Over the last 12-18 months we have seen demand in the food & beverage industry accelerate in all sectors, tempered only by the horrifying drought which continues to cause enormous pain in so many parts of the industry. Against this current struggle, we have observed that the long-term cycle still creates incredible incentive to revitalise the industry – and particularly so in re-setting capital and employment frameworks to cope with that demand.
In this food & beverage industry update we look at the employment issues that have arisen over the last 12 months, highlighting real threats in each part of the value chain which further challenge that revitalisation and growth. These issues in turn appear to raise the need to carefully consider strategy in the short to medium term to avoid further burdens to your business and/or to make sure you are focusing on the right things to secure the revitalisation and growth experience as a profitable one rather than a potential investment disaster.
Access to labour – Introduction of a national labour hire licensing scheme
Despite major skills shortages behind the farm gate, access to labour will be tighter and at significantly increased costs from 2020 and beyond.
In response to the Federal Government’s Migrant Workers Taskforce, the subsequent “Howe Report” on access to labour within primary industry and the Fair Work Ombudsman’s “Harvest Trail Inquiry”, the Commonwealth Government has accepted a range of recommendations and will seek to implement a national labour hire licensing scheme in 2020. This comes hot on the heels of State legislation in Queensland, South Australia and Victoria which has also focused on agriculture/horticulture as high risk industries for workers and migrant exploitation.
The thrust of these changes will be to require licensing, auditing and significantly enhanced enforcement of minimum employment conditions against all businesses (including producers) which advertise, provide or use any “labour hire” services. It remains to be seen how this will be policed at the national level, but the Victorian experience so far (which was implemented from 1 November 2019) suggests that the reach of such regulation extends far beyond traditional concepts of labour hire – instead capturing any operator who uses contract services within its business. Producers will need to ensure that they only use licensed and accredited services or they themselves will face significant penalties too.
Payment of “piece” rates – a WIN for producers in the Full Court of the Federal Court!
“Piece” rates have long been a part of the employment arrangements behind the farm gate – being payment for the amount of the food/product picked rather than the hours worked (eg. the number of bins picked or sheep shorn).
In a great result for producers, the Full Court of the Federal Court this year ruled in Fair Work Ombudsman v Hu  FCAFC 133 that piece rates remain an acceptable payment method under the Horticulture Award 2010 in a case involving a mushroom growing business in Queensland. Importantly, the Court noted that an employee employed on “piece-rate” arrangements did not need to have their pay topped up to meet the minimum hourly rate obligations under the Award provided that the piece-rate was reasonably set as being capable of being achieved by the employee.
Chain of responsibility
Two recent cases in the Victorian Magistrates’ Court in September 2019 have highlighted the increased policing of heavy vehicles under chain of responsibility laws:
- A company was fined for having a class 1 heavy vehicle observed twice as being over height and over mass. The company was fined $36,000.00.
- Another company had a heavy vehicle intercepted after being overloaded and with no load restraint covering a load of soil, which was loaded over the waterline. The vehicle was also weighed on portable weighing devices and found to be loaded at 121% of its mass, thus a severe mass breach. The company was in our view lucky to escape with only a fine of $13,000 given that sentencing is now being carried out against the severity of the threat to safety, rather than the extent of any injury/accident has actually occurred.
Review of heavy vehicle laws (HVNL) – consultation ends soon in May 2020
Despite the relatively recent re-write and implementation of heavy vehicle laws, the National Transport Commission was tasked by the Commonwealth to again review the HVNL with a view to legislation being drafted in 2021.
Importantly for present purposes, consultation with industry will shortly be drawing to a close. If you haven’t read the discussion papers or provided a submission yet, we strongly recommend that you get across the process before consultation ends in May 2020. The NTC website containing the relevant discussion papers and progress of the review can be found here.
Capital reinvestment – the very real threat of legacy manufacturing agreements
While 25% of all manufacturing in Australia now occurs in the food & beverage industry, and with new capital investment and export opportunities also proceeding apace, this part of the value-chain is still beset by legacy instruments from a bygone era (ie. think car manufacturing) which still severely impede workforce productivity and threaten investment programs.
This was recently highlighted in the Federal Court case of AMWU v O-I Operations (Australia) Pty Ltd  FCA 1272 in which the union was successful in obtaining an injunction against the company using management staff to operate the plant while employees were taking industrial action. While the judge noted that it would in any ordinary sense defy belief that the company could not choose to operate its machinery as it saw fit, the injunction was ordered because the company’s enterprise agreement itself had a legacy provision restricting the use of management staff in such circumstances.
To that end, unless processors are properly reviewing their enterprise agreements and/or other legacy working conditions to ensure full management productivity is retained, then they stand to only incur significant capital investment losses rather than reap the benefits of the upswing in work and opportunity.
Guarding of plant
Adequate guarding of plant is a safety protection that often gets overlooked until an incident occurs. There have been recent prosecution cases in the Magistrates Court of Victoria involving a gap in guarding which enabled bodily access to the danger area of the plant, with the risk of entanglement, crushing, amputation injury etc:
- A fruit processing company was fined $25,000 without conviction after a worker’s finger was partially severed by moving machinery. The employee was cleaning an operating packing line when her finger was caught between the conveyor and a metal edge. The company subsequently installed guarding to cover the gap between the conveyor and the edge. In the current climate the company was very lucky to escape conviction.
- A processor of egg-based products used a machine to mould and seal a tray made out of plastic film. The plant used a fixed cutting blade and a moving bottom plate to cut through the plastic between the trays, separating them into rows of trays. The plant had interlocked guarding, however, bodily access to the cutting blades was possible through gaps on either side of it. An employee suffered a partial amputation to the tip of his right middle finger when he attempted to remove a piece of plastic that was jammed in the plant. The processor was fined $15,000 without conviction.
The risk of injury from bodily access to the danger area of moving plant during operation, cleaning and maintenance necessitates adequate guarding to eliminate or reduce risk of harm. While this has been a “no-brainer” and known across the industry for many years, these cases are a salutary reminder for new players coming to the sector that you absolutely need to ensure that your machinery includes adequate guarding. In particular, look for gaps between the guarding and moving parts, ensure that plant is not used for a purpose other than for which it was manufactured, and that workers are trained in safe operation and cleaning of equipment. This applies equally to new as well as second hand equipment.
Restaurants, Cafes & Retail
Underpayments and “wage theft”
It is now fair to say that underpayments have become a HUGE issue in the hospitality and retail sectors, with Woolworths setting a new record for massive liabilities hot on the heels of other major brands like 7-Eleven and Caltex.
If you are operating a café, restaurant or other retail shop, you need to understand now that the landscape has changed immensely and as such need to have your records and processes in order in case the very active Fair Work Ombudsman chooses to investigate.
Issues you need to be aware of include the following:
- If you do not have reasonably maintained payroll records (in accordance with your obligations), you now bear a “reverse onus of proof” to prove that you did not underpay your employees.
- There is a five-fold increase in penalties for being aware of underpayment issues and failing to act on them.
- As a director, manager or payroll service provider, you may face personal liability as an “accessory” for being knowingly concerned in a breach by any company you are working for.
- As a franchisor, you also have liability in respect of your franchisees unless you take reasonable steps to ensure wage compliance.
In this heightened environment we strongly recommend that you consider payroll auditing – particularly to ensure that no mistakes have been made in your automated payroll instructions or that you have properly passed-on increases in terms and conditions as a result of modern award changes (which have been very substantial as a result of the long-running review of modern awards by the Fair Work Commission). Ignorance is no excuse.
Modern Slavery – supply chain investigation and reporting
Finally in this update, we note that from 31 December 2019, all businesses with turnover exceeding $100 million will be required to prepare and file a “Modern Slavery Statement” setting out how you are auditing and managing the risks of modern slavery in your supply chain. While at first we probably shared the view that many of you will have had that “this is just not relevant to me because as if I have slavery in my supply chain”, on a closer look at it this is a massive issue where your supply chain is sourced overseas or from vulnerable industries. It also involves validating not only your first-tier suppliers, but your entire supply chain including all your suppliers, their suppliers and beyond.
If you are interested in learning more about this highly topical issue, listen to our recent webinar on the topic, in which we covered all the practical steps you should look at undertaking in order to comply with these requirements. You can access a recording of the webinar by clicking here.
We trust you have found this update useful. KHQ Lawyers is one of few law firms in Australia with a dedicated food & beverage practice supporting clients from all sectors of the industry (be they producers, manufacturers, distributors or packers). Our experience stems from many years supporting major national and international FMCG clients with their product labelling and associated regulatory requirements. Read more about our expertise.