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University of Technology Sydney Law Research Series |
Last Updated: 16 March 2018
Cross-Jurisdictional and Other Implications of Mandatory Clothing Retailer Obligations.
Michael Rawling[*]
This article is about the imposition of mandatory obligations upon effective business controllers of supply chains for the protection of workers. Specifically, the article analyses the genesis, design and operation of NSW, South Australian and Queensland mandatory clothing retailer codes and their broader implications including for the cross-jurisdictional regulation of international supply chains. The extent to which those State mandatory codes already operate cross-jurisdictionally to regulate supply chains spanning across jurisdictions throughout Australia is analysed. It is argued that imposing mandatory obligations upon effective business controllers of supply chains is necessary to adequately address the exploitation of domestic and overseas supply chain labour. In an analogous fashion to the operation of the mandatory clothing retailer codes, domestic legislative regulation of international supply chains can be achieved by piggy-backing mandatory requirements onto the intrinsically cross-jurisdictional agreement between an effective business controller and its outside supplier.
Introduction
There is now a body of research on the adverse outcomes of supply chain outsourcing for vulnerable workers labouring within supply chains.[†] This includes the impact of domestic supply chain outsourcing on vulnerable workers in the textile clothing and footwear industries who are labouring in developed countries[‡] and exploitation of workers in developing countries.[§] Increasingly, a preferred response to exploitation of ‘supply chain labour’ is legislative imposition of mandatory schemes regulating supply chains, such as the industry-specific schemes in Australia.[**] One key lesson is the importance of changing the commercial dynamics of the supply chain by imposing mandatory obligations on participants exercising the greatest commercial influence over other participants – a category of entrepreneurial entities variously described as ‘effective business controllers’[††] or ‘lead firms.’[‡‡] This harnesses their influence to ensure that all other commercial parties in the chain meet their legal obligations towards supply chain labour.
This article breaks from established literature (which examines systems of supply chain regulation generally) by focussing solely on mandatory legal obligations (applying to a category of effective business controllers) at the top of the chain. This regulation exists in Australia under a world-leading form of ‘top down’ regulation contained within mandatory clothing retailer codes made under State legislation. This article is the first to analyse the codes in detail and identify their significant implications. The article argues that the imposition of mandatory obligations at the apex of domestic TCF supply chains can instil discipline throughout the chain to achieve improvements in the pay, conditions and work health and safety of vulnerable TCF outworkers at the base of those particular supply chains. It therefore concludes that imposing obligations on business controllers of supply chains is a crucial component of any scheme to improve the working conditions of supply chain labour, and on that basis suggests adapting and extending this regulatory model beyond the domestic TCF sector. In particular, it contends that the TCF industry legislative model could be adapted to apply to domestic supply chains in other industries. Moreover, the pre-existing cross-jurisdictional State regulation of domestic supply chains (which currently spans different Australian State jurisdictions) indicates that domestic legislation could be used to cross-jurisdictionally regulate the international supply chains of effective business controllers (operating within that domestic jurisdiction) to improve the conditions of workers engaged by their overseas suppliers.
The article proceeds as follows. First, it explains the research methodology of partly completed empirical research drawn upon in this article. Next, it explains the widespread emergence of supply chains. It then considers the necessity for regulating the effective business controllers of supply chains by examining their influence over whole supply chains. This includes both a generic analysis of the influence of effective business controllers within both domestic and international supply chains in any industry as well as a more specific analysis of effective business controllers in the domestic TCF industry. Second, the article traces the development of, and analyses, legal obligations applying to clothing retailers under mandatory retailer codes in three Australian jurisdictions (NSW, South Australia and Queensland).[§§] This section considers the extent to which these mandatory retailer obligations are triggered by the (frequently cross-jurisdictional) deal between a retailer and its supplier so that they may achieve consequences for all TCF supply chain workers including consequences outside the geographical boundaries of the regulating State. Compared to the NSW and SA mandatory codes (which, upon a preliminary assessment, may have been implemented as intended), the initially proclaimed form of the Queensland code is shown to have had the broadest potential application but that this was weakened by amendment, poor implementation (and its ultimate repeal). The final section considers the significance and broader implications of these developments for the regulation of domestic and international supply chains within and beyond the TCF sector.
Research Project and Methodology
This article is part of an Australian Research Council funded project[***] investigating the operation in practice of industry-specific legislative schemes regulating the TCF supply chains in three jurisdictions (NSW, Queensland and South Australia) and the road transport supply chains in two (NSW and South Australia) along with the impact on supply chains of Work Health and Safety (WHS) legislation in those States. Although the study will ultimately compare and contrast the implementation of legislation in the TCF industry to the implementation of legislation in the road transport industry, this article concentrates on industry-specific legislative initiatives in the TCF industry.
The larger study utlilises a range of research methods, including interviewing key informants and workplace observations.[†††] The project will involve at least 50 qualitative interviews overall including 20 with governmental regulators, 20 with union regulators and at least 10 with businesses (or business representatives) and workers. At the time of writing, 30 interviews and 5 workplace inspections had been completed..[‡‡‡] 26 of the interviews completed were with governmental and union regulators from both the TCF and road transport industries. Four (4) of the interviews completed were with businesses involved in TCF and road transport supply chains or employer associations who represent such businesses. Interview protocols were utilised (and refined in light of experience) to provide some common structure, but semi-structured interviews were deliberately chosen so interviewers could be guided by the conversation rather than a rigid set of questions. Issues raised by one interviewee were able to be discussed with later interviewees.
While the empirical research is incomplete, this article draws on five (5) interviews completed in the TCF industry, and reports some preliminary indications about the implementation of the TCF model of regulation, to be fully tested and refined once the field work and data analysis is finished.
The Widespread Emergence of Supply Chains
Australian labour law, at least from the mid-20th century predominately assumed that labour law’s scope was regulation of the direct relationship between employees and a single entity known as the employer.[§§§] However, the assumed standard employment arrangement has declined. This has involved the demise of the unifying category of “employee”[****] and the emergence of a spectrum of worker types (including a range of ‘precarious workers’).[††††] In addition, following widespread outsourcing of work, the unitary employer has been replaced[‡‡‡‡] with more complex business network structures (involving a number of interconnected organisations) such as the vertical supply chain. This type of supply chain is an interconnected series of contracts organised to produce and sell goods and/or services at a profit for the effective business controllers of the chain. Supply chains reach from the commercial party who sells goods or services to consumers through a number of interposed commercial parties, right down to the workers who perform the work.
The Role of the Effective Business Controller in the Supply Chain
A study of the role of effective business controllers who wield the most commercial influence in supply chains clearly demonstrates the need to regulate them in order for schemes of supply chain regulation to improve working conditions of workers at the base of the chain.
Powers of effective business controllers generally
Just as the commercial power of the large, unitary employer (common in the 20th century) enabled all relevant aspects of the business to be shaped or governed — crucially including all aspects of labour relations — so too the contemporary effective business controller of a supply chain retains the same potential,[§§§§] even if it is sometimes wrongly asserted that their activities do not shape the labour relations of other commercial parties in the supply chain, or that they are too small to do so.
Effective business controllers can coordinate multiple-level, vertical, international and domestic supply chains made up of direct suppliers, contractors to those suppliers, distributors and other businesses who can indirectly and cost-effectively provide them with labour. The goods or services produced by that indirect labour and supplied up through the chain of businesses can then be sold to consumers more profitably than if they were produced by an integrated firm[.]
Direct access to consumer markets and/or control over intangibles such as brands and product design allow effective business controllers to outsource production to suppliers, severing any direct relationship with supply chain workers, but, at the same time, maintaining the key role in specifying who produces what and how it is produced[.] Typically, the effective business controller sets, in contracts with its direct suppliers, the size and frequency of orders, delivery schedules, time allowed for production and price and quality of goods or services. These parameters (which are passed down the chain to all further participants) practically determine matters such as supply chain workers’ pay and work time[.] In some circumstances, effective business controllers may also directly monitor or intervene into the work practices of their indirect labour force[.] The effective business controller is frequently not even physically located within the same geographical jurisdiction as the supply chain workers whose working conditions they influence[.] As part of the power inherent of a client who can provide (or cease to provide) another commercial party with work, effective business controllers can get suppliers’ to accept their terms as well as manipulate competition among potential suppliers to achieve the right price and quality for goods or services[.] This influence comes from the strategic position as clients at or near the apex of the supply chain, allowing smaller, astute controllers (as well as those with significant market share) to decide who participates in a particular supply chain and on what terms they participate[.] Despite the controls maintained by the business controller, it is other parties to the supply chain who bear the risks of the supply process[.] There is now substantial evidence that dictation of aspects of production and services delivery (notably time and costing) by effective business controllers has significantly contributed to poor work and health and safety outcomes for workers engaged within their supply chains[.]
Despite their extensive influence, a key commercial tactic of many effective business controllers is to deny they have any control beyond their dealings with direct suppliers[.] Certainly part of the initial attraction of the supply chain structure is the creation of legal distance between effective business controllers and workers down the chain. But this has been an increasingly risky strategy given the reputational damage that might result from a failure of business controllers to enforce adequate labour conditions throughout their supply chains. There is also increasing expectations of investors to safeguard the business’s reputation by satisfactorily addressing labour conditions within their supply chains[.] The discussion below in this article demonstrates that the mandatory clothing retailer codes have effectively addressed this kind of tactic.
Clothing retailers operate as effective business controllers
In the Australian TCF industry an oligopoly of major retailers are effective business controllers of TCF supply chains[.] In contracts for the supply of TCF goods these retailers impose on manufacturers or suppliers onerous contractual terms to secure the price and quality of goods and the turnaround times that the retailers require[.] Principal manufacturers in Australia who enter into supply contracts with retailers either manufacture TCF products in their own factories or enter into arrangements with smaller manufacturers (popularly known as ‘makers’) for the supply of these products. When this occurs, principal manufacturers pass on the stringent requirements of the retailers to the makers so that they can meet their own obligations to retailers. These smaller Australian makers will engage onsite manufacturing workers but will also often further contract out the clothing orders through varying stages of intervening entrepreneurial parties until the actual production work is finally given out to ‘outworkers’. These outworkers typically work at hom[e and ]make up approximately 40% of the workers in the TCF industry[.]
In the journey down the supply chain each successive party takes it share of financial return but passes on the contractual demands originally determined by the retailer. By the time the orders reach the smaller operators who directly engage workers, those direct work providers (who frequently have insufficient resources to carry out their labour law obligations) have an incentive to evade any legal obligations owed to their workers so as to survive in an environment where competitors undercut each other by offering the lowest price for manufacturing work[.] Therefore, the structuring of the supply chain primarily by effective business controllers (as well as principal manufacturers) creates an environment that is conducive to outworker exploitation[.] Prior to the introduction of mandatory retailer obligations, major retailers were content to preside over supply chains which provided them with quickly produced, high quality clothing and large profit margins, but which also led to the exploitation of outworkers (who were sufficiently distant from the retailers to ensure that retailers could escape legal liability for this exploitation)[.] As a result of cost, quality and time pressures from major retailers and fashion houses which are passed down the entire chain, many clothing outworkers experience pay as low as the equivalent of between $2 and $5 an hour[,] long hours, a high incidence of work-related injuries and high levels of threats and abuse from work providers[.] Because outwork is frequently carried out at residential premises in the largely ‘invisible’ economy, it is difficult for regulators to locate workplaces to enforce industrial laws.
Implications of the effective business controller’s role for public regulation
The above analysis of effective business controllers demonstrates that they already regulate supply chains for their own commercial interests. This also suggests that they might regulate supply chains to enhance rather than undermine the pay, conditions and safety of supply chain labour. This foreshadows opportunities for public regulation to harness the existing powers of the business controller. Such public regulation could, for example, require effective business controllers to set down work standards for supply chain labour and to monitor and enforce compliance with these requirements throughout their supply chains[.] Despite these opportunities for public regulation, prior to the introduction of mandatory clothing retailer codes, few (if any) existing legislative provisions in Australia imposed any mandatory obligations regarding working conditions at the base of supply chains upon retailers.
The Evolution of Mandatory Clothing Retailer Obligations
This section examines the evolution of effective business controller obligations under mandatory clothing retailer codes which came into force in New South Wales in 2005, in South Australia in 2008 and in Queensland in 2011 (until its repeal in Queensland in November 2012). Although these are industry-specific codes applying to clothing retailers, their design could be adapted to apply to effective business controllers in other industries. Moreover, although these codes regulate domestic supply chains, their cross-jurisdictional application spanning different Australian States indicates that the regulation’s conceptual basis could inform cross-jurisdictional regulation of supply chains spanning national borders.
The mandatory retailer codes are part of a package of federal and state mandatory rules that regulate supply chains to protect vulnerable TCF workers in Australia. Under State legislation there are also deeming provisions and rights of recovery for outworkers[.] At the federal level the Fair Work Act 2009 (Cth) contains Part 6-4A - Special provisions about TCF outworkers which also provide deeming provisions, an outworker right of recovery and provisions for the making of a mandatory code (at some future time). In addition, special provisions regulating outwork exist within the federal Textile Clothing, Footwear and Associated Industries Award 2010[.] These other parts of the package contain important provisions which allow regulators to protect vulnerable TCF outworkers. However the mandatory retailer codes are a crucial component of the scheme because, as is discussed further below, these codes interlock with the Homeworkers Code of Practice to specifically regulate powerful retailers at the top of the chain.
NSW
Mandatory clothing retailer obligations originated in NSW. The process by which these mandatory obligations were achieved in NSW involved complex interactions between the development of voluntary and mandatory retailer obligations and lengthy negotiations and consultations between government, unions and, at times, disunited, sub-sets of capital. The genesis of this mandatory retailer regulation was a sustained campaign to address outworker exploitation led by the Textile Clothing and Footwear Union of Australia (TCFUA) along with community organisations including Fair Wear and Asian Women at Work. This was a ground-breaking campaign in NSW given that, at that point in time, no other mandatory clothing retailer code existed in anywhere in Australia.
The NSW inquiry into pay equity released in 1998 found that there was ‘widespread and endemic failure’ to comply with pre-existing award clothing outwork provisions[.] Justice Glynn stated that:
“it is important that all retailers, fashion houses, governments and government agencies become party to appropriate codes of practice/conduct. . . .If all relevant participants do not sign then consideration should be given to making the code mandatory.[&]
In June 1999 Igor Nossar, the then Chief Advocate of the TCFUA (NSW) also identified the importance of regulating retailers in order to effectively address outworker exploitation:
“garments in N.S.W. will often not be made under N.S.W. state award conditions unless the parties at the apex of the contracting pyramid - the major retailers - are subjected to a N.S.W. state legislative regime which compels those commercially powerful parties to utilise that very commercial power in favour of the protection of outworkers (rather than against that purpose of protection) ... the commercial behaviour of those retailers - especially their behaviour in relation to the giving out of work - must be rendered transparent and visible to all authorised policing agencies[&]
Due to the link between commercial pressures emanating from the top of the supply chain and adverse work outcomes for supply chain labour, the accountability of retailers was a prerequisite to effective enforcement of outworker protections. To this end, in 1996, the TCFUA had negotiated a ‘Deed of Co-Operation with at least one major retailer which obliged the retailer to inform the TCFUA about the number, type and price of products supplied to the retailer, obliged the retailer to compel all of its suppliers to keep records about further giving out of work to further parties down the chain and impelled the retailer to inform the TCFUA if the retailer became aware of any instances of outworker exploitation by any party at any level in that retailer’s supply chain[. ]
Also, in 1997, the Homeworkers Code of Practice, a self-regulatory industry
scheme, was negotiated between the TCFUA and major employer
bodies representing
TCF manufacturers and retailers[.]
Part 2 of that code provided for the accreditation and regulation of TCF
manufacturers. The (original) Part 1 of the Homeworkers
Code of Practice
committed TCF retailer signatories to obtain TCF products from manufacturers
accredited under part 2 of the Code.
But it failed to set more rigorous
retailer obligations which might have addressed outworker exploitation such as
an obligation
which would require retailers to find out where their work orders
were going and under what conditions their work was performed.
In any case,
voluntary, self-regulatory schemes tend to commercially disadvantage more
ethical retailers because they had agreed
to not profit from outworker
exploitation while less ethical retailers not covered by the voluntary scheme
continue to profit from
such exploitation[.
]
In June 1999, legislative outworker protections in NSW were proposed by
Nossar[.] In December 1999 the NSW
government released an issues paper on the NSW governments outwork
strategy[.] Whilst the NSW Labor
government was in power (from 1995 to 2005), the Industrial Relations
(Ethical Clothing Trades) Act 2001 (NSW)(the Ethical Clothing Act (NSW)) was
enacted[. ] Part 2 of that Act established a
tripartite industry council known as the Ethical Clothing Trades Council of New
South Wale[s] which had the ability
to recommend the making of a mandatory clothing retailer code for NSW. Such a
council consisting of a Chairperson
and representatives from the Australian
Retailers Association, Australian Business Limited, the Australian Industry
Group (NSW),
Unions NSW and the TCFUA (NSW) was formed after the Ethical
Clothing Act (NSW) commenced in February 2002. This council had a fixed
timetable to consult and report to the relevant Minister, who, (upon considering
the Council’s report), could then proclaim
mandatory clothing retailer
obligations[.] Before, the expiry
of the timetable for this tripartite process, the dynamic created by the
impending possibility of mandatory retailer
obligations allowed the TCFUA to
firstly negotiate a new self-regulatory code for NSW
retailer[s] and then a new Part 1 to
the Homeworkers Code of Practice[.]
Following this the TCFUA finalised individual code agreements with three major
clothing retailers binding them to identical terms
to the National
Retailers/TCFUA Ethical Clothing Code of
Practice[. ]However, at this point, many less
ethical retailers did not become signatories to this self-regulatory
scheme.
The first version of the Ethical Clothing council’s
recommendation drafted by Nossar recommended the making of a mandatory clothing
retailer code for NSW[.] This draft
was reflected in the NSW Ethical Clothing Trades Council’s first
recommendation in its 2003 report[.]
The council’s recommendation to make a mandatory code was supported by
five out of the total six stakeholder organisations
sitting on the council
including the Australian Retailers Association (representing retailers) and the
Australian Industry Group
(representing a portion of clothing manufacturer
employers)[.] The relevant NSW
Ministers then adopted the council’s recommendation. By order in Gazette
on the fifteenth of December 2004
mandatory retailer obligations were proclaimed
in the form of a delegated legislative instrument entitled the Ethical
Clothing Trades Extended Responsibility Scheme (“the NSW mandatory
code”). This mandatory retailer code took effect on 1 July
200[5] and is still currently in
operation at the time this article was written.
Coverage of NSW mandatory
code
The NSW mandatory retailer code applies to all retailers, wherever
domiciled, who sell clothing products within NSW (“NSW retailers”)
where those products are manufactured or altered in Australia (except those
retailers who are signatories to and are operating in
compliance with the
National Retailers/TCFUA Ethical Clothing Code of Practice (formerly known as
Part One of the “Homeworkers Code of
Practice”)[.] It
also applies to all suppliers, wherever domiciled, including locations outside
of NSW, who enter into any agreement with a NSW
retailer for the supply of such
clothing products; and those supplier’s contractors (including
sub-contractors to contractors)[.]
Thus the only limits on the cross-jurisdictional application of the code are
that clothing is manufactured in Australia and sold
in NSW. Otherwise, it
appears that retailers and suppliers can be domiciled in any location. Many
direct suppliers will also be
manufacturers such that the cross-jurisdictional
application of the code would be confined within Australian borders. However,
the
scope of the code is, in theory, broad enough to apply to a supplier
domiciled overseas who arranges for goods manufactured in Australia
for a NSW
retailer. It is also sufficiently broad enough to regulate a retailer domiciled
overseas who sells Australian made clothes
in NSW. Thus the definition of
retailer appears to have foreshadowed the era of arms-length internet retailing.
This aspect of the
code signals the development of a model for obligations upon
effective business controllers which could be adapted to regulate any
kind of
domestic or international supply chain including those where goods are sold over
the internet.
The National Retailers/TCFUA Ethical Clothing Code of
Practice imposes disclosure obligations parallel to the mandatory code
obligations upon each affected retailer. This ensures that no domestic
retailer
of (domestically worked on) clothing products can escape from the obligation to
pro-actively provide the governmental and
union
regulator[s] with the necessary
information required to track down all locations where clothing work is
performed within Australia, as long as
the finished product is sold by clothing
retailers which are subject to a State mandatory code or the National
Retailers/TCFUA Ethical Clothing Code of Practice.
Obligations under
NSW mandatory code
Both retailers and suppliers are subject to two main
types of obligations under the NSW mandatory code. Firstly, the commercial
parties in the TCF supply chain are required to contract in a particular way due
to requirements to include certain contractual terms.
Secondly, there are more
traditional statutory obligations which require regulated parties to record and
disclose relevant information.
Under the NSW code, when retailers enter
into an agreement with a supplier (for the supply of domestically produced
Australian clothing),
these retailers are required to obtain a range of outcomes
from their suppliers which extend to mandatory contractual terms (in the
form of
an undertaking). In those circumstances, the retailer must obtain an
undertaking from the supplier that (a) all addresses where work is
performed on the clothing products (whether at a factory or at the residential
address of an outworker) will be disclosed to the retailer; and (b) the
engagement of outworkers by the supplier (or its contractors)
will be under
conditions no less favourable than the prescribed industrial award
conditions[.] The retailer must
also inform the supplier that a breach of the supplier’s
undertaking (by the supplier, or the contractor, or both) will be
taken to be a breach of the agreement and grounds for termination of
the agreement (between the retailer and the
supplier)[.] Thus the
undertaking becomes an essential term of the agreement between the retailer and
the supplier. A NSW retailer must not enter
into an agreement with a supplier
in those circumstances if the retailer has not obtained the undertaking from
that supplier[.]
This first
type of obligation whereby the state intervenes into the contracting practices
of commercial parties has ample precedent.
Modern welfarist principles have
modified freedom of contrac[t] such
that, under general contract law and consumer law, parties are being required to
include or exclude particular contractual terms.
For example, under consumer
protection laws, the state requires the parties to read particular terms into
contracts with consumers[.] In
addition, the contract law doctrine of illegality prohibits parties from
including certain terms in a
contract[.] This form of regulation
has the inherent capacity to apply cross-jurisdictionally because the regulation
attaches to the contract
or agreement between parties which has always been able
to span jurisdictional boundaries. In any case, under the mandatory codes,
the
agreement between the retailer and its supplier forms the principal basis for
most of the regulatory intervention including traditional
and contracting
obligations. As is argued more fully below, the extent to which the mandatory
code obligations are solely triggered
by the existence of a deal between a
retailer and its supplier is significant, given that this deal (if not
accompanied by other
jurisdictional restrictions) could form the basis of
domestic state regulation of international supply chains.
Retailers also
have information gathering and record-keeping obligations under the NSW
mandatory code. Under the NSW code, if a retailer
enters into an agreement with
a supplier (for the supply of domestically produced Australian clothing), that
retailer must request
from the supplier (and the supplier must thereupon provide
to that retailer) all addresses where work is performed, whether outworkers
are
used, the name and address of each outworker (and of each employer of the
outworkers), the name and address of each contractor
engaged by the supplier,
and the number and type of clothing products made under the agreement (between
the retailer and that supplier)[.]
Where the retailer enters into such an agreement with a supplier, the retailer
must also keep records of all locations where work is
performed[. ] The only requirement for these
obligations to apply is the retailer/supplier agreement (and not the engagement
of a particular type
of worker).
Furthermore, these obligations mean
retailers have a ‘need to know’ important information about
outworkers performing
work within their own supply chains. It is no longer
possible for clothing retailers to comply with their legal obligations under
the
mandatory code and deny any knowledge of what happens beyond their direct
contract with suppliers. The ‘need to know’
obligation operates so
that the clothing retailer cannot pretend to not know information about who is
performing their clothing manufacture
work. This ‘need to know’
obligation is analogous to the well-known commercial concept of ‘due
diligence.’
Like due diligence, the ‘need to know’ obligation
allows the retailer to gain important information about other commercial
entities they deal with, allowing them to make decisions about future dealings
with those other entities. In many cases, the retailer
would have already
acquired the required information by way of pre-existing commercial activities.
For example, in one contract
imposed by a retailer on a manufacturer, the
retailer was allowed to inspect (and even substantially control) the
manufacturing of
clothing[.] And it
appears that clothing retailers are acting upon such contractual rights. Recent
factory inspections of some makers undertaken
as part of fieldwork by the author
and research colleagues, revealed that the quality control representative of the
retailer and
principal manufacturer was present at or had recently visited maker
sites when inspections occurred[.
]
In addition, a NSW retailer has important disclosure obligations.
A NSW retailer must pro-actively (and regularly) disclose to the
governmental
and union regulators (at least every 6 months) records of all suppliers’
names and addresses (and whether outworkers
are
engaged)[.] Hence, regulators have
a ‘right to know’ corresponding to the retailers ‘need to
know’. The retailer obligations
to obtain information and to keep and
disclose records arise when a retailer enters into an agreement with a supplier
but are not
tied to the engagement of an
outworker[.] Thus the retailer must
keep records of all clothing supply chains and provide details of all locations
where work is performed for
a contractor or subcontractor, whether the work is
performed by a factory worker or an outworker or by any kind of worker who
performs
clothing manufacturing work.
Further, if a NSW retailer enters
into an agreement with a supplier (for the supply of domestically produced
Australian clothing),
a retailer must ascertain (from the supplier) whether an
outworker is to be engaged (to perform work under the agreement between
the
retailer and that supplier)[.]
Where a NSW retailer becomes aware that an outworker was (or would be) engaged
(by a supplier, contractor, transferee, or supplier’s
continuing entity)
on less favourable terms or conditions than those prescribed under a relevant
award (or relevant industrial instrument),
then the retailer must report the
matter to the relevant union or government
officer[.] If a NSW retailer enters
into an agreement with a supplier (for the supply of domestically produced
Australian clothing), the retailer
must provide (to the supplier) a specified
standard form (itemising all relevant information about that agreement) to be
completed
(and returned to the retailer) by the supplier – and the
retailer must then retain that completed standard form (and provide
an extract
of that standard form to the relevant
regulators)[.] Finally, under the
currently applicable codes, a retailer must not enter into an agreement with a
supplier (for the supply of domestically
produced Australian clothing) or accept
clothing products (from a supplier or contractor) unless the supplier (and each
contractor
used by the supplier) is registered to give out work under the
relevant industrial instrument[. ]
Intervention into commercial contracting practices under the NSW
mandatory code’s provisions also imposes requirements on suppliers
who
provide clothing goods to retailers. Specifically, a supplier must include with
the invoice to the retailer (for the supply
of domestically produced clothing
products) a completed copy of the undertaking from the supplier to the retailer.
Additionally,
with such an invoice, suppliers are required to disclose
information to retailers about all locations where work is performed on
that clothing[.] This obligation to
provide work locations is not dependent on the type of worker performing the
work (although it includes the situation
where an outworker is engaged). Under
the NSW mandatory code, a supplier must also provide the retailer with
sufficient information
to enable the retailer to keep (and disclose) accurate
records. A supplier must further provide the retailer with sufficient
information
to enable the retailer to take reasonable steps to ascertain
compliance with the NSW mandatory code throughout the retailer’s
supply
chain[.] In particular, a supplier
must, “when showing samples of clothing or offering for sale ready-made
items of clothing to a retailer,
indicate to the retailer whether any or all of
the clothing items will be, or have been manufactured in
Australia.[&] A supplier must keep
records about all locations of where work is to be performed, details of
the originating agreement between the retailer and the supplier, and details
about each of the supplier’s
contractors[.]
The NSW
mandatory code also imposes obligations upon each supplier in regard to that
supplier’s dealings with its own contractors.
In particular, at the time
of engaging a contractor, the supplier must provide that contractor with full
details of the originating
agreement between the retailer and the supplier
(including the undertaking from the supplier to the retailer and all locations
where
work is to be performed)[.]
Finally, a contractor to a supplier (which includes a subcontractor to a
supplier’s contractor[)] has
obligations under the NSW mandatory code. Such a contractor must provide the
contractor’s own sub-contractor with details
about the contract between
the retailer and supplier, including the undertaking from the supplier to the
retailer[.] A supplier’s
contractor must also keep records of the originating agreement (between the
supplier and the retailer), including
the undertaking from the supplier to the
retailer[.] These obligations
ensure that parties below the supplier in the TCF supply chain have explicitly
been made aware that the retailer
has required its principal supplier (and the
supplier has undertaken to the retailer) that the principal supplier and all of
its
contractors in the supply chain will engage outworkers under conditions no
less favourable than those under the relevant award or
industrial instrument.
Under the NSW mandatory code a retailer, supplier, contractor or subcontractor
covered by the code who fails
without reasonable excuse to adopt any code
standard or practice is guilty of an
offence[.]
The mandatory
code capitalises on retailers’ commercial influence in the clothing supply
chain to ensure the transparency of
the contracting process in the supply chain
and to efficiently capture crucial information about where production work is
taking
place and who is undertaking that work. Some preliminary evidence
suggests that the system of ‘top down’ obligations
imposed on NSW
retailers is taking effect. In at least one instance unearthed in the course of
fieldwork interviews, a NSW retailer,
with the assistance of a regulator,
reportedly used knowledge gained by the imposition of retailer obligations to
compel other commercial
entities to comply with industrial obligations owed to
workers within their supply chain[.]
In another instance raised during fieldwork, a major retailer, working with a
regulator, found that a particular supplier was not
in compliance with
industrial obligations owed to workers within their chain. The retailer
reportedly cancelled clothing supply
orders from that supplier for a number of
weeks, until the retailer was contacted by the regulator to say that the
supplier was working
with the regulator to address those non-compliance issues.
The retailer apparently wanted to send a message to the rest of their
suppliers
that, if a supplier was not compliant with industrial obligations owed to
relevant workers, the retailer was prepared
to suspend their clothing
orders[.] These practical examples
appear to substantiate previous comments made by James et al that regulating a
few large commercial parties
with the greatest commercial influence in the chain
can achieve a ‘multiplier’ effect of compliance throughout many
smaller
commercial operations in the
chain[.] These examples demonstrate
that, as a result of mandatory retailer obligations, certain retailers have been
encouraged to act ethically
and police supply chains.
Moreover, it
appears that regulators have initiated the cross-jurisdictional regulation of
supply chains spanning the borders of various
Australian states. In a further
instance revealed during the course of interviews, regulators have reportedly
followed a cross-jurisdictional
supply chain involving a retailer with retail
stores in a number of states, a large factory in one State and smaller makers
located
in a number of other
States[.] Indeed NSW regulators
have used information disclosed by businesses at or near the top of the supply
chain to track down many sites
of clothing production performed for retailers
throughout Australia, making the hidden workforce
visible[.] In one reasonably large
clothing supply chain, the original number of workers (identified by traditional
means by a NSW regulator
visiting workplaces) grew to four (4) times the
original amount of workers (as a result of top down tracking mechanisms by that
NSW
regulator). In another large supply chain the number of workers known to
regulators increased by seven (7) times the original number
of identified
workers. And finally in a third, smaller, supply chain the number of identified
workers grew by approximately three
(3) times the number originally
identified[.] This type of data
presented by Nossar in 201[1] was
also discussed by an interviewee who stated, ‘that’s the sort of
information the [mandatory] code
delivers’[.] This
indicates the importance of harnessing retailer power in order to successfully
implement regulation and produce increased workforce
visibility. Moreover, in
each of these three cases of dramatically increased visibility, regulators were
able to secure compliance
for most or all of these workforces with pay and
conditions standards, work health and safety standards as well as workers
compensation
legal requirements[.]
However, these preliminary findings need to be fully tested and
confirmed after collecting and analysing all of the project data.
Furthermore,
it appears that some retailers are attempting to get around the domestic system
by sourcing a tiny amount of ethically-produced
clothes from Australian
producers so that they can say they are operating ethically, but then sourcing
the rest of their clothing
from
overseas[.] This reinforces the
need for domestic regulation of international supply chains which is discussed
further below.
Regulators play a critical role in implementing the NSW
mandatory code. Although there have been few if any prosecutions of the NSW
mandatory code, it appears that the threat of prosecution is frequently deployed
by regulator[s] and retailers act to
avoid prosecution and negative media exposure.
The mandatory code has
been used by regulators specifically in relation to retailers. But the NSW
mandatory code is also used in
conjunction with the whole TCF industry
legislative scheme including the federal modern award to successfully regulate
the entire
TCF supply chain.
South Australia
In South Australia, outworker provisions were inserted into the (renamed)
Fair Work Act 1994 (SA) by the Industrial Relations (Fair Work) Act
2005 (SA)[. ] One of those inserted
provisions allows the South Australian government to make a mandatory clothing
retailer code “by
regulation.[&] The making of a code
by executive regulation drastically simplified the process compared to the
parallel method required in NSW
described above (involving the formation of a
tripartite industry council). The relevant South Australian governmental agency
then
conducted consultations with key
stakeholder[s] including those with
the TCFUA(NSW/SA/Tas branch). In 2006, during the term of the Rann Labor
government, the South Australian government released for public
consultation a draft mandatory clothing retailer
code[.] In 2007 regulations called
the Fair Work (Clothing Outworker Code of Practice) Regulations 2007 were
made. Those regulations, which contain the South Australian Clothing Outworker
Code of Practice (“SA mandatory code”)
in Schedule 1, commenced on 1
March 200[8] and are still
currently in operation at the time this article was written.
The SA
mandatory retailer code has a parallel scope of application to the NSW mandatory
retailer code. It applies to all retailers
(wherever domiciled) who sell
clothing products within South Australia (“South Australian
retailers”) as long as those
clothing products are manufactured (or
altered) in Australia (except for those retailers who are signatories to —
and are operating
in compliance with — the National Retailers/TCFUA
Ethical Clothing Code of
Practice)[.] It also
applies to each supplier, wherever domiciled, who enters into any agreement with
a South Australian retailer for the supply
of such clothing products (including
“a supplier who carries on business outside” South Australia); and
also applies
to those supplier’s contractors (including sub-contractors to
contractors)[.] Those retailers,
suppliers, contractors and sub-contractors are then subject to almost identical
(if not identical) obligations under
the SA mandatory code to those which exist
under the original NSW mandatory retailer
code[.]
Queensland
During the term of the previous Queensland Labor government, additional
outworker protections were inserted into the Industrial Relations Act 1999
(Qld) by the Industrial Relations and Other Acts Amendment Act 2005
(Qld)[.] These amendments
included the insertion of a provision which allowed the Queensland Government to
make a mandatory clothing retailer
code by giving notice of such a code which
constitutes subordinate
legislation[.] Hence, this
Queensland process of making a mandatory code closely parallels the simplified
South Australian method of executive
regulation. A mandatory retailer code
called the ‘Mandatory Code of Practice for Outworkers in the Clothing
Industry’
(Qld mandatory code) was made and commenced on 1 January
2011[.] At the time the code was
made a Labor government still retained office in Queensland. In March 2012 the
Newman coalition government
was elected to the Queensland Parliament. In
November 2012, after a concerted campaign by the Council of Textile and Fashion
Industries
of Australia mainly representing small clothing manufacturers, the
Qld mandatory code was
repealed[.]
Although there are certain generic features common to all three mandatory retailer codes, obligations under the Queensland code were not identical to the obligations under the other two codes. Despite its repeal, the initially proclaimed form of the Queensland mandatory code is of continued interest, given that it contained a number of regulatory innovations beyond the previous extent of retailer obligations under mandatory codes in NSW and South Australia. Specifically, the Queensland code contained a broader set of obligations which intervened into the contracting practices of the parties compared to the NSW and South Australian codes.
The Queensland mandatory code had a similar scope of application to the NSW and SA mandatory codes. It applied to all retailers who sold clothing products in Queensland (‘Queensland retailers), suppliers, wherever domiciled, who supplied to those retailers, supplier’s contractors and sub-contractors to those contractors[.] Under the initially proclaimed form of the former Queensland code, when a retailer entered into an agreement with a supplier (for the supply of domestically produced Australian clothing) the retailer previously had to obtain an undertaking from the supplier that (a) all addresses where work is performed on the clothing products (whether at a factory or residential address) will be disclosed to the retailer; and (b) the engagement of outworkers by the supplier (or its contractors) would be under conditions no less favourable than the prescribed industrial award conditions[.] Under that former Queensland code, like the other State mandatory codes, the retailer also had to (ii) inform the supplier that a breach of the supplier’s undertaking (by the supplier, or the contractor, or both) would be taken to be a breach of the agreement and grounds for termination of the agreement (between the retailer and the supplier)[.]
In an innovation beyond the operation of the NSW and SA codes, under that Queensland code suppliers previously had to obtain an undertaking and work locations from their contractors[.] A supplier also had to inform the contractor that a breach of the undertaking allowed the supplier to terminate the agreement with the contractor[.] Therefore, under the former Queensland code, the intervention into contracting practices applied to contracts between suppliers and their contractors (as well as the contract between retailers and their suppliers). In addition, contractors to suppliers had similar obligations to suppliers. That is, previously in Queensland, a contractor would have had to provide an undertaking and work locations to the supplier[.] In this way, under the former Queensland code, there was an unbroken chain of intervention into contracting practices throughout the supply chain.
The former Queensland code contained similar retailer obligations to the other State codes to keep records of work locations and pro-actively and regularly disclose supplier and work location records to government and union regulators[.] The Queensland code also contained similar obligations to have ascertained whether an outworker was to be engaged[;] to have reported when an outworker was engaged under less favourable than award conditions; to have provided to the supplier and then collect from the supplier and report to regulators a form itemising agreement information[;] and to not have entered into an agreement with a supplier unless the supplier and its contractors had registered to give out work[. ]
Under the former Queensland mandatory code, suppliers faced similar
obligations to the NSW and SA code obligations to provide the
retailer with
sufficient information for that retailer to maintain records and ascertain
compliance[.] Furthermore, under
that mandatory code, a supplier’s invoice to the retailer (for the supply
of domestically produced clothing
products to that retailer) had to be
accompanied by the supplier’s provision of full details of any contracts
between that
supplier and the supplier’s
contractors[.
]
According to fieldwork interviews, a regulator visited workplaces to
give out copies of the Qld mandatory code to TCF businesses in
an effort to
educate regulated parties about their obligations under the
code[.] However, after these
workplace visits, many regulated parties were reportedly confused about who had
what obligations and, as a
result, in certain instances, outworkers were
reportedly incorrectly led to believe that they had to comply with
(non-existent) code
obligations to receive work. Unlike regulator activity in
at least one other state, it appears from the fieldwork data gathered
so far,
that there may have been less effort by regulators to work with TCF businesses
so that those businesses could work towards
full compliance over a period of
time[. ]This unsuccessful attempt to explain
the Qld mandatory code may have fuelled business opposition to the code, which
became a crucial
factor which led to the code’s abolition. Nevertheless,
some features of the design of the initially proclaimed form of the
Queensland
mandatory code remain the best template for adaptation to other
contexts.
Implications of Regulating the Effective Business Controller
Preliminary findings about the successful implementation of currently
applicable mandatory clothing retailer codes indicate that governments
can
regulate the contracting practices of effective business controllers.
Governments can dictate to commercial parties with the
greatest influence in the
chain how to contract in order to successfully regulate supply chain outsourcing
for employment policy
purposes. It is appropriate for governments to so dictate
contracting practices to business controllers where those business controllers
set the parameters of work performed within their chain. It is especially
important for governments to intervene into contracting
practices of effective
business controllers where commercial pressures coming from those business
controllers lead to low pay, poor
working conditions and poor work health and
safety outcomes. By regulating entire supply chains, including the activities
of commercial
parties with the most commercial influence in the chain, the root
causes of poor outcomes for supply chain labour can be addressed.
Moreover, by
harnessing the power of business controllers, mandatory regulation can operate
to empower those business controllers
to police their supply chains for ethical
as well as commercial reasons; if mandatory regulation can encourage business
controllers
to become the most ethical or responsible parties in the supply
chain, the role of addressing supply chain labour issues might be
partially
assumed by the business controllers themselves. Thus the imperatives of
regulators and business controllers can be aligned
to compel the rest of the
parties in the supply chain to comply with their legal obligations towards
supply chain labour.
Domestic implications
The lessons of prior
experiences in implementing mandatory retailer codes need to be heeded,
especially the crucial importance of
having a regulator with sufficient
incentive and resources to work with business controllers over time to achieve
business compliance.
Although this point is important it would be broadly
applicable to implementing a variety of legislation in the commercial sphere
and
beyond. Provided that sufficient attention is given to implementing the
regulation, and, in light of preliminary indications
that business controllers
may be successfully regulated under the currently applicable mandatory codes, it
is appropriate to consider
extending mandatory regulation of TCF retailers to
other jurisdictions around Australia. One possible avenue for such an extension
of the scope of mandatory retailer obligations is under federal legislation.
Indeed, under the Fair Work Act 2009 (Cth), a TCF industry mandatory
retaile[r] code can be made by
executive regulation[.] Such a
federal code may make provisions for retailer obligations by applying, adopting
or incorporating any matter contained in
one of the mandatory codes made under
State law[.] Currently a federal
mandatory code has not been made. Such a federal code is unlikely to be made
during the term of the current
Abbott coalition government. In this context,
the currently applicable State mandatory codes demonstrate that there is a
continuing
role for State jurisdictions to regulate TCF business controllers
even in the era of transfer of industrial relations powers to the
Commonwealth.
If Labor regains government in an Australian State, a campaign for extending the
scope of mandatory clothing retailer
obligations under that State jurisdiction
might simply use the implementation of the NSW and South Australian mandatory
codes (and
the initially proclaimed form of the Queensland code prior to
amendment) as a regulatory model for TCF retailers.
The regulation of
TCF retailers under mandatory codes also has cross-industry application. That
is, the regulation of TCF retailers
might be used as an illustrative,
currently-existing model of regulation which could be adapted and applied to
other industries such
as the road transport,
construction[, ]cleanin[g and ]aged
care industries[, ]within which effective
business controllers also affect the work parameters of supply chain labour.
Indeed, in somewhat uncertain
political
circumstance[s] the road safety
remuneration tribunal considered the application of mandatory obligations to
another sub-set of business controllers
— consignors and consignees of
road freight. The existing State mandatory clothing retailer codes were raised
in the tribunal
proceedings as existing examples of laws already regulating a
category of effective business
controllers[.]
Implications
for regulating international supply chains
The current geographical scope
of the mandatory clothing retailer codes also has potentially far-reaching
implications for the regulation
of transnational or international supply chains
which are used by effective business controllers to source goods or services
from
overseas jurisdictions and sell those goods or services in a home,
developed-world jurisdiction. The NSW, South Australian (and
formerly
Queensland) mandatory retailer codes applied (or formerly applied) legislative
obligations to any “supplier who carries
on business outside” the
respective state as long as the supplier was supplying TCF products to a
retailer regulated (by the
respective mandatory
code)[.] The mandatory codes
currently require (or required) retailers to gather and keep records about
contracts for the supply of clothing
products manufactured anywhere in
Australia[.] Therefore, these
codes already have or had consequences beyond the geographical borders of the
relevant State jurisdiction. There
seems no obvious legal impediment preventing
domestic jurisdictions from exercising these same regulatory powers to span
national
borders and achieve outcomes
abroad[.]
The form of
international supply chain regulation being proposed here would not rely
on an extra-territorial application of state
powers[.] Rather, it would
involve the exercise of intra-territorial legislative jurisdiction. From the
beginnings of commercial activities,
commercial parties have conducted business
deals which stretch across national boundaries. This is how international
supply chains
are formed. Commercial parties within one jurisdiction contract
with commercial parties in another, overseas jurisdiction. It is
these
commercial contracting practices which enable intra-territorial regulation of
international supply chains[. ] Specifically,
the exercise of intra-territorial powers to extend regulation beyond national
borders rests upon the business dealings
between a regulated retailer (with
sufficient geographical nexus to the relevant state in order to invoke the
exercise of intra-territorial
legislative jurisdiction) and a supplier having
commercial dealings with such a regulated retailer. That is, the
intra-territorial
basis for this form of regulating international supply chains
arises from the fact that the regulated retailer who contracts with
an outside
supplier must conduct retail business within the geographical borders of the
relevant home-state jurisdiction. Thus intra-territorial
legislative
jurisdiction could be used to regulate the actual contracts or arrangements
between such a regulated retailer and its
suppliers located around the globe.
In particular, like the mandatory codes, this legislative jurisdiction could be
used to dictate
additional terms of (prime) supply contracts between a regulated
retailer and its overseas suppliers and harness the influence of
the regulated
retailer conducting within-jurisdiction commercial activities to achieve
outcomes throughout an international supply
chain even where most of that
relevant commercial behaviour and all of the work actually
performed (ultimately for the retailer) physically occurs outside the
geographical borders of the regulating
state[.]
For example, in
the TCF sector, an Australian clothing retailer might have obligations to obtain
information from suppliers about
all overseas locations of production and the
conditions under which clothing products are produced at those locations. The
retailer
could then be obliged to report this information to regulators and use
commercial sanctions against a supplier where working conditions
are
unsatisfactory. Governments at all levels possess this intra-jurisdictional
power to regulate international supply contracts
of business entities which in
any way operate within or through the respective geographical jurisdictions of
those governments[.]
It has
been suggested that domestic regulation of international supply chains should
focus on the eradication of “egregious
labour
abuses[&] such as forced labour
and child labour. This would have considerable support amongst non-government
organisations. Yet it is unclear
whether an ‘egregious labour
abuse’ scheme would secure the necessary support from business. In this
regard the recent
experience the Ethical Clothing Australia organisation
changing the name of its clothing label from ‘No Sweatshop’ to
‘Ethical Clothing Australia’ is instructive. The name change
occurred because business didn’t want to be associated
with the negative
term ‘sweatshops’. A system simply requiring a retailer to report
information on where the work is
done and under what conditions may be
preferable to some businesses, as it would allow reporting of any satisfactory
working conditions
as well as any unsatisfactory conditions or egregious labour
abuses.
However, if the past is anything to go by, the conditions for
adapting and extending supply chain regulation to protect further categories
of
workers would require a concerted union and community campaign akin to the
previously successful campaigns led by the TCFUA, which
preceded legislative
regulation of TCF supply chains under Labor governments. Given the current
political climate that is hostile
to unions, a weakened union movement and a
less active public campaign, it remains uncertain as to when the necessary
conditions
would arise.
Conclusion
This article has evaluated the mandatory clothing retailer codes made
under State legislation in Australia. The article, by reference
to examples,
argued that retailer obligations have contributed to the improvement of pay,
working conditions and the work health
and safety of hitherto invisible clothing
outworkers. Mandatory obligations on clothing retailers with the greatest
influence in
the supply chain were pivotal to particular instances of successful
implementation of the NSW legislative scheme regulating supply
chains in the TCF
sector. This indicates the entire supply chain needs to be regulated to improve
the working conditions of supply
chain labour. However, these findings are
preliminary because the empirical research for the project described in this
article is
incomplete. The field work and data analysis for this project need to
be finished to gain a fuller understanding of the implementation
and
effectiveness of the legislative schemes in Australia which regulate supply
chains.
The article argued that the effective implementation of clothing
retailer obligations indicates that imposing obligations on effective
business
controllers of domestic supply chains in other industries in Australia ought to
be considered as a measure to address the
exploitation of supply chain labour in
those industries. Moreover, it was argued that the current cross-jurisdictional
application
of the State mandatory codes beyond the boundaries of the State
within which those respective codes were made, demonstrates there
is an existing
legislative capacity for intra-jurisdictional regulation of international supply
chains to protect workers abroad.
Just as the (sometimes cross-jurisdictional)
deals between retailers operating in NSW, South Australia and Queensland and
their suppliers
formed the basis of regulatory intervention under the mandatory
codes, so too the deal between retailers (active in the domestic
jurisdiction)
and their overseas suppliers could form the basis of domestic regulation of
international supply chains. Imposing
obligations upon the effective business
controller of the supply chain is an essential element of the mandatory schemes
required
to adequately address the exploitation of domestic and overseas supply
chain labour.
[*] Lecturer, Faculty of Law,
University of Technology Sydney. This paper reports on research undertaken for
an Australian Research Council
funded project, Australian Supply Chain
Regulation: Practical Operation and Regulatory Effectiveness, DP120103162.
Thanks to Terry Carney, Shaunnagh Dorsett and the anonymous referees for their
comments. Any errors are my
own.
[†] See, eg, C
Wright,, and J Lund , ‘Supply Chain Rationalization: Retailer Dominance
and Labour Flexibility in the Australian Food and
Grocery Industry’ (2003)
17 Work, Employment and Society 137; P James et al,
‘Regulating Supply Chains to Improve Health and Safety’ (2007) 36
IndusLJ 163; P James and D Walters, D. (2011) 'What
Motivates Employers to Establish Preventative Arrangements? An Examination of
the Case of Supply
Chains' (2011) 49 Safety Science
988.
[‡] See, eg, I Nossar, R
Johnstone and M Quinlan, ‘Regulating Supply-Chains to Address the
Occupational Health and Safety Problems
Associated with Precarious Employment:
The Case of Home-Based Clothing Workers in Australia' (2012) 17 AJLL
137.
[§] See, eg, G Gereffi,
'Introduction: Globalisation, Value Chains and Development' (2001) 32
Institute of Development Studies Bulletin 1; S Cooney, 'A Broader Role for
the Commonwealth in Eradicating Foreign Sweatshops?' [2004] MelbULawRw 10; (2004) 28 MULR 290;
M Anner, J Bair and J Blasi, ‘Toward Joint Liability in Global Supply
Chains: Addressing the Root Causes of Labor Violations
in International
Subcontracting Networks’ (2013) 35 Comp Lab L & Pol'y J
1.
[**] Nossar, Johnstone and
Quinlan above n 2; James et al above n 1; R Johnstone, et al (2012) Beyond
Employment: The Legal Regulation of Work Relationships, Federation Press,
Sydney, 2012 pp68-69; M Rawling and S Kaine, 'Regulating Supply
Chains to provide a Safe Rate for Road Transport Workers' (2012) 25 AJLL
237.
[††] Nossar,
Johnstone and Quinlan, above n
2.
[‡‡] G Gereffi,
'Introduction: Globalisation, Value Chains and Development' (2001) 32
Institute of Development Studies Bulletin
1.
[§§] Ethical Clothing
Trades Extended Responsibility Scheme 2004 (NSW)(NSW Mandatory Retailer Code);
Schedule 1 – (South Australian
Clothing Outworker Code of Practice) of the
Fair Work (Clothing Outworker Code of Practice) Regulations 2007 (SA)(SA
Mandatory Retailer
Code); Mandatory Code of Practice for Outworkers in the
Clothing Industry (Qld)(Qld Mandatory Retailer Code). Those mandatory
retailer obligations remain in place in NSW and South Australia, but have been
abolished in Queensland in November
2012. See further analysis below in this
article.
[***] Australian Supply
Chain Regulation: Practical Operation and Effectiveness
DP120103162.
[†††]
In addition to legal and documentary analysis, the project fieldwork includes
semi-structured interviews principally to capture the
experience of regulators
(namely, government officials and relevant union officials) but also regulated
businesses. Participant
observation of regulators is also being undertaken by
accompanying them to workplace inspections. Finally quantitative analysis will
be undertaken of measurable statistical data or records about working conditions
within the industries.
[‡‡‡]
Additionally, around 7 follow up interviews were conducted with particularly
informative interviewees (from the initial 30) in order
to gain a deeper
understanding of their
experience.
[§§§]
Johnstone et al, above n 4
p1.
[****] J Howe and R Mitchell
‘The Evolution of the Contract of Employment in Australia: A
Discussion’ (1999) 12 AJLL
113.
[††††]
See M Quinlan, C Mayhew, P Bohle, 2001 'The Global Expansion of Precarious
Employment, Work Disorganisation and Occupational Health:
Placing the Debate in
a Comparative Historical Context' (2001) 31 International Journal of Health
Services
507.
[‡‡‡‡]
See J Fudge ‘Fragmenting Work and Fragmenting Organizations: The Contract
of Employment and the Scope of Labour Regulation’
(2006) 44 Osgoode
Hall LJ
609.
[§§§§]
See H Collins Regulating Contracts, Oxford University Press, Oxford,
1999, p24; A Rainnie, ‘The Reorganisation of Large Firm Subcontracting:
Myth and Reality’
(1993) 49 Capital and Class 53 at
68.
M Rawling and J Howe, 'The Regulation of Supply
Chains: An Australian Contribution to Cross-National Legal Learning' in K V W
Stone
and H Arthurs (Eds), Rethinking Workplace Regulation: Beyond
the Standard Contract of Employment, Russell Sage Foundation, New York,
2013, p233 at p235[.]
J Bair,
'Global Capitalism and Commodity Chains: Looking Back, Going Forward' (2005) 9
Competition and Change 153 at 165; Gereffi at al above n 6
at 1[.]
C Wright and W Brown
'The Effectiveness of Socially Sustainable Sourcing Mechanisms: Assessing the
Prospects of a New Form of Joint
Regulation' (2013) 44 Industrial Relations
Journal, 20 at 22; D Grimshaw, H Willmott and J Rubery,
'Inter-Organizational Networks: Trust, Power, and the Employment Relationship'
in
M Marchington et al (eds) Fragmenting Work: Blurring Organizational
Boundaries and Disordering Hierarchies Oxford University Press, Oxford, 2005
p39 at p40; I Nossar, ‘The Scope for Appropriate Cross-Jurisdictional
Regulation of International
Contract Networks (Such as Supply Chains): Recent
Developments in Australia and their Supra-National Implications’, Business
Outsourcing and Restructuring Regulatory Research Network Working Paper
No[.]1, 2007, available at:
<http://www.borrrn.org/index.php?option=com_content & view=article & id=3:first-working-paper & catid=1:working-paper-series
& Itemid=8 .>
at p9
J Rubery, J Earnshaw and M Marchington, 'Blurring the
Boundaries to the Employment Relationship: From Single to Multi-Employer
Relationships'
in M Marchington et al (eds) Fragmenting Work: Blurring
Organizational Boundaries and Disordering Hierarchies Oxford University
Press, Oxford, 2005, p63 at
p76[.]
Nossar, above n
18 at 9[.]
I Nossar,
‘Cross-Jurisdictional Regulation of Commercial Contracts for Work Beyond
the Traditional Relationship’ in C
Arup et al (eds) Labour Law and
Labour Market Regulation: Essays in the Construction, Constitution and
Regulation of Labour Markets and Work Relationships, Federation Press,
Sydney, 2006, p202 at p209; Grimshaw, Willmott and Rubery above n
16 at 57; James et al above n 1 at
166[.]
Rawling and Howe,
above n 16, at 241[.]
Nossar,
above n 18 at
10[.]
M Quinlan Supply
Chains and Networks Report Safe Work Australia, July 2011 at
4[.]
See Wright and Brown above
n 16 at 26; Australian Council of Superannuation Investors, Labour and Human
Rights Risks in Supply Chain Sourcing: Investment Risks in S&P/ASX200
Consumer Discretionary and Consumer Staple
Companies Research Paper,
Australian Council of Superannuation Investors, June 2013 at
11[.]
Australian Council of
Superannuation Investors, above n 25, at 3; Walter and James, above n 1 at
992[.]
M Islam and A Jain
‘Workplace Human Rights Reporting: A Study of Australian Garment and
Retail Companies’ (2013) 23 Australian Accounting Review 102 at
103[.]
I Nossar Briefing
Paper: ‘Behind the Label’: the New South Wales Government
Outworker Strategy – the Importance of the Strategy and Prerequisites
for
its Success, TCFUA, Sydney, 2000;
p3[.]
Nossar,
Johnston[e and ]Quinlan above n 2 at
145.
E Diviney and S Lillywhite, Ethical Threads: Corporate
Social Responsibility in the Australian Garment Industry, Brotherhood of St
Laurence, Melbourne, 2007 p5[.]
C Mayhew and M Quinlan, 'The Effects of Outsourcing on Occupational Health and
Safety: A Comparative Study of Factory-Based Workers
and Outworkers in the
Australian Clothing Industry' (1999) 29 International Journal of Health
Services 83 at 88[.]
M
Rawling, 'A Generic Model of Regulating Supply Chain Outsourcing' in C Arup et
al (Eds), Labour Law and Labour Market Regulation; Essays on the
Construction, Constitution and Regulation of Labour Markets and Work
Relationships, Federation Press, Sydney, 2006, 520 at
525[.]
I Nossar Proposals for
the Protection of Outworkers from Exploitation, TCFUA, Sydney, June 1999,
p2[.]
Mayhew and Quinlan above n
31 at 98; Diviney and Lillywhite above n 30 at p4.
Mayhew and
Quinlan above n 31 at 98; Quinlan above n 24 at
p7[.]
Nossar above n 18
at 9; Walter and James above n 1 at
989[.]
See S Marshall
‘An Exploration of Control in the Context of Vertical
Disintegration’ in C Arup et al (Eds), Labour Law and Labour Market
Regulation; Essays on the Construction, Constitution and Regulation of
Labour Markets and Work Relationships, Federation Press, Sydney, 2006, p542
at pp553-554; Rawling above n 32 at
pp528-536[.]
For the history of
TCF industry awards see S Marshall ‘Australian Textile Clothing and
Footwear Supply Chain Regulation’
in C Fenwick and T Novitz (eds) Human
Rights at Work: Perspectives on Law and Regulation Hart, Oxford, 2010, p555
at pp566-569[.]
Industrial
Relations commission of NSW Pay Equity Inquiry Report to the Minister
Matter No IRC6320 of 1997, Industrial Relations Commission of NSW, 14
December 1998, Glynn J at 641[.]
Ibid, at 643.
Nossar, above n 33.
Ibid,
p3[.
]
See Homeworkers Code Committee Incorporated, Application
for revocation of A91252-55 and substitution of authorisations A91354-57 in
respect of Homeworkers Code of Practice, Australian Competition and Consumer
Commission, 21 February 2013,
p1[.]
Nossar, above n 28,
p2, p4-5, p12; see also Marshall above n 38,
p572[.
]
Nossar, above n 33[.]
NSW Department of Industrial Relations, Behind the Label
– The NSW Government Clothing
Outwork Strategy Issues Paper,
NSW Department of Industrial Relations, December 1999.
This Act
contained stand-alone provisions as well as amendments to the Industrial
Relations Act 1996 (NSW)[. ]Previous
literature has examined the crucial ‘bottom up’ rights of outworkers
contained with this NSW legislative scheme:
Nossar, Johnstone and Quinlan,
above n 2 ; Marshall, above n 37; Rawling above n 32.
Indu[s]trial Relations (Ethical Clothing
Trades) Act 2001 (NSW)(NSW Ethical Clothing Trades Act) s 5.
NSW
Ethical Clothing Trades Act s 11, s
12[.]
NSW
Retailer[s]/TCFUA Ethical Clothing Code of
Practice, 18 September 2002.
National Retailers/TCFUA Ethical
Clothing Code of Practice, 9th October
2002[.]
These individual
agreements ensured that code terms would still apply to those major retailers
even if they ceased membership of
the Australian Retailers
Association[. ]
I Nossar,
Mandatory Code Recommendations – First Draft, 26 May
2003[.]
NSW Ethical Clothing
Trades Council Twelve Monthly Report, NSW Ethical Clothing Trades
Council, 2003, at 36[.]
Ibid;
Nossar above n 18, p15[.]
Order
under the NSW Ethical Clothing Trades Act s 12, New South Wales Government
Gazette No. 200 Official Notes 17 December 2004.
NSW Mandatory
Retailer Code, definitions of “retailer” and
“manufacture” cl 5, cl
8[.]
NSW Mandatory Retailer
Code, definitions of “supplier”, “retailer”,
“manufacture” “contractor”
cl
5[.]
The term
‘regulator[s]’ is used in this
article to describe both parties charged with responsibilities for enforcing
retailer obligations –
governmental inspectorates and unions. See,
further, T Hardy and J Howe, 'Partners in Enforcement? The New Balance
Between Government and Trade Union Enforcement of Employment Standards in
Australia' (2009) 22 AJLL 306.
NSW Mandatory Retailer Code
cl 10(2), Schedule 2 Part B[.]
NSW Mandatory Retailer Code cl 10(2), Schedule 2 Part
B[.]
NSW Mandatory Retailer Code
cl 10(3)[.]
See Collins above n
15.
See discussion of consumer guarantees regime in A Bruce,
Consumer Protection Law in Australia, 2nd ed Lexis Nexis
Butterworths, 2014, Sydney at Chapter
10[.]
See discussion in J W
Carter, Contract Law in Australia 6th ed, Lexis Nexis
Butterworths, Sydney, 2013 at
624-634[.]
NSW Mandatory
Retailer Code cl 10(1)(b), Schedule 2 Part B; cl
15[.]
NSW Mandatory Retailer
Code cl 12(1)(f)[. ]
Nossar,
above n 28 at p3[.]
see
also Diviney and Lillywhite above n 30 at p5[.
]
NSW Mandatory Retailer Code cl 12(3), Schedule
1[.]
NSW Mandatory Retailer Code
cl 12, definition of “agreement” cl
5[.]
NSW Mandatory Retailer Code
cl 10(1)(a)[.]
NSW Mandatory
Retailer Code cl 11(1), definition of “relevant person” cl
5[.]
NSW Mandatory Retailer Code
cl 13(1), Schedule 2 Part A, cl 15, cl 12[.]
NSW Mandatory Retailer Code cl
21[. ]
NSW Mandatory Retailer
Code cl 15 (3), Schedule 2 Part
B[.]
NSW Mandatory Retailer Code
cl 14[.]
NSW Mandatory Retailer
Code cl 15(1).
NSW Mandatory Retailer Code cl 16(1)(b), Schedule
2[.]
NSW Mandatory Retailer Code
cl 16(1)(a), Schedule 2[.]
NSW
Mandatory Retailer Code definition of “contractor” cl
4.
NSW Mandatory Retailer Code cl
16(2)(a)[.]
NSW Mandatory
Retailer Code cl 16(2)(b)[.]
NSW
Mandatory Retailer Code cl 7(2), cl 10(3); NSW Ethical Clothing Trades Act s
13[.]
Regulator Interview
A[.]
Regulator Interview
B[.]
James et al, above n 1, at
176[.]
Regulator Interview
C[.]
Nossar, above n 18
at 16[.]
I Nossar
‘Supply Chain Regulation in the US and Australia: - A Comparative
Perspective of the Effectiveness of Regulating OHS’
presentation delivered
at International Symposium on Regulating OHS for Precarious Workers
Deakin University, Melbourne, 17 June
2011[.]
Ibid.
Regulator Interview B[.]
Nossar, above n 91[.]
Business interview A[.]
Regulator interview A.
The amending legislation renamed the
Industrial and Employee Relations Act 1994 (SA) as the Fair Work Act 1994
(SA)(SA Fair Work
Act) Previous literature has examined the resulting,
‘bottom up’ rights of South Australian outworkers: see Marshall
above n 35; Rawling, above n 30[. ]For a
proposal for legislative protections for outworkers in South Australia, see I
Nossar, Proposals for Protection of Outworkers in South Australia, TCFUA,
Sydney, 2002.
S99C, SA Fair Work Act s 99C.
Safe
Work Au[s]tralia “Clothing Outworker
Code’ explanation available at http://www.safework.sa.gov.au/show_page.jsp?id=5052
(accessed 7 April 2014).
Draft Outworker (Clothing
Industry) Protection Code (SA) [.]
(accessed on 7 April
2014).
Fair Work (Clothing Outworker Code of Practice)
Regulations 2007 (SA) s 2.
SA Mandatory Retailer Code definitions
of “retailer” and “manufacture” cl 5, cl
8[.]
SA Mandatory Retailer
Code definitions of “supplier”, “retailer”,
“manufacture” and “contractor”
cl
5[.]
The SA Mandatory Retailer
Code has an additional cl 28 (which concerns the application of South Australian
award protections) and
an additional sub-clause
8(2)[.] The maximum penalty for a breach of
the SA Mandatory Retailer Code differs from the maximum penalty for a breach of
the NSW Mandatory
Retailer code: see SA Mandatory Retailer Code cl
7(2).
For a proposal for legislative outwork provisions for
Queensland see I Nossar, Proposals for the Protection of Outworkers in
Queensland, TCFUA, Sydney,
2002[.]
Industrial Relations
Act 1999 (Qld) s 400I[.]
Qld
Mandatory Retailer Code cl
2[.]
Repeal Notice
[Subordinate Legislation 2012 No[.] 193 made
under the Industrial Relations Act 1999 (Qld)] as of the 9th November
2012.
Qld Mandatory Retailer Code, definitions of
“retailer”, “supplier”, “manufacture” and
“contractor”
cl
4[.]
Qld Mandatory Retailer
Code cl 10(1)[.]
Qld Mandatory
Retailer Code cl 10(1)(b) and (c), Form 3A; NSW Mandatory Retailer Code cl
10(2), Schedule 2 Part B; SA Mandatory Retailer
Code cl 10(2), Schedule 2 Part
B;
Qld Mandatory Retailer Code cl 15(c), Form
4A[.]
Qld Mandatory Retailer
Code cl 15(d), Form 4A[.]
Qld
Mandatory Retailer Code cl 15(c), Form
4A[.]
Queensland Mandatory
Retailer Code cl 16(2)(a), cl 14, Form 3, Form
1[.]
Qld Mandatory Retailer
Code cl 10(1)(a).
Queensland Mandatory Retailer Code cl 11(1),
Form 2, clause 12.
Qld Mandatory Retailer Code cl
12[.
]
Qld Mandatory Retailer Code cl 16(1), cl 16(2), Form 3,
Form 3A[.]
Qld Mandatory
Retailer Code cl 16(2)(b)[.
]
Regulator interview
C[.]
Regulator Interview
D[. ]See also “Shock at Steps to
Repeal Queensland Code Protecting Outworkers”, Fairwear Latest News, 30
November 2012 available
at http://fairwear.org.au/resources/latest-news/
last accessed on 28 August 2014.
See, in
pa[r]ticular, Fair Work Act 2009 (Cth)(Cth FW
Act) s789DC(5).
Cth FW Act
S789DA-s789DD[.]
Cth FW Act
S789DE(3) and (4)[.]
See H
Collins[, ]'Ascriptions of Legal
Responsibility to Groups in Complex Patterns of Economic Integration' (1990) 53
MLR 731 at 732.
See United Voice ‘Clean
Start: Fair Deal for Cleaners –
Subcontractin[g and ]Illegal Practices Fact
Sheet, United Voice, 17 October 2009 available at http://www.unitedvoice.org.au/tender/fact-sheets/subcontracting-and-illegal-practices
accessed 28 August 2014
See[, ]S Kaine, 'Collective Regulation of
Wages and Conditions in Aged Care - Beyond Labour Law' (2012) 54 Journal of
Industrial Relations 100.
Eric Abetz, the federal
Mini[s]ter for Employment announced a review
of the operation of the Road Safety Remuneration Tribunal: Eric Abetz media
Release ‘Review
of the Road Safety Remuneration System’ 30 November
2013. At the time of writing a review of the road safety remuneration tribunal
was being conducted see Commonwealth Department of Education ‘Review of
Road Safety Remuneration System https://employment.gov.au/review-road-safety-remuneration-system
accessed on 28 August 2014.
Road Safety Remuneration Tribunal
(RTO2013/1) Re Transport Workers’ Union of Australia, Transcript of
Proceedings, 29 October
2013[.]
NSW Mandatory Retailer
Code cl 19, definition of “supplier”, “retailer” and
“manufacture” cl
5[.]
NSW Mandatory Retailer
Code definition of ‘clothing products’ cl
5[.]
Nossar above n 18;
R Johnstone, ‘Informal Sectors and New Industries: The Complexities of
Regulating Occupational Health and Safety in Developing
Countries’ in J
Fudge, S McCrystal, and K Sankaran (Eds) Challenging the Legal Boundaries of
Work Regulation Hart, Oxford, 2012, p67 at
p80[.]
For a proposal to use
extra-territorial powers to regulate supply chains to achieve outcomes abroad
see Cooney above n 3[.]
M
Rawling ‘Supply Chain Regulation: Work and Regulation Beyond the
Employment Relationship’ PhD Thesis, University of
Sydney, 2010
p322[. ]
Nossar, above n 18
[.]
Nossar, above n 18;
Johnstone, above n
134[.]
Cooney above n 3
at 329.
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