This chapter provides background information on the characteristics of the cleaning industry that make it 'high risk' for worker exploitation.
A high risk industry for the exploitation of workers
The committee heard that the cleaning industry was particularly prone to the exploitation of workers, due in large part to two characteristics:
the demographic vulnerability of the workers commonly employed in the cleaning industry; and
the prevalence of complex employment chains and contracting arrangements.
In particular, the committee heard that the use of such fractured employment relationships was often designed to diminish or exclude those who use contracting arrangements from responsibility for worker exploitation, sham employment arrangements and wage theft.
The Federation of Ethnic Communities' Councils of Australia (FECCA) stated that cleaning work is often 'low paid, insecure, isolating, dangerous and difficult' and noted that the exploitation of migrants and Australians from culturally and linguistically diverse (CALD) backgrounds in the cleaning industry had been highlighted many times by community organisations, parliamentary inquiries, unions and the Fair Work Ombudsman (FWO).
The FWO submitted Australian Bureau of Statistics data that revealed particular characteristics of the cleaning workforce. For example:
50 per cent of workers were born overseas (compared to 30 per cent of all employed persons in Australia);
40 per cent spoke a language other than English at home (compared to 21 per cent of all employed persons in Australia);
of those who spoke a language other than English at home, 19 per cent either did not speak English at all, or did not speak English very well (compared to 8 per cent of all employed persons in Australia);
28 per cent did not have Australian citizenship (compared to 12 per cent of all employed persons in Australia);
12 per cent were current students; and
68 per cent were employees, as opposed to contractors or owner/managers (compared to 85 per cent of all employed persons in Australia).
The FWO acknowledged that these characteristics may increase the vulnerability of workers in the cleaning industry to exploitation.
The Law Council of Australia (Law Council) noted that in terms of job entry requirements, the cleaning sector has minimal language or skill set barriers. It commented that this made the sector attractive to migrants, international students, and young people. This position accorded with the data put forward by the FWO.
Maurice Blackburn Lawyers (Maurice Blackburn) made a similar point, stating that vulnerable demographics often employed in the cleaning sector included:
individuals from CALD backgrounds;
individuals returning to the workforce following family responsibilities;
individuals who had left school early; and
Employment chains conducive to exploitation
WEstjustice Community Legal Centre (WEstjustice) which operates in the western suburbs of Melbourne, observed that its clients from the cleaning sector frequently encountered exploitative work arrangements:
Exploration is rife. Our cleaning clients are frequently engaged in sham arrangements and routinely underpaid. One fifth have suffered a workplace injury and one in six workers complained of discrimination or bullying. Clients were paid as little as $13 an hour, and some received no income at all. Some clients had been forced to pay for 'training' and then left out of pocket and without a job.
JobWatch, an employment rights community legal centre which operates in Victoria, advised that it was aware of 'widespread problems' for workers engaged by entities (such as cleaning companies, labour hire companies and sole traders) that contract with client entities to provide cleaning services. The problems encountered by these workers included:
loss of entitlements due to a change in employer, while doing the same work for the same client;
employer insolvency and phoenix activity;
work health and safety breaches; and
exploitation of temporary visa holders.
The Employment Law Centre of Western Australia also noted that it dealt with a number of clients from the cleaning industry who had experienced similar problems.
United Voice, one of the key unions which represents workers in the cleaning industry, identified that due to the nature of contract cleaners as a 'highly dispersed' and 'hidden' workforce, the full extent of their exploitation was difficult to determine. It reported that in its experience of the retail cleaning sector, contraventions of the Cleaning Services Award 2010 are 'extremely common' and 'exponentially higher' once a second-tier or more of sub‑contracting is introduced.
United Voice explained the typical areas of award non-compliance:
Most cleaners working in supply chains are not receiving payslips, are paid a flat cash rate for all hours worked (and so are not paid minimum wages, part-time allowances, night shift, weekend or public holiday penalty rates), do not receive overtime, do not receive superannuation, and are often unable to provide a clear indication of the business which has employed them.
United Voice posited that the primary reason for the pervasive non‑compliance with legal obligations in the retail cleaning industry is the 'cutthroat nature of the competitive contracting system'.
The Cleaning Accountability Framework contended that the cleaning industry is 'more susceptible' to exploitative practices given that in addition to a highly vulnerable migrant workforce, it is labour intensive, subject to outsourcing and subcontracting, and lacking in consistency and transparency in pricing.
The Centre for Business and Social Innovation at the University of Technology Sydney pointed out that the cleaning sector is characterised by 'aggressive price competition'. It noted that as the work has minimal skill requirements and low barriers to new business entrants, this created a downward pressure on wages and conditions for workers.
Mr Josh Bornstein, Principal Lawyer for Maurice Blackburn, drew the committee's attention to the rise of employment arrangements involving some kind of intermediary between the entity receiving the services and the worker:
If there is a single most important change in the labour market to highlight today, it is that large companies have got out of the business of directly employing staff. Since about the 1970s, the trend has been that large companies have, instead of employing people directly, including cleaners, decided to cease that employment and instead source those workers through different arrangements, where there is an intermediary—third party, labour hire company or supply chain—involved.
The Maurice Blackburn written submission elaborated on this concept and set out why these arrangements are, by their nature, prone to the exploitation of workers:
Large retailers and corporations are able to outsource their cleaning requirements through a competitive tender process. Through this, they are able to dictate pay rates – by selecting the successful tenderer on the basis of cost – without having the direct responsibility to the cleaners for their employment terms and conditions.
The emergence of this middle party – the employer of the cleaners – has led to a disconnect between the development of purchasing policies by retailers/corporations, and the impacts those policies have on the ones who actually provide the service.
These middle parties – the business operators who win the tender to provide services must figure out how to provide the services, and derive their own profit, in a highly competitive marketplace where the success of the tender is determined primarily by the lowest bid. One obvious way they can look to cut costs is in employees’ pay rates.
The Australian Council of Trade Unions (ACTU) also raised concerns regarding the trend to outsource cleaning services:
We have long held concerns about the parlous state of worker’s rights in the cleaning industry – an industry in which wage theft, wage stagnation, insecurity and poor working conditions are entrenched features. For many years the twin influences of outsourcing and the industrial relations systems’ focus on technical employers rather than those who actually set wages and conditions have created powerful rationales within the cleaning industry for worker exploitation. Most workers in the industry are employed by an entity that has been forced to bid for work doled out by large corporations who have huge incentives to keep prices low. Many are attempting, within the current [industrial relations] framework, to bargain with an entity that, despite being their employer, has absolutely no control over the amount of money available for wages or the conditions they work under.
United Voice strongly echoed these points. United Voice also observed that the money allocated to cleaning contracts is generally fixed, with the going tender price typically remaining static and unresponsive to rises in labour costs, public liability insurance expenses and the consumer price index:
Any cleaning contractor who wishes to survive in such an environment must conform with the de facto norms of the industry, which involve ruthless cost-cutting, promises to perform the work at or below cost, and doing and saying ‘whatever it takes’ to win contracts in the short term.
Despite cleaning companies’ claims to superior levels of ‘innovation’ and ‘efficiency’, it remains the case that many contracts are for sums that are so low that they cannot possibly be adequate to enable the contractor to deliver quality cleaning of the areas involved without either paying unlawfully low wages, intensifying work and/or cutting costs on equipment or chemicals.
Contractors know, however, that bidding for and accepting such contracts is the price of doing business.
Under such industry conditions – where adhering to the law is likely to send you out of business, and the chance of being punished for non‑compliance with labour laws is low – worker exploitation becomes a rational business decision.
The ACTU also emphasised this reality, stating that the current state of the cleaning industry created an environment where 'obeying the law is a recipe for financial ruin', and subsequently 'worker exploitation has become a rational business model'.
The ACTU further argued that the current framework allowed large corporations to retain all the power but none of the responsibility:
Large retailers, who essentially control the wages and conditions of cleaners through their contracting, have been able to establish the legal fiction that they are detached from the workplace entitlements of workers in the industry – leaving them with all of the power and none of the responsibility.
Professor Allan Fels who chairs the Commonwealth Government's Migrant Workers' Taskforce, observed that the exploitation of workers not only causes harm to the individuals involved, but also to the Australian business community:
The exploitation of these vulnerable workers can cause personal detriment to the individual, to their family members and to their dependants. Obviously, this also has some negative effects on Australian business. It makes it hard to compete if the business next door is cutting prices because they're paying wages below the minimum.
Chapter 5 of this report examines in more detail the negative impact of fragmented employment chains on the treatment of workers.
The committee is deeply concerned by the trend in contracting out cleaning services through convoluted supply chains with murky lines of responsibility.
The committee considers that such contracting and sub-contracting arrangements are being intentionally used by large corporations to dilute the responsibility and accountability for the basic legal entitlements owed to workers at the bottom of the chain.
The committee is of the opinion that these arrangements create a perverse incentive for entities at the top of the supply chain, often large, profitable, well‑known corporations and businesses, to deliberately distance themselves from the legal entitlements of the individuals who are providing labour for them.
Finally, the committee acknowledges of the work being done by Professor Fels and the Migrant Workers' Taskforce. The committee notes the extension of time granted to the Taskforce and that Professor Fels indicated he anticipates the final report will be submitted to the Government no later than November 2018. In this context the committee notes Professor Fels' public statement from March 2018 that the 'Taskforce will provide a Progress Report to Minister Cash [the former Minster for Employment] shortly. In this report, we will flag some early recommendations in areas canvassed by the Taskforce, and flag the work the Taskforce will focus on over the next 6 months.' As far as the committee is aware, the Government has not released or responded to the Progress Report.
The committee awaits with interest the publication of the Taskforce's final report and urges the Government to release the report immediately and to respond without delay. The committee also encourages the Government to consider the evidence and recommendations of this report in its deliberations on the final Migrant Workers' Taskforce report.
The committee recommends the Government take immediate steps to protect vulnerable workers subject to wage theft and exploitation by companies who continue to operate with impunity.
The committee recommends that upon receipt of the final report of the Migrant Workers' Taskforce, the Government:
immediately publicly release the report along with the Taskforce's Progress Report; and
within a month, publicly release its response.
The committee further recommends that the Government take into account the evidence and recommendations of this committee's report in preparing its response to the Migrant Workers' Taskforce report.