The ‘Closing the Loopholes’ changes to the Fair Work Act allow an application to be made to the Fair Work Commission for an order that labour hire workers must receive the same pay as a host company’s employees, if some criteria are met.

Although orders will not take effect until 1 November 2024, applications can now be made and businesses that provide or use labour hire should begin preparing for the changes.

A recent case* about pay arrangements under an enterprise agreement gives an insight into the complexities that can arise.

The Facts

Australian Manufacturing Workers’ Union claimed that Opal Australian Paper contravened a term of its enterprise agreement that required Opal to not pay “wages and conditions” for contractor’s workers less favourably than for its own employees.

The Dispute

The union alleged that a worker who was paid $54.99 per hour should have been paid at least $59.98 per hour.

Opal argued that the union’s calculation was incorrectly based upon an overtime rate rather than a base rate and that the true rate was $51.15 per hour.

The Decision

After carefully reviewing the enterprise agreement and the employee’s pay arrangements the Fair Work Commissioner decided that:

  1. Both the union and Opal were wrong and that the correct rate was in fact $55.24 per hour.
  2. The underpayment of $0.25 was already offset by other benefits received by the worker including a travel allowance and a safety bonus.
  3. There was no contravention of the enterprise agreement.

What Should Employers and Employees Do?

The disputed term in the enterprise agreement had the same objective as the ‘same work, same pay’ laws, and the case points to some of the complexities that will arise under the new laws and the need to be prepared.

Labour hire providers should:

  • Understand the new laws and how they may be affected.
  • Understand how to interpret classification levels and pay rates under a host company’s enterprise agreement if an order under the new laws applies to their workers.
  • Review their terms of engagement with host companies.

Companies engaging labour hire providers should:

  • Understand the new laws and be prepared if an application is made that may affect their business.
  • Be ready to respond to requests by labour hire providers about rates of pay for a worker under the new laws.
  • Review their terms of engagement with labour hire providers.

Workers in labour hire should also understand the new laws and how they may be affected by them.

Some more information is available here or you can book online for an initial no-obligation chat about reviewing an employment contract or contractor agreement.

 

*Australian Manufacturing Workers’ Union v Paper Australia Pty Ltd [2023] FWC 2129