'Crippling' labour hire laws passed

Analysis

'Crippling' labour hire laws passed

New labour-hire legislation has been passed in Australia, which has the potential to be “crippling” for both labour hire and non-labour hire businesses all over the country.

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New labour-hire legislation has been passed in Australia, which has the potential to be “crippling” for both labour hire and non-labour hire businesses all over the country.

South Australia was, as of last week, the second state/territory to pass legislation regulating the activities of the labour hire industry. The first was Queensland; its new law enters into force on 16 April 2018. Meanwhile, Victoria has had an inquiry into the labour hire industry and has announced it intends to legislate. 

“If you get coverage in SA, Vic, Qld then you’ve pretty much got the country,” commented lawyer Alan Girle, a specialist workplace and employment lawyer with Australian Business Lawyers & Advisors (see disclosure).

Meanwhile, the Australian Capital Territory is carrying out an inquiry into the labour hire industry. Workplaceinfo was this morning told by an industry observer that Western Australia is considering labour-hire licensing legislation.

As all of these states and territories are currently Australian Labor Party–controlled, and the inquiries/bills have all been introduced by the ALP, then it appears that the Australian Labor Party is seeking to regulate the labour hire industry introducing similarly-worded labour-hire legislation across the country wherever it is in power at the state and territory level. 

Criminal offence


Last week the South Australian Legislative Council passed the Labour Hire Licensing Act 2017. The core elements of the SA law are that:
  • labour hire businesses must now be licensed before providing labour hire services
  • unlicensed provision of labour hire services is now a criminal offence, and
  • being a customer of an unlicensed labour hire provider is now also a criminal offence.
Penalties of up to three years’ jail or a fine of up to $140,000 apply to individual people who either provide unlicensed labour hire services or who buy the services of a licensed labour hire provider. Companies are subject to a $400,000 fine. 
Queensland has similar provisions in its new legislation. 

Other obligations


The SA legislation has a wide variety of other important provisions. For instance, customers of unlicensed labour hire businesses are obliged not to enter into arrangements intended to avoid these laws and they must also report “avoidance arrangements” to the appropriate authorities.

Labour hire businesses are subject to licensing requirements, which means they must apply for a licence. Third parties can object to the granting of licences on a number of grounds. 

There is also a long list of laws, the breach of which can result in the loss of a licence.

Meanwhile, the appropriate authorities have sweeping powers to amend, vary, suspend, revoke or cancel licences. They also have extensive powers to enter premises to carry out searches of buildings and property, seize physical and electronic documents, and compel individuals to answer questions. The legislation doesn’t provide for a right of refusal and there are criminal penalties for non-compliance or obstruction of authorised officers. 
Additionally, there are also public registers of licensees with very broad and detailed disclosure requirements. 

Very wide scope of law


South Australia’s, and Queensland’s, new laws have “extra-territorial” effect i.e. they will apply in other states and territories. For instance, a Sydney-based business could be committing a criminal offence if it hosts labour hire-workers from an unlicensed provider in SA. Alternatively, if a Sydney-based labour hire provider engages people to work in, say Queensland, and it does not have a Qld licence, then it too could also be committing a criminal offence. 

However, the potential for liability is much wider than that. Even businesses that would not normally be thought of as being providers, or users, of labour hire workers could be caught by the new legislation.

In the SA legislation, provision of labour hire services takes place when a person agrees to pay a worker and then supplies that worker to do work to another person as part of the business or commercial undertaking of that other person. 

Mr Girle points out that, under the Queensland legislation (which has a similar but not identical definition to the SA legislation), non-labour hire businesses have inadvertently been captured by the legislation. 

Large enterprises will typically structure themselves into a number of smaller companies. As a matter of company law, these smaller companies are separate legal persons even though they are all part of the same larger enterprise. Owing to standard financial management practice, these companies charge each other fees for carrying out work. If those separate companies in the same enterprise supply each other with staff, and if payment is made, then there is a legal argument that they are labour hire businesses and must therefore be licensed, even if they are not otherwise involved in the labour hire industry. 

Practical effects


The legislation may have several detrimental effects on business. Brisbane-based Mr Girle has examined the Queensland version of that legislation. He argues that the “real risk” of the legislation is that the customer of a labour hire business may be unaware that the labour hire provider is unlicensed, has had its licence suspended or cancelled, or is under investigation.

“The risk for host employers is that they start work one day with their labour hire workforce, and then they get a phone call saying that they cannot then use their labour hire employees. That could be crippling,” he says.

An example could be a remote farm with a large labour hire workforce to help with the harvest. Another could be in the logistics industry where a large labour hire workforce has been deployed in an inner-city to help with warehousing operations at a peak time, such as in the run-up to Christmas.

If a host-employer was tempted to solve the problem of having a suddenly-unlawful workforce on its hands by taking on the labour hire worker as casual employees, then there could be substantial financial costs. 

Mr Girle points out that many labour hire contracts have clauses that require the payment of fees if the host employer engages the worker. “So host employers can be faced with large costs,” he points out. 
“Businesses will have to put contingency plans in place,” says Mr Girle. 

Further reading

Unions to 'remove or control' contingent workforce, industry warned
SA drafting bill for dodgy labour hire company crack down
Tough new rules for labour hire providers: Qld bill
Victoria moves to rein in labour hire cowboys

Disclosure: Australian Business Lawyers & Advisors and WorkplaceInfo.com.au are both owned by the NSW Business Chamber.
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