First ‘same job, same pay’ decision sheds light on new provisions

Since late 2023, employees of labour hire entities (labour hire workers) and unions can make applications to the Fair Work Commission (Commission) for a ‘regulated labour hire arrangement order’ (labour hire arrangement order) requiring labour hire workers be paid no less than the employees doing the same work who are directly employed by the host employer.

These changes were introduced by the Fair Work Legislation (Closing Loopholes) Act 2023 (Cth) (Closing Loopholes Act) to prevent employers from avoiding the rates and conditions they bargained for regarding their directly employed workers.

While the relevant provisions came into effect on 15 December 2023, the orders themselves will not take effect until 1 November 2024.

Where a labour hire arrangement order is made, labour hire entities will be required to ensure their labour hire workers are paid no less than the ‘full rate of pay’ at which the employees would be paid under the host employer’s enterprise agreement (or another workplace instrument) if they were directly employed by the host employer (protected rate of pay). The ‘full rate of pay’ includes the incentive-based payments and loadings, monetary allowances and overtime or penalty rates being received by the host employer’s direct employees.

When determining the outcome of an application, the Commission must make an order when: 

• a labour hire entity supplies employees to perform work for a host company; and 
• an employment instrument, including an enterprise agreement or workplace determination, applies to the host company and would apply to the labour hire workers if they were employed directly by the host company.

The Commission cannot make labour hire arrangement orders where:

• the host company employs less than 15 employees;
• the labour hire workers are providing a service (rather than their labour);
• it’s not fair and reasonable in all circumstances to do so; or 
• the labour hire workers are covered by a training arrangement or are only working for the host company for a short period (generally three months or less).

The changes impose civil penalties on labour hire entities paying less than the protected rate of pay. New anti-avoidance provisions will also apply in circumstances where parties enter or carry out a scheme, including an arrangement or agreement, to avoid the making of a labour hire arrangement order.

The first application was made in the Commission by the Mining and Energy Union (MEU) seeking that the labour hire workers employed by WorkPac Pty Ltd and WorkPac Mining Pty Ltd (collectively, WorkPac) are paid the same as the employees of the host employer, Batchfire Callide Management Pty Ltd (Batchfire). The decision was handed down by the Commission on 1 July 2024 and has provided useful guidance for how these applications will likely be dealt with, and what employers should keep in mind.

Batchfire employed 237 production employees and 110 maintenance employees, as well as supervisory, technical and administrative staff who all worked at a black coal mine operated by Batchfire (Callide Mine).  Direct employees of Batchfire were covered by the Callide Mine Union Enterprise Agreement 2021 (Callide Mine Agreement). 

WorkPac supplied 324 production workers to Batchfire to work on the Callide Mine.

Batchfire and WorkPac production employees working at the Callide Mine attended the same meetings, performed the same production work, operated the same Batchfire-owned or leased machines and equipment, wore the same Batchfire uniforms, followed the same instructions communicated by the same Batchfire supervisors, and were subject to the same training, induction process, policies and procedures.

The Full Bench was satisfied the application met the requirements because:

• WorkPac supplied the labour hire workers to perform production work at the Callide Mine;
• the Callide Mine Agreement would have applied to those labour hire workers if Batchfire had employed them directly; and 
• Batchfire was not a small business employer. 

As such, the Full Bench decided that it was required to make a labour hire arrangement order providing that WorkPac pay its labour hire workers at least the full rate of pay as stipulated in the Callide Mine Agreement. 

Overall, the Full Bench’s application of the new provisions was prescriptive and non-contentious.  However, there are a few points of interest to note about this decision. 

• The Full Bench confirmed that the relationship between a labour hire entity and a host employer in supplying labour hire employees isn’t intended to be restricted by reference to the formal arrangements by which this typically occurs. A direct agreement between the labour hire entity and the host employer for the supply of labour isn’t required. Further, the Full Bench determined that the requirement for the performance of work for the host employer is still satisfied if ‘the work is performed wholly or principally for the benefit of’ the host employer or a related entity of the host employer.
• As mentioned earlier, the Commission is prohibited from making a labour hire arrangement order if it’s satisfied it’s not fair and reasonable to do so. To determine whether it’s fair and reasonable, the Commission can consider various factors, such as the pay arrangements that apply to the employees of the host employer and the history of industrial arrangements applying to both the host employer and the labour hire employer. The Full Bench confirmed these factors only need be considered if the parties raise them in their submissions. In other words, if these issues are not brought up by the parties, the Commission isn’t obligated to consider them, although they have the discretion to do so.

Further applications have been filed with the Commission since the Callide Mine decision.  The Commission, when determining these applications, may make labour hire arrangement orders that will immediately take effect from 1 November 2024.

The application of the new provisions in the Callide Mine decision indicates there is a low threshold for establishing the relationship between the labour hire entity and the host employer. The decision demonstrates that obtaining a labour hire arrangement order may be relatively simple provided  the applicant can demonstrate:

• the labour hire workers are engaged to perform the same work as the directly employed workers of the host employer; 
• the relevant instrument would apply to the labour hire workers if they had been directly employed by the host employer; and 
• the host employer is not a small business employer.