Govt hiring strategy could breach workplace laws


Govt hiring strategy could breach workplace laws

A Victorian Government department’s employment practices risk breaching federal workplace laws, a Fair Work Ombudsman inquiry has revealed.


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A Victorian Government department’s employment practices risk breaching federal workplace laws, a Fair Work Ombudsman inquiry has revealed. 

Fair Work inspectors investigated the Department of State Development and Business Innovation (DSDBI) after a major union alleged it was involved in sham contracting.

While a detailed examination has found no evidence of sham contracting, it has identified a “heightened risk” that in seeking to achieve financial savings, the department may contravene the Fair Work Act.

If found guilty, the department could face fines of up to $51,000 per breach and individual managers could be liable for penalties of up to $10,200 per breach. 

As a consequence, the Fair Work Ombudsman has urged DSDBI to conduct an urgent, comprehensive review of its policies and processes.

DSDBI has been asked to report back within six months.

Risk of non-compliance

A statement of findings released today says the Fair Work Ombudsman expects DSDBI, as a large employer with a high degree of sophistication and resources, to take the necessary action to reduce its risk of non-compliance with federal workplace laws. 

The 22-page report follows allegations raised in November 2013 by the Victorian branch of the Community and Public Sector Union (CPSU).

The Fair Work Ombudsman began an inquiry in December 2013, focused primarily on whether DSDBI had breached Section 357 of the Fair Work Act by misrepresenting employment as independent contracting.

The inquiry included a review of key departmental policies, procedures and contracts and face-to-face interviews with managers, workers and union representatives.

While there was no evidence of sham contracting, the inquiry found:
  • The way in which DSDBI proposed to engage certain workers as independent contractors increased its risk of non-compliance with workplace law;
  • Some workers may not be receiving their correct entitlements if they are characterised as independent contractors instead of employees,
  • The department’s workforce was reticent to complain publicly, and
  • DSDBI had not responded to or acted upon recommendations made previously by the Victorian Auditor-General’s Office about its procurement of labor.

Comprehensive review required

It recommends DSDBI: 
  • Conduct a comprehensive review of its labor engagement policies and processes to ensure they comply with federal workplace law,
  • Audit all independent contractors recruited through labor-hire agencies who undertake work traditionally performed by public service employees,
  • Ensure all workers are receiving their correct wages and entitlements and back-pay any outstanding entitlements it identifies, and  
  • Obtain legal advice regarding the use of independent contractors for work traditionally performed by public servants.  

Employees were 'fearful' of reporting concerns

The statement of findings details how Fair Work inspectors looked specifically at five of the department’s procurement processes, raising concerns about three that could potentially result in the misclassification of employees.

During their investigation, Fair Work inspectors noted that Victorian public service employees were “fearful of reporting their concerns, except on a strictly confidential basis.”

The Fair Work Ombudsman found “a connection” between various Victorian budget announcements dating back to 2011 and DSDBI’s labor procurement practices in 2013.

“In particular, in seeking to achieve savings required by the various budget announcements, DSDBI had commenced experimenting with a changing operating model characterised by heightened risk and non-traditional forms of labor engagement,” the report says.

The Fair Work Ombudsman also refers to a Victorian Auditor-General’s Office (VAGO) report tabled in the State Parliament on November 27, 2013, which examined the use of “contract” and “temporary” staff across 11 departments, including DSDBI.

VAGO concluded that extended periods of engagement suggested “these resources were being used to fill permanent roles” and cautioned the departments about their engagement practices, stating that “it is unclear whether individuals employed as contract staff for extended periods are legally ‘employees’ entitled to accrue employee benefits”.

The Fair Work Ombudsman report notes that while all departments had an opportunity to respond to VAGO’s report, DSDBI did not do so.

Sham contracting

Deputy Fair Work Ombudsman (operations) Michael Campbell said sham contracting occurs when an employer deliberately attempts to disguise an employee/employer relationship as an independent contracting relationship.

“By disguising employment as independent contract work, employers avoid their responsibility to provide employees with their correct minimum entitlements, such as ordinary hour wages, overtime, penalties, allowances, leave payments, superannuation and possible tax exemptions,” he said.

It is the second time in months that the Fair Work Ombudsman has had to remind a state government department of its obligations under federal workplace law.

In December, the Agency cautioned the South Australian Department of Education and Child Development (DECD) about a lack of corporate governance over transport services for children with special needs and urged it to take immediate steps to rectify the deficiencies.

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