The new Same Job, Same Pay legislation has been put to the test for the first time in a recent case heard by the FWC. How might this decision impact employers engaging labour hire workers?

The Fair Work Commission (FWC) has made its first ruling under the new Same Job, Same Pay framework, after finding that the labour hire workers employed by a Queensland coal mine performed essentially the same work under the same conditions as the mine’s permanent employees.

As a result, more than 300 labour hire workers servicing the mine are set to receive pay increases of up to $20,000 per year as of November this year, when Same Job, Same Pay orders will come into effect.

Particularly for organisations in heavily unionised sectors, this decision serves as a reminder to evaluate employment practices to ensure compliance with the new legislation.

Labour hire workers perform the same work, argues union

The employer in this case, a Queensland-based open-cut coal mine, currently employs approximately 350 permanent employees who are covered by an enterprise agreement, and supplements its workforce with approximately 320 labour hire workers. 

Earlier this year, the Mining and Energy Union (MEU) put forward an application under the Same Job, Same Pay framework arguing that the labour hire workers’ roles were indistinguishable from those of the permanent employees, and they were thus entitled to the pay rates set out in the host employer’s enterprise agreement.

In its ruling, the FWC noted that the labour hire workers and permanent employees attended the same pre-start meetings each day, performed the same production work using the same equipment, wore the same uniforms and followed the same procedure for requesting annual and personal leave, among other similarities.

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling,” says Aaron Goonrey, Partner at Pinsent Masons.

The FWC was ultimately satisfied that the labour hire employees were entitled to the same rate of pay as their permanent counterparts.

Significantly, neither the labour hire company nor the host employer opposed the application, acknowledging these similarities and accepting the order to bring the labour hire workers’ pay rates in line with the host employer’s enterprise agreement.

“The decision is not contentious in the facts – these people did the same role,” says Goonrey.

“But there will likely be some upcoming applications which will be more complicated because they will be defended by labour hire companies or by the host company.”

The MEU has expressed its intent to assess the circumstances for labour hire workers at each work site and make further applications under the Same Job, Same Pay framework.

“This decision is going to be part of the case law that helps guide employers who use labour hire companies in terms of how they can avoid an order like this being made,” he says.

Understanding the Same Job, Same Pay framework

The Same Job, Same Pay legislation was passed by the Albanese government in December last year as part of the Closing Loopholes Bill. The laws are designed to prevent employers from using labour hire to undercut the wages and/or conditions afforded to permanent employees via their enterprise agreements.

The legislation applies to businesses which have 15 or more employees, are covered by an enterprise agreement, and whose workforce is supplemented with labour hire workers. Sectors like construction, manufacturing, transport and healthcare in particular are likely to be impacted.

Under the new laws, the FWC can order labour hire companies to pay workers the same amount that would be paid to them under the host employer’s enterprise agreement, if they have been working for the host employer for more than three months and perform the same work as permanent employees.  

While Same Job, Same Pay orders will not kick in until November this year, applications can still be submitted beforehand, as occurred in this case. Any pay increases ordered by the FWC will become effective in November.

Anti-avoidance provisions have also been put in place to prohibit schemes that prevent the FWC from making a Same Job, Same Pay order or avoid the application of an order. 

A possible example would be trying to engage labour hire workers as contractors to deprive them of the new protections, or intentionally turning over the workers to stay under the three-month placement period. Deliberate attempts like this to skirt the new laws or game the system could attract significant civil penalties. 

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling.” – Aaron Goonrey, Partner at Pinset Masons

Is this the end of labour hire? 

This ruling signals the first of many decisions with significant financial impact on employers who use labour hire, particularly in heavily unionised industries like mining. Goonrey says this may prompt some employers to reevaluate their use of labour hire and its benefits.

“A lot of companies that use labour hire may be resigned to the fact that they will now have to pay a premium for that labour hire. Or, they’ll go to market and employ employees directly, which is part of the reason [why this policy was introduced] – to try and give more permanency.”

With that said, he disagrees with the notion that this policy will signal a “death knell” for labour hire. 

“There will still be a place for labour hire. I think a lot of companies will simply say, ‘We’re willing to pay the premium just for that flexibility.’ And there are a number of companies that are already paying their labour hire providers the same as what they’re paying their employees.”

For employers who engage labour hire workers and have an enterprise agreement in place, Goonrey suggests conducting a thorough analysis of the makeup of the labour hire workforce and the potential ramifications of a Same Job, Same Pay order to determine whether it would be beneficial to adapt or reduce the use of labour hire.

“It will become a finance issue, an operational issue and ultimately a business issue… [So], realistically, what you should be doing is bringing all the relevant business stakeholders together – finance, HR, operational – and working out, if an application was made, how much would this cost you?

“You’re better off being armed with the information about what the ultimate cost could be, as opposed to saying, ‘Let’s wait and see what happens.’”

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