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Tuesday, 28 November 2006
Page: 94

Senator TROETH (8:12 PM) —After that extremely colourful interpretation of this legislation by Senator Sterle, I think it is perhaps time that we put some coherent statements and facts and figures around it. These two bills, the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, implement the government’s 2004 election commitment to protect and support independent contractors, whom the government regards as an extremely important sector of Australia’s working population. The proposed legislation recognises independent contracting as a legitimate form of work that is primarily commercial and that, as such, should be regulated by commercial and not workplace relations laws. I would like to go through some of the major aspects of the bill and then I would like to look at some of the most commonly asked questions about this bill and provide some answers.

Firstly, deeming: the Independent Contractors Bill will override state laws which deem certain classes of worker to be employees and which provide employee like entitlements to independent contractors. The government considers that these laws unnecessarily interfere in commercial relationships. But I do want to point out that the proposed legislation will not affect taxation legislation or the definition of an employee for the purposes of tax. Similarly, the proposed legislation will not affect the operation of state and territory laws regarding workers compensation, occupational health and safety or superannuation. These bills will specifically preserve state laws that deem outworkers to be employees, and I will have more to say about that later; provide specific protections for outworkers, and I will also be referring to that; and provide specific protections for owner-drivers in New South Wales and Victoria. For other independent contractors who have previously been deemed to be employees, there will be a three-year transitional period to give businesses and workers time to adjust to the legislation when it is passed.

The Independent Contractors Bill expressly preserves state and territory laws that protect outworkers, and, where outworkers are not covered by laws of the state or territory providing some form of remuneration guarantee, the provisions of the bill will provide for a minimum rate of pay. The bill will not override protections for owner-drivers in New South Wales and Victoria, the only two states with such legislation. The government believes that protections applying to owner-drivers in those two states should not be disturbed at this stage. The Minister for Employment and Workplace Relations has announced that a review of owner-driver arrangements will be undertaken, with a view to achieving nationwide consistency if possible. That review will begin in 2007.

Finally, over the next four years, $15 million will be spent on providing information and assistance to those affected by the legislation. That was announced in the 2006 federal budget. The bill will replace existing unfair contracts jurisdictions with one single federal unfair contracts jurisdiction, and it will make the existing federal unfair contracts legislation—currently in the Workplace Relations Act—more accessible by providing that unfair contract remedies may be sought in the Federal Magistrates Court as well as in the Federal Court. That will minimise costs and court time for all parties involved in proceedings.

The Workplace Relations Legislation Amendment (Independent Contractors) Bill will protect employees from sham or disguised employment arrangements, such as where an employer misrepresents an employment relationship as an independent contracting arrangement. Civil penalties of up to $33,000 will apply to employers who deliberately try to avoid their responsibilities through the use of sham arrangements. The bill will also set out penalties which will apply to employers who engage in certain threatening or deceptive behaviour and make employees change their status to independent contractors. The Office of Workplace Services will investigate alleged sham and deceptive conduct cases and enforce the provisions as required.

There are some frequently asked questions about these bills. They have been asked by the opposition. They have been asked by groups in the community. I would like to look at some of them, such as: why does the Independent Contractors Bill not recognise dependent contractors? The term ‘dependent contractor’ is used by some commentators to refer to a worker who is, at common law, an independent contractor who provides a service to only one entity or primarily to only one entity. Proponents of ‘dependent contractors’ consider such workers to be employees.

The term ‘dependent contractor’ incorrectly assumes that a contractor who performs work for primarily one entity is financially dependent on that entity and is in an unequal bargaining position as compared to their principal. That ignores the reality that independent contractors may be comfortable performing work for one principal or being engaged on a long-term contract. For instance, IT professionals or contract engineers tend to be engaged on more complex and longer-term contracts than, for argument’s sake, independent contractor fruit pickers, and they are highly skilled professionals who are in strong bargaining positions.

The common law does not recognise the existence of ‘dependent contractors’. At common law, there are employees on the one hand and independent contractors on the other. So, consistent with the common law, the government also does not recognise the existence of dependent contracting. We consider that to adopt and use such a concept in the bills would blur the distinction between commercial arrangements and the employment relationship.

Some people have also asked why the Independent Contractors Bill does not use a statutory definition of an independent contractor. Again, the bill relies on the common-law test to distinguish an employee from an independent contractor. Under the common law, the totality of the circumstances surrounding the working arrangement is taken into account to determine whether the arrangement in question is an independent contracting arrangement or an employment relationship. That test has been firmly established by the courts and applied over many years. It considers a broad range of factors such as the ability to control a worker, hiring, training, location of workplace, who supplies tools and equipment and so on. The government does not consider a statutory definition to be desirable, as it would be less flexible than the common-law test.

Another question asked is: why does the Independent Contractors Bill override state deeming provisions? It will override state and territory laws that deem, or effectively force, certain classes of independent contractors to be employees. These laws, we believe, undermine the status of independent contractors and inappropriately draw them into workplace relations systems. Deeming takes no account of individual preference. It reduces choice and flexibility available to parties when choosing working arrangements that suit individual needs and personal circumstances. That choice has been the hallmark of the legislation enacted last year by this government through the workplace relations bill. I refer to the minister’s second reading speech, made in the other place, in which he said:

State deeming laws have become so absurd that they can result in completely arbitrary distinctions—an independent contractor who drives a bus can be deemed an employee, while a taxi driver is not; or a person who packages goods under a contract for services is deemed to be an employee if they do so at their home, but not if they do so on business premises; a blind installer is deemed to be an employee but a plumber is not.

So, there we have it. Those sorts of circumstances undermine the legitimate desire of many business owners to increase efficiency through the use of a flexible workforce that can be increased or reduced to meet the operational requirements of the business.

On the other hand, state and territory laws will not be overridden to the extent that they apply to outworkers. This is because outworkers are a particularly vulnerable class of workers. The provisions of the bill that override state and territory deeming provisions will not disturb the operation of chapter 6 of the New South Wales Industrial Relations Act or the Victorian Owner Drivers and Forestry Contractors Act. The government considers that these state laws should continue to operate until a more comprehensive review of all state and territory owner-driver laws can be undertaken and, as I said, this review is scheduled to commence in 2007.

What laws does this bill override? This bill would exclude the operation of state and territory laws that deem independent contractors to be employees or that provide employee like entitlements to independent contractors for the purposes of a workplace relations matter. State and territory laws that deem independent contractors or provide them with employee like entitlements for matters that are not workplace relations matters are not excluded. Workplace relations matters are defined in section 8 but broadly include laws relating to employees and employers in substantially the same way as they are treated under the Workplace Relations Act or state and territory industrial laws. Workplace relations matters do not include, for example, laws about superannuation, workers compensation, occupational health and safety, taxation and consumer rights.

This bill will also exclude the operation of state and territory unfair contract laws, and these laws allow contracts to which independent contractors are a party to be amended, varied or found to be void on an unfairness ground. Instead, the bill will establish a new federal contract review jurisdiction. State and territory laws that allow the review of contracts to which independent contractors are a party on grounds other than unfairness grounds are not overridden by this bill. An unfairness ground does not include state and territory laws that relate to matters that are defined not to be workplace relations matters. This means that contract review mechanisms in, for example, consumer rights laws are not overridden by the Independent Contractors Bill.

I would now like to move to the part of the bill that protects outworkers. As has been remarked previously, these are largely workers at the end of the production line in, largely, the textile industry, although other industries are involved. The government recognises that outworkers are a vulnerable class of workers within Australian workplaces and deserve additional protection. The government has been and remains committed to ensuring that state and territory laws that afford protections to outworkers are not overridden by federal legislation. Last year, when we were putting through the Workplace Relations Act, both in the committee hearing and in this chamber, as chairman of the Senate Employment, Workplace Relations and Education Committee, I was particularly concerned that this particular group of workers be not disadvantaged by either omissions from the Workplace Relations Act or sections that would harm them. I am very pleased to say that, as a result of extensive negotiations carried out by my committee at the time of the passing of the Workplace Relations Act, and as a result of the hearings of this committee, we were able to ensure that, in the government’s view, outworkers are sufficiently protected. I would like to thank every member of my committee, including the deputy chair, Senator Marshall, for their cooperation in ensuring that we devoted sufficient time to hearing the concerns of the outworkers. I hope that that group of workers consider that their concerns have been effectively looked after by the government.

FairWear, which are one of the groups concerned in negotiations, and the Textile, Clothing and Footwear Union of Australia raised concerns that the current provisions did not achieve the policy objective that I have just outlined, so, with the agreement of the government, the department consulted with the outworker representatives to see that those protections remained undisturbed. In the Senate committee report, we recommended that provision be made for that protection, and I am delighted to say that the government has taken into account those recommendations.

During the committee stage, the government will move amendments to the Independent Contractors Bill to: (1) amend paragraph 7(1)(c) to ensure that anti-avoidance laws that prevent a person from contracting out of minimum terms and conditions for outworkers are not overridden; (2) amend paragraph 7(2)(a) to clarify that state and territory laws that protect outworkers are not overridden; (3) remove part 4 of the proposed legislation, as it is considered not to have any application to outworkers and imposes unnecessary regulatory burdens on persons who engage outworkers; and (4) repeal part XXII of the Workplace Relations Act for the same reason. Outworkers related amendments will also be moved to various provisions of the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, and those amendments are consequential on the more substantive stages. I have already mentioned the review of the owner-driver’s legislation, which I think is very satisfactory. I commend the bill to the Senate.