Chorus to rein in subcontractors following employment law breaches

Releases findings of independent investigation

Chorus has released the findings of an independent investigation into the employment practices of subcontractors rolling out the UFB, vowing to take actions to ensure consistently fair conditions that comply with employment laws.

It has released a long list of actions that it and subcontractors Visionstream and UCG have committed to take.

Chorus commissioned the review, from MartinJenkins, in October 2018 following an investigation by the Labour Inspectorate that found almost all subcontractors to be breaching employment standards.

The investigation found that migrant workers in particular were being exploited. Labour Inspectorate national manager Stu Lumsden said observed breaches had included contracting employers failing to maintain employment records, pay employees’ minimum wage, holiday entitlements, and provide employment agreements.

“In a number of cases it was found that contractors deliberately used practices such as ‘volunteering’ or extended trial and training periods without pay," he said.

MartinJenkins' report said it could not rule out the vulnerability of the model to serious breaches occurring.

"This meant that our recommendations are designed to guard against the potential for serious migrant exploitation consistent with [Chorus'] desire to take the necessary steps to ensure all workers are treated fairly throughout the supply chain."

However, Chorus’ chairman Patrick Strange said the report had found the vast majority of employment law breaches to be low level, but "the way the supply chain is set up means it could still be vulnerable and this will be fixed.”

Chorus oversight lacking

Read more: Bullish forecasts for Chorus value from L1 Capital, New Street Research

MartinJenkins found more than 70 percent of the UFB Connect workforce to have English as a second language and said Chorus had "relied too heavily on a model whereby workforce risk, including the risk of migrant exploitation, was managed by the service companies without sufficient oversight."

It said Chorus’ consideration of strategic workforce risks had focussed on the steps required by its service companies to drive recruitment to meet the burgeoning demand for connections to fibre.

"Second order risks such as the composition of that workforce, particularly the use of migrants, was not clearly identified as a key risk to the UFB delivery programme at a board or executive level within Chorus.

"The productivity improvements delivered by the subcontracted workforce were prioritised by all parties in the supply chain as service companies struggled to keep up with demand while also ensuring that quality standards and customer experience remained high."

Chorus defends use of migrants

Chorus’ CEO Kate McKenzie said the report had found the use of a sub-contracting model to deliver UFB to be appropriate, and that the use of migrant workers was to be expected and reasonable given the significant demand for labour and the time-limited and one-off nature of the work required.

“The success of UFB, and meeting the huge demand for fibre at a time of near full employment in New Zealand, led to a substantial change in the mix of the sub-contractors working on our behalf, with more sub-contracted migrants and small businesses than before,” she said.

“We underestimated that risk as it emerged, instead focusing on productivity, health and safety and quality. When issues arose we relied too heavily on the assurances given, which are not appropriate checks in a situation where there are a large numbers of migrants."

She said Chorus would "make the necessary changes to ensure fairness in line with employment laws no matter where in the supply chain workers are contributing and would share its learnings with other businesses and government to help inform wider policy choices.


MartinJenkins made several recommendations:

- All workers engaged in the Chorus UFB supply chain should be able to earn a decent wage for a fair day’s work.

- Suppliers must respect the labour rights of workers and take steps to ensure their supply chain is free from discrimination, harassment, corruption and bribery.

- Suppliers must handle all business dealings and transactions with the highest standards of integrity, transparency and honesty.  Management systems must support good practice and clear accountability

- Productivity improvements in the supply chain should strike the appropriate balance between the needs of the customers and the needs of the workers.


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