New ACT law to protect 'exploited' contractors

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New ACT law to protect 'exploited' contractors

The ACT Government is planning to establish a new division of the Consumer and Trader Tribunal to hear applications from dependent contractors for review of unfair contracts.

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The ACT Government is planning to establish a new division of the Consumer and Trader Tribunal to hear applications from dependent contractors for review of unfair contracts. 

The Minister for Industrial Relations Katy Gallagher this week tabled the Fair Work Contracts Bill in the Legislative Assembly, saying it would provide a low cost accessible alternative for contractors in the ACT. 

She gave examples of how contractors could be unfairly treated and the remedies the new legislation could offer (seebelow). 

Gallagher said the new division of the tribunal ‘will assist in preventing unscrupulous employers from undercutting federal award standards by engaging contract workers on lower wages and conditions than are required for direct employees’. 

‘In recent years we have had rapid growth in ''non-standard'' working arrangements,’ she said. ‘This has seen an increasing use of casual employees, labour hire employees and contract workers.  

‘However for many contractors the contractual relationship is not one of genuine independence and equal bargaining power.  

‘The Fair Work Contracts Bill will establish a legislative scheme to ensure that vulnerable contractors who do not have equal bargaining power are protected against exploitation.’ 

Gallagher said dependant working relationships of this nature create unequal bargaining power when contracts expire and have to be renegotiated.  

Due to their unequal bargaining position, contractors can often find themselves in a ‘take it or leave it’ situation, faced with the option of accepting an unfair contract, or finding a new job. 

She said the Fair Work Contracts Bill will ensure that small businesses, as well as the growing number of contract workers, have access to inexpensive, flexible and enforceable protection against unfair contract terms. 

Examplesof the protection the new tribunal division could offer

1. Albert is engaged as an independent contractor to work as a security guard for a security company.  He works for the company on this basis for ten years. 

Under the contract Albert does not receive annual leave, long service leave, or superannuation contributions and pays his own tax. Albert is paid an hourly rate which is below the award hourly rate. 

Albert asks on several occasions over the ten years to be made an employee of the company.  The company refuses to engage Albert as an employee.  

The Tribunal may order that the company back pay Albert the difference between his wages and the award rate and compensation for the lack of leave payments and superannuation contributions equivalent to what he would have been entitled to had he been an employee of the company. 

(This example is based on an actual case recently heard by the NSW Industrial Relations Commission under the NSW Unfair Contracts provisions.) 

2. Bridget is an owner/driver engaged by a major transport company for more than five years under a contract for services.  

Six months before this contact expires, the company offers Bridget a new contract including a 30% reduction in pay rates and a requirement that Bridget purchases a new truck within 12 months.  

The new contract does not guarantee any work with the company after four years. 

When negotiations break down, the company threatens to immediately terminate Bridget’s existing contract. Faced with unemployment and no alternative source of income, Bridget agrees to the new contract with the reduction in pay rates and an increase in equipment costs. 

Bridget is forced to cut costs on her vehicle maintenance creating environmental and safety risks. 

The Tribunal may decide to vary the later contract so that it includes pay rates equivalent to those under Bridget’s former contract (or the same as the relevant award rate).   

The Tribunal may insert a clause into the contract to require the company to fairly compensate Bridget for the costs of investing in new equipment if the contract is terminated early.  

(This example is based on the Boral dispute in 2002) 

3. Chris is the sole director and employee of C Pty Ltd, an independent contractor engaged by a major telecommunications company T Ltd to install hardware at the homes  and businesses of the clients of T Ltd.  

Under the contract C Pty Ltd is responsible for the maintenance of T Ltd’s equipment, including a vehicle, and the costs of travel between installations.  C Pty Ltd is responsible for its own insurance coverage. 

T Ltd is involved in a very competitive market and decides to cut the cost to its clients in an attempt to gain market share.  As a result T Ltd offers C Pty Ltd a significantly lower rate for each installation on a take it or leave it basis.  

As the only employee of C Pty Ltd in order to cover costs Chris is required to work an additional day a week.  Under the new arrangement being proposed by T Ltd the payments Chris would receive would be less than what he could receive if he was being payed the federal minimum award wage. 

The Tribunal may order that the contracts be varied to ensure that C Pty Ltd receives payments for each installation that would over a fortnight average out to a level equivalent to the federal minimum award wage for the amount of work involved in the installations. 

(This example is based on the Foxtel dispute in 2003) 

4. Deli Ltd is the franchisee for a small food business with a turnover of less than $200,000 per annum.  

Deli Ltd purchased, and is responsible for, equipment and vehicles and has two employees.

In response to increased national competition the head franchisor decides to enforce a clause in its franchise agreements which allows it to impose a cut in the price of particular goods, in this case egg and bacon rolls, for a period of time. 

Due to its position opposite a construction company headquarters Deli Ltd relies heavily on the sale of egg and bacon rolls. As a consequence over the period of the price cut Deli Ltd cannot meet its operating costs. 

The Tribunal may order that the franchise agreement be varied to remove the clause in the agreement that allows for unilateral reductions in the price at which the franchisee can sell goods. 

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