It is no secret that for a number of years the fashion industry has been the subject of negative press, with pundits regularly accusing pockets within the industry of fostering the exploitation of workers who lack the knowledge and resources to defend their workplace rights.
In particular there have been a number of criticisms about the treatment of outworkers who generally operate from their home or informal factories. Unfortunately, these criticisms reflect only a small number of defiant players in the textile, clothing and footwear (TCF) industry that fail to operate within the minimum award conditions and legislative safety net. Yet it only takes a few “bad apples” to taint the whole industry.
While the majority of businesses in the TCF industry operate within the regulatory framework, the recent focus on outworker conditions has nevertheless fueled the introduction of a new Bill that is set to amend the Fair Work Act 2009 (Cth) (FW Act) to improve employment conditions for TCF workers.
So what’s it all about?
An outworker is an individual who performs work at residential premises or at other premises that would not conventionally be regarded as being business premises in the TCF industry. The Fair Work Amendment (Textile, Clothing and Footwear Industry) Bill 2011 (TCF Bill) was passed on March 22, 2012 and is now awaiting assent. The legislation will commence on a day to be fixed by Parliament. The TCF Bill will amend the FW Act in an attempt to enhance protections for outworkers in the TCF industry and promote universal protection of these workers throughout Australia by extending the operation of the FW Act to outworkers irrespective of their status as an employee or contractor.
At present the FW Act provides a Federal regulatory framework for workers in the TCF industry by stipulating a minimum safety net of standards that businesses must afford to their employees. In addition, the Textile, Clothing, Footwear and Associated Industries Award 2010 (TCF Award) contains a series of obligations relating to the way work is performed by outworkers. A number of states including New South Wales, Queensland and South Australia have also introduced state-based laws, codes of practice and awards to regulate the protection of outworkers.
The difficulty with the FW Act is that it is not specifically designed for the TCF industry and therefore does not take into account the fact that the TCF industry is characterised by an unusual set of circumstances. For instance, unlike other industries, production in the TCF industry often consists of a mix of home based and factory environments and for this reason often involves an “invisible” workforce.
While the TCF Award provides outworker specific provisions to address these unusual traits, given the nature of the TCF industry, there is a heightened risk for businesses to operate outside the realms of the law by forcing sham contracting arrangements on vulnerable workers and operating sweatshops with little scrutiny by the Government. These are the “bad apple” operators.
The legislation aims to create a harmonised national framework for outworkers by ensuring that within the TCF industry they have the same terms and conditions as other workers regardless of whether they are an employee or contractor outworker. The new law also allows an outworker code of practice to be issued, provides mechanisms for outworkers to recover monies owed from contractors along the supply chain and extends the right of entry provisions in the FW Act to investigate exploitation more broadly in the TCF industry, particularly under ‘sweatshop’ type conditions.
The TCF Bill was passed by both Houses of Parliament following a significant inquiry where key players in the TCF industry were given the opportunity to comment on the proposed changes to the Federal industrial relations system. During the inquiry, a number of industry groups raised concerns that the legislation would inhibit TCF outworkers who operate legitimate businesses as independent contractors. This raises the question: does one regulatory framework fit all participants in the TCF industry? Those members of the industry who spoke out in opposition to the TCF Bill would say no. However, it is impossible to argue against the case for further regulation when it is based on a greater ability to capture (and penalise) those who continually evade the law and to promote the protection of vulnerable workers within the industry.
Does one bad apple spoil the rest?
The perception that many workers in the TCF industry are vulnerable to exploitation arising from chronic non compliance with minimum award and legislative conditions may only stem from a small number of defiant participants in the industry. But does one bad apple really spoil the rest? Put another way; is the new outworker legislation really necessary when there are a large number of businesses that are operating legitimately and successfully within the realms of the law?
The legislation means that TCF outworkers and workers in so called ‘sweatshops’ are now entitled to the same treatment under the law as any other Australian employee regardless of their status as an employee or contract outworker. While there is no dispute that a large number of outworkers in the TCF industry are in a position to make genuine choices about their working arrangements, special arrangements are required to protect the most vulnerable workers in the industry that may not have the bargaining power to protect their workplace rights.
While the TCF Bill has been introduced to weed out the “bad apples”, there is a risk of over-regulation in the TCF industry. Industry participants have raised genuine concerns that by deeming all contract outworkers as employees, the TCF Bill:
- assumes that all contract outworkers want to be treated as employees (when many don’t); and
- does not take into account outworkers who do not display vulnerable characteristics due to their qualifications, knowledge and skills.
On this basis, it has been argued that the deeming provisions in the legislation may act as a disincentive to businesses that wish to engage independent contractors rather than adhere to the conditions of an employment relationship.
Under the new legislation, a TCF contract outworker is only taken to be an employee where the contract outworker performs work either directly or indirectly for a Commonwealth outworker entity. The changes introduced by the TCF Bill do not prevent a worker or business from setting up a genuine independent contractor arrangement within the parameters of the law, as only contract outworkers that provide services to one entity will be deemed employees under the new provisions. In light of this, it is unlikely that the amendments introduced by the TCF Bill will prevent industry participants from continuing their business as usual.
While there is a risk of over-regulating the TCF industry, it is important that measures are implemented to ensure that all outworkers in the TCF industry receive their minimum entitlements including basic working conditions, minimum hourly rates of pay, leave and safe and healthy working conditions.
Potential for benefits
While there still remains a risk that even a small number of vulnerable workers with little bargaining power may be exploited, regulation is needed to control the conditions under which outworkers are engaged and perform work. Although the introduction of the TCF Bill into law may only be required to address the controversial aspects of only a small number of players and does not reflect the whole of the TCF industry, the regulatory changes nevertheless have the potential to introduce positive benefits to the TCF industry.
For instance, while the new legislative framework for TCF outworkers is unlikely to have a significant impact on those industry participants that are currently meeting their obligations under the law, the changes do have the potential to act as a stronger voice for vulnerable workers and address problems such as underpayments and denial of minimum entitlements.
The rationale behind the TCF Bill is to target businesses that are acting in breach of their legal obligations and are receiving an unfair advantage through the exploitation of workers who have little control over the conditions under which they are engaged and have minimal bargaining power. The intention of the regulatory amendments is not to penalise businesses operating within the parameters of the law or inhibit the capacity of TCF outworkers to operate successful businesses. Businesses that are currently complying with the TCF Award, the FW Act and State-based regulations will not be penalised by the TCF Bill in the form of additional labour, time and administrative costs of compliance.
What now?
The impact of the changes introduced by the TCF Bill are yet to be seen as the new TFC legislative regime has yet to come into force. However, while the new law has the potential to level the playing field for outworkers that lack the bargaining power to negotiate workplace terms and conditions with their employers, it is unlikely that the new regime will have an adverse impact on businesses that are currently complying with existing arrangements.
The TCF Bill was introduced following criticisms that many workers in the TCF industry are vulnerable to exploitation arising from non-compliance with award and legislative conditions. The TCF Bill has been heralded a special measure to protect the most vulnerable workers in the industry and if enforced correctly, should not prevent most industry participants from continuing their business as usual.