Cat MacLennan: Thanking essential workers properly

Prime Minister Jacinda Ardern and Director-General of Health Ashley Bloomfield at their daily media briefings make a point of publicly thanking different groups of essential workers.

Cleaners, supermarket workers, caregivers and others have been singled out for their crucial role in keeping Aotearoa New Zealand functioning during the pandemic. Indeed, the entire country now understands how important these workers are in ensuring that New Zealanders are fed and supplied with the necessities to work and to run their households.

It is, therefore, appropriate and well overdue to thank these people for their work.

However, the real reward the workers want for their labour is to be paid enough to actually live on: the ugly reality is that many of our most essential workers are also our lowest-paid and have in recent years been deprived of most employment law protections.

Carpenter Samuel Parnell in 1840 fought for an eight-hour working day and this country was the first in the world to introduce a minimum wage law in 1894. Both of these were designed to ensure people received fair remuneration for their work, could support their families on their earnings, and had enough time left at the end of the day to spend quality time with their loved ones.

But recent decades have seen hard-won employment protections stripped away by labour hire practices specifically designed to circumvent employees’ legal entitlements. The result is that many workers now regularly toil for 12 hours a day and take home less than the minimum wage.

The two most common ways this is done are by the use of labour hire companies, and by wrongly classifying workers as contractors rather than employees. Unions and workers are therefore having to bring expensive and time-consuming court cases to try and win back employment law protections already achieved decades ago.

In 2017, the Employment Court ruled that two people who worked providing catering for airlines were in fact employees, despite the businesses involved arguing that they were contractors.

In order to save money, LSG Sky Chefs used a labour hire company to provide it with many of the staff it needed to prepare the meals it supplied to airlines. Solutions Personnel found workers and provided them to LSG Sky Chefs, which then managed and closely controlled the workers.

Ms T signed up with Solutions in 2009, when she was relatively young. She worked up to 62.75 hours a week washing cutlery and once toiled for 34 days straight without a day off. When she first started the job, she was given a document claiming to be an independent contractor agreement.

Mr P signed up with Solutions in 2013 and was also handed a document purporting to be an independent contractor agreement. He worked as a loader at LSG Sky Chefs for two years, averaging 45 hours a week.

Ms T and Mr P brought a case in the Employment Court claiming that they were employees of LSG Sky Chefs, rather than contractors.

Independent contractors have none of the legal protections provided to employees. They are not required to be paid the minimum wage, do not receive holiday or sick pay, cannot bring personal grievances, and generally bear the expense of providing their own work equipment such as vehicles, uniforms and other necessities.

Labour hire companies developed in the late 1980s, with Australian academic Steve O’Neill stating that their evolution was based on a desire to replace or supplement existing employees in highly unionised and dispute-prone industries such as construction.

The triangular arrangements benefit labour hire companies, which earn income by providing staff to other businesses, and save money for the firms for which the workers actually carry out tasks.  The people who are disadvantaged are the workers.

The low level of pay received by these workers becomes clear when one realises that the arrangement enables the labour hire company to make a profit and the service-providing business to save money, even though the latter pays both the labour hire firm’s fee and the cost of the workers. The only way this makes sense financially is if the workers’ remuneration is cut to the bone.

Since they first emerged, labour hire companies have spread to many different countries. I did the legal research for the LSG Sky Chefs case, and researched the law in the United Kingdom, the European Union, Ireland, Ontario, South Africa, Australia and the United States. That is how prevalent these unfair triangular arrangements are.

Here, the Employment Court had little difficulty in concluding that Ms T and Mr P were in fact employees of LSG Sky Chefs. The court rejected the claim that the outsourced workers were used to meet seasonal fluctuations in workloads. Rather, it said, there was a consistent pattern of hours worked, at consistently high levels.

The Employment Court stated that Ms T and Mr P were in vulnerable positions and had very little appreciation of New Zealand employment law or the documentation Solutions gave them to sign. The judges said that the arrangement suited LSG Sky Chefs as it meant that the company was “not troubled by the usual responsibilities and liabilities associated with an employment relationship.” Further, the labour hire workers would be able to work through any strike action by LSG Sky Chefs’ employees.

The court also noted that the International Labour Organisation had in 1997 implemented the Private Employment Agencies Convention to protect labour hire workers. New Zealand has not yet ratified that convention.

In deciding whether the two workers were employees, the Employment Court said that the core issue was the real relationship between each of them and LSG Sky Chefs. The fact that documents stated that the pair were independent contractors was not determinative. In fact, the judges described the paperwork as “poorly worded and confusing” and concluded that Ms T and Mr P were effectively “steam-rolled” into signing it.

The court noted that the two workers were required to wear uniforms and worked alongside LSG employees “doing precisely the same work, in precisely the same way, and wearing precisely the same uniforms.”  The key difference was that Ms T and Mr P were paid less than employees and did not receive holiday and sick pay and other employee entitlements. LSG Sky Chefs exercised a significant degree of control over both workers, managed performance, and dealt with requests for time off.

The attitude to the workers was summed up in an email the managing director of Solutions sent to LSG Sky Chefs when the latter reduced payments under the labour hire agreement –

“The product we sell you is a live product that needs to be feed (sic) weekly.”

The Employment Court ruled that it was “fanciful” to suggest that either worker was in business on his or her own account. They were employees.

The case also highlighted another common characteristic of the workers caught up in these disadvantageous webs: both Ms T and Mr P were immigrants and had English as a second language.

A second court decision released earlier this month dealt with the issue of whether couriers were employees or independent contractors. Once again, the Employment Court concluded that the worker was an employee.

Mr L was a driver for Parcel Express Ltd. When he started work as a courier, he signed a document stating that he was an independent contractor. English was his second language and he had no knowledge of the legal requirements relating to contractor or employee status, and did not understand the document he signed.

Chief Employment Court Judge Christina Inglis said that, in some cases, “the perceived benefits of characterising a worker as an independent contractor are decidedly lopsided, and that a degree of cynicism has likely informed the way in which the relationship was described from the outset.”

She said Mr L’s situation involved such circumstances. He was approached at church and asked to consider working for Parcel Express, which was having difficulty retaining drivers. Mr L met with the company and was told that, if he came to work for it, he would need to buy his own van, pay $2000 for company signwriting on the vehicle, shell out a further $2000 bond for a bond, pay $140 a month for a scanner, and sign a contract.

There was a dispute over when Mr L was given a copy of the written agreement, with the court accepting it was likely to have been later than the company alleged. Further, Mr L did not have a GST number and had no idea what one was, and was not advised to go away and read the document and take advice on it.

Chief Judge Inglis said she had little doubt that Mr L had no real understanding of his status while working for Parcel Express. He was assigned a run, with the boundaries being set by the company and Mr L having no say over the area covered. He was required to work where and when directed by the firm, as well as to wear the company uniform and adhere to its procedures’ manual.

Mr L was obliged to hold insurance cover with a company approved by Parcel Express, organise a relief driver if he was away, and not take more than 20 working days’ holiday a year without the firm’s approval.

The court said that determining Mr L’s status required an assessment of the real nature of the relationship between the parties. The underlying policy intent of section 6 of the Employment Relations Act 2000 was to stop some employers from labelling individuals as contractors to avoid responsibility for employee rights such as holiday pay and minimum wages: in other words, to prevent form from trumping substance.

The essential issue was whether the worker served his or her own business, or someone else’s business. The court said that Parcel Express exerted a high level of control over Mr L’s work, he received business exclusively from the company, and there were virtually no opportunities for him to grow the run. Chief Judge Inglis held that the evidence firmly pointed to Mr L being an employee.

It is easy to see why companies are so keen for workers to be classified as contractors rather than employees. In the Parcel Express case, if Mr L had been an employee, the firm would have been required to pay for his van, the signage, the scanner, and insurance. It would also have been liable for holiday and sick pay and ACC levies. All of those employee legal entitlements were avoided by calling Mr L an independent contractor.

These two cases illustrate how protections for workers which were fought for and won more than a century ago have in practice been rolled back, meaning that many people now work long hours for very low rates of pay. Many security guards regularly put in 12-hour days, while cleaning work is also commonly outsourced and poorly remunerated.

The Government in 2018 set up a working group led by former Prime Minister Jim Bolger to make recommendations on fair pay agreements. The agreements have been used in Australia for nine years. They involve a sector-level bargaining system, setting out pay rates, hours of work and leave arrangements across entire industries. Their primary purpose is to provide a safety net of employee entitlements, thereby getting away from the current race to the bottom which occurs when firms tender for contracts.

The security industry would be one which would be well-suited to fair pay agreements. Security workers are commonly paid the minimum wage or only a very small amount more, and remain on the same pay rate even after 20 years in the industry.

The working group reported back in January 2019, but the Government then cooled on the idea of the agreements. There was a further round of consultation, followed by Workplace Relations Minister Iain Lees-Galloway saying this month that legislation to implement the agreements was not expected before the September 2020 general election.

In another move, the Government in November 2019 released a discussion document examining how better protections could be provided for contractors. The paper set out four options for change, with the goal of deterring employers from misclassifying workers as contractors rather than employers, and making it easier for workers to access determinations as to their employment status.

Submissions on the paper closed in February but it is hard to see this initiative getting a look-in before the election either.

Frontline workers deserve to be rewarded for their service during the pandemic. Fair pay agreements, preventing employees from being misclassified as contractors, and paying a living wage to all workers would be real ways of thanking them. The Government could also set a good example when letting contracts, by requiring the living wage to be paid to workers as a condition of winning government work.

Bluntly, if we are not prepared to provide frontline staff with decent working conditions, our words of thanks are just empty rhetoric.

Cat MacLennan is a journalist and barrister

Photo by byronv2 on Foter.com / CC BY-NC