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Executive summary

The Fair Work Ombudsman (FWO) commenced an inquiry into cleaning arrangements in Tasmanian supermarkets in response to regular reports that cleaners were being significantly underpaid.

The inquiry specifically examined the labour procurement arrangements adopted by the major supermarket brands in Tasmania; Coles [Wesfarmers limited ACN 008 984 049], Woolworths [Woolworths Limited 000 0014 675] and IGA [Metcash Limited 112 073 480].

The decision to commence an inquiry was based on intelligence, observations of consistent trends and the FWO’s experience of a correlation between multiple levels of subcontracting and non-compliance with the Fair Work Act 2009 (the Act).1 Other inquiries conducted by the FWO have shown that this is particularly the case in industry sectors where the nature of the work is low-skill and intensive, such as cleaning.2 These characteristics often attract vulnerable workers, including migrant workers. The inquiry was chiefly concerned with businesses at the top of the labour supply chain and their capacity to control settings and determine how much money was going into and through the supply chain.

In its early phase, the inquiry established that there were different practices in operation for cleaning services at the three main supermarkets. Consequently, the inquiry focused on 55 supermarket sites (43% of total Tasmanian supermarket sites), involving 31 Woolworths sites (100% of its Tasmanian sites), seven (7) Coles sites (44% of its Tasmanian sites) and 17 IGA sites (21% of its Tasmanian sites).

At Coles supermarket sites the daily cleaning requirements were undertaken by direct employees, and contract cleaners were only used for occasional strip and polish work. At IGA supermarket sites, cleaning was primarily undertaken by direct employees. However, at all Woolworths supermarket sites, cleaning services were provided by contractors and contractor employees.

This is why, as the inquiry progressed, it came to concentrate on Woolworths’ cleaning labour supply chain. The inquiry found that at the time Woolworths’ approach to procurement and oversight of its cleaning contracts had contributed to a culture of non-compliance characterised by:

  • significant underpayment of cleaners
  • multiple levels of subcontracting in breach of the direct terms of Woolworths’ own service agreements
  • networks of corporate structures reliant on the engagement of vulnerable workers
  • inaccurate and/or false records
  • difficulties in identifying the true employers of labour within a supply chain
  • inadequate monitoring and identification of who is cleaning each site.

The inquiry uncovered indications of non-compliance by contractors at 90% of Tasmanian Woolworths sites and to date, the inquiry has uncovered a range of breaches resulting in total underpayments of $64 162.54. However, it is estimated that the total underpayment quantum is much greater, as Fair Work Inspectors were impeded in quantifying employees’ entitlements by poor record-keeping, incomplete, inaccurate and / or false records, and a lack of cooperation from workers. In this respect, the inquiry observed links between the employees’ level of vulnerability, for instance their visa status, and their willingness to provide evidence.

Of the total underpayments identified, $21 332.37 has been repaid.

The inquiry has led to:

  • three referrals to the Australian Taxation Office concerning cash payments and misleading or false tax declarations
  • four individuals / entities in the Woolworths’ supply chain subject to ongoing legal proceedings.

At the time of publishing this report, there remains an ongoing investigation into a number of businesses that clean Woolworths supermarkets. We also note that at the time of publishing, Woolworths has implemented improvements in its governance and monitoring of contractors within its supply chain and is continuing to work productively with the FWO to implement further improvements.

  1. See ‘Department of Education and Child Development procurement of minibuses – November 2014’, ‘Labour procurement arrangements of the Baiada Group – June 2015’, ‘Trolley collection services procurement by Woolworths Limited – June 2016’ - Inquiry reports page.
  2. See ‘Procurement of housekeepers by four and five star hotel groups – May 2016’ - Inquiry reports page.