The Fair Work Commission (FWC) has recently made a significant ruling under the new “Same Job, Same Pay” legislation, marking a pivotal moment for employers utilising labour hire workers. This landmark decision arose from a case involving a Queensland coal mine, setting a precedent that could have wide-ranging effects on employment practices across various industries.
Key Takeaways from the Ruling
In this inaugural case, the FWC determined that over 300 labour-hire workers at a Queensland coal mine were performing tasks identical to those of the mine’s permanent employees under similar conditions. Consequently, these workers are poised to receive substantial pay increases, up to $20,000 annually, starting this November when the Same Job, Same Pay orders take effect.
This ruling underscores the need for organisations, particularly those in heavily unionised sectors, to reassess their employment strategies to ensure compliance with the new legislation.
Background of the Case
The Queensland coal mine employs around 350 permanent workers under an enterprise agreement and augments its workforce with about 320 labour hire employees. The Mining and Energy Union (MEU) argued that the labour hire workers were performing roles indistinguishable from those of the permanent staff and should therefore receive equivalent pay.
The FWC found compelling evidence that labour hire and permanent workers were treated similarly: they attended the same pre-start meetings, used the same equipment, wore the same uniforms, and followed identical procedures for leave requests. This led to the conclusion that the labour hire workers were entitled to the same pay rates as permanent employees.
Notably, neither the labour hire company nor the host employer contested the application, accepting the order to align the labour hire workers’ pay with that of the permanent employees.
Understanding the “Same Job, Same Pay” Framework
The Same Job, Same Pay legislation, passed in December last year as part of the Closing Loopholes Bill, aims to prevent employers from using labour hire to undercut wages and conditions set out in enterprise agreements. The law applies to businesses with 15 or more employees covered by an enterprise agreement and supplemented with labour hire workers. Sectors such as construction, manufacturing, transport, and healthcare are expected to be significantly affected.
Under these laws, the FWC can order labour hire companies to pay workers the same amount as permanent employees if they have been working for the host employer for over three months and perform the same work. While these orders will not be implemented until November, applications can be submitted beforehand, as demonstrated by this case.
Additionally, anti-avoidance provisions are in place to prevent schemes designed to circumvent the legislation. This includes attempts to classify labour hire workers as contractors or rotating workers to stay under the three-month threshold, with significant penalties for deliberate avoidance.
Impact on the Future of Labour Hire
This ruling may prompt employers, especially in unionised industries like mining, to reconsider their reliance on labour hire. While some companies may be willing to pay a premium for the flexibility labour hire offers, others might prefer to hire employees directly to avoid potential financial implications.
Aaron Goonrey, Partner at Pinsent Masons, advises employers to conduct thorough analyses of their labour hire workforce and the potential costs of complying with the Same Job, Same Pay orders. Understanding the financial and operational impacts will enable businesses to make informed decisions about their employment practices.
Preparing for Compliance
For employers utilising labour hire workers under an enterprise agreement, it is crucial to evaluate the makeup of their workforce and the potential ramifications of Same Job, Same Pay orders. Engaging all relevant business stakeholders, including finance, HR, and operational teams, to assess the potential costs and benefits will be essential in adapting to the new legal landscape.
By proactively addressing these challenges, businesses can better navigate the changes brought by the Same Job, Same Pay legislation, ensuring compliance while maintaining operational efficiency.
Disclaimer: The information provided in this blog was accurate at the time of writing and is intended as general advice. For specific advice, please call AHR on 1800 577 515.
