Friday Workplace Briefing
Closing the Loopholes – Labour Hire Changes
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About the Hosts
Principal Lawyer - Head of Workplace Relations
Senior Associate - Workplace Relations
Kim McLagan: Another topic that we’re talking about from Closing the Loopholes bill and this is closing the Labour Hire Loopholes Bill. And look, I’ve got to refer to my notes, ’cause this is a really big one, Nina.
Nina Hoang: It is. There’s a lot of information.
Kim McLagan: There’s a lot in this we won’t have time to go into all of it, but we’ll try and simplify it and make it as practical as possible. But when we’re talking about labour hire, we’re talking about an employer who directly employs an employee.
Nina Hoang: Yeah.
Kim McLagan: And then that employee will go off to a host employer and do work at the host.
Nina Hoang: Yes.
Kim McLagan: So I’ll be referring to an employer, employee and the host.
Nina Hoang: Yeah.
Kim McLagan: Okay. So the current law relating to labour hire workers is under national employment standards, obviously entitled to minimum entitlements under the NES. Subject to the nature of the work they do if they’re captured by an award, they’ll be entitled to the minimum entitlements and conditions under the award. And if their employer has an EA obviously they’ll be subject to that EA.
Nina Hoang: Yep.
Kim McLagan: But what the Labour Hire Loopholes Bill is trying to achieve is if you do the same job alongside another person, you get the same pay. So for an employee at a host they will be entitled to the same pay and entitlements or monetary entitlements as the host’s employee.
Nina Hoang: Yeah. And the purpose of that, Kim, wasn’t it? Because obviously the host has taken some time and effort to negotiate this enterprise agreement with their workers.
Kim McLagan: Yeah.
Nina Hoang: And so they didn’t want, well the government didn’t want labour hire to then come in and undercut that because it would be very unfair then. And it would discourage people from engaging directly and just turning to labour hire.
Kim McLagan: Yeah. So how will apply is that the Fair Work Commission will be able to make a regulated labour hire arrangement order which will impose on the employer to pay their employee the same as the host’s employees if that makes sense?
Nina Hoang: The same full rate of pay.
Kim McLagan: Full rate of pay. And so that includes pay rates, penalty rates, overtime rates, bonuses and incentives. Obviously not annual leave or anything like that because they all already receive that from their employer. But in terms of monetary rates…
Nina Hoang: Yeah.
Kim McLagan: At the host, they’ll be entitled to all of that. In circumstances where the host has an enterprise agreement or industrial instrument, they’ll be paid under the host’s or need to be paid by their employer under the host’s EA terms.
Nina Hoang: Yeah so to be clear that they’re not covered by the EA.
Kim McLagan: No, no not EA.
Nina Hoang: It’s just that they have to be paid that same full rate of pay. I think it’s called a protected rate of pay or something. And it includes loadings as well. So it’s just to make sure that, Kim’s right, for monetary purposes ’cause we were having a debate before as to whether it would include entitlements like leave or things like that. But it wouldn’t because that it’s not-
Kim McLagan: That’s an employee entitlement.
Nina Hoang: Yeah, exactly. And so the employer in this case would already be providing the leave entitlements and things like that.
Kim McLagan: That’s right.
Nina Hoang: Just making sure that the rate of pay is the same.
Kim McLagan: Yeah so this won’t take, likely to take effect November next year. And then after that, either the employee of the labour hire employer may apply to the Fair Work Commission for a regulated labour hire arrangement order. The host can, an employee of the host can apply or the union.
Nina Hoang: Yeah.
Kim McLagan: Where it won’t, there are some exemptions. It won’t apply to a training arrangement. Like an apprenticeship.
Nina Hoang: Yeah. Okay.
Kim McLagan: Or if the engagement is less than three months. It also won’t apply if the, I always forget if it’s which one. Small business one.
Nina Hoang: Oh it’s if the host is a small business, it won’t apply.
Kim McLagan: Yes.
Nina Hoang: But if the employer is a small business, it…
Kim McLagan: Yeah, thank you for clarifying. So there’ll be a number of criteria the Fair Work Commission will need to take into account whether it’s just and reasonable to make one of these, or it’s an-
Nina Hoang: It’s not an automatic order, they will consider it. Yeah.
Kim McLagan: So it’s just some examples, pay arrangements of the employees of the host employer and the industrial instrument that covers them. Whether the work is going to be performed just as labour or if it’s a specific service. So if it’s a specific service, less likely to be awarded or to make the-
Nina Hoang: Yeah I think I saw there were distinctions that people were talking about how if say it was like an IT service like we have an IT provider who comes to our offices, it’s not going to really capture those kinds of arrangements. Yeah.
Kim McLagan: And they look at the wider work arrangements and the relationship between the host and the employer and that sort of thing. So it will be quite a complex piece of legislation if it comes in. So we’ll wait and see what happens there.
I’m sorry, I’ve got to check my notes ’cause it is complex and I just want to make sure, oh, here we go.
So if the employee of the employer is a casual but the host doesn’t employ casuals then the casual will be paid as if the, sorry will be paid as if they were a permanent employee under the host’s arrangements. but they’ll have the 25%.
Nina Hoang: Yeah. So they’ll actually get paid more.
Kim McLagan: Yeah.
Nina Hoang: And actually not about paying more, if the host’s EA has a lower pay rate than what the labour hire provider’s already paying they won’t make an order to make it less it doesn’t have to be matched. Like if you are paying better off, then that’s fine.
Kim McLagan: But there will be a lot of consequences for this especially on the labour hire employer because they will end up paying more, I have no doubt, than what they already pay their employees.
Nina Hoang: Oh yeah, definitely.
Kim McLagan: Now, interesting though, the host employer has an obligation to advise the employer what their pay rates are so that the employer can calculate them. And if the host provides inaccurate information they can actually be liable to civil penalty.
Nina Hoang: Yeah. And I think the legislation has said like in those cases where the mistake has been on the host, then the employer won’t be liable at all.
Kim McLagan: Yeah. Yeah.
Nina Hoang: So it forces them to work together which I think is good.
Kim McLagan: So there we go. We’ll see how it all unfolds.
Nina Hoang: Look, I don’t think it’ll be that big a change. Like we’ve heard about it with the palm scheme which is the federal government scheme where workers from overseas are being brought in through labour hire and that already has requirements for same pay parity. So I think all this talk and commentary about, oh this is going to be huge changes, I don’t think it’s going to affect that many labour hire providers because of most of them are already having to do this and have already had to take those steps. And by November 2024, I think it would only be a few small exceptions who haven’t jumped on that boat.
Kim McLagan: Yeah, there you go.
Nina Hoang: Yeah. Alright, let’s talk about the case study.
Kim McLagan: We’re going to have to listen very carefully with this one.
Nina Hoang: It’s a bit of a tricky one.
Kim McLagan: Andrew has gone to town on this one so I’ll read it slowly, but I had to read it a few times just to get my head around…
Nina Hoang: There’s a lot of moving parts.
Kim McLagan: There’s a lot in this one.
So, Kitchen Hands Proprietary Limited or KH was a commercial caterer. It was difficult to retain staff particularly waiting staff. KH agreed to undertake a function at the Bright City Bowling Club (BCBC). BCBC engaged KH for the function. Kiana, the CEO of KH asked BCBC if they had any casual staff that they could engage through BCBC for the night. They would pay BCBC 10% on top of wages for the night to cover their costs.
This suited KH because they paid 15% over the award under their EA and BCBC paid in accordance with the award. So there was a small profit to be made and no workers’ compensation risks on KH. Kiana attended BCBC to inspect the premises. It was unusual for him to attend the site. It was a business that ran between 50 to 100 functions a week. But this one was for over 1000 people. They would have to bring in some of their own cooking equipment. And on reviewing the plan it had some real safety concerns for him.
The function went well. Three of the young waiters asked Kiana if they could stay on casually as the BCBC only used them two nights a week. Kiana spoke with the BCBC CEO Tina and she said she was happy to keep the same arrangement which was a win-win for both organisations. At the next BCBC function a year later for 1000 people, Kiana again attended site, spoke with Tina whilst they reviewed the safety plan and raised concerns about the sloping uneven ground the barbecues, supplied by KH, would have to be located on.
The risk assessment showed there was a risk of people tripping and being burnt by the barbecues but did not identify the obvious hazard of a person bumping the barbecue and knocking it over which would send hot red coals over an area containing flammable items including gas bottles. They agreed to put down sand and a carpet to keep the barbecue safe.
Chris, one of the loaned wait staff from BCBC to KH had been drinking most of the night. A very common issue with wait staff hired by KH. He was one of many, he was bringing out a box of beers when he tripped on a depressed area of carpet, fell, he was a big young man, knocked over a barbecue. The contents quickly catching fire to the carpet, a nearby hay bale and minutes later gas bottles started to explode.
Chris died from a bottle explosion where shrapnel from the gas bottle sliced through his femoral artery.
Nina Hoang: Oh, Andrew, that’s so graphic.
Kim McLagan: Gosh that was not a nice one to read actually.
Nina Hoang: No, no.
Kim McLagan: So Nina, for you was BCBC and KH in a labour hire relationship and caught by the state labour hire legislation? And if so, who could be prosecuted and for what?
Nina Hoang: Yes. So I think Andrew specifically made this very tricky because this case study is not contemplating the normal standard labour hire and host relationship. You know, we all know if you’ve got a meat works and you have a labour hire provider who is providing the employees then it’s a clear labour hire arrangement.
But in Victoria we have the Labour Hire Licencing Act which is very, very broad and it was instituted by the labour government in consultation with the unions and it catches a lot more different types of arrangements. And that’s specifically what happened here. So a labour hire arrangement can arise when a business is supplying individuals to work in and as part of the, we’ll call them the host business or undertaking and they’re directly paying the employee.
So in this case, BCBC is providing the labour, sorry the casual workers to work for KH to supplement their work but they’re still paying them directly. So they’re their employees. So it actually would be captured under the Labour Hire Licencing Act which they probably didn’t think of and most people wouldn’t have thought of too. And so because it’s captured they would’ve had to get a licence from the Labour Hire Authority and because they didn’t they would be prosecuted likely. And the penalty is 150,000 for Kiana as the individual and 600,000 for KH business. On the other hand, BCBC is also liable because oh wait, no, sorry, flip that around. BCBC was the one. So they’re the ones who should have gotten licenced.
Kim McLagan: It’s confusing.
Nina Hoang: But KH as the one who is engaging BCBC as the labour hire provider is also in breach because you cannot engage a labour hire provider that is unlicensed and you are up for the exact same penalties as well so 600K, 150,000. So, I think it’s just really tricky of Andrew to put it in here but I would strongly recommend that you review your arrangements because if you are supplying any employees to other companies and they’re involved in operational requirements so they’re actually doing things within the business then there is a potential that they could be captured under these roles. Not so much if it was like, like a temporary arrangement or if it was a consultancy thing where they’re coming in to more advise on the operations. But if there’s an operational role then there is a real potential it could be captured. Yeah. All right, nice. So Kim, under Closing the Loop, would Chris and his cohort of BCBC workers be able to make an application to the Fair Work Commission for a protected rate of pay?
Kim McLagan: Yes, they would, but it would have to be for an engagement longer than three months. If it was less than three months well then that falls within the exceptions of the Loopholes Bill.
Nina Hoang: Cool. And then would KH be liable for a family death benefit claim under the Wrongs Act?
Kim McLagan: No, because KH are not the primary employer, but BCBC would be, but BCBC would join KH and then KH would seek to rely on their public liability insurance but the insurer may not indemnify them because they’re operating under an illegal contract.
Nina Hoang: Nice.
Kim McLagan: Okay, last one. A safety one for you Nina. Who would be liable under safety law, if at all and why?
Nina Hoang: I think they both would be. So there’s a common misunderstanding that labour hire and hosts can kind of separate what their duties are. And there’s been changes to get around that specifically that if you have labour hire employees they’re deemed to be employees for the purposes of the host employer’s safety obligations. So you’re actually supposed to consult with each other.
So in this case, the risk assessment was terribly done, didn’t account for the major risk and they allowed the barbecue to so easily knocked over. It was next to flammable gas bottles which should never be the case. So there’s high-risk, no controls done to address it. And they also permitted drunk people to be around. They didn’t put controls around that as well. And remember safety law you have to account for stupid people. So no, no, seriously, I did a training and I was like, you have to. It doesn’t matter if they do the wrong thing like you have to put controls to protect them from it. So there’s a high-risk that they’d be guilty of reckless endangerment for being indifferent to the risk and not putting controls in place. All right.
Kim McLagan: Okay, got through it.
Nina Hoang: Yeah.
Kim McLagan: So break next week because of the public holiday. And you and Andrew are both away next week. You are heading off to Vietnam. You have your thing for almost a couple of weeks so we won’t see Nina for a little while unfortunately.
Nina Hoang: It’ll be Andrew and you next time.
Kim McLagan: We will miss you very much.
Nina Hoang: Oh, thank you very much. Give us a thumbs up so that we can know that we are doing well without Andrew.
Kim McLagan and Nina Hoang:Yeah.
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