Briefing note

Broken chains of responsibility: Victorian COVID-19 clusters reveal subcontracting risks

The latest wave of COVID-19 in Melbourne has today been linked to working arrangements and conditions for security workers at quarantine hotels. Hotel workers have breached gag orders to share information with the public about the poor training, confusing advice and minimal PPE they received on the job.

A few weeks ago, a different group of frontline workers at Cedar Meats, also in Melbourne and also contract workers, were at the centre of a separate COVID-19 cluster.

Both cases highlight the risks of complex contracting and subcontracting arrangements.

Subcontracting often results in a lack of transparency and accountability for a workforce, with lead contractors eschewing responsibility for training, failing to provide adequate Personal Protective Equipment (PPE), and even failing to provide minimum wages and conditions. Lines of responsibility are often unclear, and critical information is easily miscommunicated.

This short-term profiteering is a public health issue. Not only does it jeopardise the health and safety of workers, but it increases risks for the whole community, and has major implications for the whole economy.

Below we compare these two recent COVID-19 clusters, and discuss how the use of labour hire, contracting and subcontracting to undercut wages and conditions contributed to virus transmission in the community. We also identify related issues in other high risk, front line sectors - like commercial cleaning - and call on investors and companies to urgently review the use of subcontractors in these industries.

Contracting, subcontracting, and public health risks

ACCR's report on Labour Hire and Contracting across the ASX100, released May 2020, highlights the key business, operational and workforce risks associated with the use of labour hire and contracting. These include:

  • Poorer Occupational Health and Safety standards, including a lack of training and PPE
  • Confused lines of responsibility
  • Poor communication between host companies, intermediaries and workers
  • Less reporting of workforce issues, risks and breaches, as precarious workers fear losing their jobs
  • The creation of a two-tier workforce, with subcontracted workers on lower workers than other workers performing the same job.

Unfortunately, many of these risks were borne out during the Cedar Meats and hotel quarantine clusters.

It is important to recognise that this is not a 'behavioural' issue on the part of individual workers, as some have implied. In both instances, the connection between the way work was organised and the spread of the virus is clear. Employers and governments are well aware that vulnerable workers will take whichever jobs are available to them, often despite risks to their own health and safety. The contracting, organisation and management of safe work is the responsibility of those doing the contracting, organising and management.

Profits Ahead of Safety in Melbourne’s Quarantine Hotels

On July 2, reports emerged of significant subcontractor failings at the Victorian quarantine hotels linked to the current outbreak of COVID-19 in the state. Security guards allege that:

  • They were only provided 5 minutes of training in infection control procedures before being deployed;
  • They were made to sign documentation saying they understood infection control procedures - despite not receiving proper training;
  • They were provided with a single glove and mask per shift;
  • Subcontractors employing workers with no security experience and on lower wages than security guards employed through the primary contractor.

In subsequent reports, health professionals working at quarantine hotels raised concerns that security guards were given no training, and that there was limited space for guards to properly socially distance during break times.

Victoria's Chief Health Officer has acknowledged that there were miscommunication problems among staff - saying "there wasn’t as robust an understanding of the distance that was required between contracted staff".

These issues highlight the hollowing out of wages and conditions that has occurred in the security industry over a number of years. Workers, unions and government inquiries have highlighted the risks associated with the proliferation of dodgy subcontractors in the industry for years, highlighting how complex supply chain and lack of oversight of contractors make this security one of the industries at highest risk of modern slavery.

ACCR notes that the Victorian government has instigated a judicial inquiry into COVID-19 transmission at the quarantine hotels, and a further update will be released once that inquiry has handed down it’s findings.

Cedar Meats Cluster

The Cedar Meats COVID-19 cluster, reported in April, raises very similar issues about the relationship between contracting and public health risks. The Australian meat production industry is highly casualised, and many workers are recruited overseas by labour hire providers and other similar agencies.

At Cedar Meats, over half of the company's workforce were employed by a labour hire firm. This left many workers without basic leave entitlements, and also appeared to contribute to poor communication of critical health and safety information between state public health authorities, the host company and the labour hire agency. As with the quarantine hotel workers, some meat workers spoke to the media on the condition of anonymity about unsafe conditions, poor PPE procedures and crowding at the abattoir. WorkSafe has launched an investigation into whether workers at the abattoir were provided with adequate PPE and hand sanitiser.

Due to the nature of factory work, and the specific machinery in abattoirs, social distancing is difficult, and workers are at increased risk of infectious disease transmission. Several COVID-19 'hot spots' and clusters have emerged at meat processing and production worksites around the world - including in the US, Canada, Germany, Ireland, and in Australia. But it is also impossible to separate working conditions from public health more generally.

An investor statement initiated by ICCR on COVID risk in the US meat industry has been endorsed by 118 institutions with $2.3 trillion USD in combined assets. The statement calls for wage increases and rapid action on workforce safety.

Recent analysis by ISS Governance notes:

The lack of paid leave provisions is reportedly enticing largely low-paid workers to continue to work despite the risk of exposure. Media have also reported claims that workers were not adequately informed about the spread of the virus within meat processing operations. Some company officials reportedly attempted to avoid closure of factories, while stakeholders maintain that politicians and industry representatives have shifted the responsibility for protection against the virus onto workers.

Commercial cleaning: potential future source of infection?

The industrial context of the commercial cleaning sector shares many significant similarities with that of the security sector. A large temporary migrant population, employed through complex subcontracting arrangements, and significant downward pressure on contract prices, below what would guarantee legal minimums for workers. These structural issues make the sector one of the domestic sectors at highest risk for modern slavery. They also pose significant risks for workplace transmission of COVID-19, if workers who had previously been working from home return offices that do not have sufficient hygiene and cleaning safeguards in place.

Core issues that have been identified:

  • Current contracts are not sufficient (in terms of staff and hours) to cover the additional cleaning required to meet new hygiene and safety standards and advice.
  • Cleaners not being provided safeguards to protect themselves from the virus (including fit-for-purpose personal protective equipment)
  • Cleaners not being provided with sufficient training in how to carry out their work safely, and ensuring that buildings are properly cleaned for tenants.

The Cleaning Accountability Framework (CAF) is a multi-stakeholder certification scheme that was developed to address supply chain risks in the cleaning sector. It involves lead/host companies (e.g. property owners), investors and asset managers; cleaning companies; employee representatives, industry associations, and the Fair Work Ombudsman. CAF advocates for responsible contracting practices.

CAF has produced guidance for commercial property owners, to allow them to update their cleaning supplier contracts to a sufficient standard to protect cleaners and the employees and contractors of their tenants from COVID-19. This guidance highlights that building owners have while they have a responsibility to ensure that their buildings are kept safe for tenants, they must also ensure that this doesn’t come at the expense of workers.

At the start of the pandemic, CAF conducted a survey of cleaners in CAF-certified buildings, while the United Workers Union conducted a survey of workers across the cleaning sector. The results from the two surveys are stark - and raise significant red flags regarding the safety of workers returning to offices.

Recommendations for investors and companies

Labour hire and subcontracting in high risk, front line sectors represent significant risks for workers, the community - and in the case of renewed lockdowns - the broader economy.

If companies fail to address the specific risks posed by labour hire and subcontracting in these industries, they leave themselves exposed to reputational, legal and financial risks that may significantly disrupt operations if COVID-19 outbreaks occur.

Investors should engage companies regarding how they are ensuring that all contractors and subcontractors are provided with sufficient training, PPE, social distancing in order to complete their jobs. It must ensure that companies have pandemic plans in place, and that contractors and subcontractors are actively included in these plans, and that there are clear lines of responsibility and reporting potential transmission breaches.

Furthermore, they must determine whether company profits are based on undercutting wages and conditions, and locking out experienced, permanent staff. These short-term decisions have the potential to force longer term impacts on profits.

Each of the industries profiled here are also the industries with the greatest domestic exposure to Modern Slavery in Australia. The industrial issues which make these sectors high risk for modern slavery are the same issues that have resulted in these sectors becoming a risk to public health and to the broader economy. Engaging with companies on the COVID-19 risks in their contracting supply chains will also provide investors with insights over the modern slavery risks in a company’s domestic supply chain.

Coverage of these statements