Louise Markus (Greenway, Liberal Party) Share this | Hansard source

I rise today to speak on the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. One bill is the principal bill. The other makes a number of necessary amendments to the Workplace Relations Act. The two bills have the same outcome—that is, to implement the government’s 2004 election commitment to establish legislation for independent contractors. The Productivity Commission estimates that there are between 800,000 and 1.9 million people operating as independent contractors in this nation. The numbers are growing. People want the freedom to choose their own path in life and, in a modern economy such as Australia’s, there should be a dynamic mix of working arrangements.

The Independent Contractors Bill 2006, the principal bill, is the first of its kind. It is the first piece of legislation that acknowledges the independent contractor niche by introducing a stand-alone bill, rather than introducing the reforms in the workplace relations legislation. It is a bill that not only acknowledges but also protects this unique sector of the workforce. It delivers on a 2004 election promise and is another reminder of the Howard government’s commitment to remove barriers to opportunity, to reduce red tape and to protect the freedom of choice. Independent contracting is not for everyone, but for the people who work in it—for example, the building and construction industry, the transport industry, which includes owner-drivers, the IT industry, the textile, clothing and footwear industry, the services industry, consultants, couriers and cab drivers—this bill delivers legitimacy, certainty and protection.

Tradespeople and related workers make up the bulk of independent contractors. Independent contractors are generally microbusinesses. The Productivity Commission reports that 27 per cent of all self-employed contractors are trades based. This is particularly true of the building and construction industry, where the bulk of independent contractors work as tradespeople in the housing sector. Professionals make up the second largest group at 18.3 per cent, with production and transport workers and labourers the third highest, at 10.6 per cent. The June 2004 national profile snapshot published by the Australian Bureau of Statistics shows that there are just over three million businesses in Australia. The majority of those businesses are non-employing—in other words, independent contractors running their own businesses.

In my electorate of Greenway as at June 2004 there were 3,866 small businesses in the construction industry and 1,322 small businesses in the transport and storage industry. For these people, the bills will, in simple terms, clarify the status of independent contracts as a legitimate form of work, protect the freedom of independent contractors to enter into contracts of their choice, preserve existing protections for certain groups—in particular, textile, clothing and footwear outworkers and owner-drivers—provide penalties for employers who seek to avoid their obligations by the practice of sham arrangements and establish a single unfair contracts jurisdiction. The legislation will further develop an industry based voluntary code of practice for the labour hire industry and fund a compliance and education campaign of $15 million for employers and contractors to inform them of the new arrangements, and it will include specific information on how to make sound contracts. Finally, it will exclude certain state and territory laws which seek to limit the ability of genuine independent contractors to enter into commercial agreements or which seek to draw independent contractors into the net of workplace regulation.

This bill will free up restrictions on entrepreneurship and will create more jobs. Independent contracting is a way of balancing work and family, of building wealth and of providing services in a person’s own area of expertise. Between 1998 and 2004, the number of self-employed persons grew by almost a quarter of a million people, by approximately 14 per cent. These are people who have taken the initiative to set up and establish themselves as businesspeople. They are not employees and should not be considered by industrial relations law to be employees. As the honourable member for Menzies, the Hon. Kevin Andrews, said in this place on 22 June 2006:

Independent contractors are entrepreneurs and, of course, the one-person micro-businesses of today are often the employing small businesses of tomorrow.

People who have chosen to become independent contractors are people who have chosen to work for themselves to gain the benefits and the flexibility that self-employment provides. That choice should be respected.

The term ‘independent contractor’ generally means a person who offers services on a contractual basis. Contracts are set for a duration and for a set fee for a client, and the contractor controls their own work. The contractor supplies their own entitlements such as insurance and superannuation and pays their own tax. In some instances this could be through a third party, such as a labour hire firm. Under this scenario, the contractor is generally seen as running a business in a commercial enterprise. The bills strongly support the notion that independent contracting should be in the realm of commercial law and that the courts should continue to apply long-established common-law tests to establish the status of the contractor.

The Independent Contractors Bill 2006 and related bill have a number of provisions that are worth noting. The bills acknowledge independent contracting as a legitimate form of contracting for services that fall outside the common understanding of ‘an employee’. The bills do not define the term ‘independent contractor’ beyond its meaning under common law. This provides clarification, certainty and consistency, and it assures people of the freedom of choice to make their own arrangements in respect of their working lives.

The bills do not disturb the definition of ‘independent contractor’ used by the Australian Taxation Office to identify independent contracts, nor does the principal bill’s definition of an independent contractor expand beyond its common-law meaning. It does, however, override state provisions which deem certain classes of independent contractors to be employees. It is ridiculous that under some states’ deeming laws a bus driver who is an independent contractor can be deemed to be an employee while a taxidriver cannot. A person who works from home is deemed to be an employee, but if they do the same job on business premises they are deemed to be a contractor. A supplier, an installer of window blinds, can be deemed to be an employee but a plumber cannot. They all provide services, yet the deeming laws marginalise these workers.

The deeming laws are a dead hand on entrepreneurship. They choke initiative and relegate people instead of rewarding them. The principal bill, the Independent Contractors Bill 2006, will remove these arbitrary distinctions and free up choice. There will be a three-year transition phase, during which time a fully funded awareness program will be conducted. The funding for this education campaign has been accounted for in the 2006-07 budget.

Of particular interest is the way the bills approach the issue of outworkers and owner-drivers in the transport industry. Australian law recognises two types of outworkers—employee outworkers and outworkers who are independent contractors. Outworkers are considered to be a particularly vulnerable category of worker because of the generally held view that these workers tend to lack bargaining power in relation to their rights and entitlements. According to the Productivity Commission, outworkers are typically women from East Asian background with low English skills and limited formal education. This bill will not override state protections for contract outworkers. When looking at the challenges of this particularly vulnerable sector, the government has sought to protect all workers in this category by extending existing federal provisions which guarantee minimum remuneration for contract outworkers in Victoria to all contracted textile, clothing and footwear outworkers throughout Australia. This provision will be part of the Australian Fair Pay and Conditions Standard and will cover workers who are not already covered by state or territory legislation.

A similar provision has been included for owner-drivers. There are a number of large transport companies in my electorate who use contractors, as well as a number of individual owner-drivers, and this bill offers both protection and opportunity. The bills will not override protections for owner-drivers in New South Wales and Victoria. This approach will ensure that the status quo remains in these states, pending a review of owner-driver arrangements to be undertaken in 2007. The review will examine the existing state regulation of owner-drivers, with a view to rationalising but not replicating the existing state regulatory arrangements.

All these protections would not be as effective if there were not measures at all levels. Stand-alone solutions help, but unless there is a whole-of-business approach the effect will be muted. This is why the government has also looked at the client end of the equation and has established provisions for unfair contracts and penalties for sham arrangements.

Currently, unfair contract laws suffer from duplication. There are systems in place in New South Wales and Queensland where these matters are dealt with by industrial commissions and the federal jurisdiction, which resides within the courts. Under the new provision, the government will establish a single, national unfair contracts jurisdiction as far as constitutionally possible. (Quorum formed) Such a provision will give a small family business and eligible, incorporated independent contractors access for the first time to the unfair contracts scheme. This means that there will be less delay and expense in dealing with applications to the national unfair contracts scheme.

Importantly, the bills will allow a financial cap to be imposed on unfair contracts claims by regulation, if there is a demonstrated need. Unfortunately, in the commercial world of supply and demand, some clients do not behave with integrity. The incidence of sham contracts where clients seek to avoid their obligations regarding the entitlements to employees does happen, and we need to discourage that practice. The government has recognised the impact that victims of sham contracts suffer and has moved to include substantial penalties in the bills.

The provisions in the Independent Contractors Bill 2006 set a world standard in legitimising independent contractors in their own right. For the first time the status of this sector of the working community is being recognised, with the force of law to create opportunity for this sector and to protect it against unscrupulous operators.

These bills have bipartisan support as both the government and the unions recognise the reality of a modern economy. There is a place for government to stand up for the small businesses in this sector by removing barriers to business and protecting those who are most vulnerable. There is also a place where vested interests can agree on what is in the best interests of this working nation. I commend the bills to the House.

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