Submission Senate Standing Committees on Education

SUBMISSION

SENATE STANDING COMMITTEES ON EDUCATION AND EMPLOYMENT Corporate Avoidance of the Fair Work Act

THE ELECTRICAL TRADES UNION OF AUSTRALIA

January 2017

CONTENTS

1. Executive Summary 2. Recommendations 3. Labour Hire 3.1 Lack of specific regulation of labour hire 3.2 Modern Awards and Enterprise Agreements 3.3 Unfair Dismissal 3.4 Sham Contracting 3.5 Civil Penalty Regime 4. Strategic Voting Cohorts 5. Termination of Agreements 6. Overseas Workers 7. Phoenix Activity

1. Executive Summary

The Electrical Trades Union (ETU) is the Electrical, Energy and Services Division of the Communications, Electrical, Electronic, Energy, Information, Postal, plumbing and Allied Services Union of Australia (CEPU). The ETU represents approximately 65,000 electrical and electronic workers around the country and the CEPU represents approximately 100,000 workers nationally, making us one of the largest trade unions in Australia.

The ETU welcomes the opportunity to submit to the Committee submissions in relation to the inquiry into corporate avoidance of Fairwork Act (FWA) obligations1. An inquiry of this nature is long overdue. Australia’s industrial relations laws, regulations, policies and practices are in many ways largely out dated and ill-equipped to practically and effectively deal with contemporary industry and some workplace practices and well resourced, determined corporations and employers are deliberately flouting their legal and moral obligations to their employees and the community. If our industrial relations system is intended to provide protection to workers and to redistribute market incomes, the inescapable conclusion is that our system is currently failing. It simply does not reach many areas of the modern labour market. When put into practice the outcomes that Australia’s industrial relations framework delivers does not reflect the intention and spirit of our laws. There is limited rights and entitlements for workers of all categories all predicated on an antiquated bargaining system that no longer exists.

The severe skewing of the industrial relations system towards the favour of employers is spilling out well beyond the industrial sector an into the wider community. In 2016 ETU members were caught in a bitter and long-running industrial dispute with Carlton and United Breweries (CUB) in Victoria when 55 maintenance workers (CUB 55) at the Abbotsford plant in Melbourne were sacked, replaced and then told they would be rehired by a labour hire contractor in a move that would reduce conditions and cut their pay to just 50 cents above the award – in effect a 65 percent pay cut. This sparked a nationwide campaign seeking justice for the sacked workers and to send a message to both corporate employers and law makers that in Australia you have to treat workers with respect, dignity and fairness.

1 Appendix A.

The CUB dispute also highlights the increasingly common practice of companies ‘gaming’ the FW Act by creating new corporate entities and putting into place long-term enterprise agreements, with wide coverage, that are voted on by a very small handful of employees who are not involved in the actual work in question. Once certified, those agreements can apply to employees of the entity nationally, and for up to 4 years, across a broad range of industries and callings.

The CUB dispute serves as a prime example of how loopholes in the FWA are being exploited by employers to avoid moral and legal responsibilities to their workforce. The repercussions of which can flow through to the wider national workforce.

Labour hire is a component of Australia's insecure workforce and has grown at over 30 per cent per annum throughout the 1990s and 2000s, leaving Australia near the top of OECD country rankings for use of agency work.2 This trend has been a major source of the undermining of the industrial relations system and there has been much evidence of exploitation through this model, uncovered by trade unions, the media and the Fair Work Ombudsman as well as parliamentary inquiries. Labour hire practices not only enable corporate avoidance with respect to providing proper wages and conditions to workers under industrial laws, it also ensures that collective bargaining is significantly weakened at the site, and guarantees a highly casualised and insecure workforce.

We are seeing an increasing incidence of an alarming practice whereby employers are able to subvert the collective bargaining process by terminating old agreements or threatening to do so, leaving employees' pay and conditions to fall back to the award, instead of bargaining to negotiate a new agreement.

In practice the Australian industrial relations system in general, and the FWA in particular, heavily favours employers and are so dysfunctional that there is a need for a complete rethink of the industrial relations system and an examination of current employment models.

This responsibility falls to the federal government as it has a responsibility to reform Australia’s workplaces for the better to ensure that not only are our workplace laws fair

2 Huiyan Fu, Temporary Agency Work and Globalisation: Beyond Flexibility and Inequality, 2015, p96.

and balanced in their design and intention, but that they are strong and effective in bringing equity and balance to the workplace. Fundamental to this is ensuring employers are unable to exploit legislative loopholes to undermine terms and conditions of employment and avoid their responsibilities under our industrial relations framework.

In order to start to restoring balance to our industrial relations legal and regulatory framework we make the following recommendations.

2. Recommendations

Recommendation 1

The FWA must prohibit corporations using from using Labour Hire/Contractors for existing, permanent, on-site employees, as a means to reduce wages and conditions and otherwise evade employer obligations under the FWA. Where these features of an employment relationship exist, the Principal business must retain/ assume responsibility as the beneficial & controlling entity responsible for the terms and conditions of its workforce and their terms of employment.

Recommendation 2

Transmission of business provisions in the FWA must be extended to ensure that the intent of the provisions apply to workers in a scenario where a company replaces one provider of contract labour with another. The provisions must recognise that long-term, full-time workers who are permanently at the same site are not supplementary labour-hire employees, and have the features of employees who ought to be protected under the FWA.

Recommendation 3

Carlton United Brewery senior management should be subpoenaed to appear before the Senate Inquiry to explain their actions with regard to the 2016 CUB 55 dispute.

Recommendation 4

Programmed Skilled Workforce Limited senior management should be invited to appear before the Senate Inquiry to provide further insight as to Programmed’s actions with regard to the 2016 CUB 55 dispute with particular reference to the advice received from CUB in relation to the dispute.

Recommendation 5

The National Employment Standards should incorporate a new standard requiring a worker, whether directly or indirectly engaged, to have the right to elect to become a permanent employee after twelve months regular and systematic service with the same employer. If a worker elects to become a permanent employee, any periods of service as an indirect casual or contract work should be counted for the purpose of determining eligibility for long service leave, parental leave, redundancy payments and protection for unfair dismissal.

Recommendation 6

Employee length of service is a critical factor that must be taken into consideration when determining the fairness of a dismissal and removing the criteria of a minimum employment period to determine eligibility to make an unfair dismissal claim.

Recommendation 7

A principal employer entity must be bound by, and prohibited from colluding with contracting entities to unilaterally terminate an existing collective Agreement, to be replaced with another form of individual or unrepresented bargained Agreement.

Recommendation 8

That the statutory timeframe for lodging an unfair dismissal claim be set at 90 days in order to bring Australia in line with existing international standards such as those in the United Kingdom and Canada.

Recommendation 10

The Government take urgent steps to establish regular and ongoing public database of instances of employment arrangements that are i) outside award or certified industrial arrangements and ii) found to be in breach of industrial laws and regulations to enable a more effective response and policy approach.

Recommendation 11

Urgent steps be taken to establish a statutory presumption that a contractor is an employee whereby a contractor’s default employment status at law would be that of an “employee” of the relevant host employer. Where there is a dispute about the legal status of a

contractor, the party asserting that the person is an independent contractor would be required to establish that the contractor is in fact an independent contractor by demonstrating the person is operating a business and does not work under that employer’s control.

Recommendation 12

The establishment of a National Labour Hire Licensing Scheme that incorporates:

 effective market regulation and compliance measures;  capital requirement to function as a barrier to entry;  a ‘fit-and-proper’ person test for all operators and directors;  a bond which is paid to a fund to mitigate risk against liquidation and the failure to pay worker wages and entitlements;  an annual license fee requirement to fund a dedicated compliance unit;  a dedicated compliance unit with the ability to investigate allegations of breaches and impose penalties;  penalties for the use of non-licensed labour hire agencies; and  clear rules for licensees and other operators in the industry including regular reporting and submission of tax documents.

Recommendation 13

To improve equal protection and reduce reliance on compliance monitoring, the Government should establish a framework of support for temporary migrant workers and their spouses, who are subject to exploitation and social isolation. This framework could be derived from or modeled after settlement services and should include pre-departure and upon-arrival education for temporary migrant workers and formal linkages with an NGO or union near the worker’s place of employment. NGOs and the unions are valuable partners to provide safe connections beyond the workplace.

Recommendation 14

The Migration Act 1958 and the FWA be amended to state that a visa breach does not necessarily void a contract of employment and that the standards under the FWA apply when a person has breached their visa conditions or has performed work in the absence of a visa consistent with any other visa requirements.

3. Labour Hire

An increasingly common feature of the contemporary Australian workplace sees “host” employers shifting employee obligations and responsibility by utilising labour hire agencies, contracting out services or other mechanisms such as franchising arrangements.

Labour hire is a component of Australia's insecure workforce and has grown at over 30 per cent per annum throughout the 1990s and 2000s, leaving Australia near the top of OECD country rankings for use of agency work.3 The ABS estimates that 576,700 workers or 5 per cent of employed people in 2008, had found their current job through a labour hire agency.4 Some 97 per cent of these were estimated to be employees and 3 per cent were estimated to be independent contractors.5

This trend has been a major source of the undermining of the industrial relations system and there has been much evidence of exploitation through this model, uncovered by trade unions, the media and the Fair Work Ombudsman as well as parliamentary inquiries.

Labour hire has generated widespread interest for a range of reasons. On the one hand companies and employers contend it is an important tool to match the supply and the demand of labour, but the reality is it is commonly used to facilitate the avoidance of legal responsibilities connected to a direct employment relationship. Labour hire is used by firms as a way of avoiding standard employment entitlements and conditions attaching to direct employment such as the right to ongoing work via access to unfair dismissal protection and redundancy pay and protections. Labour hire involves the provision by a third party of labour only, generally without provision of any particular kind of expertise beyond that already held by employees of the host organisation. Hence, the raison d’etre of labour hire is purely and simply to permit industry to avoid industrial relations laws and consequently shift risk to workers, so business can take the benefit of labour without the burden of complying with laws that are premised on workers being protected in the labour market and given a fair share of the profits generated.

3 Huiyan Fu, Temporary Agency Work and Globalisation: Beyond Flexibility and Inequality, 2015, p96. 4 Ibid. 5 ABS, http://www.abs.gov.au/AUSSTATS/[email protected]/Previousproducts/6105.0Feature%20Article1Jan%202010

The growing attention directed towards labour hire is part of the broader debate around the proliferation of ‘insecure’ or ‘non-standard forms of employment’. These terms are generally used to describe working arrangements that are defined by their difference from the ‘standard employment relationship’, which is often understood as a bipartite relationship with a worker engaged in a subordinate capacity to work at the employer’s premises on a full-time and permanent basis. However, the increasing use of labour hire arrangements to source labour mean that it is become less atypical and more standard. The hyper-normalisation of labour hire arrangements warrants particular consideration, particularly in light of a trend of unscrupulous practices that have emerged in various sectors including in the construction and electrical industry.

Labour hire practices not only enable corporate avoidance with respect to providing proper wages and conditions to workers under industrial laws, it also ensures that collective bargaining is significantly weakened at the site, and guarantees a highly casualised and insecure workforce.

Labour hire workers cannot bargain for a collective agreement with the host employer, or participate in bargaining for such an agreement. Whilst labour hire workers can make a collective agreement with the labour hire agency (subject to the practical barriers which attach to their predominantly casual form of engagement), the agency is not the entity that on a day to day basis controls the work that they perform and the conditions under which and location where it will be performed. The ETU and its members experience, in cases the 2016 CUB dispute which will be discussed in greater detail later in this submission, suggests the at these arrangements have been used, at least by some, to circumvent the protections associated with permeant employment. This includes unfair dismissal laws, workplace health and safety, collective rights and other conditions such as wages, paid leave entitlements, allowances and shift rates to name but a few. Further, temporary working arrangements could foster inequality by creating a two-tier labour market. In this situation, employers only provide permanent status to core employees, while maintaining a pool of more dispensable workers that may not enjoy the same working conditions as those employees performing the same job who are hired directly by the host employer.

Case Study - Incitec Pivot Phosphate Hill

Incitec Pivot Phosphate Hill Mine in Queensland last year made 40 permanent direct full time maintenance and trade employees redundant under the terms of the covering agreement. These same

employees were then then told to apply for work with a labour hire company that has secured the contact in order to get their old jobs back at an approximate $50 000 per annum reduction. We are now hearing anecdotally that there is consideration currently being given to re-employing the workers directly with one key difference – no industrial agreement.

Labour hire is overwhelmingly used as an avoidance strategy and its continued operation in the present regulatory setting is untenable unless one accepts that the workers who are engaged by labour hire agencies are second class citizens. There is no good reason why a situation should be allowed to continue whereby two workers can work side by side in the same role yet one has a lesser standard of employment protection or a lower rate of pay, or indeed that a worker can be sacked and rehired under labour hire conditions to perform the same job under vastly reduced conditions.

Reform is necessary and, in the absence of outright restrictions on labour hire, measures must at least be taken to ensure that labour hire workers engaged in a workplace, however temporarily, have the same level of industrial citizenship as the employees they work with.

3.1 Lack of specific regulation of labour hire

The use of labour hire in Australia has never been prohibited nor strictly regulated. There is currently no jurisdiction in Australia that regulates the activities of the labour hire industry. This has seen rogue operators flourish in many industries.

While three State Governments are currently considering the implementation of state based licensing schemes, the Commonwealth should take the initiative and establish a national labour hire licensing scheme to regulate the industry.

Many of the protections and entitlements under the FWA apply only to ‘employees’ as defined at common law. A general premise of the regulatory framework is that a binary and direct employment relationship is in existence, so the statutory foundation of the FWA is potentially compromised by the fact that it is not now uncommon for the employment relationship to be fragmented and for multiple organisations to be involved in shaping key working conditions. Effectively this means that laws which were originally intended to protect workers from exploitation are now being used to perpetuate such problems by focusing regulatory attention on the wrong parties. Indeed, the civil remedy regime established under the FWA and the way in which responsibility and liability is

broadly ascribed, generally reflects traditional presumptions about employment arrangements.

3.2 Modern Awards and Enterprise Agreements

Labour hire workers are typically engaged on a casual basis and hence, even if working on a long-term and regular basis, ineligible for severance pay under the FWA6. It is common for workers to be engaged as “casuals” for several years, including as a “Full time casual”. Even when employed by a labour hire agency on a permanent basis, labour hire workers may not receive severance pay. Some agencies have sought in those circumstances to argue that an on-hire employee who loses his or her job as a result of the agency losing tenure with the host employer is due to the "ordinary and customary turnover of labour" exemption under the FWA7.

Notwithstanding the application of anti-discrimination and occupational health and safety legislation that generally cover all labour hire workers, in Australia there is no general provision dealing with the equal treatment of labour hire workers compared to workers directly hired by host companies. Nevertheless, clauses ensuring equal treatment of labour hire workers are present in some modern awards. Furthermore, some enterprise agreements include clauses limiting the duration and the proportion of labour hire employment, to prevent employers covered by those agreements from introducing labour hire to obtain cheaper and non-unionised labour. Such clauses are valid under the FWA as long as they meet the ‘permitted matters’ pursuant to FWA section 172.

3.3 Unfair Dismissal

As a consequence of a labour hire worker who wants to bring an unfair dismissal claim faces a series of challenges, including the following:

(i) Providing evidence of the dismissal if she/he remains on the books of the agency as an employee; (ii) Demonstrating the unfairness of the dismissal served by the agency in circumstances where the agency has received instructions from the user- company to no longer supply the worker;

6 FWA s123(1). 7 FWA s119(1).

(iii) Limitation period for unfair dismissal claims of 21 days from the date of dismissal;8 and (iv) Qualifying period a barrier for labour hire workers not entitled to bring action for an unfair dismissal.

Labour hire workers cannot make an unfair dismissal claim against a host employer, even where the host employer is the decision maker as to whether the worker will have a continuing job at the workplace or not. The “General Protections” contained in the FWA adapt poorly to the work situations of labour hire workers because in the main they protect the labour hire agency itself from “adverse action” rather than the workers the agency employs and makes available to workplaces.

(i) Providing evidence of the dismissal if she/he remains on the books of the agency as an employee;

(ii) Demonstrating the unfairness of the dismissal served by the agency in circumstances where the agency has received instructions from the user-company to no longer supply the worker;

It is common labour hire companies amongst our membership to fail to afford employees procedural fairness during the disciplinary and dismissal process, including warning the employee of unsatisfactory performance, informing the employee the reason for the dismissal and providing an opportunity to respond, and allowing the employee to have a support person at discussions relating to the dismissal.

A recent FWC Full Bench decision9 highlighted that when terminating an employee engaged to perform a job for a host employer because the host employer directed the labour hire employer to end the placement can be valid.10 This is an issue as there is an increasing number of contracts between labour hire providers and host employers containing clauses which afford discretion to the host employer to end a placement at its direction.

(iii) Limitation period for unfair dismissal claims of 21 days from the date of dismissal

Under section 394(2) of the FWA, the limitation period for unfair dismissal claims in 21 days from the date of dismissal, unless the Fair Work Commission considers that there are ‘exceptional circumstances’ justifying an out of time application. The principle on which the 21 period is determined is that if re-instatement is sought then it should occur as soon

8 This is not only specific to labour hire workers, but all workers who are unfairly dismissed. 9 Donald Pettifer v MODEC Management Services Pty Ltd [2016] FWCFB 5243. 10 The Full Bench ensured that the decision is not harsh, unjust or unreasonable by considering all the circumstances (i.e. procedural fairness is afforded, redeployment opportunities are genuinely considered, etc.).

as possible. This is in addition to the general rationale that a short limitation period will encourage and facilitate a “quick resolution of claims and increase the feasibility of reinstatement as an option”.11

However, this ignores the statistics that show that it is only a very small percentage of workers who seek reinstatement. A vast majority seek other remedies and compensations. It also needs to be acknowledged that employees are generally upset or shocked from having been dismissed and this can impact on the time it takes to make a decision to seek redress for unfair dismissal as promptly as the FWA dictates. It is our view that the 21 day limitation period this limitation disproportionally favours employers and companies. Many of our members are pressured to find new employment following a dismissal. It is unarguable to say this would be more problematic for those who have a non-English speaking background, literacy barrier or not familiar with the relevant industrial laws in Australia.

Consider the recent statistics of how low reinstatement as an outcome is very low12 and to reflect on limitation period for unfair dismissal claims in other major countries. For instance:

 In the United Kingdom the limitation period is 3 months;13and  In Canada the limitation is 90 days.14

In our view the FWA does not achieve its goal of genuine unfair dismissal protection because the short limitation period prevents large numbers of employees from making unfair dismissal claims.

We recommend that the statutory timeframe for lodging an unfair dismissal claim be set at 90 days in order to bring Australia in line with existing international standards such as those in the United Kingdom and Canada.

(iv) Qualifying period a barrier for labour hire workers not entitled to bring action for an unfair dismissal

11 Explanatory Memorandum p. v; Commonwealth, Parliamentary Debates, House of Representatives, 25 November 2008, 11193 (Julia Gillard) [222]. 12 https://www.fwc.gov.au/termination-of-employment/unfair-dismissal/remedies 13 Employment Rights Act 1996 (UK) c 18, s 111(2). 14 Canada Labour Code, RSC 1985, c L-2, s 240(2).

A common issue that arises among ETU members who are labour hire workers is that they are not entitled to bring action for unfair dismissal if they have been working for less than 12 months, in the case of a small business employer; or was less than 6 months, in any other case.15 To illustrate, one NSW ETU member was employed by a labour hire company and working at site in Sydney with a host employer. The member was dismissed 2 weeks before reaching the 6 month minimum employment period and was not eligible to put an unfair dismissal application because he failed for the qualifying period of employment. This poses serious questions as to whether the unfair dismissal process is achieving its purpose of protecting both employers and employees. Alternatively, the ETU recommends that the FWC should take the length of service when determining the fairness of the dismissal.

We recommend that the employee’s length of service is a critical factor that must be taken into consideration when determining the fairness of a dismissal and removing the criteria of a minimum employment period to determine eligibility to make an unfair dismissal claim.

3.4 Sham Contracting

Sham contracting occurs when an employment relationship is mischaracterised as an independent contracting arrangement. Sham contracting is often used by employers to avoid the obligations that would ordinarily apply if the person was accurately characterised as an employee. Sham contracting arrangements deprive persons of the normal rights that employees are entitled to, including minimum wage rates, paid leave (including annual, personal and compassionate leave), penalty rates, and shift loadings.

Sham contracting places workers in extremely precarious positions, as they do not have the security associated with direct, permanent employment. As cited in the previous section of this submission, they are also excluded from unfair dismissal protections under the FWA.

Under the sham contracting provisions of the FWA, employers are prohibited from misrepresenting an actual or proposed employment relationship as an independent contracting arrangement.16 However, it seems that the sham contracting provisions remain

15 FW Act ss 382 and 383. 16 See FW Act, s 357. Sections 358 and 359 of the FW Act respectively prohibit a person: from dismissing or threatening to dismiss an employee in order to engage them to perform substantially the same work as an

somewhat problematic notwithstanding the recent decision of the High Court in Fair Work Ombudsman v Quest South Perth.17 For instance, the sham contracting provisions have proven to be complex (a number of proceedings have fallen down because of pleading problems). Further, the defence available under the sham contracting provisions are potentially too broad – allowing employers to effectively evade liability.

We are of the view that agreements should be made between an employer or employers and a group of “workers” (including labour hire employees and contractors). There should be no distinction between single-enterprise and multi-enterprise agreements. All workers at an enterprise (directly engaged employees, employees indirectly engaged through a labour hire provider and contractors) have the ability to bargain together with the “host employer” for an enterprise agreement and enforce other bargaining rights (such as good faith bargaining and protected action) in support of their claims.

3.5 Civil Penalty Regime

Even if these limitations can be overcome, and a Court finds that a lead firm is liable for contraventions of the FWA under the accessorial liability or sham contracting provisions, it is not clear that the remedies are sufficient to deliver the necessary deterrence.

The civil remedy established under the FWA is weak – especially when compared to the sanctions available under comparable statutes, such as the Competition and Consumer Act 2010 (Cth). Further, there is no capacity for the FWO (or unions) to seek an incapacitation order either against the corporate employer or the relevant officers under the FW Act.

Unlike ASIC and the ACCC, the FWO does not have the power to seek an order disqualifying directors or officeholders from managing corporations for a relevant period; and there is a no licensing regime which applies to employers generally (or labour hire agencies more specifically).

We are of the view that the manifestly inadequate civil penalties regime under the FWA is providing a loophole through which corporations and employers are able to significantly reduce or entirely avoid obligations.

independent contractor; and from making what they know to be false statements to induce a current or former employee to agree to such an engagement. See generally FW Act, Pt 3-1, Div 6 17 [2015] HCA 45.

4. 2016 Carlton United Brewery Dispute – The ‘CUB 55’

We are aware of a separate submission from the CUB 55 workers we support that submission in its entirety.

In early 2009, CUB outsourced the in-house maintenance employees at its Abbotsford site – many of whom had worked for CUB for decades - to a labour hire company, ABB. The majority of the ex-CUB workers were employed by ABB, and the workers were able to negotiate an enterprise agreement which substantially maintained the majority of their existing terms and conditions; albeit with an overall reduction in income of up to 10% for senior trades people. In 2014 CUB engaged a new labour hire company called Quant Australia Pty Ltd. Again, most of the ex-CUB employees were transferred over to Quant and were able to maintain their existing terms and conditions in an enterprise agreement which was negotiated on site, and certified by the Fair Work Commission in November 2015. On 10 June 2016, 55 employees of the Quant – with over 900 years of combined service at CUB - were terminated. This occurred 7 weeks prior to the end date of the labour hire contract between Quant and CUB. It came as a surprise, as CUB had told workers there would be a ‘smooth transition’ in their working arrangements through the contract renewal process. CUB subsequently entered into a new contract for the provision of labour hire with Programmed Skilled Workforce Limited.

The former CUB maintenance workers / Quant employees were invited to apply for their same jobs back through a subsidiary of Programmed, Catalyst Recruitment. The terms and conditions for the job were set out in a non-union enterprise agreement which was voted on years before by three casual employees with no connection to the CUB site whatsoever. Furthermore, the Catalyst Recruitment enterprise agreement significantly cut the previous Quant terms and conditions (including wage reductions of up to 65%);

In or about September 2016, Programmed / Catalyst terminated their contract with CUB. CUB refused to tell the union the terms and conditions upon which the new employees are engaged. CUB continue to refuse to re-engage the ex-CUB / Quant workers on the terms and conditions which applied under the 2015-2018 Quant agreement.

These actions serve as a prime example of how loopholes FWA are been exploited so corporations can avoid responsibilities to their workforce, the repercussions of which have the potential to flow through to the wider national workforce.

The CUB 55 were sacked on a Friday with little or no communication or notice from CUB, with a new labour hire replacement workforce ready to commence the following Monday. The Catalyst Agreement, that that would have seen worker wages and conditions reduced by 65%. was a labour hire agreement that had laid dormant for five years.

It is clear that there was a deliberate strategy to enable the principal employer, CUB, to avoid its responsibilities to its workforce across multiple levels such as wages, employment conditions and health and safety. In addition to driving down employee costs, the strategy was designed to place the worker is a less secure, more vulnerable position to discourage them from speaking out against any conduct from the principal employer, such on health and safety issues.

The actions of CUB in sacking the CUB 55 workers and immediately replacing them with labour hire workers and then offered their jobs back at 65% les wages under the Catalyst Agreement must be considered within the context of CUB agreeing to a new enterprise bargaining agreement, the Quant agreement, in November of 2015. This clearly demonstrates that CUB had not been bargaining in good faith in 2015 for the Quant agreement as they are required to do under the FWA.

Discussions with Programmed Skilled Workforce Limited further confirmed that CUB had a sophisticated and deliberate strategy to avoid all of its legal obligations under the FWA, and also its moral obligations under to its workforce. Programmed advised that there was another agreement that contained the same conditions as the Catalyst Agreement that could have been used to transfer the CUB 55 workers to as part of CUBs plan, but that alternative agreement was an existing operational agreement with active employees and employers and as a consequence would require a vote under the FWA. The advice from CUB to Programmed at that time was that CUB wanted to bring the dispute on in the middle of winter when sales demand was at its annual low, and therefore did not want to wait the four to six weeks that a vote would take as required under FWA provisions.

Even more astonishingly, Programmed advised that at the 10 week mark in the dispute, they offered to pay CUB the difference between the Catalyst Agreement and the previous wages and conditions. We were advised that the motivation behind this was that Programmed were of the view that the dispute was against their values and wanted the

dispute resolved in order to avoid breaching their values. However, somewhat crucially in addition to that, we are of the understanding that Programmed also had internal legal advice to extricate themselves from the dispute urgently.

It was revealed that the Catalyst Agreement has only been signed by an unrepresentative cohort of only three employees and none of the signatories had ever worked for CUB. One of the workers that signed the Catalyst Agreement has since stated that he only worked for Programmed for six days and signed it simply because the company asked him to. When questioned by the media, he stated that he and had no knowledge or memory of the agreement details. Similarly, the second signatory to the Catalyst agreement only worked for Programmed for a number of days, while the third signatory was understood to be the partner of the Human Resources Manager that worked for Programmed in Victoria who now works for the Australian Industry Group. There are still serious doubts as to whether this signatory did in fact work for Programmed at the time he signed the Catalyst Agreement, but even it transpires this is in fact the case, the period of working for Programmed would have only have been a number of days.

The FWA stipulates that agreements must be negotiated and certified by the relevant workforce. These requires were clearly avoided in the case of the use of the Catalyst Agreement, signed 5 years previously by an unrepresentative cohort of three, being brought by CUB and Programmed to apply to 55 CUB maintenance works in Victoria.

By using a labour hire agreement to provide a degree of separation between previously direct employees, CUB avoided its obligations to consult with their workforce about the drastic changes they were seeking to introduce. One of the primary purposes of labour hire is that it may be used by firms to hedge against the risk of future redundancy payments for example where a project length is unknown or future restructuring is planned or possible. It should not be so easy for employers to shift the risks of doing business onto workers in this way. Unless the industrial relations system progresses to provides more universal rights to the multiple classes of workers – including both substantive rights (such as safety net conditions) and process rights (such as bargaining rights), these practices will continue unabated.

The FWA protects employees where there is a “transfer of business”. The purpose of these provisions is to protect employee’s terms and conditions of employment under existing enterprise agreements (and other transferring instruments), for those employees who move

from the first to the second employer. The provisions are designed, in large part, to prevent employers from restructuring their business for the purpose of undermining existing terms and conditions. CUB were able to avoid the application of the transfer of business provisions simply by changing contracting providers. This is because, while the transfer of business provisions operate when a company first outsources its workforce to a contractor, they do not apply when the company replaces the first contractor with another contractor. This loophole undermines the object of the transfer of business provisions in the FWA, which were designed to protect employees. In the case of CUB, it allowed CUB to engage a new labour hire provider and reduce the wages of long-standing workers at the Abbotsford site by up to 65%.

That fact is that on any objective standard the actions of CUB in this dispute were morally reprehensible and that there is the merest hint of possibility of actions such as these being legal or permissible under our industrial relations laws points to an urgent need to reform our system.

5. Strategic Voting Cohorts

The CUB scenario also highlights the increasingly common practice of companies ‘gaming’ the FW Act by creating new corporate entities and putting into place long-term enterprise agreements, with wide coverage, that are voted on by a very small handful of employees who are not involved in the actual work in question. Once certified, those agreements can apply to employees of the entity nationally, and for up to 4 years, across a broad range of industries and callings.

In addition to the CUB dispute there is a growing number of cases in the Fair Work Commission that highlight the strategy by employers of using small and unrepresentative groups of workers in order to secure more widely applicable employer-favourable collective agreements that provide sub-standard wages and conditions. Section 186 (3) of the FW Act requires that the FW Commission be satisfied that the group of employees covered by the agreement was fairly chosen. Sections 186 (2) and 188 require that the agreement has been genuinely agreed to by employees.

It is antithetical to the objects of the FWA that an entire workforce’s terms and conditions can be subject to an Agreement that was made explicitly to excise the relevant workers’ input into collective bargaining.

A principal employer entity (i.e. CUB) must be bound by, and prohibited from colluding with contracting entities to unilaterally terminate an existing collective Agreement, to be replaced with another form of individual or unrepresented bargained Agreement.

6. Termination of Agreements

One of the relatively early cases that considered the termination of agreement provisions in the FW Act is Re Tahmoor Coal18 . It established a relatively high bar to agreement terminations, including that “it will generally be inappropriate for FWA to intervene in the bargaining process so as to substantially later the status quo in relation to the balance of bargaining between the parties so as to deliver to one of the bargaining parties effectively all that it seeks from the bargaining”.

This approach was generally followed until the Full Bench Decision in Aurizon19. In that decision, the Full Bench terminated 12 enterprise agreements. In its reasons, it departed from the view expressed in Re Tahmoor. In essence, the Full Bench took issue with the statutory construction in Re Tahmoor and found that there was no indication in the FW Act that there should be a predisposition against the termination of enterprise agreement that had passed its nominal expiry date. The unions aggrieved by the Full Bench Decision sought judicial review, however the Full Court was unsympathetic.

7. Overseas Workers

Undocumented work performed in breach of visa condition is a huge problem in Australia. The well publicised 7-11 matters20 provide examples of where international students who were legally allowed to work in Australia were required to work in excess of their visa conditions precisely so their employers could then exploit the technical breach of their visa conditions in order to underpay and rob them of their wages and workplace entitlements. The vulnerabilities that migrant workers experience are well documented both

18 [2010] FWA 6468 19 [2015] FWCFB 540 20 http://www.abc.net.au/news/2015-08-31/7-eleven-business-model-ripping-off-workers-allan-fels/6733658

internationally and domestically. The International Labour Organisation (ILO) reports “ migrant workers often enjoy little social protection, face inequalities in the labour market and are vulnerable to exploitation and human trafficking.”21

After many years of reviews22 looking into workers engaged on visas, the same issues of exploitation are still widely reported.23 These include:

 Working longer hours or days than non-visa employees;  Not being paid overtime;  Not paid at least the minimum award rates;  Overcharges on rent or other expenses by the employer; and  Harassment.

Major issues that workers on 400s visas include:

 Falsification of skills assessment criteria for obtaining skills recognition from Trades Recognition Australia in anticipation of an application for permanent residence by overseas students;  Demands by the sponsor for large sums of money (in the case $4000) in return for skills assessment references;  Underpayment of employees and possible breaches of Award conditions and entitlements; and,  Falsifying time and wages records.

The incentive to pressure temporary workers and engage workers on visas exists because the FWA does not apply when a person has breached their visa conditions or has performed work in the absence of a visa consistent with any other visa requirements.

There is mounting evidence about the pressure that certain employers have exerted on temporary visa workers to breach a condition of their visa in order to gain additional leverage over the employee.

21 International Labour Organisation. (2014) Rules of the Game. An introduction to international labour standards. Geneva: International Labour Office. 22 Eg Deegan, B. (2008). Visa subclass 457 integrity review: Final report. Canberra: Department of Immigration and Citizenship: p6. https://www.immi.gov.au/skilled/skilled-workers/_pdf/457-integrity-review.pdf 23

The recent ‘National Disgrace’ Senate report24 highlights the prevalence to which companies are avoiding their obligations under the FWA and are putting pressure on temporary migrants to breach their visa conditions. To address this, it recommended that the Migration Act 1958 and the FWA be amended to state that a visa breach does not necessarily void a contract of employment and that the standards under the FWA apply when a person has breached their visa conditions or has performed work in the absence of a visa consistent with any other visa requirements.

The chronic under reporting of exploitation by visa holders will continue without a concerted effort by government to address this issue. Changes to the laws, including that the standards under the Fair Work Act 2009 apply even with a visa breach, are required to encourage visa holders to come forward. Furthermore, visa cancellation should be limited to cases of serious noncompliance with a visa. Seriousness must consider whether the noncompliance was brought about by the conduct of employers.

Case Study – Thiess

Contracting firm Thiess last year was strong arming works on 457 visas, threatening to sack them if they exercise their legal right to join a union. Thiess had placed illegal clauses in employees contracts to granted the employer the power for migrant workers to be sacked and deported if they joined a union. Thiess had employed at least eleven skilled migrants on these illegal contracts, with the workers carrying out electricity network maintenance in Western Australia and Victoria.

All workers on visas must be guaranteed access to information about the minimum standards and protections available by virtue of the FWA. For instance, that it be a condition of the employment of each holder of a overseas work visa that the worker be provided and acknowledge receipt of an information fact sheet which informs them of their rights and obligations under the laws of the Commonwealth of Australia including their rights to freedom of association to a join an organisation that bests represents the migrant workers’ employment interests. This would also have to take in consideration resources to ensure language is not a barrier. Furthermore, establishing a Fair Work helpline specific to migrant workers to communicate with these workers from diverse cultural backgrounds.

24 http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/temporary _work_visa/Report

Looking beyond the FWA, the inquiry should also consider the potential impacts of recent activities undertaken by government to facilitate more flexible arrangements to bring in migrant workers with the goal of easing employer burdens and stimulating competitiveness in global markets. For example the China-Australia Free Trade Agreement (CHAFTA). Whilst this agreement make it illegal to pay Chinese workers less then Australian workers, this agreement increase the entry pathway for Chinese workers without sufficient regulatory oversight and enforcement of labour standards.25

While we acknowledge that Australia will need to remain to remain competitive globally, it cannot come at any costs to the workforce. Workers interests must be balanced with an honest acknowledgement of the darker side of globalisation and its impact on the lives of those most vulnerable in the global economy, with an appropriate response to changing economic conditions requires increases in system flexibility to have corresponding increases in protection and to compliment other policies.

8. Phoenix Activity

A problem that some of our members and other workers in the construction sector have had to deal with activities of ‘phoenix companies’; where a company deliberately goes into liquidation to avoid paying tax, creditors or employees. The business then ‘resurrects’ through a different entity which enables a company that owes money to creditors and employees to restart without paying its debts.

We regard phoenix activity as the evasion of tax and other liabilities, such as employee entitlements, through the deliberate, systematic and sometimes cyclic liquidation of related corporate trading entities. In some instances of phoenix activity only one entity within a group of companies will be liquidated, whereas in other cases the corporate group covering the whole business will be stripped of assets and liquidated. Due to the diversity of phoenix activity, it is difficult to precisely define.

Phoenix activity has a range of impacts on the Australian economy.3 Employees lose entitlements when phoenix activity has occurred and will often not be paid superannuation; businesses won’t have goods and services they have paid for provided or

25 http://www.smh.com.au/business/workplace-relations/chafta-has-opened-door-to-unqualified-workers- 20160602-gpajfz.html

will have debts left outstanding; and government revenue is impacted by phoenix companies not paying tax debts.

In a speech to the Australian Senate in 2014, Senator Cameron quoted a figure of $2.64 billion26 as the estimated amount of money lost by creditors in the construction sector alone to phoenix related insolvencies annually.27 Due to the ease of entry into the construction industry, there is a proliferation of small firms with little management expertise in the industry. In addition, the general lack of financial barriers to entry has created an industry where market forces are most ruthless. Saturation of contractors in the construction industry. Phoenixing practices in the building industry and construction industry most commonly in building sub-industries which have large workforces of semi or unskilled labour, and where labour costs are a significant part of the running costs of the business. These includes scaffolding, concreting, bricklaying, plastering and steel fixing. To a lesser extent, plumbers, glaziers and electricians have been identified as being involved in phoenix company activity.

The use of phoenix companies occurs across many different industries and is not confined to the construction sector. However, this is a major concern to the ETU as the major by- product of phoenixing activity usually involves non-payment of group tax (PAYG (withholding), state payroll tax superannuation, long service leave contributions and workers’ compensation premiums.28

Many of our members who have been impacted by phoenixing activity has jeopardized the well-being of providing for their family needs. Particularly, as a result of being the major income provider for their household.

26 “Corporate Insolvency in the Australian Construction Sector: Key findings from ASIC insolvency data 2010 – 2011” Kingsway Financial Assessments Pty Ltd, released February 2012 - See more at: http://www.gadens.com/publications/Pages/Senate-Inquiry-into-insolvency-in-the-Australian- construction-industry.aspx#sthash.tThGQWDI.dpuf 27 Senator Cameron, Speech to the Senate Building and Construction Industry, Hansard, 26 August 2014, p. 5624 - See more at: http://www.gadens.com/publications/Pages/Senate-Inquiry-into- insolvency-in-the-Australian-construction-industry.aspx#sthash.tThGQWDI.dpuf

28 Bruce Collins SC, “Inquiry into construction industry insolvency in NSW”, Department of Finance and Services (NSW) Government of NSW, November 2012, p115, para 6 .

While phoenix arrangements have been mentioned in cases dealing with FWA breaches, there are no special prohibitions against this behavior under the Act. The penalties that are applied to company controllers as accessories to the company’s failure to pay entitlements reflect no additional punishment because of the phoenix context. Nor do the FWO or FWBC always consider seeking penalty against errant directors in these circumstances.

One of the ways to ensure that the liquidation of the corporate employer is not used to avoid the consequences of breach of the FWA is to remove the benefits of liquidation. Imposing a compensation order on the directors personally would go a long way towards achieving this.

Case Study – Heyday Group

As many as 500 employees of NSW electrical contractor, the Heyday Group, lost their jobs following the collapse of the parent company Hastie Group. Heyday Group was one of the largest data and electrical contractors in NSW and ACT. Hastie Group, the parent of Heyday Group had $20 million of losses following the discovery of accounting irregularities. The disclosure came amid lengthy negotiations with the company’s financiers which were notified by letter informing them they would not be paid because of the Hastie Group collapse. The ETU had 600 members affected by the collapse across NSW and ACT, with another 400 Heyday employees in Queensland and Victoria.

Appendix A

Terms of Reference

The incidence of, and trends in, corporate avoidance of the Fair Work Act 2009 with particular reference to:

(a) the use of labour hire and/or contracting arrangements that affect workers' pay and conditions; (b) voting cohorts to approve agreements with a broad scope that affect workers' pay and conditions; (c) the use of agreement termination that affect workers' pay and conditions; (d) the effectiveness of transfer of business provisions in protecting workers' pay and conditions; (e) the avoidance of redundancy entitlements by labour hire companies; (f) the effectiveness of any protections afforded to labour hire employees from unfair dismissal; (g) the approval of enterprise agreements by workers not yet residing in Australia that affect workers' pay and conditions; (h) the extent to which companies avoid their obligations under the Fair Work Act 2009 by engaging workers on visas; (i) whether the National Employment Standards and modern awards act as an effective 'floor' for wages and conditions and the extent to which companies enter into arrangements that avoid these obligations; (j) legacy issues relating to Work Choices and Australian Workplace Agreements; (k) the economic and fiscal impact of reducing wages and conditions across the economy; and (l) any other related matters.