The 7-Eleven underpayment story, and other recent
cases involving large businesses such as Baiada Poultry and
Myer, have revealed how big businesses, at the top of the supply
chain, may be held responsible if their contractors are underpaying
Under the Fair Work Act, being "involved in" a breach
(such as underpaying workers their award entitlements, or sham
contracting) is effectively the same as
breaching the laws yourself (section 550). You can
be subject to the same penalties and other orders.
So if you engage a security or cleaning contractor who is
underpaying their workers, not only would that contractor be in
breach of the law; you may be found to have committed the same
breach if the elements of section 550 are made out. You could be
found to be "involved in" the breach if you aided or
induced that action, or you were a party to the contravention by
your act or omission.
Say your contractor charges you for labour by the hour. You get
charged $30/hour for someone working on a Saturday, and you know
that under the award that employee should be getting at least
$40/hour on Saturdays. Or you had an employee of the
contractor working a 10 hour shift last Wednesday, but the
amount the contractor invoices you could only cover the cost
of an employee working 8 hours under the award (let alone any
on-costs or profit margin for the contactor).
Is the contractor complying with the law? Probably not. If you
do nothing, when you know something may be wrong, are you a party
to that breach? Quite possibly!
The Fair Work Ombudsman, trade unions and others are
increasingly using the accessorial liability provision to go after
"the big fish", when significant underpayment or
exploitation of workers has occurred. And of course, the media and
the "court of public opinion" can also be a very
effective way of ensuring that big corporates, who care
about their brand, are found to be responsible when
small contractors (or franchisees in the case of 7-Eleven) are
The Fair Work Ombudsman released a speech last week highlighting
these issues, and emphasising the willingness of the regulator to
go after the "big corporates", at the top of the supply
chain, not just the small contractors.1
In this speech, the Fair Work Ombudsman emphasised that cleaning
and security contracting were seen as high risk industries, where
underpayments are common. Another common feature of these cases was
that the workers were migrants on various forms of temporary visas,
who were less likely to complain because of their precarious visa
If you are a large business and you care about your brand and
doing the right thing, have a look at your arrangements with the
small contractors you use. Under the contracts you have
entered into with contractors, are they obliged to comply with
their legal obligations to employees? It is a good start if the
contract says this, but it isn't enough.
Do you know if they are they are actually paying their workers
enough to comply with award obligations? Are they complying with
other sources of minimum employment entitlements such as the
National Employment Standards and enterprise agreements?
You need to know. If they are not, and you don't do anything
about it, it might become your problem. You might get an unwelcome
call from the Fair Work Ombudsman, or end up with some media
attention you don't want – or both.
In the article, "Three Handbook Policies to Rethink Immediately," featured in the September 2016 edition of WCR, Attorneys Wendy Coats and Rochelle Nelson discuss three policies restaurants should consider removing from their employee handbooks immediately
It is commonly understood that under the FMLA, an eligible employee of a covered employer is entitled to 12 workweeks of leave during a 12-month period for the birth of a child, the placement of a child for adoption or foster care, . . .
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