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Sham Contracting - Howard's individual contracts by another name

Ned K.

The recent 4 Corners story about the super exploitation of workers at Seven 11 convenience stores shocked many people. It took a lot of courage for workers on temporary visas to speak out about the sham employment contracts masquerading as respectable, legitimate franchisor- franchisee relationships. 

The Seven 11 story is just the tip of the iceberg. In other industries such as construction, transport and contract cleaning, union representatives have been fighting sham contracts for years with differing degrees of success.Now these sham contracts are appearing in community services sector like disabilities and aged care to name a couple. Instead of "Jim's Mowing" franchisees cutting your lawn, they will care for your disabled relative or aged parents as well! All at race-to-the-bottom competitive prices emanating from the Labor and Liberal Parties' models of "consumer directed care"!

Franchisees and subcontracting in these industries have accelerated since the defeat by the Your Rights Of Work campaign of the Howard Government's Australian Workplace Agreements (individual contracts). In terms of impact on take home pay of workers who actually perform the work, these sham contracts are more sinister than the attempt by big business and the now Turnbull Government to reduce Sunday penalty rates on weekends. In contract cleaning for example, wealthy shopping centre owners often give cleaning contracts to companies that are well known for sub-contracting out the work, requiring all cleaners to have their own ABN, Or they award the contract to a cleaning company that has a franchise business model. The largest franchising cleaning company is Jani King, from the USA.

Under the franchise model, the cleaning companies usually target migrant workers who are attracted to this type of work because it gives them the appearance of self employment or owning a business and the hope of regular work. The latter is often essential for progressing the status of their visas towards permanent residency. However the franchisee has to pay a fee up front of up to $5,000 and is then provided with a one-off issue of basic equipment and materials such as a vacuum cleaner. The amount the franchisee is paid on a monthly basis is converted to an hourly rate of somewhere between $24 per hour and $30 per hour. On the surface this appears reasonable compared with a casual day rate under the award of $23 per hour for day work. The catch is that from the hourly rate the franchisor, the cleaning company in this example, takes out a royalty of up to 25%. leaving the person performing the cleaning on less than the award. Then there is workers' compensation levy of up to 7% to pay in some cases and the franchisee may also have to pay public liability insurance as well.

Depending on the size of the place to be cleaned, the franchisee may also need to find cleaners to help complete the work. The cleaning company sometimes pays the franchisee the same equivalent hourly rate for additional cleaners. As the franchisee him or herself receives less than the award, they try and find cleaners who will accept working for even less than the franchisee. $15 to $16 per hour on an ABN is common, or it could be cash in hand. Overseas students are prime targets for franchisees, or older workers who may be eeking out an existence on a pension or some other miserable government benefit. Often these workers work on the flat rate even if working on weekends or in the middle of the night. If overseas students work over 20 hours a week to keep their job, they are locked in to illegal work with respect to immigration visa restrictions on their hours of work to 20 per week. So they become unlikely to report their exploitation to an authority and are reluctant to join a union. One, because their earnings are so low and every dollar counts and secondly, because they think if they belong to a union, they will lose their job if the boss or property owner finds out.

Then there is the question of unpaid superannuation.

Since the 4 Corners story broke, there is anecdotal evidence that more migrant workers trapped in these exploitative situations are deciding to speak out and looking for help in how to tackle their exploiters. Unions have an opportunity to organize thousands of workers in these situations, but will they?

Cases that have reached the prosecution stage or public exposure have so far been due to support from Fair Work Ombudsman or community based or consumer associations or concerned individual activists. It is time for unions to engage with this growing, super exploited section of the workforce who have the appearance of being 'their own boss'. After all, unions in Europe, especially the UK, grew out of individual self-employed artisans joining together as early as the 1500s and more extensively in the late 1700s and early 1800s.

For unions to put these workers in the 'too hard basket' would be short sighted and damaging to their exisiting core membership base whose very existence as weekly paid employees is threatened the longer the exploitation of the 'be-your-own-boss' workers goes unchallenged.


Sham Contracting - Howard's individual contracts by another name
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