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Wednesday, 29 November 2006
Page: 28

Senator ABETZ (Minister for Fisheries, Forestry and Conservation) (11:25 AM) —I thank honourable senators for their contributions to this debate. In summing up on these two bills, the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, I note that many senators have made a contribution and I will take issue with some of the comments that have been made. It may be helpful if we reflect first on the government’s intention in relation to the bills. The government’s intention and firm commitment is to ensure that those who choose to work as independent contractors may do so without excessive regulation. These bills are built on the tenet that independent contracting arrangements are commercial arrangements and should not be governed by industrial legislation. This belief is reflected in our approach of having stand-alone legislation for contractors rather than including non-employment relations reforms in existing workplace relations legislation.

To briefly recap, the bills will: recognise and protect the unique position of independent contractors in the Australian workplace; override state laws which deem certain categories of independent contractors to be employees for the purposes of state industrial relations legislation; maintain existing protections under state legislation for outworkers in the textile, clothing and footwear industry; maintain existing protections under state legislation for owner-drivers in the road transport industry; replace existing state unfair contracts jurisdictions with a single national jurisdiction; and protect genuine employees from sham contracting arrangements and from threatening or deceptive behaviour aimed at making employees change their status to independent contractors. The passage of these bills will be accompanied by funding of $15 million over four years to support enforcement and education activities.

I would now like to reflect on a number of the issues raised during the debate. First of all, there was some talk about the common law definition. The use of the common law definition of an independent contractor will be that which is in the Independent Contractors Bill. There has been some criticism of the bill’s retention of the common law distinction between who is an employee and who is an independent contractor. This criticism has called for the proposed legislation to provide a statutory definition of these terms. The government carefully considered the feasibility of a statutory definition, and had regard to the recommendations of the relevant House of Representatives committee.

The government considers that the common law is the best arbiter of the distinction between an employee and an independent contractor. The common law test looks at the totality of a relationship between a person and their hirer, not just the formal contractual arrangements between the parties. It considers all the relevant circumstances of the particular relationship, making it both flexible and fair. It is highly unlikely that a statutory definition would, as has been claimed by some, reduce the number of disputes over the status of any worker. There will always be some doubt around the fringes of the definition that will result in a court having to determine the true nature of a person’s status.

In retaining the common law definition, the government has rejected the use of the incorporation of the alienation of personal-services income test to determine who is an independent contractor for the purposes of the Independent Contractors Bill. Senator Siewert asked yesterday why the government has not accepted this recommendation. In response to the honourable senator, I say that this test has been developed to address taxation policy needs and is unsuitable for use in the context of this bill. Not only does the self-assessment nature of the alienation of personal services income test leave it open to potential manipulation, but it also requires a hirer to know details of each and every one of a worker’s income sources. This is knowledge that a hirer cannot reasonably be expected to have and demonstrates the impracticality of the use of this test in the context of this bill.

I would also like to respond to Senators Murray and Polley, who have asked why the proposed bill does not recognise so-called dependent contractors. This is, with respect, an academic rather than a legal concept, used to describe a person who provides a service to only one, or primarily one, entity and who should therefore be treated as an employee. However, the dependent contractor concept is fundamentally flawed because it fails to recognise the reality that some contractors are comfortable working for one principal or are engaged on a long-term contract. Furthermore, the concept of dependent contracting has no recognition at common law.

Secondly, let me address the exclusion of state and territory laws that deem independent contractors to be employees. The government opposes laws which deprive a person of the right to choose the manner in which they work. Deeming laws prevent a person from being an independent contractor, irrespective of the way in which they structure their business. They force people operating in prescribed industries to operate as employees. The Independent Contractors Bill will return freedom of choice to all working Australians, giving them the ability to select the working arrangements that best suit their individual needs. The Independent Contractors Bill includes transitional arrangements for workers affected by the state deeming laws at the time the proposed legislation takes effect. People covered by the transitional arrangements will continue to be deemed to be employees for up to three years. However, they may elect to switch off the state laws at any time within that period by executing a written agreement with their principal.

I should note that the Independent Contractors Bill will not override state laws that deem outworkers to be employees. The government recognises that outworkers are a particularly vulnerable section of the Australian labour market who deserve additional protections. On that note, I thank Senator Troeth and her committee for the work that they did. Whilst on the topic of outworkers, I will take a moment to set out the particular protections provided for them under the Independent Contractors Bill.

Senator O’Brien interjecting—

Senator ABETZ —It is good to see that Senator O’Brien is awake. The government’s intention has always been to exempt outworkers from the effect of the provisions which override state laws. Currently the bill seeks to provide a guaranteed minimum rate of pay for outworkers who do not have such a rate of pay guaranteed by state or territory laws. These provisions are a recognition by the government of the particular vulnerabilities facing outworkers. As senators would be aware, the Senate Employment, Workplace Relations and Education Legislation Committee inquired into the provisions of the bills and unanimously recommended that some of the provisions in relation to outworkers be amended. I take this opportunity to foreshadow the government’s acceptance of the committee’s recommendations. The government’s proposed amendments will clarify the effect of the policy intention of the bill in relation to outworkers. These amendments were developed in consultation with the Textile, Clothing and Footwear Union of Australia, Fair Wear and the Senate committee. I would like to thank all those involved in ensuring that the provisions clearly and fully reflect the government’s intention to preserve existing protections for outworkers. This fact, with respect, seems to have been lost on senators from the other side of the chamber.

There has also been significant focus on owner-drivers in the road transport industry who are covered by existing New South Wales and Victorian owner-driver laws. The Independent Contractors Bill will maintain all existing state owner-driver protections for the time being. The proposed legislation only names those laws in New South Wales and Victoria because these are the only jurisdictions with specific owner-driver laws in operation. However, let me be clear about the extent of the preservation of these laws. It is the government’s intention to review all state and territory laws regulating owner-drivers in 2007, with a view to achieving national consistency where possible.

I will make some specific comments about amendment (4) to clause 7 of the Independent Contractors Bill, page 7, lines 22 and 23. This amendment would omit clause 7(2)(b)(iii) of the bill. That subparagraph currently provides that any instrument made under a provision of the law referred to in clauses 7(2)(b)(i) or 7(2)(b)(ii) is not affected by the general exclusion of certain state and territory laws in clause 7(1). As such, any instrument made under chapter 6 of the New South Wales Industrial Relations Act 1996 or the Victorian Owner Drivers and Forestry Contractors Act 2005 would not be excluded by this bill. This is the intention of the bill. However, clause 7(2)(b)(iii) is unnecessary because if a law is not excluded—that is, it continues to operate—then instruments made under that law are similarly not excluded, except where a law is excluded by regulations made under section 10 to the extent that the law authorises the making of an instrument. The omission of clause 7(2)(b)(iii) is therefore not intended to change the effect of the bill with respect to instruments made under a law listed in clauses 7(2)(b)(i) and 7(2)(b)(ii). Rather, the amendment would remove clause 7(2)(b)(iii) because it is a redundant provision.

I would like to take this opportunity to allay the concerns of Senator Hutchins, who took issue with proposed government amendment (4) to the Independent Contractors Bill. This amendment would omit a redundant subparagraph from the bill. It would not change the legal effect of the provision. The subparagraph currently provides that any instrument made under one of the saved owner-driver laws would continue to operate after the commencement of this bill. However, the provision is unnecessary, because if a law is not excluded then instruments made under that law are similarly not excluded and will continue to operate. Therefore, there is no need to spell this out in a separate provision. The supplementary explanatory memorandum provides more detail which makes this intention clear.

Senators Marshall and Hutchins have criticised the bill for not preventing children from being engaged as independent contractors. Interestingly enough, child labour regulation is a state and territory government responsibility. The proposed legislation expressly provides that the Independent Contractors Bill does not override state child labour laws.

Senator Kemp —And they are Labor governments, aren’t they?

Senator ABETZ —They are indeed, Senator Kemp. I now turn to the unfair contracts jurisdiction. The Independent Contractors Bill will override existing unfair contracts jurisdictions for independent contractors in those states where they exist—Queensland and New South Wales. Independent contracting is a commercial arrangement which should not be regulated by workplace relations laws that focus on employment considerations. The government considers that state unfair contracts jurisdictions have gone too far in attempting to rewrite commercial contracts which have been validly agreed between the parties. In both Queensland and New South Wales the relevant state industrial relations commissions can rewrite a contract applying to an independent contractor even where the terms of that agreement were fair when entered into. This is totally unacceptable and creates commercial uncertainty for both parties.

The new proposed jurisdiction will more appropriately focus on commercial considerations when determining whether a contract is unfair. Moreover, a single nationally consistent unfair contracts jurisdiction will minimise the confusion and inconsistency which arises from the duplication of multiple systems. To ensure that this new federal jurisdiction strikes the appropriate balance between the overly prescriptive New South Wales and Queensland jurisdictions and the absence of any contract review mechanism in other jurisdictions, I will shortly be moving a number of amendments to the unfair contracts provisions on behalf of the government.

A number of senators opposite have raised concerns about the expense of this jurisdiction. These concerns are as unfounded as they are misleading. The proposed provisions confer jurisdiction on the Federal Magistrates Court to review and vary harsh or unfair contracts. This jurisdiction will be significantly cheaper than the existing jurisdiction in New South Wales. To file a matter in the New South Wales jurisdiction and have it set down for a one-day hearing will cost a person $1,916. The same person will be charged only $769 to do the same thing in the Federal Magistrates Court—a saving of about $1,200. By conferring the federal unfair contracts jurisdiction on the Federal Magistrates Court, the government is making this jurisdiction more accessible to everyone.

Lastly, I would like to touch upon the sham penalty provisions that are proposed to be included in the Workplace Relations Act by the Workplace Relations Legislation Amendment (Independent Contractors) Bill. While the government fully supports the use of genuine independent contracting arrangements, it will not tolerate the actions of people who knowingly seek to disguise employment arrangements as independent contracting arrangements, thereby denying employees their lawful entitlements. To this end, the Workplace Relations Legislation Amendment (Independent Contractors) Bill includes four new civil penalty provisions to address sham arrangements.

Broadly speaking, these provisions would apply to persons who knowingly disguise employment relationships as independent contracting arrangements, persons who dismiss or threaten to dismiss an employee for the purpose of re-engaging that employee as an independent contractor and persons who seek to deceive or mislead others to persuade them to become independent contractors. These provisions provide substantial additional remedies where an employer seeks to avoid the payment of employment entitlements by wrongly classifying an employee as an independent contractor or coercing an employee to become an independent contractor. A corporation that is found to have breached any of these provisions will be able to be fined up to $33,000, and an individual will be fined $6,600.

Contrary to the claims of a number of senators opposite, these penalties would be able to be sought not only in the Federal Court but also in the Federal Magistrates Court. Further actions would be able to be commenced by an employee, a workplace inspector or, with the employee’s consent, an employee’s union. I would like to take this opportunity to foreshadow the government’s intention to move amendments to these provisions during the committee stage of the debate. These amendments will provide additional remedies for persons affected by a breach of any of these provisions. They will also clarify the government’s intention with respect to persons who knowingly seek to disguise employees as independent contractors.

During the debate yesterday, Senator Marshall made reference to the government’s fair pay and conditions standard in the Workplace Relations Act as the ‘low pay and conditions standard’. What a quite absurd remark. As Senator Marshall would be well aware, the Australian Fair Pay Commission recently handed down an increase of $27 per week to the minimum wage in Australia. Under this decision, Australian employees cannot be paid less than $511 per week. According to the latest OECD data, Australia has the highest minimum wage, as a proportion of median earnings, in the OECD—a very proud achievement.

The government will be opposing the Australian Democrats’ second reading amendment, for reasons that I think would be well known to everybody in this chamber—namely, that it was never the intention of either bill to dictate the way in which independent contractors should manage their affairs. One of the most fundamental advantages of being an independent contractor is the freedom and flexibility that comes from being able to make your own choices about how you work and how you structure your working arrangements. Just in case Senator Murray was not aware, we will not be supporting his amendments either. I commend the bills to the Senate.