Department of Education, Employment and Work Place Relations

15/2/2011

Department of Education, Employment and Work Place Relations:

Dear Fair Work Review Board,

You will know from my earlier submission to the Senate thatI am an Ethically Approved Manufacturer and fully support the “outing” of any exploitationin our sector. Ethical behavior is core to my beliefs.

As a manufacturer of high-end apparel to Australian Designers, I holdgrave concerns of a blanket legislation being put in place that directly discriminates against those of us who behave ethically. The legislation takes away the human right to run your own business from home. It is a legislation that places a Restriction of Trade across the sector.

To this, I have taken the time to put in writing the concerns I have with the legislation and also bring to your attention the complexities of our sector; how implausible it is to actually function under the legislation and the resulting demise of our sector if it is enforced.

The background to the Bill refers to payment for the work of outworkers for as little as $2-3 per hour. This encapsulates the main concerns of the Committee and the TCFUA, that being the low pay that outworkers in the industry are alleged to receive for the work they perform. Invariably whenever the issue of outworkers arises in the media, similar stories are told about the amount of pay these outworkers are alleged to receive. It is always stated in any article in the media about the industry or in any TV report as evidenced by the DVD the TCFUA placed before the Committee. The amounts alleged are always pitiful.

The citation in the background to the Bill as to outworkers being paid from $2-3 per hour shows this statement comes from the second reading speech made on the 24/11/2011 by Senator J Ludwig. Where does Senator Ludwig obtain his information from for his statement? Is it from a report by the Brotherhood of St. Laurence dated back in May 2008? If so, this information came from research they had conducted into this issue in 2007! They also cited the report of Cregan 2001, which seems to be commonly cited, which stated that outworkers averagebetween $2-$3 per hour and were working 12hrs per day. The Brotherhood of St. Laurence interviewed 2 groups for their report. One group said they were paid $2.50 for a detailed shirt, which took 1hr to sew. The second group said they were paid between $2/3 an hr.

Despite the fact that the Cregan paper was done in 2001 and the Brotherhood of St. Laurence research was done in 2007, there is a paucity of evidence before the Committee as to the situation since then, other than some anecdotal evidence, and in particular 2 "outworkers" who gave evidence to the Committee in relation to this issue. The transcript fails to identify if these 2 outworkers gave sworn evidence before the Committee. Further, not one question was asked of these 2 "outworkers", they were not subject to any clarification of their statements, and frankly their evidence was incredible. Be that as it may, does the Committee have details as to who employed these people, where that employment took place, and what they were required to do?I ask why the TCFUA is only putting forward these such outworkers when they have spoken to my Contractors who has explicitly told the TFCUA they choose to be a Contractor, are happy and ask the TCFUA to leave them alone!

The BoSL indicated that they interviewed, in 2007, 13 outworkers. 13! They based their findings in relation to hours worked and rates of pay on that number of outworkers. That is the $2-$3 per hour that outworkers are being paid. Where they obtained these people from is not stated. Where they worked or whom they worked for is not stated. In their report they indicated it was difficult to ascertain the number of outworkers in Australia at the time, but they provided a figure range as follows: between 23,650 (Industry commission 1997) and 329,000 TCFUA 1995. 13 outworkers equates to .054 percent of the lower figure and .0039 of the upper figure. It also equates to an average of 2-3 Manufacturing Factories at the most. Is this a good sample? Were they randomly selected? Is this the basis upon which this Government wishes to amend the Fair Work Act in relation to "outworkers"? Why are these 2- 3 factories simply not dealt with? Why is the whole of the Sector being punished for the fallibility of 2-3 factories??.Are these 13 Outworkers still working today? If so, are they still working for the factories that were paying them $2-$3 per hour? If they are working today, what is their rate of pay in 2012??

The Chair of the Committee Senator Marshall at the Public hearing on the 2/2/2012, is quoted as saying “everyone has tried to address this issue which is really unacceptable exploitation of many many people”. Does Senator Marshall rely upon the BoSL report from 2007 for this statement or would he please identify how many outworkers he is referring to.

As an employer in the industry, I can indicate that I pay a contract rate of $22. Per hour. ( Award plus entitlements) This is a far cry from the $3.60 quoted in the BoSL report. I have never heard of or seen any evidence of anyone being paid $3.60 for a detailed shirt. The issue here is that we have to ascertain what time an average machinist takes to make a garment and the piece rate is based on industry standards.

The purpose of the Amendment is to deem contract outworkers to be employees, not withstanding there is little credible evidence to support such a change.

You mentioned that we couldn’t speak directly for the Contractors we know, that they need to voice what they want themselves.

I will though take the time to voice my concerns on the inflexibility and discrimination the legislations holds for these people. The voice of all in the sector deserves to be heard, not just those the TCFUA put forward. I will also provide letters from these Contractors with their own point of view to support the case. These Contractors have worked as Contractors with the TCF Industry for over 25 years. They have chosen to have businesses rather than be Employees. The business’s have supported their lives; they have bought their houses and raised their children through these legal entities, which abide by Australian Tax Law. The legislation will negate all equity in their business’s and deny them the tax benefits all others sectors are afforded.

Financially these Contractors are worse off. They will be forced be employed at the Award Rate, and taxed at a higher rate as their customers will now be deemed employers! They can longer claim the business expenses to the degree they can under a Business/Company structure. What happens to these peoples’ Partnerships? I ask, why does anyone have the right to deny those who choose to have their own business simply because it is based in their home. The global movement is for people to work from home. Australia is a Small Business Enterprise country!

Another example as to how this blanket legislation is detrimental to our sector: We contract to a patternmaker to make our patterns who works from her home studio. She had invested over 20K in setting up her business and contracts to other companies. She is a good example of a contract outworker in the Textile Sector. Her contract rate is $55+ GST. Under the legislation she is deemed an employee and will be an illegal entity because she works from home.

Also, if I, as a manufacturer in a factory, choose to reduce my over heads and run my business from my double garage, the legislation invalidates my company structure completely and forces me to be come an Employee. This simply, because I would choose to work from home?? The money I have put into setting up my company structure would be ignored. My right to run my business from home would be denied.

Further more, in my discussion with the TCFUA, I asked if my contractor who worked from home decided to set up business next door in a factory paying a minimum of 20K a year on a lease, would they have any problem with her being a Contractor. The answer was no! The only difference would be that she is paying 20K a year in a lease, but somehow that makes it all ok?? How does forcing contractors to pay lease overheads of a minimum of 20K a year be the deciding argument on whether they are an Outworker or a Contractor? How does this benefit the Worker?

Under the current arrangement my Contract Outworkers invoice to my company charging GST. One cannot tax a Partnership. It is impossible for any manufacturer to comply with both Australian Tax Law and the legislation.

By deeming contract outworkers to be employees ignores all business structures in place. We do not want this. All examples above are a clear restraint of trade that the common Law would not sanction.

It concerns me that the legislation has gone as far as a Senate hearing with those making decisions showing no understanding of how our Industry works.

Schedule F of the Fair Work Act demands that all Outworkers be guaranteed a minimum 20hrs per week work even if I have no work.

As we discussed in our meeting, any one garment could require several different technicians to finish a garments’ production and not one of these has the same amount of time required on each garment. These technicians range from: Patternmaker, Grader, Cutter, Fuser, Plain Machinist, Over locker, Button Technician, Button Hole Technician, Presser: Finisher. Depending on the fabrications we may need to draw on yet a further set of skills. I.e., a cutter who is skilled in Bridal and apposed to a cutter trained in Ready to Wear.

Machinists are skilled in different area of manufacture. One may be skilled in Jackets; others in Pants, Shirts or Evening wear. This is primary to the need for Contractors as it gives Manufactures the ability draw on a pool of contractors to complete various orders. Many contractors will work for a number of factories to generate their required turnover

The Legislation requires me to employ every technician for a guaranteed 20 hrs. A week whether we have a garment that requires their skill or not.

The reality is the TCF sector fluctuates continually on several levels. These being; Volume, Seasonality and Varied Design requirements from each and every Designer.

A Designer may produce up to 35 styles seasonally with further drops in season to address consumer needs

The beauty of local manufacture is speed to market, the ability to react quickly to both these Design and Environmental changes. More and more Companies are designing in season to react to consumer needs and to compete with the ever increasing competition form overseas companies such as Zara and Top Shop who drop new product into store every 6 weeks.

Manufacturers have no guaranteed level of work and no way of foreseeing the design elements in each garment, making it impossible to forecast the technicians required. Therefore to provide a minimum 20 hours on a weekly basis or up to 5 weeks notice of termination (as per NES) is not possible.

The current arrangements with contactors falls in line with all other sectors in Australia– they are responsible for the quality of their work. They decide which work they wish to take on. They are responsible for their Work Cover obligations and to ensure their workplace is a safe working environment.

How is a Manufacturer able to monitor work safety in the contractors premises on a daily bases. In the factory, we have workplace guidelines that ensure work safety and quality in manufacture. It is impossible to manage this without putting in place daily Quality Control Visits to all Contract Outworkers. In addition, Contractors work for several different people at any one given time. As their employer, we would be liable for any Work Cover issues. How is one to ascertain this when they can have several jobs going at any one given time for different companies?

As with any Contractual Agreement, Contractors are paid when the job is completed and they are responsible for any mistakes they have made. The Contractor is required to make the repairs to fulfill the agreement. In the instance where they are to be employees, they do not have this same responsibility of quality assurance. This may range from quality of make to cleanliness, which speaks to Work Cover issues.

As well as our current QC within the factory, I would need to put in place a QC officer on the road to do QC inspections daily to ensure quality of make as well as ensure continued Work Cover compliance.

In quiet times, when work flow is slow, it is has been suggested by TCFUA, that we just terminate them .I ask Senator Marshall how this benefits the workers? How are they meant to maintain their mortgages? How are they to get a loan from a bank when their employment is continually terminated?

How do we, as Employer’s meet our obligations and deal with unfair dismissal?

How do we manage the paperwork of terminating people every few weeks/ months and payout terms? The added cost of managing the Contractor, as an employee will further disadvantage local manufacture to an unworkable and non-competitive situation

The amendments proposed as to Rights of Entry are absolutely contrary to the protection that the courts rigorously enforce in relation to search powers. The amendments give greater powers than those available to the police in this country and allow for entry to premises without there being any reasonable grounds for doing so. They only need to suspect a breach. This would no doubt lead to a High Court challenge if the power were ever to be used. The legislation would be very closely scrutinized.

No other sector in Australia has these constraints on them.

I thank you for your time and will forward letters from contractors separately for you to present as evidence to Senator Marshall of another voice in the sector that deserves to be heard.

I look forward to hearing from you.

Kind Regards,

Louise Lorkin I Director

Melbourne Made Pty Ltd.

Factory 8/ 282 Chesterville Road