THE Number of workers, disaggregated ASX100 on their use of labour hire EMPLOYMENT MODEL according to the definitions and/or contractor workforces. In provided above and type of contract almost all cases, the reporting was (e.g. full-time, part-time, casual) Definitions of labour hire, found to be insufficient to allow contractors and/or any other investors to identify the employment Where indirect workers are higher significant segments of the indirect model used, let alone determine the on a very short-term contractors workforce. sustainability of that model and how it (e.g. to perform specific tasks), it contributes to long-term shareholder may be more appropriate to provide The boundary of each workforce value. an average for the reporting period segment should be clearly defined, either as numbers of workers or FTE. ACCR notes that this lack of reporting and the definition should clearly also reflects the absence of indicators articulate the level of control the These disclosures are aimed at in commonly used reporting company has over each group of providing investors with transparent frameworks, such as the GRI.127 workers. data that gives a clear picture of the employment model used by ACCR has developed this framework As identified above, in the cleaning a company, and the breakdown of to guide companies on the types section, suppliers may be included the whole workforce (including of material and materiality-based as part of the core workforce, direct employees and any triangular disclosures that would provide particularly if they perform tasks employment relationships). investors with sufficient information that are necessary to the daily to assess their workforce strategy. operations of a company (for Investors should use their ownership example). rights to engage companies on their In many sectors, it should also disclosures and on the risks and include independent contractors benefits of their workforce strategy. delivering core services on behalf of In preparing this guide, ACCR reviewed the company. existing benchmarking and reporting Groups of workers who are not initiatives, and identified indicators considered as part of the core that broadly captured the contingent, workforce and excluded from contractor, or labour hire workforce. reporting should be noted, so that Where possible, this guide has sought investors can assess the validity of to extend these initiatives rather these exclusions. than developing entirely new sets of indicators and disclosures.
127. ACCR has reviewed a number of existing labour rights benchmarks and ESG frameworks and their suggested reporting metrics for contingent, supplier, contractor, subcontractor and labour hire workforces, including: Committee on Workers’ Capital (CWC) Guidelines for the Evaluation of Workers’ Human Rights and Labour Standards; Corporate Human Rights Benchmark (CHRB); Ethical Trading Initiative (ETI) Base Code; Global Reporting Initiative (GRI); OECD Guidelines for Multinational Enterprises; UN Guiding Principles on Business and Human Rights (UNGPs); UN Principles of Responsible Investment (UNPRI); Workforce Disclosure Initiative (WDI).
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It should detail what due diligence OCCUPATIONAL HEALTH AND the host company undertakes to MODERN SLAVERY AND LABOUR SAFETY (OHS) audit the safety performance of its EXPLOITATION contractors.
Reporting on safety incidents Host or lead companies with should be disaggregated by direct ACSI has developed a detailed control over a worksite or worksites hires AND labour hire and/or framework for companies and where a risk of modern slavery has contractors investors on improved health and been identified, should outline their 128 safety disclosures. ACCR supports “approach to collaboration” with this framework, which sets out four At a minimum, companies should key stakeholders to assess, monitor, key themes underpinning health and provide detail on fatalities, critical mitigate and remediate modern safety management, questions for incidents and the severity of slavery risks. investors to ask to satisfy themselves incidents. These disclosures should as to how companies are addressing be disaggregated by direct hires A number of guides have been those themes, and sample qualitative AND labour hire and/or contractors. produced to assist companies to and quantitative disclosures for If a segment of the workforce is meet their responsibilities under the companies. The above questions excluded from these disclosures, Modern Slavery Act 2018 (Cth), and are provided as an adjunct to that this should be noted and an develop best practice approaches framework, and are aimed at guiding explanation given as to why. to addressing modern slavery in investors in determining the impact their value chains.129 Each of these of a company’s employment model on Note: in many cases, companies guides note that company responses OHS outcomes, and what policies and are already recording the number to identified modern slavery risks procedures it has in place to address of hours worked by contractors as will depend on the degree of control the particular OHS risks associated part of their OHS disclosures. The a company has over a worksite or with labour hire and/or contractor publication of disaggregated data worksites, the amount of leverage workforces. would therefore not unduly burden that the company has over a supplier, them. In addition, in high-risk industries, and the severity of risk in a particular investors may also seek to engage sector and/or supply chain. Reporting on Occupational Health companies on regulatory disclosures, As noted above, some Australian and Safety Management System and specifically, whether any of companies are exposed to modern (OHSMS) should include specific their primary contractors/labour slavery risks through their detail on inclusion on labour hire hire agencies received notices for procurement of services in Australia workers and contractors regulatory breaches or penalties, (e.g. cleaning and security), on sites for work on a host company’s site. that they control. In these cases, If their primary contractors/labour This should include information companies should undertake more hire agencies have received notices, on the OHS induction and training extensive due diligence. Where the investors should seek to determine process for labour hire workers and level of control is sufficient, they may what due diligence the host company contractors, and if it differs to the be responsible for remediation where has taken with respect to those process for direct employees. adverse human rights impacts are breaches. It should also detail how identified. information is shared between As discussed in Section Two, host contractors and the host company, or lead company participation in and between contractors. In multi-stakeholder mechanisms or particular, how incidents and agreements, where workers have lessons learnt are communicated to an active role in monitoring and contractors. assessment, has been identified as necessary to addressing modern slavery risks and responsibilities in high-risk industries.
128. ACSI, The Future of Health and Safety Reporting: A Framework for Companies, pp. 19–28. 129. ACSI, Modern Slavery, Risks, Rights and Responsibilities; Department of Home Affairs, p. 96.
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Labour hire and/or contract labour gender, race, indigeneity, disability, A TWO-TIER WORKFORCE may impact the ability for companies sexuality. Where this data is to attract and retain necessary human provided, it should also be provided and intellectual capital. Turnover for the indirect workforce. Data Benefits provided to direct rates of the permanent workforce can should specify the segment of the employees that are not provided to be indicative of corporate stability, workforce they capture, if significant contractors and/or labour hire and satisfaction (or dissatisfaction) parts of the workforce are excluded, amongst the workforce. They may and if so, why. GRI indicator 402.02 asks companies also indicate structural changes in the to report on “benefits provided to full- organisation. time employees that are not provided Disclose company policies regarding to temporary or part-time employees”, In the case of labour hire workers the workforce diversity of suppliers with this data to be disaggregated by and contractors hired on a seasonal significant locations of operation. In or project basis, turnover data may A number of companies include companies and sectors where there not necessarily be representative supplier workforce diversity are a significant number of indirect of a company’s retention of human statistics and policies in their workers employed to perform core capital. However, in cases where labour supplier selection criteria. operations for a host company (as hire is used to replace large sections opposed to specialised tasks), investors of the workforce, where labour hire Workforce diversity measures are should also review how the conditions workers are employed on regular and now a common part of corporate extended to labour hire workers long term rosters, and/or where a host governance engagement and reporting and contractors compare to direct company contracts out core business by Australian listed companies. employees. These conditions include operations, turnover rates for the Investors and other stakeholders, rates of pay, leave provisions, and contingent workforce compared to the including ACCR, have taken an interest training opportunities. direct employed workforce would allow in how companies are reporting on investors to assess the sustainability issues including gender diversity, of a company’s chosen employment Equal Opportunity Employment, model and its success in retaining and the recruitment of Indigenous MANAGEMENT OF HUMAN AND necessary human and intellectual employees. Many companies have INTELLECTUAL CAPITAL — capital. been eager to demonstrate their TURNOVER commitment to these issues. For For these contract types, it may be example, through WGEA reporting and more appropriate to provide the The turnover rate disaggregated for awards, Reconciliation Actions Plans average length of service by contract the direct and indirect workforce (RAPs), and Australian Workforce type. Alternatively, it may be more Equality Index (AWEI). appropriate to the percentage of This should note if any segments of indirect contracts that completed their the workforce were excluded from In order to adequately assess a contract term versus those that ended reporting and why. For example, company’s performance against its prior to the completion of the contract. contractors were hired on a task or stated diversity policies and targets, project basis. investors and other stakeholders need to be provided with clear information AND/OR and data. From a workforce point of WORKFORCE COMPOSITION — view, this means reporting on the DIVERSITY Average length of service of full- company’s entire workforce, not just time/part-time/contractor workers its direct employees. If company reporting is partial, incomplete or by type of employment Number of workers for materially unclear, then investors will be unable relevant diversity disclosures, to properly assess the extent to which This should note if any segments of disaggregated by direct/indirect a company is meeting its diversity the workforce were excluded from workforce (at a minimum) goals and targets. reporting and why. For example, contractors were hired on a task or Companies report on a wide range project basis. of diversity metrics, including
accr.org.au 37 Labour Hire and Contracting Across the ASX100
Appendix: company selection
The following companies were identified using both IBISWorld SECTOR COMPANY GICS IDY3DESC and Global Industry Classification Standard (GICS) industry codes, Alumina Ltd. (AWS) Mining and Metals to draw from a list of ASX100 companies, current as at 30 BHP Group Ltd. (BHP) Mining and Metals December 2019. For further Charter Hall Group Ltd. (CHC) Equity Real Estate information, see the Methodology Investment Trusts (REITS) section of the report, pp. 8-9. CIMIC Group Ltd. (CIM) Construction & engineering
Dexus Ltd. (DXS) Equity Real Estate Investment Trusts (REITS)
Downer Edi Ltd. (DOW) Commercial Services & Supplies
Evolution Mining Ltd. (EVN) Mining and Metals
Fortescue Metals Group Ltd. (FMG) Mining and Metals
Goodman Group Ltd. (GMG) Equity Real Estate Investment Trusts (REITS)
GPT Group Ltd. (GPT) Equity Real Estate Investment Trusts (REITS)
Iluka Resources Ltd. (ILU) Mining and Metals
Lendlease Group Ltd. (LLC) Real estate management & development
Mirvac Group Ltd. (MGR) Equity Real Estate Investment Trusts (REITS)
Newcrest Mining Ltd. (NCM) Mining and Metals Sectors Northern Star Resources Ltd. (NST) Mining and Metals
Mining Rio Tinto Ltd. (RIO) Mining and Metals
Commercial Contruction Scentre Group Ltd. (SCG) Equity Real Estate Investment Trusts (REITS)
Contract Services in South 32 Ltd. (S32) Mining and Metals Construction and Mining Stockland Ltd. (SGP) Equity Real Estate Investment Trusts (REITS) Property Services/ Commercial Cleaning Vicinity Ltd. (VCX) Equity Real Estate Investment Trusts (REITS) Services Whitehaven Coal Ltd. (WHC) Coal and Consumable Fuels accr.org.au 38