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Executive Summary

The Fair Work Ombudsman [FWO] conducted an Inquiry [the Inquiry] in response to industry concerns that security employees were being underpaid in the local government sector by forcing prices to unsustainably low levels.

Following a comprehensive information and awareness campaign, the Inquiry focused on 23 local government councils1 [Councils] and examined the labour procurement arrangements relating to the engagement of security services.

The Inquiry found:

  • every state had at least one instance of non-compliance with Commonwealth workplace laws2
  • 49 security businesses engaged across 57 different contracting arrangements3
  • security services for Councils are predominantly provided by employees of principal contractors4 and subcontractors5, rather than by direct employees of the Councils
  • the ‘further away’ a business was from the Council in the supply chain, the greater the non-compliance; subcontractors had 21% higher levels of non-compliance than the principal contractors who had a direct relationship with the Council:
  • 63% of subcontractors (12 of 19) failed to comply with Commonwealth workplace laws, compared to 42% of principal contractors (16 of 38).
  • 14 of the 23 (61%) Councils had non-compliance within their labour supply chain. Of those 14 labour supply chains:
  • four Council labour supply chains had non-compliant subcontractors
  • five Council labour supply chains had non-compliant principal contractors and subcontractors
  • five Councils had non-compliant principal contractors.

The Inquiry found a range of breaches of Commonwealth workplace laws:

  • total underpayments of $72 250 to 54 (12%) employees from 464 employee records assessed (all of which have since been rectified)
  • just over $51 400 was underpaid by nine subcontractors, with the remainder underpaid by five principal contractors
  • four Infringement Notices [IN] issued to one principal contractor and three subcontractors
  • 15 Compliance Notices [CN] issued to seven principal contractors and eight subcontractors
  • 26 Formal Cautions [FC] issued to 15 principal contractors and 11 subcontractors
  • one Enforceable Undertaking [EU] entered into with Melnor Security Services Pty Ltd, the principal contractor engaged by Tamworth City Council for its Tamworth Country Music Festival6
  • legal proceedings commenced against VIP Security Services Pty Ltd (in liquidation) and director Adam Marcinkowski alleging contraventions affecting five employees undertaking security work on behalf of the Gold Coast City Council, including adverse action and underpayments of almost $16 000 to three of those employees7

The most common reasons for non-compliance related to employees being paid below minimum award hourly rates as well as underpayment and / or non-payment of penalty rates (weekends, public holidays), overtime and issues around regular part-time hours of work.

  1. The Australian Capital Territory does not have local government councils so it fell outside the scope of this Inquiry external-icon.png.
  2. The Northern Territory had no instances of non-compliance as they engaged predominantly direct employees rather than contractors supplying labour.
  3. Some businesses had multiple contracts with one Council or contracts with more than one Council.
  4. For the purpose of this Inquiry, principal contractors are those who contract directly to local government councils to provide security workers.
  5. For the purpose of this Inquiry, subcontractors are those who are engaged by principal contractors to provide security workers to Councils, rather than dealing directly with the Councils.
  6. Copy of EU available on 2016-17 Enforceable Undertakings page.
  7. Media release: No VIP treatment for guards allegedly dismissed, underpaid by Gold Coast company