With regard to Councils, the Inquiry found:
- 14 of the 23 (61%) Councils had a non-compliant labour supply chain
- Councils failed to utilise their respective local government association for procurement support or advice
- the majority of metropolitan Councils had procurement departments which included legal support
- the majority of metropolitan Councils designed and drafted their own procurement processes, policies and contracts
- smaller Councils (mostly in regional areas) did not have procurement departments
- contracts contained generic references requiring principal contractors to be compliant with all relevant State and Commonwealth legislation but silent on any requirement relating to ‘real-time’ compliance auditing
- some contracts contained generic references to an obligation by principal contractors to seek permission from the relevant Council before subcontracting, although in many instances this wasn’t referenced
- an absence of any proactive governance measures or real-time compliance auditing once a principal contractor was engaged
- no evidence of any security workers engaged on ABNs or workers claiming to be independent contractors.
With regard to the principal contractors and subcontractors, the Inquiry found:
- 42% of principal contractors (16 of 38) and 63% of subcontractors (12 of 19) failed to comply with Commonwealth workplace laws, with every state (but not the NT) having at least one instance of non-compliance
- total underpayments of $72 250 to 54 (12%) employees from 464 employee records assessed (just over $51 410 was underpaid by subcontractors, with the remaining having been underpaid by principal contractors), resulting in the following compliance outcomes:
- four INs issued to one principal contractor and three subcontractors totalling $900
- 15 CNs issued to seven principal contractors and eight subcontractors
- 26 FCs issued to 15 principal contractors and 11 subcontractors
- one EU entered into with Melnor Security Pty Ltd
- legal proceedings commenced against VIP Security Services Pty Ltd and Adam Marcinkowski alleging adverse action and underpayments.
Case study - Legal proceedings: VIP Security Services Pty Ltd
The FWO commenced proceedings 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 employees. Among other things, the FWO is seeking declarations that VIP Security Services Pty Ltd and Mr Marcinkowski terminated one security guard for making enquiries in the course of his employment.
The Inquiry found the non-compliance was attributable to employees being denied:
- their full ordinary hourly rate entitlements
- penalty rates (weekends, public holidays)
- overtime rates.
There were also a number of concerns with regular part-time hours of work, such as employee hours not being set out in writing when they were engaged as part-time, or working more hours than their set hours without receiving overtime pay.
The NT was the only state/territory where the Inquiry did not identify any non-compliance with Commonwealth workplace laws.1
The Inquiry identified the following levels of non-compliance among businesses providing security employees to Councils:
- QLD - 70% (seven of 10)
- SA – 60% (three of five)
- NSW – 53% (nine of 17)
- TAS – 50% (three of six)
- VIC – 40% (four of 10)
- WA – 25% (two of eight).
Other findings made by the Inquiry included:
- NSW and QLD Councils had more levels of subcontracting than the other states
- In some instances, principal contractors were subcontracting without the knowledge or consent of the Councils
- in some instances, subcontracting agreements were silent on any requirement to be compliant with the FW Act
- in some instances, subcontracting agreements were silent on any measures relating to proactive governance or compliance auditing on its part
- 28 of 49 (57%) principal contractors/subcontractors were members of an employer association, and of those, 16 of 28 (57%) were found to be non-compliant
- 42% of principal contractors/subcontractors derived their employee entitlements from enterprise agreements, with nearly half of those agreements having been negotiated between unions and the employer
- 57% of these enterprise agreements (encompassing 18% of principal contractors, and 16% of subcontractors), were past their nominal expiry dates at the time of the Inquiry occurring.
The following Councils had principal contractors and subcontractors using expired enterprise agreements within their supply chains:
- QLD – Brisbane City Council, Logan City Council, Gold Coast City Council
- NSW – Sydney City Council
- SA – Adelaide Hills Council
- WA – City of Perth, Town of Cambridge
- TAS – City of Hobart
- VIC – Melbourne City Council, Moreland City Council.
IFAs were in place for three (5%) of the 57 principal contractors and subcontractors. Those three IFA arrangements were not compliant with the FW Act: some were presented as a condition of employment, others were not entered into voluntarily, and still others did not meet the specific requirements for making the IFAs, as set out in the relevant industrial instrument or FW Act2.
With regard to the employees, the Inquiry found:
- 74% of employees (344 of 464 employees) were aged over 21 years of age (national average of all employed workers is 77% - Census 2016)
- 70% of employees were from English speaking backgrounds (national average of all employed workers is 77% - Census 2016)
- security licencing requirements in each state required a qualification ranging from a Certificate II to a Certificate IV (the qualification could be obtained in any state jurisdiction)
- employees were generally unaware of workplace relations legislation including entitlements such as penalty rates of pay for weekend work, overtime and public holiday work.
- The majority of Councils audited during this Inquiry in the NT directly employed security workers, and where they didn’t, there was only one principal contractor who was fully compliant
- The FWO assesses the process that is involved in making IFAs to ensure they meet the requirements specified in the Modern Award and FW Act, however as there is no ‘better off overall’ test legislated for IFAs. The FWO does not assess wages agreed to under such an agreement as this is the responsibility of the employer under the FW Act. See individual flexibility agreements page.