Independent contractors legislation summarised

Analysis

Independent contractors legislation summarised

The new Federal independent contractors legislation received assent on 11 December 2006 and will commence from a date to be determined in the first quarter of 2007.

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The new Federal independent contractors legislation received assent on 11 December 2006 and will commence from a date to be determined in the first quarter of 2007.

Amendments to the legislation were made to ensure the new Act:

  • does not override State and Territory outworker protections
  • removes the minimum remuneration guarantee for independent contract outworkers in the textile and footwear industries (as these were an unnecessary duplication of State and Territory laws)
  • requires that courts, when dealing with unfair contract cases, assess the harshness or unfairness of the contract when made
  • clarifies the process of the court in reviewing services contracts, and
  • strengthens provisions preventing double-dipping

Definition

A proposed amendment to provide a definition of independent contractor was defeated in the Senate. The Common Law test of an independent contractor remains applicable. When it commences operation the new Act is intended 'to recognise independent contracting as a legitimate form of work arrangements that is primarily commercial; and to prevent interference with the terms of genuine independent contracting arrangements.'

The new Act will override provisions of State laws that deem certain classes of independent contractors to be employees and provisions that deal with unfair services contracts.

Outworkers

The new Act will not however override State legislation dealing with outworkers or contracts of carriage or bailment. Other types of contracts as prescribed by the Regulations may also be excluded from the operation of the new Act. To date no Regulations have been made.

Discrimination

The new Act will not override legislation dealing with discrimination (except in a State or Territory industrial law), superannuation, workers’ compensation, occupational health and safety, child labour, the observance of a public holiday, industrial action affecting essential services, attendance for jury service, professional or trade regulation, consumer rights, taxation, and any other matter specified in the Regulations which have not as yet been made.

Court review

Under the new Act, the Federal Court or the Federal Magistrates Court will have the power to review a contract that relates to the performance of work by an independent contractor where at least one of the parties to the contract is a constitutional corporation or the Commonwealth or a Commonwealth Authority or a Body Corporate incorporated in a Territory in Australia.

The court may determine that the services contract is either unfair or harsh or both. In reviewing the contract the court is to have regard to the relative strength of the bargaining positions of the parties to the contract, whether any undue influence or pressure was exerted on either party or whether the contract provides total remuneration that is or is likely to be less than that of an employee performing similar work. The court may have regard to any other matter that the court thinks is relevant.

The court may make an order setting aside all or part of the contract or an order varying the contract. Under transitional provisions to the Act contracts made before the new laws take effect or contracts that continue the terms of the previous contracts may continue to be dealt with under State and Territory contractor laws until such a contract is replaced by a contract made under the new Act or for three years from the date that the new Act takes effect, whichever comes first.

* Australian Business Lawyers  is a law firm specialising in employment law and related areas.

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