Doug Cameron (NSW, Australian Labor Party) Share this | Hansard source

I rise on a matter of public interest concerning sham contracting and the exploitation of foreign workers. Since coming to this place in 2008 I have spent a good deal of my time in budget estimates asking questions about what various agencies are doing to investigate and provide remedies for the growing numbers of workers who are being required to work as contractors when they are in fact employees. My questioning and probing has been met, until recently, with what I can only describe as a wall of indifference.

Nowhere has this indifference been more apparent than at the Australian Building and Construction Commission. In September and November 2008, the ABCC conducted what it described as an audit. Thirty-nine industry subcontractors were given a few weeks notice that they would have their employment arrangements audited to check whether or not they were engaged in sham contracting arrangements. Not surprisingly, the ABCC failed to find any evidence of sham contracting in the industry and, in an instant, made themselves a laughing-stock in the industry. Anyone with the faintest knowledge of the building and construction industry knows that sham contracting is rife. On 18 March this year, I attended a briefing in this building with representatives of the CFMEU and construction industry contractors working on projects in both the ACT and New South Wales. The contractors, legitimate employers, made it clear that they were on the verge of being driven out of business by rampant sham contracting. They described it as ‘no ABN, no start’, a policy that has become entrenched in the industry and is driving legitimate operators out of the industry.

These employers face a choice: adopt sham contracting practices themselves or face the very real prospect of being priced off jobs by the shonky operators. When I put to the former ABCC Commissioner, Mr John Lloyd, that it seemed strange that I could find ample evidence of sham contracting in the corridors and committees of Parliament House but the ABCC could find none on construction sites in New South Wales, the response was that the ABCC only acts on complaints—presumably not on the complaints of the construction industry unions, who have been complaining long and loud about sham contracting in the industry. Nearly 120,000 people with ABNs described themselves as ‘labourers’. Over the last decade nearly 600,000 ABNs have been issued to labourers and tradespeople who are clearly employees, backpackers and tourists in Australia on subclass 417 working holiday visas, and foreign workers in Australia on subclass 457 visas.

Sham contracting not only deprives workers of their rightful entitlements; it also deprives the community of tax revenue estimated to be in the order of hundreds of millions of dollars annually. This practice is a scourge. It should be eliminated from not only the construction industry but all industries. In a recent case launched by the Fair Work Ombudsman, a business known as the Pretzel Bakehouse, which is in suburban Adelaide, is alleged to have employed 15-year-old children provided by a firm known as Contracting Solutions Australia Pty Ltd under hiring agreements styled on what is known as the Odco labour hire system. The labour company’s director, Mr Michael Wright, is alleged to have told one of these children—a 15-year-old girl—that she would work at the pretzel outlet as an independent contractor. In the face of this, I cannot help but ask what sort of sociopath would want to engage a 15-year-old kid as an independent contractor rather than under a standard contract of employment with the relevant award underpinning her wages and conditions.

This rampant sham contracting and ruthless desire to cut costs at all costs is a sickness that in my view is a threat to the social and economic fabric of this country. In relation to sham contracting in the construction industry, I welcome the statement of the new Australian Building and Construction Commissioner, Mr Leigh Johns, made at his appearance at the recent supplementary estimates hearing. Mr Johns acknowledged:

The existence of sham contracting in any industry adversely affects decent employers, employees and government revenue.

He went on to say:

Decent employers in the building and construction industry are at a competitive disadvantage to those who engage workers on sham arrangements. They then face with an invidious choice: to either engage in the same indecency or go out of business.

Commissioner Johns told the estimates hearing that he plans to ‘convene a roundtable of relevant agencies and stakeholders to devise an all-of-government response to eliminating sham contracting in the building and construction industry.’ This is a welcome move and one that I support, but I feel that strong government action to stamp out sham contracting should not be confined to the building and construction industry.

The Liquor, Hospitality and Miscellaneous Workers Union has for years been raising concerns about the prevalence of sham contracting in the contract-cleaning industry. The LHMU described the competitive pressures at work as the industry ‘devouring itself from within’ with cleaning companies cutting corners and illegitimately subcontracting to make a profit. As a result, many cleaning companies are failing to meet statutory obligations to their staff, who are risking serious injuries and being paid poverty-level wages. In a paper published by the Centre for Applied Social Research at RMIT, the authors established that sham contracting perpetuates and exacerbates the worst of practices in the contract-cleaning industry. The paper concludes:

The chain of subcontracting at ever reduced prices trails away into a shadowy realm of small firms and individuals where illegal practices can be pursued without much risk of detection or protest.

Just this week, I received correspondence from the Australasian Meat Industry Employees Union raising concerns that unskilled foreign workers in Australia on subclass 417 working holiday visas are being engaged as contractors in the poultry-processing industry in the Hunter Valley. The AMIEU raised concerns about the poultry plant operated by Baiada Poultry Pty Ltd at Beresfield. Soon after purchasing the plant from Bartter Enterprises in 2009, Baiada increased production and, rather than seeking to engage local labour to meet increased production demands, the company engaged labour hire companies to supplement the workforce with foreign workers on 417 visas. While the union has met with some success in regularising the employment status of these workers, there remain many who are engaged under sham contracts. They are paid cash in hand at as little as $12 an hour, there are no payslips, no time and wage records and no paper trail and no tax is deducted. The union has evidence that some of the workers at the Baiada plant are recruited in China through a website hosted in Taiwan.

The website contains offers of work in Australia, including fruit picking and processing, farm labouring and beef and poultry processing in locations including the Hunter Valley, Gatton in Queensland, Shepparton in Victoria and Carnarvon in Western Australia. According to the AMIEU, based on discussions with these workers, the operators of the website or their agents provide assistance in obtaining visas, assist with travel arrangements and provide travel and accommodation in Australia, all for a very high price estimated to be in the order of $30,000. Accommodation usually consists of a rented house occupied by up to 20 people, with mattresses on the floor of every room and rudimentary privacy afforded by a sheet strung from the ceiling. For this, these workers pay around $50 a week in rent, which is deducted from their pay by the labour contractor. These workers are required to work any hours as directed without payment of overtime, and the AMIEU has had reports of workers being told to work on at the end of a 12-hour shift and if they refuse that they will be cut loose.

I emphasise that the AMIEU is taking a highly responsible approach to this problem. It is in contact with the office of Fair Work Ombudsman and other relevant authorities and it is trying to work through the issue with the company and labour hire contractors. The union has also emphasised that it is very keen to avoid these issues being turned into one around which xenophobic fears might be stirred. This is the correct approach and I intend to emulate it.

This brings me to the death of Myung Yoel Hwang, a South Korean construction worker who died in Sydney early last month. Mr Hwang was one of the invisible army of foreign workers who are working in Australian industry. He was underpaid, underinsured and working illegally on construction sites in Sydney. Mr Hwang was a tiler and was a small part of the black economy that is becoming characteristic of the industries in which sham contracting and exploitation of foreign workers is prevalent. He was paid in cash with no superannuation or workers compensation cover—all off the books. Officially, Mr Hwang did not exist. When he became ill his illegal status and fear of deportation led him not to seek medical help. He died alone, unknown and invisible. But my hope is that he will not have died in vain and that in Australia this can never happen again. Mr Hwang’s death should serve as a prompt for action to stamp out the exploitation of foreign workers in sham contracting. It will be a national disgrace if action is not taken.

I am heartened that there now appears to be a growing determination in government to take action. The Australian Taxation Office, through its Tax Agent magazine in June, has notified tax agents that it is targeting sham contracting. As I said, the ABCC has indicated it is now willing to take action, and that is welcome. But effective action will require a response from the whole of government. I endorse the call from the union movement and elsewhere for there to be a coordinated effort, including the ABCC, the Fair Work Ombudsman, the Department of Education, Employment and Workplace Relations, the Department of Immigration and Citizenship, the Australian Taxation Office, Centrelink, Safe Work Australia, the union movement, employer organisations and other relevant agencies, to stamp out these insidious practices that undermine the economic base and the fabric of our society.

Failure to look after foreign workers in this country, failure to look after children in this country should not be accepted by this parliament or this government. It is absolutely essential that people who are in the most vulnerable of positions can rely on the Australian government and the Australian parliament to look after them. To simply have the dollar, the profit, the big buck driving the whole agenda of the building and construction industry, the retail industry and the fruit-picking and rural industries is unacceptable. We need to look after human beings who are being exploited.