Construction Forestry Mining and Energy union district vice-president Bob Timbs claimed South32 had targeted the job cuts to drive labour hire entities with acceptable records out of the region leaving only the cheapest and worst providers to pick up the slack.
"They say you should never waste a crisis and the slash and burn squad at South 32 certainly got the memo," he said.
"We accept the pandemic may have necessitated some short-term cost cutting.
"But the calculated way that South 32 has exploited this health crisis to drive down wages in the Illawarra is shameful.
"This a sure-fire way to incentivise unsafe work practices and its exactly the sort of thing our union and the community has fought hard against in the past. We shouldn't have to fight again."
A South32 spokesman said South32's Illawarra Metallurgical Coal division recently made changes to contractor arrangements at Appin Mine as part of a site-wide cost reduction program and as commercial contract terms ended.
"These changes are also in response to uncertainty due to COVID-19, coupled with lower pricing and demand for metallurgical coal, and the recent mine plan change," he said.
"Safety is our absolute top priority at all times."
Timbs said while South 32's tactics were complex, what the union was asking for was straightforward.
"All Illawarra coal workers are asking for is a clear public undertaking from South 32 that when they move around their contract workforce those workers will not be financially disadvantaged or compromised in terms of safety.
"They're not asking for anything extra - just basic fairness," he said.