Don’t Turn a Blind Eye to Labour Supply Chains

The Fair Work Ombudsman (‘FWO’) is actively investigating breaches of the Fair Work Act 2009 in labour supply chain arrangements and pursuing cases against end-user businesses, including their Human Resources managers and senior managers.

The FWO is utilising the accessorial liability provisions of the Act which impose personal liability on any person who is involved in a breach of the Act. A person will be taken to be involved in a breach of the Act if they have aided, abetted, counselled or procured the breach or they have induced the breach, whether by threats or promises or otherwise, or they have been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the breach or they have conspired with others to effect the breach..

The FWO has pursued end user business for deficiencies in the management of labour supply chains such as the following:

• a major grocery retailer for procurement arrangements that appear to be set up deliberately to transfer capital risk down through labour supply chains.
• a major poultry producer for a failure to actively monitor and enforce procurement contract terms.
• a major department store retailer for governance systems that are not effective to detect non-compliance in labour supply chains.
• major hotel chains for failing to recognise that the contract price for the provision of labour was insufficient to cover appropriate remuneration.
• a failure to comply with statutory record-keeping requirements.
• a failure to actively monitor who is performing which work at which worksite and when, and the terms and conditions of their employment.
• a lack of sustainable self-monitoring systems to ensure compliance.

• Compensation: to compensate a person for the loss suffered as a result of the breach. 
• Penalties: up to $10,800 per breach, for both corporations and individuals.
• Pecuniary Penalties: up to $10,800 for an individual and $54,000 for a corporation, per breach.
• Reputational Risk: This is usually the greatest damage to the business: unwanted adverse media attention and the resulting brand damage.

The FWO has the power to secure enforceable undertakings against a business, rather than pursue prosecution.

To avoid court proceedings, the business must admit to the breach and agree to implement the measures that FWO sees fit. Recent examples of measures required to be undertaken have included:

• Providing a personal letter of apology to each affected worker.
• Publishing a notice of apology in the main capital city newspaper.
• Posting a notice of apology at each worksite.
• Making a contribution to a community workplace relations education programme.
• Rolling out training in workplace laws to all management staff.
• Amending tender documents to:
  1. refer to the terms of the relevant Award;
  2. imposing an obligation on the principal contactor to ensure subcontractor compliance;
  3. requiring the contractor to pay workers through a third party payroll provider.
• Using only one contractor and one payroll.
• Ensuring that the contract price is indexed to applicable Award rates, taking into account the number of levels of subcontractors extracting a profit.
• Implementing regular auditing of the labour supply chain.
• Identifying and reviewing the true employer of all workers attending the workplace.
• Keeping accurate records of rosters and hours worked.
• Improving governance arrangements and ensuring transparency in labour supply arrangements.

• Bar or cancellation of approval as a 457 visa sponsor;
• Penalties under the Migration Act 1958; and
• Refusal of applications.

To discuss how this FWO activity may impact your organisation, please contact us.

The Fragomen Advisory and Compliance team would be pleased to assist with further advice and guidance in relation to accessorial liability and the implications of employment law requirements for organisations that employ visa holders.