The Fair Work Ombudsman has fined the Australian arm of global cleaning company ISS Group, and its subcontractor, $168,070 for underpaying cleaners at the Melbourne Cricket Ground (MCG) in 2014.

ISS Facility Services Australia Limited – which holds a contract to provide a variety of cleaning services at the MCG – received the $132,217 penalty in the Federal Circuit Court, while the co-owners of the subcontractor, First Group of Companies, were fined $17,926 each.

The ruling is the result of a surprise night-time visit to the MCG by FWO inspectors in 2014 which discovered 11 overseas workers were underpaid $37,471 for cleaning work at the stadium after AFL matches.

The 11 cleaners were employed by First Group of Companies Pty Ltd, a now-deregistered company ISS had subcontracted between 2009 and 2014 to provide post-event cleaning services at the sports stadium.

In court, ISS admitted knowing in 2014 that the rates it paid First Group of Companies were “not sufficient to cover the employees’ entitlements” and that it was aware of the unlawfully low rates First Group of Companies was paying workers. ISS admitted its conduct contravened workplace laws.

The investigation

The Fair Work Ombudsman commenced its investigation into the MCG’s supply chain for cleaning staff in 2014 in response to media reports and intelligence suggesting significant compliance issues.

A key part of the investigation was a team of six Fair Work inspectors making a surprise visit to the MCG after the AFL preliminary final between Hawthorn and Port Adelaide in September 2014 to speak to cleaners.

Once inspectors made cleaners aware of their presence and the purpose of the visit, the workers inundated inspectors with their desire to tell their stories. The inspectors spoke to about 44 cleaners between about 9pm and just after midnight.

The workers were mostly international students from India, the Philippines, Colombia and Brazil.

The investigation discovered cleaners were paid flat rates of between $18 and $25 an hour to clean after AFL matches. The rates failed to meet minimum pay and entitlements under the Cleaning Industry Award 2010, including base hourly rates, casual loading, penalty rates, overtime and allowances.

Under the award, the workers were entitled to rates of between $18 and $46 for some shifts. The 11 workers who were the subject of the legal action were underpaid individual amounts ranging from $276 to $7272 over a five-month period in 2014.

Penalties a “wake-up call”

Fair Work Ombudsman Natalie James said the significant penalties handed down should serve as a wake-up call to any head contractors who think they can turn a blind eye to non-compliance by the subcontractors they engage.

“The Fair Work Ombudsman has been warning businesses for years: you can’t turn a blind eye to exploitation of contracted workers in your labour supply chains,” James said.

“This case provides a clear example of what can happen if you fail to actively manage your contractors in high risk sectors.

“The Fair Work Ombudsman will hold-to-account all those involved in exploitation, from head contractors down, and they risk serious consequences if they fail to take steps to ensure that all subcontractors in the supply chain treat workers lawfully.

“These responsibilities start with the procurement process.

“Price driven procurement that disregards the cost of wages and the dynamics in the market is a recipe for exploitation of vulnerable workers.

“Proving accessorial liability can be complex and I’m pleased that in the cases we have been able to obtain the evidence necessary to hold those involved in breaches of workplace laws to account.”

In court, ISS submitted that it had been a “third party” to the underpayments.

However, Judge Suzanne Jones said that “in light of the admissions” made by ISS “it is simply incorrect to describe [ISS] as a ‘third party’, if the use of that word is designed to minimise or reduce [ISS’s] responsibility for its involvement in the contraventions”.

In imposing 43 per cent of the possible maximum penalties against ISS, Judge Jones said principal contractors “must be deterred” from using non-compliant subcontractors.

“Principal contractors must be deterred from engaging subcontractors without taking steps to ensure that so long as those subcontractors are engaged by them, they comply with the [Fair Work] Act,” Judge Jones said.

Judge Jones also imposed penalties of $17,926 against each of the former owner-operators of First Group of Companies – Sharad Patel and Sidarth Luthra – for their involvement in sham contracting, frequency of pay and pay slip contraventions by their company.

The penalties take total penalties secured by the Fair Work Ombudsman in the case to $168,070.

First Group of Companies rectified the underpayments in full before it was deregistered.

In a statement issued to INCLEAN ISS Facility Services said it “took immediate corrective action as soon as the company became aware of the issue in 2014, directly employing the workers of the subcontractor and terminating the services of the subcontractor”.

ISS has also audited all of its subcontractors, reviewed its procurement system and rolled out an electronic sign-in system to monitor employees’ times of work and calculate entitlements.

“ISS have continued to fully cooperate with the Fair Work Ombudsman throughout this process,” the company said.

“ISS is committed to using a direct employment model across our whole business wherever possible, and ensuring that our 13,000 plus employees are paid in line with their award or enterprise agreement.”

James also praised ISS’s involvement with the Cleaning Accountability Framework , an industry-led initiative which promotes the adoption of best practice throughout the cleaning supply chain.

“It is clear that head contractors have a vital role to play in promoting workplace compliance within their labour networks, and it is encouraging to see that ISS has learnt from its mistakes and has taken concrete action to prevent such breaches from occurring again,” James said.

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