New protections under Victoria's Labour Hire Licensing Act

In August this year, the Andrews Labor Government released draft regulations to support the new Labour Hire Scheme that will protect the wages and conditions of some of Victoria’s most vulnerable workers. The proposed regulations focus on workers at the highest risk, including horticulture, the meat industry and cleaning.

In this blog, I explain the significance of the laws for vulnerable workers.

What is labour hire?

Labour hire involves workers who are engaged to work for a host business through a labour hire agency. The roles that labour hire workers take on are usually short-term, carried out on a casual basis or fixed contract. The labour hire agency generally pays the worker and is generally seen as the worker’s ‘employer’ even though the host business has control over the worker’s duties and performance.

The main issue facing workers in these labour hire arrangements is that there is generally no contract between the host business and labour hire worker. In this sense, labour hire workers are akin to contractors. In both instances, certain difficulties can arise when an employment relationship cannot be made out. For example, contractors are generally not protected from unfair dismissal.

What are the benefits of labour hire?

Labour hire arrangements can offer flexibility for host businesses who experience fluctuating work demands. For example, businesses can conveniently and seamlessly cover staff shortages due to staff illness or where production of certain goods occur in a cyclical fashion. Additionally, labour hire arrangements can offer workers flexibility of working hours and diversity of work and skills.

What are the disadvantages of labour hire?

A common problem is that the relationship between labour hire agencies and workers is that there is not a direct employment relationship. This means that workers usually do not benefit from certain protections or entitlements that might arise under a modern Award. As a result, labour hire workers are largely not regarded as direct employees and as such may often be considered second-class employees. The use of large numbers of casual labour can therefore create tensions and division within the workplace.

Job insecurity has become a high profile issue and at the forefront of discussion has been the role of labour hire within established industries. The replacement of permanent workforces by casuals who have been rehired under labour hire contracts at large companies, such as Toll, has been at the centre of many recent industrial disputes.

Many of the workers who are employed under these new labour hire contacts do not know whether or not they are required to attend work the following day. Nor do labour hire workers often receive penalty payments for overtime. Annual and sick leave entitlements are also often absent from short-term work arrangements.

While the underlying problems in this issue can only effectively be addressed by national legislation, the Victorian Government has attempted to improve the situation for those who are working under labour hire contracts.

How will the new laws help protect labour hire workers?

The Labour Hire Licensing Bill 2017 passed the Victorian Parliament in June this year. While it is not yet clear when the legislation will take effect, it will be no later than 1 November 2019. A new Labour Hire Licensing Authority will be responsible for implementing the Labour Hire Licensing Act 2018.

The scheme is a response to the Victorian Inquiry into the Labour Hire Industry and Insecure Work which uncovered evidence of wide-spread exploitation of employees across Victoria in the form of abuse, bullying and sexual harassment. The new laws which will regulate the labour hire industry aim to better protect labour hire workers from being underpaid and exploited by labour hire businesses and hosts.

Under the scheme, among other things, providers of labour hire services will be required to hold a licence and host businesses will be required to only use licensed providers. For example, this may address some concerns around ‘black market labour gangs’ that exploit foreign workers on work visas.

The scheme will also ensure that all host businesses are legitimate businesses and can meet strict licensing standards in regard to minimum wages, safe working conditions and satisfactory accommodation. To achieve this, labour hire providers will be examined in relation to past performance and future capacity to comply with obligations under various laws including superannuation, tax, safety and migration.

While better regulation of the industry will help improve matters, the fundamental issues remain to be addressed.