With another fruit picking season in Australia have come the usual reports of “dodgy” labour hire contractors operating in farms around the country.

Italian satirical news program Striscia recently picked up the issue of farm workers, presenting a video titled “The Australian dream”. The video documents the experience of an Italian Working Holiday Visa maker complaining about poor living and working conditions on some Australian farms.

A growing problem

In August 2013 the Fair Work Ombudsman started a three-year campaign to help employers and employees in the farm sector understand their rights and obligations. The Ombudsman has particularly focused on labour hire sham arrangements, used by employers who engage staff through third party contractors to avoid legal responsibilities. In many of these cases, employees - very often migrants on Working Holiday Visas engaged by a middleman who runs a backpackers’ hostel and offers accommodation as well as work - miss out on basic rights like minimum wages, penalties, loadings, overtime, allowances and leave.

Labour hire, also known internationally as “agency work”, involves a triangular work arrangement in which an intermediary (the work or labour hire agency) supplies workers to a company (the host) for a certain period of time, while maintaining an ongoing relationship with the parties throughout that period. Labour hire is not illegitimate per se, but it generally becomes illegal when it is used to undercut workers’ conditions.

The increasing use of labour hire arrangements is widening the gap between standard and non-standard workers (insiders v outsiders), at a time when insecure work arrangements are becoming more common. On the other hand, agency work and the presence of specialised intermediaries that facilitate the job matching process is deemed essential for the good functioning of the labour market, providing greater flexibility for businesses and more opportunities for workers.

In Australia, unlike in many European countries, labour hire workers are not defined by the law as employees of the agency and there is no general legal principle of equal treatment. There are also no regulatory mechanisms, such as the “joint-liability regime” adopted by many jurisdictions in Europe, or like the “joint-employment doctrine”, developed in the US, to apportion liabilities between the agency and the host. Finally, there are no regulatory requirements (such as financial guarantees, authorisation of operation or limitation on scope of activities) for private agencies to act as intermediaries for the supply of work.

Risks for employees

The first issue for labour hire employees who want to file a claim is to identify the employer. In the absence of legislation, this task is left to the common law, according to which the agency is normally recognised as the employer, unless it acts as a mere screen between the employees and the host company. Of crucial importance when assessing whether or not the labour supplier is the real employer of the workers it supplies, is the commercial practicality of its business and the authenticity of the underlying arrangements.

In a recent legal case brought by the Fair Work Ombudsman, the Federal Court deemed as sham contracting an arrangement between a farmer and two labour-hire agencies which was merely orchestrated to avoid paying overtime to the workers being supplied. As a result, the host company (i.e. the farmer) was deemed to be the “true” employer, with all the associated responsibilities.

The fact that most labour hire workers are hired as casual employees makes them even more vulnerable in case of dismissal. To bring an unfair dismissal claim first they must provide evidence of the dismissal despite remaining on the books of the agency as casuals. Secondly, they must demonstrate the unfairness of the dismissal served by the agency, in circumstances where the latter normally receives instructions from the user company to no longer supply the worker.

Despite the lack of general legislative provisions guaranteeing the equal treatment of labour hire employees, clauses ensuring that these workers are treated on an equal footing with direct employees are now present in most Modern Awards, including the Horticulture Award. However, when the agency is deemed to be the employer, the unreliability of most labour hire operators and the absence of a joint liability regime represent a hurdle for these workers to effectively enforce their rights.

Despite calls for change, the Australian labour hire sector remains mostly unregulated. During the Victorian election campaign, the Victorian Labor Party promised the introduction of a licensing system for labour hire agencies in Victoria.

More extreme is the proposal of newly elected Upper House member, James Purcell, who suggested “the government should consider prohibiting the use of labour hire firms to avoid exploitation of overseas workers on either Working Holiday or other types of skilled visas”.

The current framework regulating labour hire in Australia appears inadequate to ensure fairness for labour hire workers in general and for farm workers hired through labour hire contractors in particular. This can be largely blamed on the absence of specific regulations to allocate responsibilities between the agency and the host company. The lack of a system ensuring the reliability of labour intermediaries clearly exposes Australian labour hire workers to additional significant risks, making them particularly vulnerable in the face of fly-by-night operators. More work is needed to address this imbalance and bring Australia in line with international standards in this area of the law.