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Charities under scrutiny in wake of class actions and FWO inquiry

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Take it from the top

It is quite common to be walking on a busy street or in a shopping centre and be approached by someone asking for a donation for a specific charity. Have you ever wondered about how much these “fundraisers” are being paid? Well, the Fair Work Ombudsman (FWO) has.

It is quite common to be walking on a busy street or in a shopping centre and be approached by someone asking for a donation for a specific charity. Have you ever wondered about how much these “fundraisers” are being paid? Well, the Fair Work Ombudsman (FWO) has.

Since October 2016, the FWO has conducted investigations as part of its Inquiry into the exploitation of charity collectors (fundraisers). The FWO’s primary concern is that charities are unaware that workplace laws are being contravened and workers are being exploited by some sales and marketing agencies (SMAs) who supply labour for a charity’s outsourced fundraising activities.

The FWO investigation is not the only avenue through which charities and their labour hire practices have come under scrutiny. This month, newspapers have reported on Canberra fundraisers who are mounting a class action against a SMA. The fundraisers have alleged that they were paid as little as $600/week for 80 hours of work. They further allege that:

  • They failed to receive minimum employment entitlements;
  • Were paid on a results/commission only basis; and
  • The SMA engaged unpaid interns and high school work experience students.

The SMA subject to the class action responded to these allegations and stated that these fundraisers were in fact subcontractors of another SMA. These arguments highlight another focus of the FWO’s inquiry, sham contracting.

The FWO has suggested that the most common non-compliance issue for charity SMAs is sham contracting. This is where fundraisers are being classified and treated as independent contractors when their correct classification is as an employee. In some cases, the misclassification is done deliberately or recklessly in order to avoid obligations under employment law.

The Fair Work Act 2009 (Cth) (FW Act) contains provisions on “accessorial liability.” These provisions make anyone involved in a breach (i.e. underpayment, sham contracting, etc) personally liable as an “accessory” to the breach/es. This is to ensure that all those who are involved in or benefit from the exploitation of vulnerable workers (such as students and visa holders) are held accountable.

In order to minimise exposure to the accessorial liability provisions of the FW Act, it is important for those at the top of the supply chain to ensure that all parties in the supply chain have complied with workplace laws. To assist with minimising exposure to accessorial liability, charities or any other entity at the top of the supply chain should:

  • Check existing agreements to determine whether there is a condition in the agreement that requires the labour hire company or agency to comply with all applicable laws and any obligations contained in an award or enterprise agreement;
  • Enquire with the labour hire company or agency about the rates of pay where there is a suspicion that the rate provided appears to be lower than expected; and
  • Conduct spot check or audits with respect to subcontractor rates of pay to ensure correct pay and conditions are provided throughout the supply chain.

In light of the FWO’s continued investigation into charities and the class action taking place in Canberra, it is a timely reminder for charities (and other corporations) who have supply chain arrangements, that legal advice should be sought to minimise risks of accessorial liability and potential penalties for breaches in the supply chain.

 

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