Labour hire companies a setback for employment

Catriona MacLennan challenges the Government's mantra that work lifts families out of poverty, arguing that the spread of labour hire work at the expense of permanent employment exacerbates the problem

Hard-won employment protections achieved over more than a century are being eroded by the emergence of labour hire companies in New Zealand, Australia, the United Kingdom, the United States and elsewhere.

These companies operate as intermediaries between workers and the organisations for which work is carried out. Examples are cleaning, airline catering and airport baggage safety officers.

Instead of being employed by the business for which they are working, workers are contracted to that company through labour hire and temping firms. The aim is to cut costs for businesses. Firms do not have to provide full-time or a regular number of work hours. Nor do they need to pay holiday pay, sick pay or superannuation contributions. Workers might be required to pay for their own equipment and safety boots, as well as ACC levies. And there is no obligation to promote staff and pay higher wages as employees become more senior.

However, for the workers, this means low wages, no job security and insecure hours of work – and hence income – from week to week.

Labour hire firms receive “sign on” bonuses of several thousand dollars from the business. The labour hire firm also charges the business an hourly rate for each worker which is significantly higher than the rates paid to workers – perhaps $3 above the minimum wage.

As a result, in New Zealand, people now work alongside each other doing exactly the same tasks, but under vastly different conditions. Employees have regular hours and ongoing work, while the labour hire workers have no security and are generally paid several dollars an hour less than their colleagues.

Many labour hire workers are migrants, who have little bargaining power and often are not aware of New Zealand employment law.

A legal challenge to labour hire work began in the Employment Court at Auckland on 14 August 2017.

The case is brought by E Tū union in the names of two workers. The defendant is LSG Sky Chefs New Zealand Ltd, which is owned by German airline Lufthansa and runs airline catering kitchens in Queenstown, Christchurch, Wellington and Auckland.

Two labour hire firms, Solutions Personnel Ltd and Blue Collar Ltd, are named as third parties in the case.

Approximately 200 temporary workers are contracted to LSG Sky Chefs through the third parties. Many are paid only the minimum wage and do not have security of employment.

The workers are seeking a declaration under section 6(5) of the Employment Relations Act 2000 that they are in fact employees of LSG Sky Chefs. They claim that, although they signed a contract with Solutions Personnel which was expressed to be a contract for services, they were in fact employed by LSG Sky Chefs.

The hearing is expected to finish on August 18.

Many parents work two or three jobs to try and support their families but the minimum wage of $15.75 an hour is simply not enough to live on. The spread of labour hire work at the expense of permanent employment is exacerbating this precarious existence for some families.

There are also attempts in other countries to deal with the erosion of pay and other workers’ rights linked to the use of labour hire companies.

These have been prompted by alarm at the spread of labour hire. In 2012, there were estimated to be 36 million temporary workers worldwide, with 11.5 million of them employed daily as agency workers. The United States had 11.5 million agency workers, while Europe had 8.2 million and Brazil 7.1 million.

The European Union in 2008 issued Directive 2008/104/EC on temporary agency work. This was designed to provide protection to agency workers: it states that the basic work and employment conditions of agency workers should be at least those of employees.

However, the way in which courts in different European Union nations have interpreted the directive has largely undermined its effectiveness. Instead of focusing on its purpose, courts have concentrated on the word “temporary” and held that the directive applies only to short-term work.

One example of this is a court case in the United Kingdom in 2013, which aimed to provide rights to agency cleaners who had worked for a firm for between six and 25 years without ever obtaining the security of permanent employment.

The court held that regulations made under the European Union directive applied only to workers placed for a fixed period with a firm. If they were there indefinitely, they did not come within the ambit of the law.

One lawyer described the decision as driving a “coach and horses” through the protection intended to be given to agency workers.

In Canada’s Ontario, there was a 33 percent increase in temporary workers in the decade to 2014. That growth was double the rise in the number of permanent employees in that time and the wages of the temporary workers were significantly lower. In 2015, the median wage of a temporary worker in Toronto was C$15 an hour, while permanent employees were paid $22.40.

Ontario passed the Stronger Workplaces for a Stronger Economy Act 2014, aiming to provide legal protection to agency workers. Earlier this year, Bradford City Council voted to end its use of temporary staffing agencies, with councillors blaming the businesses for trapping workers in a cycle of poverty and insecurity.

In South Africa, labour hire is known as “labour broking” and has caused concern for many years.

A law which took effect in 2015 aimed to curb temporary employment services and give additional protections to vulnerable workers. It has been challenged by labour brokers.

New Zealand has seen a fall in real wages in recent decades and increasing insecurity of employment for workers.

Despite a growing economy, real average private sector wages in this country dropped by 0.5 percent in the 12 months to June 2017.

The Government’s mantra is that work lifts families out of poverty.

Sadly, that is no longer the case in New Zealand. Many parents work two or three jobs to try and support their families but the minimum wage of $15.75 an hour is simply not enough to live on.

The spread of labour hire work at the expense of permanent employment is exacerbating this precarious existence for some families.

The test case brought by E Tū will demonstrate how much protection current laws can provide to agency workers, or whether law reform is needed.

*Catriona MacLennan is a barrister and journalist and carried out research for the plaintiffs in this case.

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