Corporate

Chorus hires Martin Jenkins

Chorus has hired Martin Jenkins to review the employment practice of sub-contractors building the national fibre network after a Labour Inspectorate found widespread issues. 

The telecommunications network operator contracts out most of the ultrafast broadband network construction to VisionStream, Downer, Broadspectrum and UCG. They in turn subcontract that work out to smaller businesses. The Labour Inspectorate yesterday said it visited 75 subcontractors in the first phase of an inquiry into the data cabling sector and found 73 of those subcontractors breached minimum employment standards. 

Chorus has hired Doug Martin of consultancy Martin Jenkins to conduct an independent review of those practices. It is also seeking more information from the Ministry of Business, Innovation and Employment about the cases. 

"Clearly this is potentially an extremely serious issue and widespread breaches are absolutely unacceptable," chief executive Kate McKenzie said. "Chorus takes employment standards very seriously and has repeatedly been named as one of the best employers in Australasia. As such, immediate action on this issue will be taken."

In the year ended June, the Wellington-based company investigated claims a service company it used employed workers on a voluntary basis. That firm subsequently ended a subcontractor relationship. Its annual report says the supplier contracts clearly require workers to be employed according to New Zealand law and said it is continuing to monitor compliance with all its service companies. 

The Labour Inspector found breaches with contracting employers failing to maintain records, pay a minimum wage or holiday entitlements, or provide employment agreements. 

"In a number of cases it was found that contractors deliberately used practices such as ‘volunteering’ or extended trial and training periods without pay," national manager Stu Lumsden said. "It’s very disappointing that a national infrastructure project of this scale, which is well resourced, has failed to monitor compliance with basic employment standards."

Lumsden said the analysis indicated systemic failures in quality management and that the investigation will continue with a view to taking a wide range of compliance actions. 

Union E tū has been a long-time critic of Chorus' contracting practices. Communications industry coordinator Joe Gallagher said Chorus needs to take responsibility for the model and urged the government to fix the problems with the UFB roll-out.

"We are optimistic that this government understands the issues and wants to fix them, but time is of the essence," he said. 

Workplace Relations and Safety Minister Iain Lees-Galloway said one of his priorities is to improve protections for contractors and workers in vulnerable arrangements. 

Last week, he told a Council of Trade Unions forum he was considering ways to improve the rights for contract workers.

Chorus has previously had issues with its contractors. In 2013 it hauled in Broadspectrum, then called Transfield Services, to explain why subcontractors had downed tools after going without pay for an extended period. 

The UFB roll-out is expected to cost between $2.26 billion and $2.37 billion, of which the government is providing financing of up to $1.33 billion. 

The New Zealand arm of VisionStream, owned by Australian building group Cimic and fund manager Apollo Global Management, reported a profit of $9.6 million on revenue of $282 million in calendar 2017. Its internal labour costs of $56.6 million compared to $182.7 million spent on subcontractors. 

Broadspectrum New Zealand reported a loss of $16.1 million on revenue of $497 million in calendar 2017. Of that, $309.6 million of sales came from urban infrastructure. 

Downer New Zealand's telecommunications work was a small component of its $1.6 billion revenue in the June year. It posted a profit of $32.6 million and spent $474.5 million on subcontractors. 

Chorus shares last traded at $4.90 and have gained 17 percent so far this year.