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Inquiries into supply chain networks

We continue to tackle the systemic issues of non-compliance and exploitation in labour supply chains. Past inquiries we have conducted have consistently shown a correlation between multiple levels of subcontracting and breaches of workplace laws, usually involving vulnerable workers performing low-skilled work.

Two inquiries that we reported on in 2017-18 gave us a greater understanding of how industries that commonly rely on labour contracting operate, and the drivers behind non-compliance.

Our inquiry into the procurement of security services by local government found that the ‘further away’ a business was from the council in the supply chain, the greater the levels of non-compliance: 63% of subcontractors were found to be non-compliant compared to 42% of principal contractors who had a direct relationship with the council.

Our inquiry into cleaning arrangements in Tasmanian supermarkets, and specifically the labour procurement contracting arrangements adopted at Woolworths stores, found an alarming non-compliance rate of 90% by contractors and sub-contractors at these sites, and underpayments of over $64 000. As a result of these findings, we have made referrals to the Australian Taxation Office (ATO), initiated two litigations, and as of August 2018, Woolworths has publicly committed to monitoring its network of cleaning contractors through a new compliance partnership with us1.

Major companies have an ethical responsibility to take the lead in promoting a culture of compliance with workplace laws in their contracting networks. While it is the direct employer’s responsibility to ensure workers are receiving their proper entitlements, the top of the supply chain has an obligation to ensure that unlawful conduct is not occurring within their business. Where operators deliberately ignore exploitation in their supply chains, we use every lever available to ensure they are held accountable. In 2017-18, we successfully relied on accessorial liability laws to secure over $130 000 in court-imposed penalties against a cleaning company who sub-contracted its services to the MCG2.

The FWO also supports and encourages businesses in monitoring and managing their supply chains. Industry-driven initiatives play a key role in fostering sustainable, long-term cultural change. Our Proactive Compliance Partnerships with Woolworths have seen the company commit to monitoring and regulating its network of trolley services and cleaning contractors, to ensure its contractors and any sub-contractors are paying workers correctly and meeting their obligations.

We continue to be involved in and support the Cleaning Accountability Framework - a multi-stakeholder industry-led initiative that seeks to improve labour and cleaning standards in Australia. Our supply chain resources provide practical steps that help businesses take responsibility for their labour supply chains and networks. These guides were created in consultation with business, unions and employer organisations where contracting work is most common. In 2017-18, these resources were collectively viewed over 15 000 times.

1. The Proactive Compliance Partnership with Woolworths regarding their cleaning services supply chain was signed on 24 August 2018.

2. FWO media release: Penalty against MCG head contractor over underpayments a “wake-up call”, 29 May 2018