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Cleaning Company Found Liable For Subcontractor That Underpaid Workers

Cleaning company found liable for subcontractor that underpaid workers

Global cleaning company ISS Facility Services Australia Limited has been penalised more than $132,000 after it was discovered a subcontractor it had engaged to provide cleaners at the Melbourne Cricket Ground had underpaid the workers.

The cleaners were employed by First Group of Companies Pty Ltd, a now-deregistered company ISS had subcontracted between 2009 and 2014 to provide post-event cleaning services at the MCG.

During a surprise night-time visit after the AFL preliminary final between Hawthorn and Port Adelaide, Fair Work inspectors discovered 11 workers were underpaid $37,471.

In addition, it was found that First Group of Companies had engaged the cleaners under sham contracts, treating them as independent contractors, and not as employees – as they should have been classified.

The investigation found that the workers were paid flat rates of between $18 and $25, when they should have been paid between $18 and $46 for some shifts.

Individual cleaners were underpaid between $276 and $7,272 over a five month period in 2014.

The MCG cleaners were unpaid a total of $37,471.

Even though ISS wasn’t the direct employer of the 11 cleaners, the Fair Work Ombudsman argued it was an accessory to the underpayments, and was therefore lawfully accountable.

In court, ISS admitted that it knew that the rates it was paying First Group of Companies were “not sufficient to cover employees’ entitlements”, and that it was aware of the unlawfully low pay rates First Group was paying its workers.

Even so, it tried to argue in court that it was merely a “third party” to the underpayments.

However, Judge Suzanne Jones didn’t agree, saying, “it is simply incorrect to describe [ISS] as a ‘third party’, if the use of that word is designed to minimise or reduce [ISS’s] responsibility for its involvement in the contraventions.

“Principal contractors must be deterred from engaging subcontractors without taking steps to ensure that so long as those subcontractors are engaged by them, they comply with the [Fair Work] Act.”

Miles Heffernan, Director of Litigation at Employer Advisors, said the case should serve as a warning to all companies who engage subcontractors.

“The court has said quite clearly that you are responsible for your labour supply chain – if you use subcontractors to provide workers, then it is up to you to ensure they are complying with their workplace obligations,” he said.

“Principal contractors cannot turn a blind eye to subcontractors who are doing the wrong thing, which is exactly what happened in this case – and now ISS has to pay a hefty penalty.”

The Fair Work Ombudsman said ISS has now taken steps to improve oversight and management of its supply chain, including auditing all of its subcontractors for compliance with workplace laws, implementing training for its managers about workplace laws, and rolling out an electronic sign-in system to monitor employees work hours and calculate their entitlements.

If you are having issues with underpayments of staff, or are facing a claim of wage theft, we can help.  Please call our team at Employer Advisors on 1300 853 837.

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