Same job, same pay orders for labour hire workers

On 13 March 2024, the Mining and Energy Union (MEU) made an application for a labour hire arrangement order (Order). This application seeks to set a protected pay rate for labour hire employees working for a host business.

This application is the first under the new Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Closing Loopholes Act) allowing employees, unions and host employers to apply to the Fair Work Commission (FWC) for an Order that labour hire employees be paid at least what they would receive under a host business’s enterprise agreement. Orders made under this application may commence operation from 1 November 2024.

MEU’s application is made under section 306E of the Closing Loopholes Act which was introduced to address the ‘labour hire loophole’. The ‘labour hire loophole’ was described by the Minister for Employment and Workplace Relations, the Honourable Tony Burke, as when ‘a business agrees on rates of pay in an enterprise agreement, and then asks labour hire workers to work for less – this is a labour hire loophole and this bill will close it.’

Factual Background

MEU is seeking Orders in relation to Workpac Pty Ltd and Workpac Mining Pty Ltd employees (collectively Workpac)who perform work at Batchfire Callide Management Pty Ltd’s (Batchfire) mine in Queensland (Mine).

MEU submitted that Workpac employees who work at the Mine:

(a)    perform the same work as Batchfire’s directly employed employees;

(b)   work under Batchfire’s control and direction;

(c)    use Batchfire’s plant and equipment;

(d)   wear Batchfire livery and personal protective equipment; and

(e)    work for Batchfire’s benefit.

Despite the above, Workpac employees are paid between $10,000-20,000 less than Batchfire employees.  

Section 306E of the Fair Work Act 2009

MEU made the application for an Order under section 306E which is titled ‘FWC may make a regulation labour hire arrangement order’. MEU argues that the use of the verb ‘may’ is a ‘misnomer’ as if the preconditions to the making of the Order is established, the Commission has a duty to make the Order.  

The preconditions to the making of the Order are as follows:

1.       the person has standing to make the application;

2.      the FWC must be satisfied that:

(a)    an employer supplies or will supply, either directly or indirectly, one or more employees of the employer to perform work for a regulated host; and

(b)    a covered employment instrument that applies to the regulated host would apply to the employees if the regulated host were to employ the employees to perform work of that kind; and

(c)     the regulated host is not a small business employer.

Limitations

The Closing Loopholes Act, under section 306E(1A), introduced a significant carve out of section 306E. Specifically, the FWC must not make an Order unless it is satisfied that the performance of the work isn’t for the provision of a service rather than the supply of labour.

Secondly, section 306E(2) limits the powers of the FWC in that it must not make an Order if it is satisfied that it is not fair and reasonable in the circumstances to do so. In making this assessment, the FWC will have regard to a number of factors detailed in the Act, including the history of industrial arrangements applying to the regulated host and employer.

According to MEU, all of the preconditions have been met and none of the limitations apply in the circumstances. MEU submits that the Order should commence on 1 November 2024 as this is the date in which the section commences under the new amendments.

Effect of an Order

If the FWC grants the Order, commencing from 1 November 2024, the supplier must pay the hosted employees no less than the ‘protected rate of pay’ for the work being performed. For the purpose of this application, protected rate of paymeans the full rate of pay that would be payable to the worker if they were covered by the enterprise agreement of the host business.

We anticipate a steady increase in applications of this kind from now until November 2024 and beyond. Labour hire companies and host businesses should ensure that they are well prepared.

If you would like to discuss the possible implications of the changes, please contact the employment team at Pragma Lawyers by emailing hello@pragma.law or by calling (08) 6188 3340.

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Image source: Mining and Energy Union