A firm, employed by Sandwell Council to transport children with special education needs (SEND), was the subject of allegations, it was said in a Sandwell Council report
The claims were revealed in a Sandwell Council report - as the local authority agreed to continue using its existing transport operators while the new SEND contract is the subject of an independent investigation.
The probe was initiated after council chiefs planned to hand the £20 million contract to firms run by a former employee who was embroiled in a land deals scandal.
A report to Sandwell's ruling cabinet highlighted that concerns had been raised over one of the taxi firms currently holding the contract.
It said: "The council was alerted to concerns about modern day slavery practices in one taxi company on October 6, 2020. The referrer asked to remain anonymous."
The report said a multi-agency "scoping" exercise was carried out, involving the likes of Sandwell Council and West Midlands Police, which found modern slavery was not taking place at the unnamed firm.
But the report continued: "There were concerns at poor wages, however, because workers were self-employed, this would not fit under labour exploitation so there was very little that agencies under SHOP [Sandwell’s Slavery and Human Trafficking Operational Partnership] could do.
"As the local authority could not use modern slavery legislation to investigate the allegations further, the council used its own due diligence processes to ensure that standards of the contract were being met.
"This demonstrated a range of inconsistencies, including clear evidence that the operator was paying low rates, but as the workers were self-employed then national minimum wage did not provide a basis for our interrogation of the contract."
Sandwell's cabinet agreed to allow its current operators to continue providing special education needs [SEND] transport up until February 2022, although the council can tender any new work from September onwards.
Sandwell's deputy leader, Councillor Maria Crompton, said: "These companies must be aware that we are going to monitor them closely and they will have to evidence they are operating under good practice.
"We will not tolerate firms treating their workforce badly. In all of this, the children are the priority. We have found no evidence that they are not safe."
Last month Sandwell Council was due to award new SEND contracts to firms run by Azeem Hafeez, who was named in the Wragge Report, but this decision was put off after a number of concerns were raised.
Sandwell Council has since opened a review into the matter, while Conservative councillors have accused officials at the Labour-run authority of "looking after their mates".
Mr Hafeez denied any wrongdoing in relation to land deals.