New Contractors Act will remove labour laws protection, says union boss


New Contractors Act will remove labour laws protection, says union boss

The Federal Government’s new legislation covering independent contractors will see an increase in exploitation as they will be regulated by commercial law, not labour law, a senior trade union official has forecast.


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The Federal Government’s new legislation covering independent contractors will see an increase in exploitation as they will be regulated by commercial law, not labour law, a senior trade union official has forecast.

Jeff Lawrence, National Secretary of the Liquor, Hospitality and Miscellaneous Workers’ Union (LHMU) told a Workplace Research Centre seminar that the intent of the new Act would be to remove independent contractors from regulation by the State and Federal industrial relations system.

Definition of independent contractor

He said whether or not a person is defined as an independent contractor would depend on such matters as:

  • The level of control the contractor has over hours of work and also how work is conducted;

  • How the contractor is paid;

  • The scope of the contractor to bargain rates in the contract;

  • How tax is paid;

  • The place of work, and

  • Can the contractor subcontract the work.

Bar to deeming contractors to be employees

‘What is clear is that the deeming of classes of contractors to be employees (as is often done in State legislation, e.g. owner/drivers) is not considered appropriate by the Federal Government,’ Lawrence said. ‘The intention presumably is to outlaw this.’

Areas of concern

Lawrence said even the Government Committee considering the issue of independent contractors conceded that the advantages for this kind of arrangement appear to be more apparent for those that are highly skilled.

‘LHMU members, (low skilled service industry employees) are more likely to have less control over work and procedures, are unable to contract and are reliant on one client and therefore have poorer economic and social outcomes,’ he said.

Lawrence said areas of concern for the LHMU included in the proposed legislation is that it will:

  • Effectively remove anyone viewed as an independent contractor from regulation by awards and agreements;

  • Remove the right for unions to collectively bargain on behalf of ‘independent contractors’, although they may continue to represent groups of independent contractors negotiating a common contract (in accordance with changes to the Trade Practices Act).

‘Members of the LHMU may find themselves forced into an independent contractor situation with little recourse to labour law and without the protection of minimum pay and conditions set out in awards,’ Lawrence said.

‘There are not two paradigms - employee or contractor - instead there is a continuum from traditional employees to ‘'sham contractors'’ to real contractors.

'For example owner/drivers are not treated as employees but as contractors – however their autonomy is very limited; they can’t set their own price, that is negotiated for them by the TWU.

‘This Act will take away their bargaining power.’

Case study

Lawrence gave as a case study a cleaner who was told he would get no more work unless he became a ‘contractor’.

However he continued to work in the same fashion, with time sheets, and no relationship with clients. He did not negotiate with the client, rather his employer told him what rate he would be paid under the contract.

The cleaner was later sacked and the AIRC found it had no unfair dismissal jurisdiction because of his contractor status.

The LHMU took the case to the Federal Court which found he was in fact an employee and not a contractor and therefore entitled to pursue a case for unfair termination in the AIRC.

‘Our fear is that once the independent contractors legislation is introduced our cleaner would have little opportunity to access labour law and would be forced to pursue remedies in contract law,’ Lawrence said.

‘The intention of the Federal Government is to stop the courts looking at this kind of case – they state “these tests (common law) have gone too far and that, too frequently, the honest intentions of the parties are disregarded”.’

Artificial arrangements

He said low skilled workers will have little ability to resist being forced into artificial arrangements which may be encouraged by this legislation.

‘What little protection WorkChoices offers will be eroded by independent contractor arrangements being abused in contracting industries,’ Lawrence said.

Contrary view

Ken Phillips, of the Independent Contractors Association of Australia, told the seminar the Act will not alter the ‘prevention of disguised employment’ arrangements. He said it will be about preventing abuse of the system.

He gave his own case study to a group of employees at a chicken plucking plant on the NSW north coast who became contractors and whose income went up by 30%.

However one day they got their work done and decided to go surfing.

‘The owner was furious, but the manager pointed out that as contractors once they had done the work they could do what they liked,’ he said.

‘The manager understood what that meant but the owner did not.’

He said the situation had been challenged in the courts, but the ruling was that they were independent contractors.

Phillips said 28% of the private sector workforce in Australia were independent contractors.

‘It has ceased to be a radical concept – it is too big,’ he said.

Equality issues

Lawrence said Phillips talks about 'equality' of control and bargaining power but ‘it does not happen like that in the real world’.

He said the LHMU will launch a campaign against sham contracting arrangements on 20 April called ‘New Start’.

The union intends to use the Trade Practices Act ability to represent independent contractors in a common contract situation to represent their interests and bargain for fair contracts.

They will use common law legal avenues where available to seek remedies for unfair contracts and issues of consent.

The LHMU will also work with employers to ensure they do not abuse the use of independent contractors.

Lawrence said the union will also encourage state governments to grant government contracts to those employers not using independent contractor arrangements.


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