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 their workers.

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 underpaying staff.

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 status.

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.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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