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Staying compliant when using labour hire contractors

Business Management

Do you know your responsibilities for workers’ rights and wellbeing when using a labour hire contractor? 

Slavery, tragically, is not a thing of the past. While you won’t find workers labouring in shackles in Australia, there are still people who exercise the power of ownership over others through forced work, debt bondage and servitude.  

NSW’s Anti-Slavery Commissioner, Dr James Cockayne, told delegates at the 2023 Fair Farms conference in October that approximately 41,000 people are living in modern slavery conditions in Australia right now.  

“Some of these people are living on farms and farming communities,” James said. “And in an echo of our blackbirding past, quite a few are coming from Pacific Island neighbours.”  

James is particularly concerned by the plight of a small number of temporary migrant workers who came to Australia under the Pacific Australia Labour Mobility (PALM) scheme who now meet the test of forced labour and debt bondage. He cited instances of sexual servitude, intimidation to dissuade workers from speaking out, substandard accommodation, people defrauded and wages unfairly docked.  

“Most of the PALM scheme is positive,” he said. “But the minority poses a serious risk to the scheme, the sector and Australia more broadly. If we don’t regulate it effectively there’s a risk of a harvest of harm for the sector.” 

Growers must provide and maintain a safe work environment for all workers, including labour hire workers. Photo: Dean Goad

Where do the risks exist?

Most modern slavery risks emerge in the process of recruitment and are perpetrated by labour hire practitioners before the workers get to the farm. The fact is that out of the 400 or so approved employers in PALM, 90 per cent are labour hire contractors (LHCs). Not all of them are ‘dodgy’, but some are – and pose a massive source of risk.  

But before growers point the finger at non-compliant LHCs, we should consider that the culture of blame shifting is part of the problem. James has written in the past about modern slavery being a system failure which will require a whole-of-system approach to repair (see Further reading).  

“This is the responsibility of everyone in the system, from supermarkets to labour hire contractors, to growers and the workers themselves,” he said.  

Is the grower responsible for workers’ rights and wellbeing when using an LHC? It’s important to understand the concept of ‘accessorial liability’, where a person or company is involved in the contravention of a workplace law, even if they are not the direct employer.  

The Fair Work Ombudsman (FWO) website explains: “When this happens, they’re treated the same way as the employer responsible for the contravention. They can be ordered by a court to pay employees’ unpaid wages and entitlements, as well as penalties for their involvement in the contravention.”  

Compliance expert Terry O’Brien told delegates to expect a “tsunami wave of compliance and regulations, driven by Europe”. Germany’s Supply Chain Due Diligence Act 2023, for example, imposes heavy fines and even jail time for company directors who have failed to address human rights abuses in their supply chains, even if they are on the other side of the world.  

Steve Dargavel, Labour Hire Licensing Commissioner at the Victorian Labour Hire Authority, noted that “hosts are often unaware that the people working for them are being exploited”, which increases their exposure of non-compliance with workplace, tax, super, and occupational health and safety laws. Growers must provide and maintain a safe work environment for all workers, including labour hire workers.   

Compliant farmers are engaged in worker compliance, take an interest, and keep validated records using excellent management systems. Photo: Darren James Photography

Red flags when using a labour hire contractor

Don’t outsource responsibility. Make a practice of always keeping good records of who is working on your property. Be engaged, talk to the workers, ask plenty of questions and look out for red flags such as evidence of unlawful deductions.  

According to the FWO’s Harvest Trail Inquiry report, the FWO identified a total of 693 individual breaches. “Underpayment or non-payment of wages (44 per cent of breaches) and failure to meet pay slip and record-keeping obligations (41 per cent) were the most common types of breaches identified, with the balance comprising casual loading, penalty rate, leave and leave loading, overtime and other technical breaches.”  

These are the main LHC red flags listed by compliance experts at the Fair Farms conference:  

  • A lack of paperwork: Dodgy labour hire contractors will do their utmost to avoid paperwork. Steve Ronson, Director of Enforcement with the Fair Work Ombudsman, said: “Paperwork is the bedrock of compliance, but for [some] LHCs, cash is king. Workers are paid cash in an envelope, with no company name, no ABN, no penalty rates and no tax details. Cash payments invariably lead to a failure to pay tax, super, insurance and more.”  
  • Unlawful deductions: PALM workers have told regulators of being unfairly charged with unreasonable or unlawful deductions, such as having to pay to access the laundry or kitchen, or paying unreasonable fees for transport to and from the farm.  
  • Substandard accommodation: Accommodation must meet the local council’s minimum standards, including occupancy limits, maintained and in good repair, cleanliness and safety, with toilets and bathing facilities. In the midst of a national shortage of housing, worker accommodation is set to become more challenging. Compliance breaches in this area are highly likely to end up in the newspapers 
  • Multi-level contracting: While multi-level contracting isn’t illegal in itself, having multiple layers in LHCs can be strongly suggestive of non-compliance. Highly complex supply chains often mean risks and responsibilities are passed on to smaller and less stable entities, while the transparency of operators lower in the chain is severely reduced.  
  • No-one in charge: The Fair Work Ombudsman reported difficulty in commencing legal proceedings against companies with majority overseas-based directors and just one domestic resident with little assets in Australia. These directors are sometimes visa holders, with working holiday, student, or returning resident visas. Steve Dargavel said there are “lots of actors operating through proxies and shadow directors”. 
  • Lack of licence (depending on the state): Labour hire licensing schemes presently operate in Victoria, Queensland, South Australia and the ACT, with the federal government advocating for a national scheme. James Cockayne commented that NSW is currently “a magnet for dodgy contractors” due to having no licensing scheme. In states with a licensing scheme, the obligation is on the grower to only use licensed providers and check the licence status of providers against their state government’s register. “Don’t trust the word of providers,” Steve warned. “Unlicensed providers will seek to misrepresent their license status. If they subcontract, nail that down, too, and find out if everyone [throughout the supply chain] is licensed.” 

Compliant farmers are engaged in worker compliance, take an interest, and keep validated records using excellent management systems.  

Don’t outsource responsibility. Make a practice of always keeping good records of who is working on your property. Photo: Abram Rasmussen Photography

Tools and resources

  • Stay updated with changes to the Pacific Australia Labour Mobility (PALM) scheme that may affect you. These include a minimum of 30 hours offered per week from July 2024, a minimum take-home pay guarantee of $200 a week, the requirement to explain deductions on pay, new accommodation rules, and other expanded protections. 
  • Consider joining Fair Farms to access tools, information and training to become a compliant and ethical employer.  
  • Consider surveying workers with an anonymous survey tool, so long as it is simple to use and available in the workers’ language.  
  • Get familiar with the Fair Work Ombudsman’s free resources 
  • Work with compliance authorities such as the FWO or state labour hire licensing authorities.  

Be engaged, talk to the workers, ask plenty of questions and look out for red flags. Photo: Darren James Photography


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