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Wednesday, 29 November 2006
Page: 11

Senator CROSSIN (10:07 AM) —I rise this morning to provide my contribution to the debate on the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. What we have before us here in this parliament again this week is legislation that is most unfair, unreasonable and a further attack on and abuse of the rights of workers in this country. This legislation will negatively impact on workers, including outworkers, owner-drivers outside of New South Wales and Victoria—and I will speak about the Northern Territory in a minute—and other contractors deemed by relevant state and territory legislation to be employees.

The bills introduce a layer of additional complexity to an already complex industrial relations system. They override all existing provisions contained in state industrial legislation which deem certain categories of independent contractors to be employees and provisions which grant employee related entitlements to independent contractors. This legislation will mean that independent contractors can no longer access state unfair contract laws. It will override, in fact, the state unfair contracts legislation and will water down protections for consumers and small business. This legislation does little to protect outworkers, without the proper application of the state based outworker legislation. As drafted, the legislation will have the effect of significantly weakening any outworker entitlements.

I want to mention three key points of this legislation that have been highlighted not only in discussions by my colleagues previously but also by our Parliamentary Library, in the Bills Digest that they produce. In reading that, I notice that they have summarised this legislation pretty well. The Bills Digest says:

This legislation complicates an area of law unnecessarily. The preservation of State laws in some areas and in some States, reliance on the common law test of employee/independent contractor and the introduction of very complex transitional provisions, which will last for three years, will compromise the hope that this legislation will cut through red tape for business.

Another key area of this legislation is that it provides a costly system of redress for small business and for workers. As mentioned in the contribution from my colleague Senator Hogg, it is not just the impact on employees and workers that we are going to see with this legislation; I have not heard too many people talk about the cost that this will also incur on small business. The Bills Digest says:

While the Bills contain protections to prevent unfair contracts and sham arrangements, they only provide the remote option of taking an employer/contractee before the Federal Magistrates Court or the Federal Court, both costly jurisdictions and therefore unlikely to be available to the majority of workers who these Bills should be protecting.

The legislation leaves open the opportunity to significantly expand its scope by a heavy reliance on regulation making. The legislation confers a very broad law-making power upon the executive government, including provisions which will enable the executive to make, for example, regulations capable of overriding states’ laws, as well as changing this proposed law itself.

I think the central principle, though, that underpins both of these bills is that independent contracting relationships should be recognised and supported and that the appropriate mechanism for regulation is commercial law, not industrial law. We do not agree with that. Estimates vary as to the total number of independent contractors operating in Australian workplaces. The Productivity Commission estimates from the ABS forms of employment survey data that the total number of independent contractors was 787,600 in 2004. That is about 8.2 per cent of all employed persons. It is down from the 1998 figure of 843,900, or 10.1 per cent of all employed persons.

It is interesting to note that on 9 October 2006, in the Financial Review, the Independent Contractors Association and the Australian Chamber of Commerce and Industry, ACCI, effectively said that unless the government makes changes to this legislation it ought to be dropped. But they were not saying it in the same context that my colleagues Senator Hogg and Senator Marshall have been talking about. There is one problem here: ICA and ACCI want the bills to go even further. They want the bills to be even more extreme or to be dropped. I agree with my colleagues that these bills should be scrapped, but not for the reasons that ICA and ACCI gave.

There is clearly dissent among government ranks and dissent in the industry about the effectiveness of the government’s independent contractors legislation. We opposed it in the House and we intend to oppose it now in the Senate. The government may well assert that the Independent Contractors Bill is intended to protect independent contractors, but, like all other legislation coming from this government, it does nothing to protect any worker in this country—in fact, far from it. This legislation adds to an already massively complex workplace relations system. It makes life perhaps a bit more complicated for employers, who have to do more administration, but it makes life, pay and conditions far more precarious for workers across a whole range of industries.

We know that this legislation was shunted off to the Senate Standing Committee on Employment, Workplace Relations and Education. Labor senators, not surprisingly, have produced a dissenting report for that committee. My colleagues who produced that dissenting report said:

The basic policy aim of the Independent Contractors Bill is to turn as many employees as possible into contractors. In the Government’s view, and more particularly in the view of employer organisations close to the Government, industrial relations are greatly simplified by arrangements which put employees onto either Australian Workplace Agreements, or turn them into contractors. Work Choices is intended to encourage the first of these trends—

and we have seen that; Work Choices encourages and, in fact, pushes workers onto AWAs—

and the Independent Contractors Bill is intended to encourage the latter development.

So, if you are not on an AWA in this country, you will be pushed to become an independent contractor. Furthermore, my colleagues went on to say:

Evidence was given that the protection of contractors through penalties against sham contracts would be largely ineffective. Not only are they a doubtful deterrent, but even if a firm or a principal contractor is found to be in breach of the law, it would be of small comfort to an aggrieved contractor.

               …              …              …

Even if the legal case of an individual contractor forced to work for minimal remuneration is taken up, through legal aid being available, the consequences for the individual amount to a pyrrhic victory. A case can be won, and a contracting principal penalised, but there is no guarantee for the aggrieved contractor of the same job at a decent contract price. The contract can be terminated. Nor will a judgement of a court in a particular circumstance necessarily have a deterrent effect on sham contracts generally.

I note that Senator Murray, in his eminent wisdom in these matters—as he always provides fine contributions—in his dissenting report said:

For an increasing number of contractors the notion of independence is a myth ... any choice and flexibility in their arrangements have been constructed for the benefit of those who hire them, not their own.

He went on to say:

... this legislation ... does not prevent business from exploiting loopholes in the common law that allow workers to be classified as contractors, when for all practical purposes they are employees.

With this bill it will seem even easier to hire Australians as contractors and not employees, not just because of the cost savings but because it will save them having to cope with the complexity and the flaws in the new industrial relations system. It abrogates, I believe, employers’ rights to comply with superannuation, occupational health and safety, long service leave and a whole raft of entitlements that employees in this country should be entitled to.

In introducing these so-called independent contractors laws, the Prime Minister and Minister Kevin Andrews have two messages for Australian workers. One message is: under this government’s industrial relations scheme, there is no genuine choice for people. The choice is: ‘Either cop this or cop the door and take a walk. Take an AWA or don’t take a job. Either become an independent contractor or go and find a job somewhere else.’ The other message for Australian workers is: you are on your own; you are an island, by yourself; you are out there battling an industrial relations world in which you are left to your own devices in order to survive. Not only that but also: we are going to push you out to sea in a rowboat and take all the paddles from you, so you will be just floating around out there and doing the best you can. Certainly, as a worker in this country you would not want to rely on this government to support you in your endeavour to seek fairness and your rights when it comes to the workplace.

These laws amount to nothing more than the Howard government’s latest attempt to slash wages and strip away the conditions of working Australians. We support Australians who genuinely want to start their own business and, as Senator Hogg said, we support independent contractors. But the government is trying to create the impression that these laws are somehow beneficial for small business and contractors. In fact, these laws will do precisely the opposite. We have no problem with people who want the freedom and flexibility to operate as an independent contractor. This gives me an opportunity to refer to people like my colleague Senator Sterle who, in fact, has spent many months and years on the road as an independent contractor, carting stuff to and from Darwin. In our communities we sometimes pay little homage and give little respect to the people who spend many long, tedious hours on the roads, moving our goods in this country from one place to another.

People who want to operate as an independent contractor have the freedom and flexibility to do that, but we are concerned about the government using this as an excuse to strip away protections for vulnerable workers and to force employees of a business into a position where they must become independent contractors. As a result of these laws, genuine employees will be pushed out of the employer-employee relationship and into sham independent contracting arrangements, reducing their entitlements, conditions and protections, and placing additional burdens on them.

If you are already in a bona fide contracting relationship, this bill does nothing to support you, encourage you or protect you. When introducing the bill, the minister said that Australia’s continuing prosperity requires a system which encourages creativity and rewards initiative. However there is nothing in this bill which does encourage or reward Australians who choose to be and are bona fide independent contractors. Instead, if you are a principal with bona fide contractors, you should be careful because you are now threatened with $33,000 fines if you cannot prove the arrangements are genuine. And, by the way, these fines will apply as soon as the bill passes. The minister has sold out on genuine contracting arrangements by imposing the threat of these high fines and leaving genuine contractors unsure of their status.

I turn to the unfair contracts element of the legislation. Not content with removing protections for vulnerable workers, the government has done away with unfair state contract laws for all contractors. These bills override state based employee deeming provisions and unfair contracts legislation which protect not just employees but small businesses and contractors. Under this bill, contractors have to take their chances with the government’s new unfair contracts test, which has been removed from the Workplace Relations Act and placed in this bill. Firstly, under this law, there is no ability for employer representatives or unions to apply for a review of a contract on the basis that it is unfair. Instead of going to the state or federal industrial relations commissions, workers now have to go to the Federal Magistrates Court. This is likely to raise difficulties for employees, including, of course, the expense, the length and complexity of arguments and the exposure to a costs order.

The test used in the bill to determine whether a contractor can get relief is that the contract may be unfair or harsh. In doing so, the government wants the courts to look at, amongst other things, the relative strengths of the bargaining parties and any person acting on their behalf, and whether undue influence or pressure has been used. However, the courts must now see whether the rates paid to a worker who claims their contract is unfair are commensurate with rates paid to other workers performing similar work in the industry. This means that, where all, most or some of the workers in an industry are getting low or unfair rates, according to the minister the courts should not find that this is unfair.

So, even if you can demonstrate that a contract is unfair, the courts have powers only to set aside or vary it, not to order compensation to you or your workmates for your losses in the past. Lastly, even if you are successful and you get orders to vary or set aside the contract, you need to make separate orders to enforce the first orders. I am not sure how this convoluted process is helping employees or, for that matter, their bosses in a small business area. As a result of this law, burdens will now be placed on workers which normally fall on the employer. We should not be too surprised about that under this government. For example, the burdens of superannuation and workers compensation will become the responsibility of the employee, now deemed to be the new independent contractor under these laws.

These laws will hurt ordinary Australians like clothing outworkers, drivers, cleaners and electricians. These laws tear away the protections and entitlements for Australians who are in an inferior bargaining position. If you are a worker or a small business wanting a remedy for any unfair or sham contract arrangement then you are going to have to go through the costly court process—an option not realistically open to most people that this legislation will affect.

I just want to have a quick word about the impact of this in relation to the Northern Territory, where we have a majority of owner-drivers. In relation to some of the amendments that were put up yesterday by the government, the government has promoted their new unfair contracts provisions as an additional protection for owner-drivers. However, amendment (6) that was put up by the government guts any protection for owner-drivers, especially in states other than New South Wales and Victoria. So this will have a significant impact, of course, in the Northern Territory. This amendment ensures that the only things that can be reviewed by a court are the black-and-white terms of the contract and other matters at the time the contract was made. This has devastating consequences for owner-drivers. Here is just one example of this: in reviewing the fairness of a contract over a 10-year period, you will not be able to take into account a spike in the cost of fuel in years 7 and 8. That makes the remuneration structure unfair. You will only be able to consider if the fuel component of the remuneration structure was fair at the commencement of the contract. The amendments put up yesterday do nothing to protect the fairness of a contract and will allow a situation to occur where drivers are operating below cost recovery. That has a significant impact on the safe and sustainable operation of a small business and it is without remedy.

The new unfair contracts provisions are not an additional protection, as promoted by the government. Rather, they are the creation of a situation where drivers will be working below cost recovery and where they are unable to seek effective remedy because of this amendment. The solution to this is the proposed amendments by the Democrats. We believe they will ensure the proper capacity for a review of contracts that may be considered unfair.

Finally, I just want to say that there was an amendment moved by Mr Stephen Smith, our shadow minister in the House of Representatives, in relation to this bill. I commend that second reading amendment to people. But I certainly note that this bill follows on from the government’s extreme industrial relations changes which were and still are a massive attack on living standards and living conditions. They remove the rights, entitlements and conditions of Australian employees. What this bill does, essentially, is push people into becoming independent contractors in the same way that this government has tried to force and push employees in the workplace onto Australian workplace agreements. This bill introduces more complexity and confusion into Australia’s workplace relations laws and provides a system that, as I said at the outset, is unfair and unreasonable. (Time expired)