1 Regulating Supply Chains Richard Johnstone, Socio-Legal Research Centre, Griffith Law School, Griffith University; and National Research Centre for OHS.

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Regulating Supply Chains

Richard Johnstone, Socio-Legal Research Centre, Griffith Law School, Griffith University; and National Research Centre for OHS Regulation, Australian National University

andMichael Rawling, College of Law, Australian National University

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Supply Chain (an interconnected series of contracts organised for

supplying goods or services to organisations at the apex of contractual

chains) Effective Business Controller

(eg Retailer)

Head Contractor

Contractor

Sub-Contractor

Worker

(Further) Sub-contractor

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Two approaches to regulation Duty to ‘others’ in the Australian

OHS statutes Apparel, road transport and

generic supply chain legislation

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OHS Statutes The courts have given a broad interpretation of

the employer’s duty to employees – eg Swan Hunter (UK)

Deemed employees – covering contractors and their employees – see OHSA(Vic) s 21(3), Queen v ACR Roofing (Vic, 2004), Cth, WA, (and SA, NT)

OSHA (WA) since 2005 deems ‘employees’ to include labour hire and other labour arrangements

WHSA(Qld) duty owed to ‘workers’, defined as a person who ‘does work, other than under a contract for services, for or at the direction of an employer’, and includes volunteers.

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Employer/Self-Employed Person’s Duty to Others

Broadest provisions are in OHSA(Vic) ss 23 and 24 and WHSA(Qld) s 28 – ensure persons who are not employees ‘are not exposed’ to risks to OHS from ‘the conduct of the undertaking’ (Qld duty imposed on person ‘conducting a business or undertaking’; Victorian duty imposed upon ‘employer’ and ‘self-employed persons’ – similar to HSAWA s 3).

R v Associated Octel (UK, 1996) – employer free to decide labour arrangements but is under a duty to exercise control over the activity and to ensure that it is done without exposing non-employees to risks.

Whittaker v Delmina (Vic, 1998) – broad definition of ‘undertaking’.

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National OHS Review 2008-9 Recommended that a model Australian

OHS Act include a ‘primary’ general duty, imposed upon a ‘person conducting a business or an undertaking’, owed to ‘workers’ broadly defined and ‘others’, to ensure that workers and others ‘are not exposed to a risk to their health and safety arising from the conduct of the undertaking’.

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Application to supply chains The importance of the wording of sections 21(3), 23 and 24 of the OHSA(Vic), section 28 of the WHSA(Qld) and the National OHS primary duty becomes most apparent in relation to multi-tiered or pyramidal sub-contracting found in industries like clothing, long-haul transport, construction and franchise arrangements.

These provisions impose a hierarchy of overlapping and complementary responsibilities on the different levels of contractors and sub-contractors.

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For example, employers, contractors and subcontractors at each level owe duties to all parties below them in the contractual chain.

In short, these provisions in the OHSA(Vic) and WHSA(Qld) have a very broad reach, and ensure that a firm’s OHS responsibilities extend not only to ‘employees’, but to dependent and semi-dependent workers, independent businesses and volunteers who are engaged by the firm in the conduct of the firm’s undertaking.

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Further issues: Need to ‘flesh out’ application of

these general duties in regulations and codes of practice;

Need to integrate OHS issues with measures to ensure adequate remuneration;

Inspection and enforcement strategies focusing on supply chains.

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Apparel Supply Chain Legislation‘Top Down’ Obligations – Mandatory Apparel Retailer Codes Ethical Clothing Trades Extended Responsibility Scheme 2004

(NSW) Fair Work (Clothing Outworker Code of Practice) Regulations

2007 (South Australia (SA))Expanded Scope of industrial statute – definitions of ‘industrial

matters’: Industrial Relations Act 1996 (NSW) s6(2)(k) Fair Work Act 1994 (SA) s4(1)

Outworker Rights of recovery Industrial Relations Act 1996 (NSW), ss129A-129J Fair Work Act 1994 (SA), ss99A to 99J Industrial Relations Act 1999 (Queensland), ss400A-400I Outworker (Improved Protection) Act 2003 (Victoria)

Outworker definitions and deeming provisions (extend to outworkers rights and entitlements under industrial legislation) Industrial Relations Act 1996 (NSW), s5, Sch1.1(f) Fair Work Act 1994 (SA), s5, definition of ‘contract of

employment’ s4(1) Industrial Relations Act 1999 (Queensland), ss5(1)(g), 8C,

schedule 5 Outworker (Improved Protection) Act 2003 (Victoria) Industrial Relations Act 1984 (Tasmania) s3 

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(a) Mandatory Apparel Retailer Codes

Compulsory, standardised, enforceable provisions imported by statute into retailer contracts informing retailers about (a) where apparel is manufactured and (b) under what conditions apparel is produced

Where an outworker is to be engaged, retailers must, (before entering into an agreement with a supplier), obtain an undertaking from the supplier that: The supplier and its contractors will engage

outworkers under lawful work conditions The addresses where apparel production is to be

performed will be disclosed. The retailer must also obtain information from the

supplier (and suppliers are required to provide this information) including the name and address of each party in the supply chain and the number and type of apparel products to be made under the agreement

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Mandatory Apparel Retailer Codes (cont)Commercial Sanctions

It is mandatory for a retailer to not enter into an agreement with a supplier who does not provide an undertaking

The retailer must inform the supplier that a breach of an undertaking by the supplier or one of its contractors is a breach of the agreement and grounds for the agreement’s termination

Record Keeping Apparel Retailers must keep records of contracts

with suppliers and the names and addresses of suppliers, suppliers’ contractors and addresses where work is performed and details about the clothing products to be supplied

Suppliers and their contractors must assist retailers to maintain these records

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Mandatory Apparel Retailer Codes (cont)Proactive and Reactive Disclosure Obligations

Retailers must proactively report at regular intervals (at least every 6 months) to the relevant trade union and state enforcement agency full and accurate details of the records the retailer is required keep about clothing supply contracts, production locations etc

A retailer must, upon request, provide to the relevant trade union or state enforcement agency any record the retailer is required to keep under the Mandatory Code for the purpose of allowing the (routine or otherwise) investigation of possible contraventions of the relevant award

The retailer must also report to the relevant trade union and state enforcement agency when a supplier or supplier’s contractor engages (or intends to engage) an outworker on less favourable terms and conditions than prescribed under the relevant award or industrial instrument

These provisions permit the relevant trade union to oversee entire clothing supply chains to effect compliance with OHS, workers compensation & industrial relations obligations.

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Scope of industrial statute allows for regulation of entire supply chains involving outwork Eg. under South Australian industrial statute

‘industrial matter’ includes: (i) the giving out of work or (ii) the regulation of any person who gives out work, or (iii) the creation of 1 or more contracts (including a series of contracts) that deal with outwork (see definition of “industrial matter”, Fair Work Act 1994 (SA), s4(1) )

Under NSW industrial statute ‘industrial matter’ includes:The mode, terms and conditions under which work is given out, whether directly or indirectly to be performed by clothing outworkers (see definition of “industrial matter”, Industrial Relations Act 1996 (NSW), s6(2)(k)

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Outworker rights of recoveryExample of the right under South Australian

Statute An outworker may initiate a claim for unpaid

remuneration against any person in the supply chain (apart from the retailer) who the outworker believes to be a responsible contractor

The responsible contractor nominated in the claim is then liable for the claim unless that contractor refers the claim on to another party who actually pays, or the responsible contractor deducts or sets-off the amount from moneys owed to a person who has a closer contractual relationship with the outworker.

Reverse Onus of Proof In recovery proceedings, the onus of proof is on the

responsible contractor (not the outworker)

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Road Transport Industry Supply Chain Regulation regarding OHS

1. Long haul truck driver fatigue regulationOccupational Health and Safety Amendment (Long Distance Truck Driver Fatigue) Regulation 2005 (NSW)

2. Regulation by binding industrial tribunal decisions

Re Transport Industry – Mutual Responsibility for Road Safety (State) Award and Contract Determination [2006] NSWIRComm 328

Transport Industry - Mutual Responsibility for Road Safety (State) Award (2006)

Transport Industry - Mutual Responsibility for Road Safety (State) Contract Determination (2006)

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1. Long Haul Truck Driver Fatigue Regulation

An extension of/elaboration on OHS statutory general duties which makes these duties specific to certain parties at the apex (and throughout) road transport supply chains.

Application of Regulation Applies in relation to both owner drivers and

employee drivers who are engaged to transport freight by means of a journey or series of journeys totalling more than 500 kilometres under a contract (or series of contracts)

Obligations owed by consignors who receive delivery of freight and consignees for whom freight is delivered (eg retailers), apply if the consignor or consignee employs, either directly or by labour hire, 200 workers

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Obligations under the Regulation: risk assessment and control

Consignors, consignees and head carriers must not enter into a contract with a self-employed carrier for the long haul transportation of freight unless they have assessed the risk of harm from fatigue to any driver transporting freight under the contract; and (to the extent to which they have contributed to the risk) eliminated/controlled the risk.

Similar obligation on an employer in relation to its employees

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Obligations under the Regulation: Fatigue Management Plan

An employer must prepare a driver fatigue management plan for all of its employee drivers who transport freight long haul.

A consignor, consignee or head carrier who enters into a long haul transportation contract with a self-employed carrier must prepare a driver fatigue management plan for all drivers.

The fatigue management plan must address issues that may affect driver fatigue including: Trip schedules and driver’s rosters → time required and actually

taken to perform tasks safely, rest periods required, and the cumulative effects of fatigue over more than 1 day; and of the time of day or night on fatigue;

Management practices for reporting hazards and incidents, for monitoring driver safety and for assessing the suitability of drivers;

Work environment and amenities; Training and information about fatigue that is provided to

drivers; and loading and unloading schedules, practices and systems.

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Obligations under the RegulationA consignor or consignee must not enter into a contract

with a head carrier unless satisfied that any truck driver who transports freight under the contract is covered by a fatigue management plan and that any delivery timetable is reasonable having regard to the fatigue of any such driver (c

Consignors and consignees must, upon request, allow an authorised official from the relevant trade union to inspect: all long haul freight contracts entered into in the

course of the consignor or consignee’s business, all driver fatigue management plans they have

prepared, all trip schedules, delivery timetables and driver

rosters for self-employed carriers of the consignor or consignee; and

any risk assessments prepared for or by them relating to the fatigue of (heavy) truck drivers.

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Long haul trucking award and determination The award which protects employee and labour- hire

employee truck drivers and the contract determination which protects self-employed truck drivers explicitly address the link between pay rates and safety.

Award and Determination Obligations Long haul road freight transport operators which

engage drivers to perform long haul work must prepare a safe driving plan for all of those drivers

The safe driving plan must specify a number of matters including: how the work is to be remunerated under any applicable industrial

instrument remuneration method chosen (having regard to OHS of drivers) and

rate of pay the system of monitoring effect of chosen remuneration method on

driver fatigue means of limiting the amount of hours and work performed by drivers

to prevent driver fatigue and excessive work hours and the means of enforcing those limits

how the work is to be performed and rest breaks taken the names and addresses of other parties further up transport supply

chains.

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Long haul trucking award and determination

A safe driving plan must be provided to parties further up transport supply chains - (head) consignors and transport operators

Transport operators who contract out long haul work to other transport subcontractors must ensure that those subcontractors comply with safe driving plans, the regulation and applicable industrial instruments.

Where a transport operator becomes aware that one of their subcontractors has breached any such plan, regulation or industrial instrument they must take action (eg termination of contract) to ensure that such a breach is rectified and not repeated.

The relevant trade union can inspect safe driving plans upon the provision of 24 hours notice. Any dispute between the union and a transport operator about a breach of a safe driving plan, the regulation or relevant industrial instrument can be conciliated and arbitrated by the NSW Industrial Relations Commission.