Casualisation of the workforce continues to disproportionately impact young people in Australia. With an inability to get sick leave, holiday leave, guaranteed hours, or a bank loan; the ‘flexibility’ provided by casual work is a one-way street. Much has been said about how regressive casual work is, and why we should be taking steps to discourage it from becoming the standard form of employment in many industries (such as hospitality).
One form of casual work, the labour-hire arrangement, is particularly troublesome. In a bizarre legal arrangement, companies are able to hire ‘services’ from another company called a ‘labour-hire provider’.
In theory, these arrangements look like this: having received a contract from a company, the labour-hire provider signs an employment contract with a worker and tells that worker; ‘go to that company, and do everything that they tell you. I’ll pay you for the work that you do there’.
In practice, labour-hire arrangements are used to ignore and override the spirit of Australia’s long-established employment law system. They are a malicious practice which enables workplaces to ignore enterprise bargaining agreements (EBAs) unless the EBA has a provision in it preventing labour-hire (and most don’t).
Further, the number of directly employed workers who are able to collectively bargain is decreasing – and at their own competitive peril – but labour-hire workers are prevented from negotiating with their workplace at all.
An example of this in practice is Australia’s inaugural 21st-century sweatshop, Amazon’s MEL1 facility. Even if the labour-hire staff at this facility were able to negotiate with their *cough* true employer Adecco (and get a potential pay rise of 35%) they would not get far.
Amazon has the power to simply tear up the contract regarding those workers with Adecco and look elsewhere for cheap labour.
How prevalent is labour-hire throughout the Australian Public Service?
Commonwealth departments rely on labour-hire arrangements for a considerable amount of their service delivery. While the full extent of labour-hire usage is not publicly disclosed, we do have some indications of prevalence.
For example, the Department of Human Services (DHS) has admitted that it has spent approximately $800 million on labour-hire services in the previous two years. While DHS has framed its use of labour-hire as being for the provision of call centres and compliance officers, it is clear that the use of labour-hire throughout the APS goes beyond minor roles.
A publicly available FOI request shows labour hire arrangements are prevalent in the Administrative Appeals Tribunal (AAT), the government body which handles FOI requests, migration and refugees, NDIS and social services decisions amongst others. Ironically, the AAT – despite it being responsible for Freedom of Information, is secretive about its own arrangements.
The AAT has engaged “approximately 551 individuals” through labour-hire arrangements, since 2016. It is unclear how many of them still work there, but when one considers that the AAT employs a total of 742 employees, it seems likely that a significant chunk of the AAT’s work is conducted through labour-hire.
The Government is also deploying labour hire to replace senior public servants as well as fill junior clerical positions.
Publicly visible listings on the website of major labour-hire providers show that relatively senior positions are also being procured through recruitment firms that frequently engage employees on a labour-hire arrangement. Hays, for example, has publicly available listings at the time of writing that include classification levels such as ‘APS6’ (middle-management level), and ‘EL1’ (an executive-level classification). Even executive-level ministerial positions are being procured through these firms.
It is also clear through the descriptions contained within these listings, that the use of labour-hire arrangements is present even in sectors of the APS that might be considered sensitive. Data research, policy, freedom of information officer, and even commercial procurement roles; are all being filled by labour-hire schemes. These include positions that range from graduate to senior executive level.
Forcing public servants into labour hire
Sources have also told Michael West Media that some public servants are being forced onto labour-hire contracts, despite no association with labour-hire firms. Fixed-term full-time employees within the APS have been told that they will not be promoted unless they sign onto a labour-hire contract.
Applicants who apply and are accepted for work through the government website APSjobs are told on their first day of work that they are to be put onto the payroll of a third-party company. This means that labour hire firms are actually being paid by taxpayers yet are not actually doing the work in recruiting staff to the public service. They are acting as a front. This represents a fee for no service.
Why is the federal government doing this?
It is disappointing then that the Commonwealth public service has jumped onto the ‘labour-hire arrangement’ bandwagon. Labour hire is rife throughout the commonwealth public service and seems perhaps to be concentrated in the sectors of the APS that most often interact with sensitive public data (Like the NDIS).
It does seem that the reason senior bureaucrats are electing to staff their agencies with labour-hire staff isn’t necessarily to save money, instead, it is due to the Commonwealth’s capping of public service staff numbers. In theory, the staffing cap is supposed to force government departments to reorganise their departments to be more efficient. New work processes, rather than new staff members, are supposed to be the answer to workplace problems.
Instead, new employees are still ‘hired’, but through the accounting sham of labour-hire arrangements. There is no need to mark someone as contributing to a department’s staffing cap if instead, they are simply one part of an aggregate expense within a procurement section. So goes the bureaucrat logic.
The adequacy of this practice is compounded when considering the APS’s newfound inability to find expertise among its own staff. The mythical public service bargain of secure work in return for staff loyalty has disappeared. An increase in staff employed by third parties means the APS is unable to legally provide formal external education opportunities by upskilling its promising entry-level staff.
As it is a stated priority for the Liberal and National parties to make the public service more efficient, the question must be asked, why has this practice not been cracked down upon? Is the cabinet aware that its senior public servants are involved in a de-facto fraud; booking staff as a line-item to avoid accountability?
It is unclear to what extent this practice was driven by public servants, or instigated by the politicians. Section 23 of Mathias Cormann’s Public Governance Performance and Accountability Act, makes vague reference to authorising Commonwealth Entities to enter into ‘arrangements’, but it is unclear what that section was intended to achieve. However these practices began, there can be no doubt that the Government is now well aware of the labour-hire sham going on within its departments; as the practice is now the subject of a senate inquiry.
Are these contracts even legal?
It is questionable whether labour hire contracts are even legal in the Commonwealth public service, for the following reasons.
Shockingly, it has been made clear through a public FOI request to the Public Sector Commission, that the Public Service Act’s code of conduct does not apply to labour-hire employees. They do not have a statutory obligation to behave honestly, diligently, avoid conflicts of interest, avoid improper use inside information etcetera. While the public service code of conduct is often written into labour-hire contracts, contractual arrangements are fundamentally different from the legal consequences of the Public Service Act.
The same FOI request shows that the Public Sector Commission has preemptively waved away this concern with an assurance that “if an agency has concerns about the conduct of a person providing services under a labour-hire arrangement, it may be open to the agency to simply require the labour-hire firm to replace the person with another person”.
This is a statement that is legally problematic in two respects; it evinces a lack of procedural fairness toward the APS’s many de facto public servants. No inquiry need be made into whether or not the public servant actually behaved improperly; the labour-hire employee is simply told their ‘services are not required.’.
Genuine malfeasance will also not be properly dealt with thanks to this loophole. If a labour-hire employee commits an egregious breach of the Public Service Act, there will be no formal record made against that person’s name. They will not be subject to inquiry or investigation, rather, they will be simply dismissed.
Further, they will not have to disclose their breach of the code when applying for public service jobs in future. They might find work in another government department. Perhaps some already have. Yet it seems the accountability that the Australian public expects from its public servants, is simply not an important issue to those who run the Australian Public Service.
The second important legal point is that one of the Act’s stated purposes is to ‘establish an apolitical public service’. Labour hire employees, not being bound by the code of conduct, lack any obligation to behave apolitically. This means that the presence of labour-hire arrangements, undermines the Act’s purpose (and potentially acts as a loophole for any future government to explicitly hire staff of a particular political bent).
It should also be noted that the AAT itself has received negative press for being stacked with Liberal Party employees by the present government.
The third point is that Section 6 of the public service act explicitly requests that “all persons engaged on behalf of the Commonwealth as employees to perform functions in a Department or Executive Agency must be engaged under this Act or under the authority of another Act.”
If we accept that labour-hire employees fall within this description then they are not being engaged under the Act, as the Public Service Act makes no provision for labour-hire arrangements. Neither do they fit within the legal loophole of being engaged as independent contractors, directly within the department.
It seems unlikely that a court would read Section 6 of the act as not explicitly outlawing labour-hire arrangements as to rule otherwise would render the Act’s purpose section, and tight definition of the public service, as essentially meaningless. This question has never been directly litigated; it is a lawsuit waiting to happen.
Section 6 of the Public Service Act seems to have only been discussed by a court once, by the High Court in last year’s Banerji (the public servant free speech case). If the High Court’s comments lauding the ‘long tradition of professionalism and political neutrality of officers’ established by the Public Service Act is anything to go by, there is at least a real question as to whether the rampant labour-hire practices throughout the Commonwealth Public Service are consequently, red-hot illegal.
Has Section 6 even been considered by those responsible for staffing within the APS? Has the Public Sector Commission sought legal advice on this issue? We cannot know, as such a document, even if it did exist; would be subject to legal professional privilege and thus be excluded by the Freedom of Information Act.
Labour hire continues to plague the Australian workforce, and it is clear that labour-hire is rife within the Australian Public Service. This seems to be driven by departments attempting to circumvent the staffing caps imposed upon them by the cabinet, rather than a drive to save money. Labour hire may be causing a brain-drain that is costing the public service billions.
The use of labour-hire within public service has serious transparency concerns. The APS code of conduct, and its procedural safeguards; does not apply to labour-hire arrangements. Labour hire employees that commit breaches of the code of conduct do not have to disclose that breach when looking for future work as a public servant. The Public Service Act’s role as a bulwark against a politicised public service is completely evaded through labour-hire.
It may be the case that Section 6 of the public service act means that labour-hire, as practised by the Commonwealth, is illegal. This question has never been put to a court, and the High Court’s comments in Banerji may indicate that a legal challenge has some merit.