The Fair Work Ombudsman has taken legal action after its investigation discovered 11 overseas workers were underpaid $37,471 for cleaning work at the MCG after AFL matches in 2014.
The 11 cleaners were employed by First Group of Companies Pty Ltd, a now-deregistered company ISS had subcontracted between 2009 and 2014 to provide post-event cleaning services at the MCG.
ISS admitted in court that the company knew that the rates it paid First Group of Companies in 2014 were “not sufficient to cover the employees' entitlements” and that it was aware of the unlawfully low rates First Group of Companies was paying workers. ISS admitted its conduct breached workplace laws.
The Fair Work Ombudsman commenced its investigation into the MCG’s supply chain for cleaning staff in 2014 in response to media reports and intelligence suggesting significant compliance issues.
A team of six Fair Work inspectors made a surprise visit to the MCG after the AFL preliminary final between Hawthorn and Port Adelaide in September 2014 to speak to cleaners.
The inspectors spoke to about 44 cleaners between 9pm and just after midnight.
Majority of the workers were international students from India, the Philippines, Colombia and Brazil. Many said they had obtained work at the MCG through word-of-mouth and friends.
The Fair Work Ombudsman alleged First Group of Companies employed the cleaners under sham contracts, treating them as independent contractors despite their correct lawful classification as employees.
The cleaners were paid flat rates between $18 and $25 an hour which was less than the minimum pay and entitlements under the Cleaning Industry Award 2010. Under the award, the workers were entitled to rates of between $18 and $46 for some shifts.
Fair Work Ombudsman Natalie James said the significant penalties should serve as a wake-up call to any head contractors who thought they can turn a blind eye to non-compliance by the subcontractors they engage.
She said, “This case provides a clear example of what can happen if you fail to actively manage your contractors in high risk sectors.”
“The Fair Work Ombudsman will hold-to-account all those involved in exploitation, from head contractors down, and they risk serious consequences if they fail to take steps to ensure that all subcontractors in the supply chain treat workers lawfully.”
“Price driven procurement that disregards the cost of wages and the dynamics in the market is a recipe for exploitation of vulnerable workers.
“Proving accessorial liability can be complex and I’m pleased that in the cases we have been able to obtain the evidence necessary to hold those involved in breaches of workplace laws to account.”
ISS admitted in court that it had been a “third party” to underpayments.
However, Judge Suzanne Jones said that "in light of the admissions" made by ISS "it is simply incorrect to describe [ISS] as a 'third party', if the use of that word is designed to minimise or reduce [ISS's] responsibility for its involvement in the contraventions.”
Judge Jones also imposed penalties of $17,926 against each of the former owner-operators of First Group of Companies – Sharad Patel and Sidarth Luthra – for their involvement in sham contracting, frequency of pay and pay slip contraventions by their company.
A total of $168,070 in penalties was secured by the Fair Work Ombudsman in the case.
First Group of Companies rectified the underpayments in full before it was deregistered.
The Ombudsman said she is pleased that ISS has since taken steps to improve oversight and management of their supply chain, including auditing all of its subcontractors for compliance with workplace laws, reviewing its procurement system to ensure greater insight into the wage arrangements of prospective subcontractors, implementing training about workplace laws for its managers and rolling out an electronic sign-in system to monitor employees’ times of work and calculate entitlements.
“It is clear that head contractors have a vital role to play in promoting workplace compliance within their labour networks, and it is encouraging to see that ISS has learnt from its mistakes and has taken concrete action to prevent such breaches from occurring again.”
Ms James added that her agency is prepared to take legal action in cases where vulnerable workers such as visa holders have been deliberately exploited.
