Publication Labour Hire & Contracting Across the ASX100: 4. Labour Hire in Key Sectors
As noted elsewhere in this report, there is considerable differentiation among sectors in terms of: the extent of the use of labour hire, the type of labour hire arrangements, and the risks involved. For these reasons, investors should have an understanding of the risks associated with the use of labour hire in general, as well as more specifically in relation to a given sector or subsector of the labour market.
The report focuses on key sectors:
These sectors were chosen because they evidenced high rates of labour hire, significant non-compliance by labour hire providers with employment and other legislation, and/or due to the severity of risks in a sector (see Methodology for further information). In this section of the report, we discuss each sector in more detail, and outline some more specific, sector-related risks involved in the use of labour hire. This section also reviews two ASX-listed contractors.
The mining sector includes companies that extract naturally occuring mineral solids, including bauxite, iron ore and other precious metals and minerals. Activities include underground or open cut mining, dredging, quarrying, well operations or evaporation pans, recovery from ore dumps or tailings, and other preparation work customarily performed at a mine site, or as a part of mining activity. Mining processes are often incorporated into Australian mining activities.
ASX100 companies in the mining sector
Alumina Ltd. (AWS), BHP Group Ltd. (BHP), Evolution Mining Ltd. (EVN), Fortescue Metals Group Ltd. (FMG), Iluka Resources Ltd. (ILU), Newcrest Mining Ltd. (NCM), Northern Star Resources Ltd. (NST), Rio Tinto Ltd. (RIO), South 32 (S32), Whitehaven Coal Ltd. (WHC). Two ASX100 service contractors in the mining industry—Downer Edi Ltd. and CIMIC Group Ltd.—are discussed in the section Contract Services in the Mining and Construction Sectors.
Labour hire in the mining sector
The mining sector has some of the highest rates of labour hire in Australia. In some mining operations, labour hire and contract workers constitute almost the entirety of operations.
While labour hire has always been used in the mining sector, since 2012 “many mining operators have moved to predominantly labour hire workforces in recent years with the stated aim of reducing overheads and increasing workforce flexibility”. In 2017, Rio Tinto announced that they will only use labour hire workers in their iron ore operations. Deloitte notes that 88% of new hires to BHP in the two years to 2019 were labour hire, while 50% of new workers at Fortescue in the same period were indirect hires.
A recent Queensland government labour hire inquiry identified four types of labour hire arrangements in the mining sector. Each of these arrangements is “triangular” in some way, although there are significant differences in the relationship between the three parties involved (the host company, labour hire agency/contractor, and workers).
Contract-run mining operations: where a labour hire organisation is contracted to run the mining operation on behalf of a lease holder. This gives an overall appearance of permanency, and workers may even have an Enterprise Bargaining Agreement (EBA) with the labour hire organisation. However, the leaseholder will still exert a degree of control over employees—employees can be terminated if the leaseholder terminates the contract of the labour hire agency, and have their conditions changed by the leaseholder.
Long-term contracting: long-term contracted workers are considered “full-time” employees of a labour hire company, employed on contracts over 6 months. They usually have skills that direct employees at a mine site do not. The mine operator can remove their rights to work at any time.
Short-term contracting: where workers are employed for short-term tasks such as repairs. They generally work full-time for the length of the task.
Casual, temporary supplementary labour: this is the most prevalent form of labour hire in the industry. These are non-permanent workers, who receive a flat rate of pay. While technically ‘casual’, many of these workers will be on regular, long-term rosters.
Deloitte summarises the companies in the above arrangements into two predominant groups: “labour hire agencies” and “service contractors”. Service contractors are companies engaged to undertake specific, often specialised tasks and will often have their own workforces and equipment, while labour hire workers are “employed by a labour hire company but undertake work for the host minerals company”, typically under the direction of the host company. This distinction corresponds to feedback provided by companies profiled in this report.
Risk 1: A two-tier workforce
In the Australian mining industry, labour hire employees are often employed on significantly different conditions to their directly employed counterparts on the same site. The federal parliamentary inquiry Keep it in the Regions found significant differences in the conditions of labour hire workers and permanent staff in the mining industry:
labour hire workers are paid on average 30 percent less than permanent workers (even taking into account casual loading, and considering unpaid leave arrangements);
72 percent of workers on labour hire contracts reported they are worse off than their previous employment in regards to pay and conditions.
Another area of difference between direct employees and labour hire workers is in the provision of safety equipment. The Queensland Mining Inspectorate (QMI) also found that in many cases labour hire workers and contractors were asked to provide their own safety equipment. This is in breach of Queensland OHS legislation, which states that the company in charge of a worksite must provide equipment for the entire onsite workforce, irrespective of whether workers are direct employees or contractors. The lack of protective equipment is just one factor in poorer safety outcomes for labour hire and contract workers.
The implementation of a two-tier workforce can be an explicit company strategy. At BHP’s Mt Arthur coal mine in the NSW Hunter Valley, the workforce is a mix of employees hired directly by BHP, and casual labour hire workers employed by Chandler McLeod on the Chandler Macleod Northern Districts of NSW Enterprise Agreement 2015. These labour hire workers reportedly earn 40% less than their directly employed counterparts. The shift to a two-tier workforce at the Mt Arthur mine is detailed in a 2015 internal BHP report. That report outlined a strategy to reduce the percentage of direct, permanent employment to 60% by 2017, with the remaining workers employed as casuals via a third party labour hire provider. This was despite the report acknowledging significant short-comings in the use of labour hire, including that permanent staff have better safety records and bring “greater productivity to the table”. As discussed further in the section, this can increase litigation and other compensation risks for companies.
Additionally, Deloitte has argued that a shift to contract labour in the mining sector may undermine the loyalty of workers, which is necessary for “safety, collaboration and innovation”. Deloitte cites differential rates of pay, along with employment agreements that allow contracts to be terminated with as little as four hours notice, as factors that may impact on loyalty and performance.
Risk 2: Poorer OHS outcomes for labour hire employees and service contractors
The Queensland Mining Inspectorate (QMI) is one of the few sources of publicly available OHS data in Australia that disaggregates information for contractors and direct employees.76 QMI reports that since 2001, contractors have been overrepresented in fatalities involving vehicle interaction and tyre management, relative to the proportion of the workforce they represent.77 Contractors also represented 64% of serious accidents in coal mines in 2018/19 and 67% in 2017/18,78 despite only making up approximately 50% of the coal mining workforce.
Academic studies indicate similar trends. Given this, it is concerning that only three ASX100 mining companies report any safety data that is disaggregated by employees and labour hire: Evolution Mining, Fortescue and Newcrest Mining (see Section Three).
The lack of equivalent training offered to labour hire workers also has negative OHS implications. Workers’ representatives in this industry have reported that:
… labour hire has led to more workers entering mining worksites without proper training. It’s certainly something that has led to a lot of inexperienced people coming in, not being trained or not mentored right, and has led to a culture of behaviour where the employer just thinks they can do whatever they like and get away with it.
Additionally, the presence of multiple labour hire agencies and service contractors can stymie the flow of information between workers and companies, undermining site safety and risk management. Groups of workers may be isolated from each other, with different start and finish times, break times, meal locations, even parking arrangements.
The correlation between extensive use of labour hire and poorer OHS outcomes has been posited as a factor in the spate of mining deaths in Queensland, with eight fatalities reported in the two years to January 2020.
Risk 3: Increased litigation and compensation risk from wrongly defined casuals
A significant proportion of workers employed by labour hire agencies in the mining industry are employed as casuals. Another recent and well-publicised court case involving WorkPac, the 2018 WorkPac Pty Ltd v Skene case, led by the CFMMEU, introduced litigation and compensation risks associated with casual employment in the mining sector.
In this case, the Full Federal Court found that fly-in fly-out (FIFO) labour hire worker, Paul Skene, was an employee entitled to annual leave payments under the National Employment Standards (NES). Skene was employed as a truck operator on a continuous roster arrangement—seven days on, and seven days off—but was categorised as a casual worker in his contract. He worked for nearly two years, before being dismissed.
The court determined that Skene was not a casual worker, based on a number of factors, including that he was available on an ongoing basis and had a stable and regular roster or hours. It found that it is the substance of the employment relationship that determines whether someone is a casual, not whether they are simply described as a casual or paid a casual loading. Factors identified as defining a casual employment relationship include:
- the absence of a firm, advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;
- no advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work; and
- irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
This case has increased litigation and compensation risks for labour hire providers. Relatedly:
The CFMMEU has brought a class action against WorkPac on behalf of a mineworker who worked for three years as a casual on a flat hourly rate at the Mount Thorley Warkworth mine in the Hunter Valley.
Law firm Adero has launched class actions against Hays and Stellar Recruitment, and are considering further class actions at Mt Arthur Coal Mine in NSW and with Glencore and its contractors Programmed and Skilled, and at Coal & Allied and its recruitment company SubZero.
The Electrical Trades Union (ETU) is currently signing up workers to pursue potential underpayment claims in the Federal Court for workers wrongly classified as casuals.
In the Skene case the Court did not award “pecuniary damages”, as the company’s actions were not knowingly deliberate. However, future settlements may include penalties in addition to damages and interest.
Given the significance of the decision for the organisation of work on mining sites, ACCR has concerns that no mining companies reported on the impact of this decision on their business in their annual reporting documents. It is unclear how listed companies in this sector are addressing these risks and taking steps to bring their employment practices in line with the WorkPac v Skene decision.
Case Study: Unfair Dismissal of Labour Hire Worker for Raising Safety Issues at BHP Mitsubishi Alliance (BMA) Mine
Ms Kim Star v WorkPac Pty Ltd T/A WorkPac Group  FWC 5745*
Due to their relative job insecurity, labour hire workers may be less willing or less able to raise health and safety issues with their employer or host company.
This issue was demonstrated in the Ms Kim Star v WorkPac Pty Ltd T/A WorkPac Group case. WorkPac is a major labour hire supplier, particularly in the mining and construction industries.
Kim Star had been supplied as a casual employee by WorkPac at BHP Billiton Mitsubishi Alliance (BMA)’s Goonyella Riverside mine, for a period of four years. BMA then directed its client, WorkPac, to demobilise Ms Star from the worksite. Ms Star was not assigned any further or alternate work.
On the shift immediately prior to this notification, Star had been involved in a safety incident. During that incident, Ms Star refused to complete a task until sufficient lighting, that accorded with the relevant standard operating procedure (SOP), was provided.
The Fair Work Commission (FWC) ruled that Star’s dismissal was unfair, and ordered that she be reinstated on the basis that it was “more probable than not” that her notification of dismissal was related to this incident. The FWC directed WorkPac to reinstate Ms Star to her position at BMA.
This case raises questions about the extent to which casuals and labour hire workers can raise safety issues at work. It is particularly concerning given that BMA’s own internal investigations into major safety incidents found that the company had a culture of favouring productivity over safety, which had led to significant near miss incidents and even the death of a worker.
Case Study: BHP and Operations Services and the Creation of “In-House” Labour Hire
Shortly after the Skene decision, BHP registered two new subsidiaries as part of a move to internalise a portion of their contract labour force. These subsidiaries will operate under a new group: BHP Operations Services. Prior to the creation of Operations Services, BHP reported that 54% of its workforce was contractors.
BHP has stated that this change was made in recognition of the impact of the growth of contractor numbers on the company’s social licence, and that through this change they will be able to:
promote permanent employment opportunities, in line with expectations of governments, communities and employees 
However, the creation of Operations Services (OS) may not address community expectations or the loss of social licence, and creates a second-tier BHP workforce. OS employees wear BHP-branded uniforms and are employed on BHP sites. However, their contracts stipulate:
significantly lower wages and conditions than current employees, including lower rates of pay, no accident pay, no payment for FIFO flights home.
that OS employees are hired on an OS enterprise agreement with significantly lower rates than the current BMA agreement, and the payment of FIFO flights is at the discretion of the company.
that OS employees have minimal control over their deployment between BHP sites and even regions, beyond being provided with “reasonable notice”. Under their employment agreement, workers may be transferred to any BHP site in Australia.
that OS employees have less control over shift rostering. At BHP’s FY19 AGM, the CFMMEU put questions to the company about why projected rosters for OS employees indicated that these workers could be required to work on Christmas Day—with some OS rosters requiring workers to spend six of the next seven Christmases working. By comparison, workers on the union BMA agreement only work Christmas Day if they agree to do so.
These conditions are set out in the Operations Services Production Agreement 2018 and the Operations Services Maintenance Agreement 2018. At the time of writing, these agreements were yet to be approved by the Fair Work Commission, and had been appealed by the CFMMEU.
BHP reports that they have brought their workforce in-house due to high turnover in their labour hire workforce. Given that BHP only provides turnover rates for its direct employees, ACCR was unable to confirm this, nor is it able to assess whether there has been a significant drop in turnover in the workforce brought in-house under OS.
The commercial building and construction industry in Australia includes companies involved in heavy and civil engineering construction, residential and non-residential building construction, and other construction services such as land development and installation.
ASX100 Companies in the Commercial Construction Sector
Charter Hall Group Ltd. (CHC), Goodman Group Ltd. (GMG), GPT Group Ltd. (GPT), Lendlease Group Ltd. (LLC), Mirvac Group Ltd. (MGR), Scentre Group Ltd. (SCG), Stockland Ltd. (SGP). Two ASX100 service contractors in the construction industry—Downer Edi Ltd. (DOW) and CIMIC Group Ltd. (CIM)- are discussed in the section Contract Services in the Mining and Construction Sectors.
Labour hire in the construction sector The Australian construction industry is highly fragmented and characterised by short term contracting, informal employment practices, and layers of subcontracting. Many contract and labour hire firms in the construction industry are small-scale, and provide services to primary building contractors, property developers and building and infrastructure owners. 
As with the mining industry, the construction industry heavily relies upon labour hire, with host companies contracting out a range of activities from the provision of labour, to the management of independent contractors, and even the contracting out of core operations see Contract Services in the Mining and Construction Sectors, p. 30.). Having fast and flexible access to a casual workforce is attractive to companies wanting to manage the volatility of the industry, by shifting workers onto project-based employment to manage fluctuations in demand.
Labour hire and subcontracting arrangements in the construction industry share many similarities to those in the mining sector. They range from the provision of casual/temporary supplementary labour, short-term contractors, long-term contractors, and contract service providers contracted to run whole segments of a project.
However, there is a significant difference between the commercial construction and mining sector — the proliferation of two illegitimate and illegal subcontracting practices: phoenixing and sham contracting.
ACCR is not alleging that any of the ASX100 companies analysed here are directly engaged in these activities. However, due to the lack of consistent and transparent reporting requirements on this issue there is no way to tell. However, these are illegal practices that they may be exposed to through their supply chains, and which may expose them to further risks, like modern slavery. These companies must therefore take steps to mitigate this exposure through the implementation of rigorous supplier and contractor procurement processes.
Risk 1: Illegal Phoenix Activity
ASIC defines illegal phoenix activity as where:
… a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding company debts, which can include taxes, trade creditors and employee entitlements.
In the construction industry, phoenix companies are often labour hire providers and or subcontractors. Highlighting the scale of this problem in the construction industry the Australian Tax Office (ATO) found that of 19,800 potential phoenix groups, 72% contained at least one building or construction entity.
The sector-wide risks of illegal phoenixing activity were highlighted in a 2019 inquiry into the NSW building industry that was called after a series of high profile building failures. The inquiry found that illegal phoenixing heightened the risk of defects, by allowing companies to avoid the responsibility of having to rectify defects. The inquiry highlighted a number of cases of developers:
...creating special purpose companies that they can wind up after they have completed the work, and therefore there is no party that people can go to legally to seek recompense for defective works.
A number of reforms have been proposed to address illegal phoenixing activity, however, this process has stalled.
Risk 2: Sham Contracting
Sham contracting is rife in the Australian construction industry. Sham contracting is the illegal practice of mischaracterising a genuine employment relationship as a contracting relationship, shifting risks and obligations away from employers and onto workers. It is used by employers to shirk their legal obligations under the Fair Work Act 2009, such as paying workers minimum wage and penalty rates, leave and redundancy. The use of sham contracting also frustrates workers’ access to legal regulatory regimes intended to protect and support them, such as workers compensation, occupational health and safety laws, and superannuation provisions.
Risk 3: Unlicensed trades subcontracted to the construction industry
Another issue that has emerged through various government inquiries and media reports, is the hiring of unlicensed tradespeople to complete skilled, often dangerous work. This work is typically in the electrical industry. For example, in NSW, electricians are required to be licensed to carry out electrical work. However, there is substantial evidence that unlicensed electrical work is taking place in the construction industry.
In some cases, this overlaps with the issue of sham contracting, with the Black Economy Taskforce hearing evidence of “unscrupulous labour hire firms organising ABNs for backpacker workforces on various high-rise construction sites”.
Contract Services in the Mining and Construction Sectors
A significant and growing proportion of contracting in the mining and construction industries relies on “service contractors”. In this arrangement, a host company contracts a “service contractor” to manage and deliver core operations on their behalf. A service contractor is a company that will have their own workforce composed of direct employees and labour hire workers. Service contractors will typically provide their own labour, machinery and materials to deliver contracted operations for the host. A service contractor may also engage subcontractors to perform particular operations and/or provide supplementary labour.
If the host company terminates the contract with the service contractor, the service contractor can then terminate the contracts with its workforce and subcontractors.
There may be multiple service contractors on a given site, each contracted to deliver specific elements of a project.
Key ASX100 Companies
There are two ASX100 companies who contract and provide services to the mining and construction sectors: Downer Edi Ltd. (DOW) and CIMIC Group Ltd. (CIM). Both companies’ core business is providing services to the mining, oil and gas, and construction sectors (with a focus on infrastructure). However, a small proportion of their income comes from contracts for services (e.g. cleaning).
Both Downer and CIMIC have a number of subsidiaries who are contracted to provide various services:
- Downer: Downer, KHSA, Spotless
- CIMIC: CPB Contractors, Sedgman, Thiess, UGL
UGL and a number of Downer’s subsidiaries are licensed under the Queensland Labour Hire Act to provide labour hire services in Queensland.
Downer’s subsidiary, Spotless provides cleaning, maintenance and security services.
Risks Associated with Contract Services
Downer and CIMIC are exposed to the industry wide risks that were detailed above in the mining and construction sections. While both Downer and CIMIC are predominantly known as service contractors who provide services to other companies, they also engage subcontractors and labour hire agencies. In fact, both Downer and CIMIC note that their largest expense is subcontractors, with their subcontractor expenses comparable to their direct personnel expenses.
Downer and CIMIC are used by mining and construction companies to provide labour to host companies on inferior conditions to the general workforce. For example, in 2014 CIMIC subsidiary Thiess put in a bid to BHP to replace directly employed workers with lowercost contractors at their Norwich Park mine site. Internal documents showed that BHP intended to “leverage off the success of this model to introduce it to other operations”.
Both companies have also used subsidiaries to hire workers on conditions substantially below conditions in the parent company’s enterprise agreement.
Case Study: Carrapateena Construction Project
In 2017, the Downer—Ausenco JV partnership were awarded a contract by Oz Minerals for works on the Carrapateena copper gold mine project in Port Augusta, South Australia. Work began in 2018. The recruitment process for the site was managed by Downer and job advertisements carried the Downer brand. However, when workers accepted the job and received their contract, the contract was not with Downer EDI. Instead, the contracting party was Maclab Services, and the contract specified that workers would be paid in accordance with the Maclab Services Enterprise Agreement, which included lower rates of pay than the Downer Enterprise agreement.
Commercial Cleaning Services
Commercial cleaning services involve the cleaning of large residential and commercial buildings, including supermarkets, hospitals, and offices.
ASX100 Companies in the Commercial Cleaning Services Sector
There is only one ASX100 provider of commercial cleaning services in Australia: Downer EDI (through its subsidiary Spotless).
However, several other companies across the ASX100 procure and manage commercial cleaning services. Property owners often manage a number of services—including cleaning—for their clients, and are particularly exposed to risks due to their contracting of cleaning services. ASX100 companies whose primary business is property ownership and management are: Charter Hall Group Ltd. (CHC), Dexus Ltd. (DXS), Goodman Group Ltd. (GMG), GPT Group Ltd. (GPT), Lendlease Group Ltd. (LLC), Mirvac Group Ltd. (MGR), Scentre Group Ltd. (SCG), Stockland Ltd. (SGP), and Vicinity Ltd. (VCX).
Labour Hire and Other Forms of Contracting
Commercial cleaning services has been identified as one of the Australian sectors at highest risk for modern slavery. As detailed in Section Two, a significant factor in the high levels of non-compliance in this sector is the complexity of labour hire and contracting relationships, often involving multiple layers subcontracting. As Kaine and Rawling note:
In this sector, owners of large buildings and their tenants outsource work to cleaning companies who may engage workers and/or outsource the work to smaller cleaning businesses, creating a structural pressure that contributes to low pay and poor working conditions (and often poor quality cleaning for clients and unsustainable cleaning contractor business models).
The same structural issues that have led to widespread legal non-compliance have significant implications for OHS, with rates of workplace injuries increasing to more than twice the national average in recent years.
Accessorial Liability, Proactive Compliance Agreements and the Cleaning Accountability Framework
This game-changing initiative aims to support ethical labour practices in the cleaning industry – for cleaners and cleaning companies, property owners, tenants and investors. [...] Once approved, certification can be displayed, letting tenants and patrons know our conduct with cleaners is ethical and fair. This aligns with our commitment to maintaining high ethical standards on all Cbus Property projects and investments, and to work with suppliers whose values are consistent with ours.
— Cbus Property
ACSI argues that the high-risk of slavery-like practices flourishing in services procurement, including cleaning, can only be addressed via a “cross-sector approach between business, property owners and managers, unions and statutory agencies”.
The Cleaning Accountability Framework (CAF) is an example of a multistakeholder approach, and 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. Participants involved in this scheme, including investors, have described how it assists in ensuring that labour practices in the cleaning industry are ethical, fair, and high-quality.
There are two elements which distinguish CAF from most other compliance initiatives:
Cleaners are given a formal role in the certification of buildings, and in the ongoing compliance with labour standards.
CAF has determined benchmarks for productivity rates and on-costs to assess whether the contract is sufficient to enable cleaners (including employees of any subcontractors) to work within safe productivity levels and be paid at least legal minimum wages and entitlements.
The CAF Advisory Group includes: AustralianSuper, United Workers Union (UWU), ISPT Super Property, AMP Capital, JLL, CBRE, BIC, ISS Facility Services, and Property Council of Australia (PCA). The Fair Work Ombudsman is also a member of the committee, and was actively involved in developing CAF.
In selected cases of significant and widespread exploitation, the FWO has included participation in building certification via CAF in their legally-binding proactive compliance agreements. For example, in August 2018, FWO entered into a legally binding, proactive compliance agreement with Woolworths about the company’s cleaning supply chains. The agreement requires regular audits of cleaning contractors and strengthens contracting requirements.
COVID-19 and the Commercial Cleaning Services Sector
Modern slavery and exposure risks for cleaners
There is a risk of significant job losses in the commercial cleaning industry due to the shutdown of some commercial buildings. CAF warns that job losses and workplace shutdowns related to the COVID-19 crisis may increase modern slavery risks for those currently employed in the cleaning industry, including contractors. Already, cleaners are reporting a significant loss of shifts due to COVID-19 related shutdowns.
At the time of writing, temporary migrant workers are not eligible for either the JobSeeker or JobKeeper payments if they are stood down or terminated due to the virus. Temporary migrant workers make up a significant proportion of the industry workforce. These low paid workers live paycheck to paycheck, and have minimal or low savings. Job losses puts these workers at greater risk of falling into slavery-like conditions as they are likely to seek out:
...even more precarious work and expos[e] themselves to a greater risk of exploitation. … As work dries up, desperation among workers grows. In such circumstances working conditions can quickly deteriorate at the hands of unscrupulous employers.
As companies respond to the COVID-19 crisis, their focus has been predominantly on their direct workforce. It is crucial that companies also take responsibility for their labour hire and contracting workforce—particularly where those workers perform core functions for a company, as in the case of cleaners.
CAF has outlined a set of best practice principles and ethical business conduct guidelines for building owners, including steps that they can take to minimise impacts on contract cleaning workers who are currently vulnerable due to job losses and a lack of social security support. The advice includes maintaining oversight of the cleaning contractor workforce to ensure that reductions in hours are spread between workers, and the redirection of any government support payments to workers.
Intensification of work, OHS risk and ensuring tenant confidence in building hygiene
Following the relaxation of COVID-19 restrictions, commercial business tenants who have moved to working from home arrangements for their employees will need assurance from building owners that cleaning services are sufficient to meet the additional hygiene requirements, before any employees return to work.
Building owners may also have to reassess their cleaning contracts to ensure that they are sufficient (in terms of staff and hours) to cover the additional cleaning required to meet new hygiene and safety standards and advice. Lead or host companies which do need to increase or update their supplier contracts to reflect these new standards must ensure that contracted cleaners are not working unpaid to keep buildings safe. Companies must also ensure that their contractors are providing workers with satisfactory safeguards (including fit-for-purpose personal protective equipment), implementing recommended social distancing and hygiene policies, and providing sufficient training in how to carry out their work safely. Building owners have a responsibility to ensure that keeping their buildings safe for all tenants does not occur at the expense of workers.
Similarly, host companies in sectors that have seen an intensification of cleaning requirements due to COVID-19 (e.g. aged care and hospitals) must revise their cleaning contracts to reflect this, and ensure that cleaners are paid for all additional cleaning hours worked to stop the spread of the virus.
Emerging Sectors: Large-Scale Solar Installation
Large-scale solar installations are commonly known as “solar farms”.
ASX100 companies in the large-scale solar installation sector
There are currently 16 large-scale solar installations being funded by the Australian Renewable Energy Agency (ARENA). No ASX100 companies are listed as lead organisations. Two ASX100 companies are primary contractors on four solar farms: CIMIC Group Ltd. and Downer Edi Ltd. (DOW).
Labour hire in the large-scale solar industry
Large-scale solar installation can be considered a subset of the construction industry, however the nature of the installation and the remoteness of the sites, means that there are unique risks associated with this emerging sector. There have been a number of media reports, inquiry submissions, and Worksafe audits which all highlight a range of significant risks in the sector, including:
migrant workers being employed on wages significantly below Australian legal minimums, and who are vulnerable to falling into modern slavery;
unlicensed labourers being used to perform electrical work, in breach of OHS legislation;
labour hire workers told to provide their own protective equipment, in breach of OHS legislation;
use of subsidiaries and contractors to undercut wages and conditions.
Risk 1: Exploitation of migrant labour and the potential for modern slavery
In their submission to the Senate Inquiry into the Effectiveness of the Current Temporary Skilled Visa system in Targeting Genuine Skills shortages, the Electrical Trades Union (ETU) stated that they had evidence of Filipino and Thai workers employed on subclass 400 “specialist” visa arrangements, earning only $40 per day, on a site in Collinsville, North Queensland. These workers were eating plain white rice for every meal, as “it was the only sustenance they could afford”.
The ETU also presented evidence of 115 Bulgarian nationals who had been flown in to complete work on a different site. These workers were kept separate to the local workgroup. They had their own accommodation, canteen, shift patterns, and communicated with management via a translator.
These wages are significantly below legal minimums and substantially below the typical wage for even unskilled labourers on solar sites. Nevertheless, there is some evidence that free trade agreements, which Australia is signatory to, have created the requirement for classes of visas to be created to employ temporary foreign workers on country of origin wages and conditions.
While the practice of hiring workers on wages below Australian minimums is therefore—in many cases—legal, it is exploitative, and leaves workers vulnerable to falling into modern slavery. As noted in Section Two, modern slavery exists on a spectrum of labour exploitation and wage theft, with migrant workers who are particularly vulnerable to falling into slavery-like conditions due to language barriers and precarious visa conditions. This is exacerbated by the remoteness of most solar farms, which significantly limits oversight by regulators and unions.
Keeping groups of workers separated also increases OHS risks on a site. As discussed in Section Two, the presence of multiple, isolated work groups on a site increases OHS risk, as incidents and lessons are not able to be effectively communicated between different groups.
There is also evidence that labour exploitation in the solar industry is undermining the social licence of renewables projects more broadly (see Risk 3 in this section).
The Collinsville solar farms discussed at the hearing were all managed by Edify Energy. Downer EDI provided some contract labour to the site, but it is not alleged that they employed the migrant labour discussed here.
Risk 2: Unlicensed labour undermining OHS and workmanship
There is substantial evidence of contractors using unlicensed workers to perform electrical work on solar farms in contravention of various state legislations and regulations, and with potentially deadly consequences for the workers on a site. It also has implications for the ongoing performance of the installation and the overall longevity of the project.
For example, in September 2019, WorkCover Queensland released their report on their audit of Queensland solar farms with the Electrical Safety Commission. As part of those audits, they visited 30 farms over 12 months and issued 67 improvement and infringement notices, for issues including: unsafe isolation and securing and protection of cables, earthing, marking and labelling, and testing. They also found unlicensed people performing electrical work, including carrying out cable installation (including on high voltage installations), making connections for the earthing system, and making the plug-in connections of the interconnecting wiring between PV panels.
In Victoria, the ETU reported that UGL (CIMIC) had hired unlicensed backpackers to perform electrical work on a site in Bannerton, Northern Victoria. In response, Energy Safe Victoria released advice clarifying who was eligible to work on large scale electrical installations. Job ads for these workers show rates substantially below those for licensed electricians.
Risk 3: Undermining the social licence for the expansion of the renewables sector
[F]ailing to take account of the social dimension will give rise to pressures to delay, dilute or abandon climate policy. This will make the shift to a low carbon economy less likely, thereby placing investors at risk from rising climate costs.
The Keep It in the Regions Inquiry highlighted how the use of labour hire to undercut labour conditions risks undermining a sector’s social licence in the communities where projects are based. While the inquiry didn’t explicitly look at large-scale solar farm installation, its conclusions and recommendations are relevant to this sector.
The risks outlined above are immediate and significant risks to the workers, projects, companies and investors. They also have the potential to undermine the social licence of large-scale solar installations in rural communities, and impact on broader acceptance of the need to shift to renewable power generation. This puts the expansion of the renewable sector at risk, and slows—or may even halt—necessary and urgent action to transition to a low-carbon economy and prevent climate catastrophe.
The transition to a low-carbon economy is a “whole-economy challenge” that involves governments, investors, companies, workers and unions. Investors have a role in integrating social and workforce dimensions in all their climate engagement actions. As the examples above make clear, there is an immediate role for investors to play in engaging companies on decent work in their clean energy projects, and promoting high labour standards and inclusive growth in all their clean energy projects.
The oil and gas sector was originally included in this report, as this sector has also seen a dramatic expansion of the labour hire industry in recent years. However, due to rapid and significant changes in the sector due to COVID-19, it has been excluded from the report, and will be released as a follow-up briefing paper later in 2020. ↩︎
Inquiry into the Practices of the Labour Hire Industry in Queensland, Brisbane, Queensland Government, 2016, p. 11 [accessed 6 April 2020]. ↩︎
Queensland Government; see also Commonwealth of Australia, Keep it in the Regions, Canberra, Commonwealth of Australia, 2018 [accessed 6 April 2020]. ↩︎
B Creagh, ‘Rio Tinto contractor conundrum: The new normal in the Pilbara?’, in Australian Mining, 2016 [accessed 7 February 2020]. ↩︎
P Milne, ‘Casual workforce a “threat” to mine culture, says industry expert’, in The West Australian, 29 January 2019, First edition, section News, p. 7. ↩︎
Note: in some cases the majority of functions can be contracted to different companies, with only a small core workforce who are directly employed. The Queensland Mining Inspectorate noted that on some of the mine sites they monitor, the directly employed workforce can be under 10% of the total workforce. ↩︎
Queensland Government. ↩︎
A Ponsonby, Economic effects of changes to labour hire laws, Deloitte Access Economics, 2019, p. iv [accessed 6 April 2020]. ↩︎
Commonwealth of Australia, Keep It in the Regions, pp. 142–3. ↩︎
V Zhou, ‘Mining inspectorate probes worker safety allowance in QLD’, in Safe To Work, 2018. ↩︎
Kirkwood, ‘Big Mount Arthur coal mine class action launched at Beresfield on Tuesday’, in Newcastle Herald, 26 June 2018 [accessed 5 February 2020]. ↩︎
McCarthy, ‘BHP strategy for more casual workers’, in Newcastle Herald, 19 October 2015 [accessed 7 February 2020]. ↩︎
Milne, p. 7. ↩︎
K Gregory, ‘“It should have been a wedding, not a funeral”: Jack Gerdes went to work at a coal mine and never came home’, in ABC News, 2019 [accessed 3 February 2020]. ↩︎
ABC News, ‘Miner “trapped in machinery” dies at central Queensland coal mine’, in ABC News, 13 January 2020 [accessed 6 April 2020]. ↩︎
Milne, p. 7. ↩︎
Credit Suisse. ↩︎
I Landau & D Allen, ‘Major Court and Tribunal Decisions in Australia in 2018’, in Journal of Industrial Relations, vol. 61, 2019, 421–437 (p. 423). ↩︎
D Marin-Guzman, ‘Hays, Stellar Recruitment hit with $50 million class actions over casuals’, in Australian Financial Review, 8 January 2019 [accessed 8 February 2020]. ↩︎
Credit Suisse, Not Such a Casual Cost, 23 August 2018. ↩︎
Fair Work Commission, ‘Ms Kim Star v WorkPac Pty Ltd T/A WorkPac Group (U2017/12786)’, 2018 [accessed 6 April 2020]. ↩︎
S Elks, ‘Production before worker safety for miner’, in The Australian, 31 January 2020 [accessed 6 April 2020]. ↩︎
M Stevens, ‘BHP forms its own labour hire firm to make casuals permanent’, in Australian Financial Review, 6 December 2018 [accessed 19 December 2019]. ↩︎
M Stevens, ‘BHP returns to direct employment in the coal fields’, in Australian Financial Review, 5 December 2018 [accessed 14 February 2020]. ↩︎
R Thompson, ‘Workers are voting with their feet: Drayton’, in Muswellbrook Chronicle, 8 November 2019 [accessed 8 April 2020]. ↩︎
See: https://www.fwc.gov.au/documents/documents/agreements_applications/ag2018_5649.pdf; https://www.fwc.gov.au/documents/documents/agreements_applications/ag2018_6025.pdf ↩︎
H Lingard, T Cooke & N Blismas, ‘Safety climate in conditions of construction subcontracting: A multi-level analysis’, in Construction Management and Economics, vol. 28, 2010, 813–825. ↩︎
A Kelly, Industry Report E - Construction in Australia, IBISWorld, IBISWorld, September 2019. ↩︎
Commonwealth of Australia, Black Economy Taskforce Final Report, Canberra, Commonwealth of Australia, 2017 [accessed 6 April 2020]; see also H Anderson, ‘Is illegal phoenix activity rife among construction companies?’, in The Conversation, 12 June 2015 [accessed 6 April 2020]; PWC, Phoenix activity: Sizing the problem and matching the solutions, Fair Work Ombudsman, 2012 [accessed 6 April 2020]. ↩︎
‘ASIC action on illegal phoenix activity’, 2020 [accessed 6 April 2020]. ↩︎
Submission: Inquiry into insolvency in the Australian construction industry, Australian Taxation Office, 2015, p. 20 [accessed 6 April 2020]. ↩︎
NSW Legislative Council, Regulation of building standards, building quality and building disputes, Sydney, NSW Legislative Council, 2019 [accessed 6 April 2020]. For a full list of failures see pp. 10-17. ↩︎
NSW Legislative Council, p. 59. ↩︎
Senate Standing Committee on Education and Employment, Corporate Avoidance of the Fair Work Act, Canberra, Parliament of Australia, September 2017 [accessed 6 April 2020]. ↩︎
Victorian Government, ‘Sham contracting in the building and construction industry’, 2019 [accessed 6 April 2020]. ↩︎
NSW Legislative Council. ↩︎
Commonwealth of Australia, Black Economy Taskforce Final Report, p. 248. ↩︎
Subcontracting expenses represent 32% of CIMIC’s total expenses. Subcontracting expenses in CY18 were $4,391,500, personnel expenses in the same year were $3,634,000. Subcontracting expenses represent 36.88% of Downer’s total expenses. Subcontracting expenses in FY18 were $4,193,700, while personnel expenses in the same year were $4,340,400. ↩︎
E Bagshaw, ‘BHP, Thiess wanted to pick a fight with the unions to drive down wages’, in Sydney Morning Herald, 20 February 2018, https://bit.ly/2UUCmc6 [accessed 8 April 2020]. ↩︎
ACSI, Modern Slavery, Risks, Rights and Responsibilities. ↩︎
Kaine and Rawling, 305–331 (p. 309). ↩︎
Kaine and Rawling, 305–331 (pp. 316–317). ↩︎
CBUS Property: Sustainability Report 2018, CBUS, 2018. ↩︎
ACSI, Modern Slavery, Risks, Rights and Responsibilities, p. 14. ↩︎
CAF, ‘Cleaning Accountability Framework - About’, in Cleaning Accountability Framework Inc., 2020 [accessed 6 April 2020]. ↩︎
Daryl Browning, Chief Executive Officer, ISPT: “ISPT is proud to have been a supporter of the Cleaning Accountability Framework since its inception demonstrating how we value workers rights. Our customers value quality cleaning services when they are in an ISPT building. This leads to longer leases and ultimately returns for our investors, and the 50% of Australian workers these investors represent.” ISPT, Sustainability Report, ISPT, 2017 [accessed 6 April 2020]. ↩︎
Boersma and Nolan in CAF, ‘Cleaners are our frontline defence’, in Cleaning Accountability Framework Inc., 2020 [accessed 6 April 2020]. ↩︎
CAF, Advice Relating to Reductions in Cleaning Services, CAF, 17 April 2020. ↩︎
For a list of current projects see: https://arena.gov.au/projects/?project-value-start=0&project-value-end=200000000 ↩︎
ETU, Submission to Senate Standing Committee on Legal and Constitutional Affairs Inquiry into the effectiveness of the current temporary skilled visa system in targeting genuine skills shortages, ETU, 2018 [accessed 6 April 2020]. ↩︎
WorkCover Queensland, ‘Electrical safety on solar farms’, in WorkSafe Queensland, 2019 [accessed 6 April 2020]. ↩︎
ETU, ‘Solar Scandal’, 2019 [accessed 8 April 2020]. ↩︎
Energy Safe Victoria, ‘Who can work on large-scale solar farms?’, in Energy Safe Victoria, 2020 [accessed 6 April 2020]. ↩︎
N Robins, V Brunsting & D Wood, Climate Change and the Just Transition: A Guide for Investor Action, London, UNPRI, Grantham Research Institute, London School of Economics, Harvard Kennedy School, 2018, p. 11, https://bit.ly/3dTLp4i [accessed 6 April 2020]. ↩︎
Commonwealth of Australia, Keep It in the Regions. ↩︎
Robins, Brunsting and Wood, p. 11. ↩︎