Wage theft: Retailers under the microscope

Woolworths fresh, produce, fruitWhile much of the attention at Woolworths’ Annual General Meeting (AGM) last week was centred on Amazon’s local launch, keen observers may have noticed a market release the day before, notifying shareholders that a resolution which would have opened the door to the production of an annual human rights impact report was withdrawn.

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The resolution, which Inside Retail revealed in October was an initiative of the National Union of Workers (NUW), was intent on shining a light on “exploitative arrangements” within the supermarket giant’s supply chain, particularly in horticulture.

As NUW President Caterina Cinanni explained: “Currently in Australia, workers who pick and pack fruit and vegetables for Woolworths are amongst some of the lowest paid. Thousands of these workers are also trapped in exploitative arrangements which can include being forced to work illegally for cash below the minimum wage.”

Woolworths’ Board was against the resolution from the outset, partly because it would have involved passing a separate resolution that would enable shareholders to officially express opinions about the way the business is managed.

However, the supermarket giant came to the table to negotiate with the NUW and alongside notice of the resolution’s withdrawal, issued a press release “reaffirming its commitment” to addressing human rights issues in its supply chain.

Group CEO Brad Banducci said that Woolworths will work with the union to implement pre-qualification programs with labour-hire providers, while also supporting supply chain workers with education programs and safeguarded grievance reporting mechanisms.

“We recognise the current efforts of these stakeholders, including the NUW, and are committed to actively participating in a process to deliver genuine improvements and sensible and practical reform,” Banducci said.

Woolies’ effective admission that reform is required is a sign of the times that the broader sector would do well to watch closely.

One NUW organiser IRW spoke to indicated that the supermarket giant wouldn’t be the only retailer targeted for not keeping a close enough eye on its supply chain, with Wesfarmers’ Coles emerging as the next logical target.

Underpayment widespread in retail sector

Evidence of underpayment and broad-based exploitation in Australia’s retail sector and related supply chains is also mounting, with public and government awareness of the issue rising in tandem.

A landmark study on wage theft in Australia released by UNSW and UTS last week found that one in three international students and backpackers are being paid about half the legal minimum wage ($12 per hour or less).

The report is based on a national survey of 4,322 temporary migrants from 107 countries and is being touted as the most comprehensive study of temporary migrants’ work and conditions in Australia.

The retail sector was repeatedly singled out by study authors, with 38 per cent of respondents saying their lowest paid job had been in a café, restaurant or takeaway shop – far greater than the proportion in any other type of job.

One in seven participants working on farms and in fruit and vegetable picking – which feeds into the large supermarkets – said they earned $5 per hour or less, while 31 per cent said they earned $10 an hour or less.

In convenience stores and petrol stations, a fifth said they earned $10 per hour or less, while in retail more broadly, 36 per cent said they earned $12 per hour or less.

Study author Bassina Ferbenblum from the University of New South Wales says the findings should serve as a warning to the retail sector, imploring stakeholders to cast a microscope over their place in the broader market.

“The level of non-compliance with Australian labour laws have reached epidemic proportions among international students and backpackers,” says Ferbenblum, who authored the paper with Laurie Berg of UTS.

“There are significant roles that government and business need to play in this area. Government needs to devote far more significant resources into enforcing Australian labour laws…but also to support services for temporary migrants to make claims against their employers.

“[If businesses] aren’t detecting non-compliance in their supply chains, they aren’t looking hard enough or in the right places,” she adds.

The Federal Government already legislated in September to address underpayment in Australia’s franchise sector, opting to make franchisors more liable for poor conduct within their networks in the wake of wage scandals at 7-Eleven and Domino’s.

Legislation looms

The regulation is confirmation that government is prepared to hold retailers accountable for the behaviour of their business partners, a philosophy that appears to be extending to the drafting of new legislation aimed squarely at exploitative conditions in retail supply chains.

Dubbed the Modern Slavery Act after similar legislation already passed in the UK, retailers over a certain (and currently undecided) turnover may be required to produce an annual human rights report or even take active steps to address underpayment or other worrisome workplace practices within their business networks.

Industry consultation is currently taking place, but the prospective Bill appears likely to pass, given it already has principled support from both major political parties as well as Woolworths and Coles.

The Fair Work Act already includes a provision called accessorial liability, which is designed to hold retailers accountable for the behaviour of third party contractors they work with, but a Modern Slavery Act represents a more broad-based approach that also includes protections for workers overseas.

Australian Retailers Association executive director Russell Zimmerman expects a draft Bill to hit parliament in the early stages of next year, but there’s still uncertainty over whether legislators will take a light or heavy-handed approach.

“We don’t know whether it will be similar to the UK, which is a light touch, or whether it will be heavy…the threshold is still yet to be determined,” Zimmerman says.

The ARA favours a light touch, like that of the UK, where only large retailers are required to draft reports, although possible versions of the Bill could also see retailers bearing the costs of compliance.

“If a retailer understands or knows they have a problem, it is then a responsibility of theirs to attend to that through their supply chain,” Zimmerman says.

With government regulation likely to be in effect within a few years, Zimmerman advises retailers to begin get out in front and begin working through any issues before legislation is passed.

 

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