Stephen Smith (Perth, Australian Labor Party, Shadow Minister for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

Labor opposes the Independent Contractors Bill 2006 and the bill associated with it, the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. At the conclusion of my remarks, I will formally move a second reading amendment which reflects the substance of the reason for Labor’s position. This bill and the associated bill follow on from the government’s so-called Work Choices legislation, from its extreme industrial relations legislation. In that, we see an attack upon rights, an attack upon entitlements, an attack upon conditions and an overall attack upon living standards. In the so-called independent contractors legislation we see a further attack upon rights, conditions, entitlements and protections in the workplace and on living standards generally. In the government’s so-called Work Choices legislation, in its extreme industrial relations legislation, we see an approach which attacks and reduces wages, removes or reduces conditions, and removes or reduces entitlements. That legislation tilts the lever in favour of the employer as against the employee—a weighting of the lever massively in favour of the employer.

When it comes to the so-called independent contractors legislation, there are two basic prospects which the government’s legislation sets up. On the one hand, under the guise of so-called independent contractors, the legislation will allow genuine employees, vulnerable employees, to be pushed out of a genuine employer-employee relationship and to be established as so-called independent contractors—effectively sham independent contractors. The consequence of that will be that that employee’s conditions and entitlements will be reduced or removed, but further burdens will be placed on that employee as a sham independent contractor: the burden of workers compensation, the burden of taxation arrangements and the burden of superannuation arrangements, which would normally be carried by the employer. On the other hand, we have at the state level many very soundly based protections which are there to protect contractors who are effectively in a dependent contract position—contractors who provide services or a service in the main to one contract partner, not unfamiliar in the transport industry, particularly with owner-drivers. The legislation removes or reduces the protections afforded to dependent contractors to reduce or remove protections currently afforded to contractors or small businesses. It does that by overriding state provisions in state based legislation which have employee deeming provisions or which provide access at the state level to unfair contract provisions and unfair contract legislation. These protections are for the benefit not just of consumers but of contractors and small business.

The effective message from this legislation either to a vulnerable employee or to a dependent contractor is: you are on your own. The government has sought to create a mirage that somehow this legislation is good for small business and good for contractors. Nothing could be further from the truth. For small business and for dependent contractors, it is effectively saying: ‘You are on your own. In an unequal bargaining position with a superior contract partner, you will effectively now be on your own, with no access to state based protections, no access to unfair contract provisions, no access to employee deeming provisions.’

That is summarised in the second reading amendment which I will formally move at the conclusion of my remarks but will now detail to the House:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House notes that:

(a)

this bill follows on from the Government’s extreme industrial relations changes which are a massive attack on living standards and living conditions, by removing rights, entitlements and conditions of Australian employees;

(b)

this bill also removes rights, entitlements, conditions and protections afforded to Australians in the workplace, whether employees or independent contractors;

(c)

this bill does this by allowing employees to be treated as “independent contractors”, thereby removing employee protections and entitlements and placing superannuation, tax, and workers’ compensation burdens on them;

(d)

this bill does this by removing protections from independent contractors who are in a dependent contract position and as a consequence in an unequal bargaining position;

(e)

this bill effects this by:i.      continuing to use the common law definition of independent contractor as the basis of law without the guidance of statutory criteria.ii.     allowing employees to be treated as independent contractors in a sham way by ineffective anti-sham provisions.iii.    overriding State laws with employee deeming provisions.iv.    overriding State unfair contracts provisions which provide protection to employees, contractors and small business.v.     overriding any future State and Territory owner-driver transport laws and putting existing State owner-driver transport laws at risk.vi.    failing to provide any genuine protections for outworkers through ineffective outworker provisions, significantly weakening outworker entitlements.

i.

continuing to use the common law definition of independent contractor as the basis of law without the guidance of statutory criteria.

ii.

allowing employees to be treated as independent contractors in a sham way by ineffective anti-sham provisions.

iii.

overriding State laws with employee deeming provisions.

iv.

overriding State unfair contracts provisions which provide protection to employees, contractors and small business.

v.

overriding any future State and Territory owner-driver transport laws and putting existing State owner-driver transport laws at risk.

vi.

failing to provide any genuine protections for outworkers through ineffective outworker provisions, significantly weakening outworker entitlements.(f)    this bill introduces even more complexity and confusion into Australia’s workplace laws; and

(f)

this bill introduces even more complexity and confusion into Australia’s workplace laws; and

(g)

this bill treats the Senate Employment and Workplace Relations Committee reporting on these matters with contempt by dealing with the legislation prior to consideration of its report’.

The central principle which underpins this bill and the accompanying bill is that independent contracting relationships should be recognised and supported and that the appropriate mechanism for regulation is commercial law, not industrial law. Estimates vary as to the total number of independent contractors operating in Australian workplaces. The Productivity Commission estimates, from the ABS forms of employment survey data, that the total number of independent contractors was 787,600 in 2004—8.2 per cent of all employed persons—down from the 1998 figure of 843,900, which is 10.1 per cent of all employed persons. This is disputed by the Independent Contractors of Australia, which has also cited Productivity Commission and FOES data to claim that the percentage of independent contractors in total employment has grown from 16.4 per cent in 1978 to 19.9 per cent in 2004, almost two million employees. Accordingly, estimates range from approximately 800,000 to two million independent contractors in 2004, somewhere between eight per cent and 20 per cent of all Australian employed people.

The government’s legislation does not seek to define the term ‘independent contractors’ beyond its meaning under common law. At common law, employees are engaged under a contract of services, whereas contractors are engaged under a contract for services. In other words, an independent contractor is generally a person who is engaged on a labour only contract, usually determined as a one-off flat rate. Generally, the independent contractor remains responsible for a number of aspects of the relationship that would usually be the responsibility of an employer—for example, superannuation payments and remitting income tax to the Australian Taxation Office. This is problematic and it means that an independent contractor is seen to be a person who contracts for services to be provided, without having the legal status or protections of an employee, even if they are dependent upon that contract—for example, owner-drivers in the transport industry.

In addition to this definitional issue, the government’s legislation covers five key areas. These are: (1) state laws with employee deeming provisions; (2) state transport owner-driver laws; (3) state unfair contracts jurisdiction; (4) outworkers in the TCF industry; and, (5) the so-called sham arrangement provisions.

The Independent Contractors Bill 2006 has five separate parts. Part 1 contains the principal objects and the relevant definition as referred to. Part 2 seeks to override state and territory deeming provisions. Part 3 seeks to establish a national services contract review scheme to enable applications to be made to a court for the review of services contracts. Part 4 seeks to provide a default minimum rate of pay for contract outworkers in the TCF industry and part 5 seeks to create transitional arrangements under the legislation. As I have indicated, associated with this bill is the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. The purpose of that bill is to amend the Workplace Relations Act 1996 to deal with the sham employment arrangements.

On analysis of the bill, despite government assertions that the legislation is intended to protect independent contractors, the legislation does no such thing. The bill introduces a layer of additional complexity on an already complex industrial relations legal system provided to us by the government. The provisions are highly prescriptive, technical and introduce an effusing array of concepts. There are, for example, pre-reform commencement contracts, continuation contracts, related continuation contracts, remedy contracts, test contracts and a contractor test designed to clarify the continued application of state contractor law under the deeming provisions to relevant services contracts. In addition, some types of contracts entered into after the commencement of the bill will be subject to relevant state laws, while others will not, depending upon the satisfaction of technical requirements. That difficulty is referred to in the second reading amendment which notes that the bill introduces even more complexity and confusion into Australia’s workplace laws.

I referred earlier to the application of the common-law test and it is worth while dealing with that in more detail. The test for distinguishing between employees and independent contractors is the common-law test as it has been applied by Australian courts and tribunals for many years. It is acknowledged that that test is difficult and complex but the criteria applied by the courts includes: the degree of control the worker has over the work; the degree to which the worker is treated as part of the principal’s enterprise—for example, if the worker wears the principal’s uniform; whether the worker is using his or her tools and equipment; how the principal pays the worker; whether it is at the discretion of the worker to work, if the principal has the right to dictate hours of work and the worker can refuse tasks; the provision of leave, superannuation and other entitlements by the principal to the worker; the place of work; whether the worker has the right to delegate work to others; whether the worker provides similar services to the general public; and whether the worker is providing skilled labour or labour that requires special qualifications.

Genuine independent contractors have always been considered by our courts and tribunals to be in commercial arrangements and are therefore subject to the provisions of contract law. When called upon to test the validity of a claim to either employee or independent contractor status, the courts have applied the relevant common-law test. Affirming this status and the commercial status of independent contractors therefore adds nothing new to the current regulatory framework. The bills, by adopting the common-law test, bring with them all the same difficulties. In practical terms, Professor Andrew Stewart has identified the limitations of the common-law approach. He said:

The fact is that any competent employment lawyer can take almost any form of employment relationship and reconstruct it as something that the common law would treat as a relationship between principal and contractor ... thereby avoiding the effect of a wide range of regulation which is typically applicable only to employees, such as industrial awards, registered agreements, leave and superannuation legislation, and unfair dismissal laws.

That goes to the first primary point that under this legislation people who are genuine employees, particularly those in vulnerable positions such as outworkers, will be pushed out of the employer-employee relationship, lose whatever protections they have as employees under the employer-employee relationship and then have the additional burden of those things which genuine independent contractors would normally make provision for—namely, superannuation, taxation arrangements and workers compensation. That is the first, central focus of the government’s legislation. The government’s so-called anti-sham provisions to prevent people from being pushed into that position are in themselves a sham. So the government’s sham provisions are in themselves a sham and require vulnerable employees to effectively apply to a Federal Magistrates Court to seek a determination of that issue. Issues also remain of workers hired as independent contractors under tax law.

Concern has been expressed that, while a worker may be hired on a commercial contract basis, they may meet the definition of ‘employee’ for tax purposes. Alienation of personal services income, PSI, tax rules which came into effect on 1 July 2000 removed most tax advantages for personal services contractors—while independent contractors must cover expenses for salary continuance, superannuation and the like. This then denies legitimate business deductions for dependent contractors. Similarly, professionals working as legitimate independent contractors who undertake major projects over one year are also penalised under the PSI tax rule—for example, the 80:20 rule. That goes to the second aspect of this legislation: the government is seeking to trumpet this legislation as being of benefit to small business and as being of benefit to contractors. Nothing could be further from the truth. Not only does it introduce that tax complexity to which I have referred but, in the case of genuine independent contractors who essentially provide services to one other contracting partner who is in a dependent position, very many of the state based protections—whether it be unfair contract or employee deeming provisions—are removed, with no subsequent protections provided in the government’s legislation.

I will now move to an analysis of some of the areas of concern about the bill. I will start with state laws with employee deeming provisions. The bills override all existing deeming provisions contained in state industrial legislation which deem certain categories of independent contractors to be employees and provisions granting employee related entitlements to independent contractors. In New South Wales, for example, certain categories of workers are declared to be employees and brought within the scope of industrial relations even though they may be independent contractors at common law. These deeming provisions cover a wide range of occupations, including milk vendors, cleaners, carpenters, joiners, bricklayers, painters, bread vendors, outworkers in clothing trades, timber cutters and suppliers, plumbers, drainers, plasterers, blinds fitters, council swimming centre managers, ready-mix concrete truck drivers, Roads and Traffic Authority lorry drivers and others prescribed by regulations. These provisions seek to redress the unequal bargaining power of these categories of workers which compromises their ability to negotiate working conditions. These are workers in demand categories. In many cases their working arrangements are not different in substance from those of employees.

State deeming provisions have been introduced to offer protection to workers from effectively disguised employment relationships. The Commonwealth legislation overriding state legislation is subject to a three-year transitional period and the preservation of existing deeming provisions for outworkers and owner-drivers. As a consequence, they will not apply to contracted textile, clothing and footwear outworkers. The bill provides a three-year transitional period for the commencement of the legislation and only deeming provisions in state industrial relations laws will be overridden. Deeming provisions will continue to apply to existing contracts for three years after the commencement of the act and parties may leave this arrangement early if they wish under section 33 of the principal bill, which provides the parties with an ability to enter into a reform opt-in agreement. The direct result of overriding state deeming provisions will be to leave many vulnerable workers in an unfair bargaining situation and without access to basic entitlements.

The second area that I wish to go into some analysis of is state transport owner-driver laws. The bill provides for an exemption of existing New South Wales and Victorian owner-driver legislation. The New South Wales system includes basic regulatory protection for owner-drivers, including that owner-drivers are able to recover their costs. The New South Wales system includes enterprise specific arrangements for owner-drivers. The New South Wales system does not apply to genuine independent contract transport companies, instead applying only to single vehicle owner-drivers who are dependent contractors with one company. The New South Wales legislation allows for minimum standards to be created. The Victorian system uses small business models and uses TPA protections—asking what rate owner-drivers would have gotten if they had performed that work as an employee. All contracts must list minimum hours and rates, if any, and dispute resolution is provided by the Small Business Commissioner. The legislation allows for the collective negotiation of rates. Currently only New South Wales and Victoria have state based legislation covering the employment conditions of owner-drivers. Western Australia is proposing to introduce legislation into its parliament shortly and the ACT is also suggesting similar legislation for the Australian Capital Territory.

Exemptions of both the New South Wales and Victorian state legislation are to be reviewed in 2007. This review opens up the prospect that such exemptions will cease either before or after the next federal election if the government is re-elected. There has been some coalition disquiet about these provisions, and I note that in the Financial Review the member for O’Connor, Mr Tuckey, urged the minister and the Prime Minister to remove these protections entirely. As a consequence we saw the government committing itself to a review. Most of us in this place know what a review is likely to lead to. If the government is re-elected, the results of that review, on the urging of people like Mr Tuckey, would no doubt see the existing New South Wales and Victorian protection provisions removed, just as the legislation has the effect of preventing other states—for example, my own state of Western Australia—from introducing comparable legislation to protect so-called dependent contractors.

The third area is the exclusion of the state unfair contracts jurisdiction. Independent contractors can no longer access state unfair contract laws. The bill creates a federal unfair contracts jurisdiction. Arguably, in some ways the bill extends the rights of independent contractors by introducing a national unfair contract regime. However, the states’ tests are much broader, and much more easily able to be accessed. The new unfair contract provisions are significantly more limited, for example, than those in New South Wales. In New South Wales, the state Industrial Relations Commission can review a contract which has become unfair subsequent to the parties entering into it.

Under this bill there is no ability for employer organisations or unions to apply for unfair contract review on behalf of a party, which is the case under state law. The effect of this part will be greatest in states where existing regulation is most prevalent—New South Wales, Victoria and Queensland in particular. The parties to independent contract arrangements in these jurisdictions will see a sharp decline in the level of the regulation of their relationships. This provision treats all contractors on a purely commercial basis, regardless of whether they are an outworker, a deemed employee or an independent contractor. This will result in a loss of entitlements and protections and will encourage employers to hire workers as independent contractors rather than employees. In addition to removing the state unfair contracts legislation, unfair contract matters will now be tried in the Federal Magistrates Court, a more formalistic jurisdiction. This will add to the expense, the length and complexity of arguments and the exposure to costs.

Concern has also been expressed that overriding state unfair contract legislation would water down protection for consumers and small business. Current legislation in New South Wales and Queensland provides for state industrial relations tribunals to hear cases of unfair contracts and provide remedies. This is because of the broad way in which the employer relationship is construed under these jurisdictions’ legislations. The repeal of these provisions reduces opportunities of small business to claim that a contract is unfair. There is no effective federal unfair contracts legislation, and unconscionable contract principles under common law do not provide an effective remedy in most cases. These two areas are referred to in the second reading amendment and draw together the strands of overriding state laws to remove or reduce protections which are afforded not just to individual employees but also to small business and to contractors, particularly the access of small business and contractors to the unfair contracts provisions in New South Wales.

Let me move to outworkers in the textile, clothing and footwear industry. Part 4 of the bill provides for a default minimum rate of pay for contractor textile, clothing and footwear outworkers which would operate where an outworker is not guaranteed a minimum rate of pay under state and territory law. The wage is based on the minimum rate applicable to the TCF contracted worker under the minimum wage guarantee contained in the Australian Fair Pay and Conditions Standard. Contract outworkers along the chain of contract, as well as head contractors, may be liable for the payment of the default minimum rate. Records must be kept for TCF outworkers. Contracted outworkers will not have access to relevant state unfair contract jurisdictions. Currently outworkers are deemed to be employees under state industrial legislation in New South Wales, Queensland, South Australia and Tasmania. This means they are entitled to all benefits which attach to being an employee, even though they are employed under a contract for services. Clause 7(2)(a) of the bill will permit a state and territory law to continue to the extent that the law applies to a services contract in which an outworker is a party.

The bills introduce the notion of an outworker being a contract worker. This dual characterisation will lead to greater confusion among clothing suppliers and outworkers as well as providing an additional incentive to those suppliers to circumvent the current system. It will encourage forum shopping by enabling state outworker entitlements to be enforced under state law, whereas any proceedings for review of unfair contracts must be instituted under the federal jurisdiction. The dual operation of state and federal jurisdictions will result in state authorised inspectors having the added burden of determining the extent to which clothing suppliers have genuine defences under this bill. As well, there is no provision in the government’s legislation to aid in the enforcement of state outworker laws such as issuing compliance declarations by companies when engaging outworkers. Nor does the bill require contractors to inform outworkers of their entitlements under the relevant state law.

These bills will do little to protect outworkers without the proper application of state based outworker legislation. Given the generally accepted vulnerable and exploited position of outworkers in the contract process, there is a compelling argument that all relevant matters dealing with the engagement and regulation of outworkers should be removed from the jurisdiction established by the bills and remain a matter for state regulation. The legislation as drafted will have the effect of significantly weakening outworker entitlements.

The Senate Employment, Workplace Relations and Education Legislation Committee, effectively as we speak, is conducting a private hearing with the textile, clothing and footwear industry to consider these regulations. It would have been preferable if the government had allowed the committee to conclude its deliberations and make recommendations in respect of outworkers prior to the commencement of debate in this House. But I hope that the Senate committee will recommend amendments to the government’s legislation to ensure much more effective protection of outworkers. It is clearly the case that this is an area of great weakness in the legislative arrangements. One area of great weakness in regard to outworkers leads me to a major area of weakness in the legislation—the so-called sham arrangements provisions. The explanatory material accompanying the bill states that a sham arrangement is ‘an arrangement through which an employer seeks to cloak a work relationship to falsely appear as an independent contracting arrangement in order to avoid responsibility for legal entitlements due to employees’—the very point that Professor Stewart drew attention to. I referred to him earlier. Page 9 of the explanatory memorandum states:

Employees in disguised employment relationships should have appropriate remedies available to them as they are not in reality independent contractors.

The difficulty with the so-called sham provisions is that they are themselves a sham and will be completely ineffective in preventing precisely that from occurring. This is in very many respects the major deficiency of this bill. It is not done by error; it is done deliberately. This will enable employees who are genuinely in an employer-employee relationship and who are in a vulnerable position, with unequal bargaining power, to be pushed artificially into a so-called independent contractor’s provision that will see them at risk of having their employee conditions and entitlements reduced or removed and also place on them the normal burdens of a genuine independent contractor in terms of provision for workers compensation, taxation arrangements and the like. Those points are picked up in the second reading amendment—that is, ‘allowing employees to be treated as independent contractors in a sham way by ineffective anti-sham provisions’. The so-called sham provisions are of themselves a sham.

Let me draw the strands of Labor’s analysis of this legislation together. The government would like the community to believe that somehow a so-called independent contractors bill will be beneficial to small business and to independent contractors. Nothing could be further from the truth. For small business and independent contractors, this reduces or removes current protections, particularly those protections made available under state laws providing access to the unfair contract jurisdiction and access to deeming provisions. At the same time, the ineffective operation, no doubt deliberately designed, of the so-called sham provisions will see vulnerable employees pushed into an artificial independent contractor provision, seeing their rights and entitlements reduced and an additional burden placed on them. They are the great two messages of this piece of legislation: you are on your own. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House notes that:

(a)

bill follows on from the Government’s extreme industrial relations changes which are a massive attack on living standards and living conditions, by removing rights, entitlements and conditions of Australian employees;

(b)

this bill also removes rights, entitlements, conditions and protections afforded to Australians in the workplace, whether employees or independent contractors;

(c)

this bill does this by allowing employees to be treated as “independent contractors”, thereby removing employee protections and entitlements and placing superannuation, tax, and workers’ compensation burdens on them;

(d)

this bill does this by removing protections from independent contractors who are in a dependent contract position and as a consequence in an unequal bargaining position;

(e)

this bill effects this by:i.      continuing to use the common law definition of independent contractor as the basis of law without the guidance of statutory criteria.ii.     allowing employees to be treated as independent contractors in a sham way by ineffective anti-sham provisions.iii.    overriding State laws with employee deeming provisions.iv.    overriding State unfair contracts provisions which provide protection to employees, contractors and small business.v.     overriding any future State and Territory owner-driver transport laws and putting existing State owner-driver transport laws at risk.vi.    failing to provide any genuine protections for outworkers through ineffective outworker provisions, significantly weakening outworker entitlements.

i.

continuing to use the common law definition of independent contractor as the basis of law without the guidance of statutory criteria.

ii.

allowing employees to be treated as independent contractors in a sham way by ineffective anti-sham provisions.

iii.

overriding State laws with employee deeming provisions.

iv.

overriding State unfair contracts provisions which provide protection to employees, contractors and small business.

v.

overriding any future State and Territory owner-driver transport laws and putting existing State owner-driver transport laws at risk.

vi.

failing to provide any genuine protections for outworkers through ineffective outworker provisions, significantly weakening outworker entitlements.(f)    this bill introduces

Harry Jenkins (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Graham Edwards (Cowan, Australian Labor Party, Shadow Parliamentary Secretary (Defence and Veterans' Affairs)) Share this | Link to this | Hansard source

I take great pride in seconding this very worthwhile amendment and reserve my right to speak.

Alan Cadman (Mitchell, Liberal Party) Share this | Link to this | Hansard source

In Australia today, many of those hardworking independent small businesses that formerly have been terrorised by the union movement and stood over in an unfair way in the workplace will be free at last. It will be a great day for many small businesses in Australia when the Independent Contractors Bill 2006 successfully passes both the House of Representatives and the Senate.

If there is any one area that has bogged down Australian productivity and workplace relations, it is the definition of who is and who is not a contractor. We have had the previous spokesman outline that in New South Wales the whole of the building industry is deemed to be employees. Nothing can be more distressing than to meet a contractor who is locked out of a site because he does not carry a bus card or a union membership, when he has been required by the head contractor to go onto a site to carry out work, and to have some musclebound person paid by the union stand at the gate and deny him access to perform his duties and earn a real income.

On the other hand, if one looks at the housing industry across the nation, which is totally subcontract and contract, the efficiency, value for money and earnings from those contracts are the best in the world. No housing industry in the world can match the Australian housing industry, all carried out by contractors. That is what this legislation is about. We can have those wonderful contractors get to work without impairment, without obstruction and without the standover tactics that CFMEU has adopted at so many sites around the country.

But it is not only the building industry. There are many other industries where people just want the opportunity to be set free into their own business. Now they will have a proper choice. They will be able to decide whether they want to be an employee or whether they want to be a self-employed contractor. The decision that they have to make will be a clear one, and nobody will be able to coerce them one way or the other because there are protections in this legislation against sham contracts and unfair contract identification.

First of all, it needs to be understood that, because this is Commonwealth law, this provision will only apply to a circumstance where one party to the commercial contract is a corporation under corporate law, the Commonwealth of Australia or a territory, or a resident or registered as a business in a territory. So the limitation is there. This law cannot apply to a sole trader or to an individual who is not incorporated. It is a wide ambit, but there are exclusions. If two independent people want to enter into a contract, they can be whatever they like but they cannot be covered by this legislation.

The other important factor within the legislation is the definition of who is actually an independent contractor. Unlike the Labor Party, which loves prescriptive law, I am pleased that the government has chosen to use the common law which, over a long period of time, has established precisely what is understood to be a self-employed person.

Once we get into the definitional process it becomes like a bill of rights: we all think we know what it means but every bit of it has to be tested in court. So the commonly accepted process which the courts apply to decide who is an independent contractor and not an employee amounts to whether they are working on their own account or through a partnership or a corporate structure. It relies upon the degree of control the worker has over the work—for example: is the worker subjected to direction on how the work is to be performed, not just what the job is? It depends on the degree to which a worker is integrated into and treated as part of a principal’s enterprise. A thing like a uniform is a simple indication that a person is presenting themselves to the public as part of an organisation. It also depends on whether the worker is making a capital contribution to the process that is going on, how the principal pays the worker, and whether the worker has freedom to choose their hours of work or whether they have an obligation to work at particular times. The freedom to make decisions as an independent individual is very much part of the common-law test of who is an employee and who is self-employed.

Factors such as the provision of leave, superannuation and other entitlements are also taken into account under common law. Another factor is the place of work. Does the person work from their own premises—even if it is from their home—or do they work from a factory, a workshop or a garage? This is about whether they can say that they work from their own premises or use that as a base.

What about delegation of work to others? Has a person got the capacity to delegate other people to perform work or to subcontract to them? There is a test of whether the income tax is deducted from the worker’s pay by the principal or whether the worker is responsible for their own income tax payments. Common law also indicates whether a worker provides similar services to the general public, so that anybody can come along and say, ‘I would like you to do a job for me.’ Another test is whether or not a worker has scope to bargain for their remuneration.

There is also the test of whether the worker is providing skilled labour or labour that requires special qualifications. I do not know whether there are many members in the House who are skilled bricklayers—I doubt it. That is a skill that is acquired through study, attendance at TAFE and experience on the job. It also requires the person to bring their own tools to the site.

There will be the removal of many of the provisions put in place by state governments that deem a person to be an employee, disregarding their capacity to make some of the decisions that I have outlined and disregarding things such as who they work for, when they work and what skills and knowledge they bring to the site. All of those things are significant in determining who is self-employed. That is why I am so pleased that this legislation will set so many Australians who have felt oppressed by past industrial law free of all of those inhibitions. They will be able to make decisions from their very first step into the world of being self-employed on their way to becoming a full and competent business.

Another test applied to whether or not a person is an employer or an employee is the issue of deterrence from future harm. Is the principal in a position to reduce accidents and provide for things to be done in a better manner?

The background to this legislation is that the government made an election commitment to introduce separate workplace legislation. I do not know of many countries in the world that have legislation like this, and I applaud the government for introducing it. There are approximately one million contractors—maybe more—in Australia. Australians are voting with their feet whether they want to be employees or self-employed. To be employed or self-employed is the test.

Most of the young people that I meet in the electorate of Mitchell in north-western Sydney have a high degree of motivation and ultimately want to be involved in something where they make their own decisions and are not reliant on an employer. They say that they want self-managed employment, which means they want to choose between opportunities. This probably involves study of some sort—whether it is for a trade or means going to university. They want to be able to work part-time on a regular basis. It is a mixture of self-directed, self-managed opportunities that they aspire to. This is the true aspirational voter as distinct from people whom a previous leader of the Labor Party attempted to describe. The fact of the matter is that people aspire to be able to do special and different things, and this legislation will provide the groundwork and the opportunity for that. (Quorum formed)

This legislation, for the first time, recognises and protects the unique position of independent contractors in Australia, something that has long been desired but something that has long been fought against by the Labor Party and the union movement. Combined, they have sought to make people who are self-employed into employees. They want to bring them under control. They want to manipulate them and bring them to a status where they can control and manage their lives through the union movement.

The legislation will enshrine the freedom of independent contractors to enter into arrangements they choose, primarily based on commercial considerations and on the definition in the common law as to who is self-employed, free from the prescriptive arrangements that are at the heart of so much of what the Labor Party loves and what the union movement lives on.

The bill delivers on the government’s commitment to ensure that independent contracting is encouraged, expanded, built up and given opportunities so that people in those industries will have freedoms they do not have at the moment. It will provide efficiencies and joy in the workplace which are not there when people are forced to do things and to behave in a manner which is against their best interests and against getting a job finished.

A principle this government believes in is that genuine independent contracting relationships should be governed by commercial, not industrial, law. So the break-out is from industrial law to commercial law. People will be able to say that they are either employees or contractors. A contractor is self-employed, separate from what an employee is.

This bill excludes some aspects of territory and state laws but will provide a fairer and more accessible national contracting review mechanism through the courts if there are proposals to change unfair contracts or to review contracts. The freedom to operate as a genuine contractor should be protected from inappropriate limits. People should have the freedom to enter into contracts. The efficiency of a modern economy relies on our maximising the skills, imagination and creativity of the Australian people, and most often that is best done when a person is reliant upon their own decisions, not the decisions of others.

The existing regulation for genuine independent contracting across many of the states is a regulation of entrepreneurship: it limits people. This legislation does not have any sort of statutory requirement for definition, and I applaud that. It is the totality of circumstances surrounding the workplace and what a person actually does that is taken into consideration. This legislation will override most of the states’ legislation for people termed as ‘deemed employees’. A previous speaker from the Australian Labor Party read out an amazingly long list of those industries and workers who are deemed to be employees whether they work for themselves or not. What a limitation that is, not only on entrepreneurship but on productivity, job satisfaction and the opportunity to go ahead. So these changes are really significant.

Do the changes come into place tomorrow? No, they do not. There is a three-year period for the transition to take place. So state deeming laws will not be knocked over tomorrow—the sky won’t fall in. Things will not happen overnight, but within three years those state deeming laws will be wiped out, and if people are a corporation, or one of the partners in a contract is a corporation, or they are within a Commonwealth or territory jurisdiction, they will have to change. The transitional period will allow deemed employees and employers to be fully informed about the government’s intentions and to make the one-off change. The transitional period will not apply to people who, after the passage of this legislation, enter into arrangements. From now on, people coming into the workforce are no longer able to be deemed as employees.

There is protection for outworkers in this legislation and there is a carve-out for owner-drivers in New South Wales. I am sorry that a better result has not been established for the owner-drivers of New South Wales. I understand the difficulties that have been created over many years. I also realise that the Razorback stoppage, along with ‘green dog’ and the history of that industrial conflict, was really about owner-drivers wanting unions off their backs. It was also about large freight forwarders trying to control owner-drivers. Owner-drivers in that case rejected the activity of both the Transport Workers Union and the large freight forwarders operating in concert. They wanted to be broken free of those controls. A capacity to negotiate in their own right, which the Trade Practices Act now provides for, should be encouraged so that they can in fact have a concerted and reasonable voice which does not have to be controlled, manipulated or directed by the TWU in New South Wales or anywhere else.

That is what Razorback was about. Those are the attitudes we have to resolve and that is why the minister is having a review of the process—a review which I, for one, want to be genuine, to resolve this problem and to give freedom to owner-drivers right across the country, in no matter what state, to make their own decisions, to contract together, to negotiate together for their own benefit and for the benefit of their families. (Time expired)

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

After listening to the presentation by the member for Mitchell, I cannot help but think of setting the workers free. It conjures up the idea in my mind of releasing the dove of peace into the wild blue yonder, but not before giving it a good old-fashioned throttling. From the outset, let me say that I am absolutely opposed to the Independent Contractors Bill 2006 and cognate bill, just as I was opposed to the Work Choices legislation brought down by this government. This legislation will give independent contractors no direct benefit. They will not be better off. It will not better equip them to negotiate with unscrupulous employers or operators. It will not even up the difference in bargaining power that exists between businesses and potential contractors as they ply their trade. Just like the Work Choices legislation, the passage of this legislation will end with reduced wages, conditions and entitlements for hardworking Australians. This legislation is the culmination of big business plotting with the government to ensure that employers hold every card in the deck when it comes to future negotiations or determining employment conditions of Australian workers.

In his second reading speech, the Minister for Employment and Workplace Relations spent a considerable time using words such as ‘choice’, ‘freedom’ and ‘flexibility’. As Australian workers have come to understand, when this government uses those words to describe industrial relations, no good can come of it. No good can come of these changes. We have all heard of the quiet revolution in Australian labour markets at the moment, which has resulted in a considerable number of individuals becoming contractors and in a shift in responsibility from employers to the contractors themselves. Generally, independent contractors remain responsible for their own superannuation payments and the remittance of income tax payments to the tax office.

The minister described contractors as people who have chosen to work for themselves. Some people do do that but plenty do not. Many are in my electorate, whether they be painters or carpenters—my son included—and they do not get a choice. Either you front up for a job with an ABN and are prepared to act as a contractor or you do not get the job. That is beyond argument. That is a fact of life applying currently in various industries. For many of the people whom the minister describes as having chosen to work as individual contractors, there is no choice.

The quiet labour force revolution has meant that the independent contractor is seen to be a person who contracts for services to be provided without having the legal status or protections of an employee, even if they are dependent upon that contract for work. Sure, there are plenty of people who have genuinely decided that they will be better off working in a contracting role, who have established businesses accordingly, preferring to retain the capacity to decide when and where they work. I do not begrudge people that choice, although I suspect, if you consider the profile of individuals who have pursued this path, you will find that they are relatively highly skilled, quite able to work for themselves, to ply their trade and to negotiate on a reasonable basis as they sell their services to prospective organisations. As the Uniting Church pointed out to the Senate Employment, Workplace Relations and Education Legislation Committee:

We are, however, also aware that there are many workers who are being coerced into moving from being employees to being contractors, although this results in financial disadvantage and lost security of employment. They perform similar work to the work they performed as employees and/or to the work done by employees working alongside them.

The church went on to say:

Whether or not contracts contribute positively to anyone’s wellbeing depends on their content and the circumstances to which they refer. An exploitative contract which results in less than a living wage creates poverty and is not in the public interest.

Once again, the churches and community groups have spoken out against the dead hand of this government’s extreme industrial relations changes. While the minister talks about freedom and choice, individuals and community organisations know only too well that under this government freedom and choice are in fact being removed. The Australian population realise that, when the government talks about industrial relations changes, it is not acting in their interests and that their wages and conditions are at risk. While many contractors might have thought that somehow they would be immune from the excesses and unfair provisions of the Work Choices legislation, the provisions of this bill mean they will not be. They will know that, even if there are changes proposed to contracts, there will be no real negotiations other than around the margins.

It is interesting that the government has chosen to exclude small groups from the provisions of the bill before us. It is particularly interesting, given the anti-union, ideologically driven short-sightedness that led to the development of this bill, that owner-drivers in New South Wales and Victoria were excluded from the provisions because of the strong representations of the Transport Workers Union on behalf of its membership. The bill seeks to maintain the existing legislation in New South Wales and Victoria with respect to road transport owner-drivers, which will be subject to review in 2007. It allows the laws that have been in place in New South Wales for some 30 years—laws I note the minister recognised in his second reading speech as having bipartisan support—whereby owner-drivers can bargain collectively, with minimum rates of pay and goodwill compensation set by a tribunal.

The minister notes in his second reading speech that the reason for continuing to exclude owner-drivers in New South Wales and Victoria was that special circumstances face these owner-drivers. He noted that owner-drivers:

... operate within very tight business margins because of the large loans they have to take out to pay for their vehicles.

The minister knew he had once again gone a bridge too far with the original version of the legislation, because the Transport Workers Union rallied in support of owner-drivers in New South Wales and Victoria and provided the minister with some considerable feedback on how strong their feeling was about the original legislation.

The union got behind its owner-drivers and convinced the minister of the folly of his ways. It is interesting that action by a union has convinced the minister to change his mind in this circumstance, given that the primary purpose of this bill is, quite frankly, to remove unions from the equation. Let me remind you, Mr Deputy Speaker, of the Dawson bill, which is currently stalled in the Senate. Its very purpose is to allow for collective bargaining of small businesses provided that they do not allow a union to be the coordinator of their bargaining. That bill has stalled in the Senate, courtesy of Senator Joyce, but the bill was a government initiative to try to strip any involvement of unions, principally the Transport Workers Union, in representing the interests of their members—in this case, owner-drivers.

The fact that the minister has backed down in respect of owner-drivers in New South Wales and Victoria indicates the importance of strong representation from unions such as the TWU, which has proved that it is prepared to get out there and look after its members. Let us face it: its members are running their businesses and applying their trades as owner-drivers in an essential industry in New South Wales and Victoria.

There is no doubt that many people within the broad class of independent contractors were deeply concerned at the prospect of what the extension of the government’s extreme industrial relations changes might mean for them. Many independent contractors know that they are independent in name only and that, in practice, they are virtually indistinguishable from employees. The prospect of the introduction of this legislation sent a chill through my electorate and certainly through the owner-drivers, who have invested considerable sums of money in purchasing their vehicles, who have spent considerable time in running up their goodwill and who certainly do a lot to earn a living and to provide for their families.

Christopher Buttel, a fellow in my electorate, indicated to me that he was concerned about the changing dynamic in the workplace that would follow the introduction of this legislation. He was particularly concerned that there would be an opportunity for companies to use their power to influence the allocation of work unfairly, with the end result being that your personality, not your work performance, would decide whether you were going to eat next week. Similarly, Robert Serafini told me that he has been driving for 16 years and has invested $70,000 in setting himself up. He was concerned that he was going to lose access to his union and that, without them, he would be under considerable pressure when negotiating future contracts. These are just two people who have told me their stories, and I am sure they are not unique. The minister may not hear the stories as he travels the boardrooms of Australia spruiking his new industrial relations laws, but people with stories like those of Christopher and Robert are out there.

Maybe listening to the real-life experiences of working Australians will be the job of the new Minister Assisting the Minister for Workplace Relations—Joe Hockey might be persuaded to lend an ear to some real-life stories. Maybe it will be the job of the government’s new industrial relations task force. But who would know, because nothing has been said about what either the task force or the new minister will be doing. Either way, it will stand in stark contrast to Labor’s industrial relations task force, of which I have been a member, which has visited 22 electorates across the Commonwealth and spoken to more than 200 witnesses. We are out there listening to the real voices within our communities. The retention of the protections for owner-drivers in New South Wales and Victoria allows the basic minimum regulatory protections to remain in the industry in a way that does not hinder competition and does not reduce flexibility or destroy productivity.

When the minister was driving this legislation through cabinet—until he was tripped up by his backbench—he seemed to forget that there is an additional dimension when it comes to the transport industry: we need to be mindful that measures that erode the protection of workers also erode the safety of the entire community. No-one wants a situation in which owner-drivers are forced to take huge risks to meet deadlines. The introduction of unreasonable transport timetables puts at risk their lives and the lives of other road users. That said, the sting in the tail of these exemptions for New South Wales and Victoria, which was provoked by a backbench revolt, is that the legislation will be reviewed in 2007. So, sometime before or after the next federal election, this government is going to revisit these issues.

Possibly the biggest problem in this bill is the provision that relates to sham contracts. Quite frankly, the government’s sham contracting arrangements are a sham. The explanatory memorandum outlines a sham contract arrangement as ‘an arrangement through which an employer seeks to disguise an employment relationship as an independent contract in order to avoid responsibility for the legal entitlements of an employee’. This type of arrangement is a disgrace. It is an abuse of the system and, as all members in this place know, it is, sadly, far too common.

The government has acted to perpetuate the likelihood that sham contracts will be entered into with increasing regularity. If this is what we have to rely on to stop a sham, it has completely failed. While the minister believes that the arrangements he has put in place in this bill will send a clear message to employers that dressing up employment relationships as contracts will not be tolerated, he has failed spectacularly to introduce such a regime. The provisions introduce a reverse onus of proof, requiring a contractee to demonstrate that they could not reasonably have known that the contract was an employment contract rather than a contract for services.

That is not all. The worst aspect is that an applicant is required to demonstrate that the contracting arrangement would be an employment relationship. Talk about putting the cart before the horse! For a successful application to be mounted, an affected worker not only has to convince the Federal Court that the contract is, or is intended to be, a contract of service—that is, an employment contract—but also must successfully rebut any claim that the contractee could not reasonably have been expected to know that it is a contract of employment. As a layperson, that sounds pretty complex to me. It is almost as complex as the Work Choices legislation itself.

The cynical among us might think that putting such a system in place was aimed not at deterring contractees from entering into sham contracts but at deterring affected workers from challenging unfair sham arrangements. These thoughts are all but confirmed when you realise that breaches will be dealt with by the Federal Court or the Federal Magistrates Court, and not by the industrial relations commissions. These are cost jurisdictions, so any affected worker who manages to get through the earlier complexities of the system also faces the prospect of having costs awarded against them should they be unsuccessful in challenging a sham arrangement. Members on the other side will not mention a word of that. This is the disincentive for people to pursue sham arrangements. Great protections, aren’t they? Protections? They are disincentives. They erode access to justice by people who are working as contractors under these arrangements.

The simple fact of the matter is that those who are most likely to be caught up in sham contracts are those who are the least able to stand up for themselves. Those workers who are being taken advantage of under sham contracting arrangements are the least likely to be able to put together a case and front up to the Federal Court or the Federal Magistrates Court. However, this government is tearing down protections for the workers who need them most. This government governs for itself and its mates, and certainly not for this country. (Time expired)

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

A simple analysis of the contribution by the member for Werriwa can be put in a very short sentence: ‘The 750,000 persons identified by the Productivity Commission—possibly extending to 1.9 million Australians—who have, irrespective of this legislation, chosen personally to be independent contractors are too dopey to make decisions on their own behalf and must have their hands firmly held by Greg Combet or, for instance, the head of the CFMEU in Western Australia, Mr Reynolds.’ And Mr Reynolds seems to have done fairly well from the job. He has just occupied an apartment in the most expensive apartment block in Western Australia. Maybe, to assist in the financing of that, he sold his share of a $3 million tavern in which he has been the major investor for some years. The tavern, I might add, is in the electorate of the member for Brand.

Who is being defended in this place? Is it the trade union movement, and the fees it attracts from, for instance, a certain group of owner-drivers? And would they ever explain to those owner-drivers the massive conflict of interest that exists when you have the same representative in a market situation defending the rights of your principal opponent?

There is no anger and distrust between a waged driver at, say, Fox, and an owner-driver, but they are competing for the same work. The member for Werriwa quotes a comment frequently made that you have to look after owner-drivers because they have such big loans to pay off. Now how did that happen? Did Lindsay Fox go out in the street and do as they used to do in the old days to collect people for the Navy? Did he put his very large arm around their necks, drag them through the gate and say, ‘You are going to buy a truck, sign up for a very expensive hire-purchase or lease agreement and then work for me for ridiculously low rates’? No.

I have been in the business. I have been an owner and I have been a subcontractor. I had a licence to drive a road train—until a conspiracy between the unions and our government and the state governments wiped my licence out, along with those of 30,000 others, because we were not driving regularly. Too bad if you drove three months a year seasonally—you were not considered a regular driver, and you would have to pay $2,000 to get your licence back. And we think we have a skills problem! And now they are talking about bringing in overseas drivers. It was the union movement that wanted to kill off all those licences.

But let me come back to the main issue. It has always been a problem for owner-drivers that, by their own choice, they line up and—because they have got no money—take on a lease contract on an asset, which is worth possibly a quarter of a million plus these days, and pay the highest possible interest rate. The prime contractor, on the other hand, has two choices. He does not pay that sort of interest rate. He has the option to buy brand-new equipment—well, he might use shareholders’ money to pay for it—and then he pays wages. There is nothing wrong with that. That is the judgement he makes back in the front office: a judgement between the cost to his business at his cost of capital and the cost of wages. He is competing with an owner-driver who generally pays very high interest rates and, as a consequence—and, for the member for Throsby’s information—usually continues to operate an old smoky truck, because he cannot afford a new one. That owner-driver has got to compete, with his choice of capital, with the prime contractor. That is the judgement. It is not avaricious; that is the judgement. And who is the representative who says, ‘I’ll look after you; trust me’? The trade union movement.

If this bill were about recognising the role of the owner-driver contractors association as a body representing its members in the Magistrates Court to argue some of these instances, I could see the sense in it. But when people come to this place and tell me they need the protection of the Industrial Relations Commission of New South Wales, when it has a conflict of interest with their entitlement to work, I find it absolutely ridiculous. I am deeply concerned, consequently, that this legislation chooses to exclude from its provisions the laws of New South Wales that create that conflict of interest. And there are a hell of a lot of drivers in New South Wales who would like to shed that restriction.

Those opposite talk about minimum rates. But once you arbitrate a rate, it also becomes the maximum rate. And independent contracting is all about initiative and hard work, in whatever category, and about delivering better returns, both to the person who takes that independent contracting choice and to the community. Because if you want to double the freight rates to a remote area in Australia—and there are plenty of them—what happens at that locality? The prices go up. If those rates have been decided in a commission that does not take that into account, then it is a bad deal.

The prime contractor is in competition. If a freight contract opens up for a major mining company or something like that, it will be Linfox versus TNT versus the other big players—Toll, in particular. And of course their business decisions are made accordingly. They have cheap capital. Owner-drivers do not. And the fundamental issue is: owner-drivers need to be able to make their own judgements as to the price they will charge. Say you are a really smart operator, and you have saved your money, or you have got an inheritance—maybe mum and dad died and you got their house, which is worth more than a truck these days—and you use cash to buy a truck and you are lucky enough to be able to put a couple of trailers behind that. In New South Wales and Victoria, the two perpetrators of this particular type of legislation, the governments have done everything to make trucking uneconomic for subcontractors by not giving them a decent configuration. But Western Australia has led in that respect, I know. We allow double-bottom semis to run around the Perth metropolitan area—surprise, surprise, they have not run over anyone yet—and that configuration adds significantly to the efficiency of the vehicle.

So someone in New South Wales—and we are going to perpetuate this—spends their own capital and thinks the rate of return they want to get will be a little bit better than bank interest. They buy a brand-new, non-polluting prime mover and they want a job, given the investment of their capital. They go to Lindsay Fox or they go to Mr Little of Toll and say, ‘I want to work at this rate.’ Under the laws of that state they have got to be shown the door. So another bloke, with smoke coming out of his truck’s exhaust pipe, gets the job, because the system provides for it. It provides for the minimum amount of investment and the lowest quality equipment—and the owner-driver is stuck with it. He cannot be competitive. He cannot go and buy the more efficient truck, the more environmentally friendly truck, and get a job, because the prime contractor would break the law if he gave him the job, notwithstanding that he has come in and said, ‘I will deliver to that remote Aboriginal community for less money than anybody else.’ But you are not allowed to do that under Victorian law. (Quorum formed) Wouldn’t it have been good for Kim if he could have called a quorum at the doorstop the other day? Next thing they will be trying it! ‘Don’t confuse me with the facts,’ those opposite say. Here they have the opportunity to hear me speak on behalf of the very people they say they are defending by opposing this legislation. But they are turning around and denying me the opportunity to explain why there is a conflict of interest in owner-drivers being represented by the trade union movement.

Let me say that I understand the circumstances in New South Wales. They have a long history. It is amazing that people can come to this parliament and tell us, quite correctly, how tough it is to be an owner-driver and then tell us they paid goodwill for the job in excess of the value of the truck they bought. Given that the rule when you buy a business is that goodwill is the luxury value of owning that business, it is silly that they do so—but I do recognise it. My concern with the provisions of this bill that exclude owner-drivers is that they will be across Australia. I think the minister is deluded in thinking he can limit national legislation to one or two states. But putting that aside, I cannot see how this proposal will benefit owner-drivers. As for my suggestion, it is still under consideration. I have had my discussions with the Prime Minister, and I want those people out there who are concerned about these exclusions to know that the government is now going to wait until it receives the report from the Senate committee. I think certain members thought that inquiry was going to be a great opportunity for the trade union movement to put its case. There have been a lot of industry people putting representations to that committee too. Quite properly, the government is going to consider those before this bill is debated in the Senate.

I have only requested an amendment that puts a two-year sunset clause into this legislation, so that something is done about it. That does not mean the removal of the rights of owner-drivers in New South Wales, where they are to their benefit. But, as I just said, if we are going to acknowledge some people as being a representative group of owner-drivers, why isn’t it the owner-drivers association? Why is it a group in the trade union movement that has got its eye on its own waged member who is in competition for the job down at Toll or Linfox? The system does not work. The reality is this: if we want to give some rights of representation to owner-drivers in this case, why not let them form an association?

I might add that the government recently put legislation into this House—which passed it and sent it up to the Senate—which allowed owner-drivers and other small business people to negotiate collectively under a set of conditions. The reason that stopped is that the Labor Party voted against it. Senator Barnaby Joyce gets a mention but the reality is that his vote counted for nothing. It is like border protection here the other day: two or three people sat over there. They could not change anything in this place without a 100 per cent vote against border protection by the Labor Party. The same thing applies.

If Labor had supported that legislation rather than making a tricky little political point, there would be a provision in as we speak where sections of the contracting community, independent people, could have negotiated collectively by the simple act of notifying the ACCC—and getting their approval, admittedly, but there was a process. That is hung out to dry. To hang it out to dry on the principle that Coles and Woolworths might amalgamate one day—what a joke. Before that happens, Wal-Mart will buy one of them!

It is a silly concept and a good opportunity to create some fairness in industry. I oppose these measures because I think they are wrong—but not in the context that there is not a situation in New South Wales that has to be addressed. You just cannot tell a lot of people overnight they no longer have goodwill when they have provided for it.

If I can come back to my example of the fellow who got an inheritance and paid cash for a truck, he does not need his superannuation to be protected. He will make provision for that out of the profits of his truck. But that sort of person is denied work under the New South Wales legislation because he cannot be competitive. He cannot come in and say, ‘Look at my beautiful new half-a-million dollar rig, highly efficient and highly environmentally sensitive. It’s got a speed limiter on it so I can’t drive too fast,’ because the boss will say, ‘Can’t take you at your price; I’m obliged to pay more and I’ve got a coupla blokes with smoky old rigs that are on the list already. I daren’t put them off, because the union’ll go crook.’ That is the situation. That is what this piece of the legislation forgets, and it is time this parliament woke up to where the benefits to the environment and the benefits to efficiency arise: out of a competitive environment. But I can bet you the bloke who has inherited that money would not go and do that and put that money at risk. I guarantee you he is not as stupid as the member for Werriwa suggests—how you have to have people who have a $3 million apartment looking after their affairs under the guise of being trade union leaders. Excuse me!

This legislation has got to go further, and I hope that the Senate committee will have sensible recommendations for the government that look after people that are in an invidious position of their own making. It has got to be resolved, but not by this process of giving them a conflict of interest.

Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share this | Link to this | Hansard source

I will resist the temptation to engage in a discussion with the member for O’Connor. It would be good advice to suggest the member for O’Connor speak to some owner-drivers, particularly those on long haulage trips, and ask them why they have to resort to the use of amphetamines to meet the contracts at minimum wage levels, to understand that people in that industry do not bargain on a level playing field. The bargaining relationship for many owner-drivers is very unfair and inequitable. I think the comments that we heard from the member for O’Connor and earlier from the member for Mitchell should explain very clearly to the broader community that this bill needs to be seen in conjunction with the government’s Work Choices legislation as yet another attack on the rights and protections of working people, particularly of those people who are classified as dependent contractors.

The Independent Contractors Bill 2006 continues the government’s attacks on the union movement and its right to properly protect and represent the interests of workers. Again, we are not surprised to hear the union-bashing sentiment in the words used by both the member for Mitchell—about which I was quite disappointed, because he normally refrains from playing the person—and the member for O’Connor, who has good form on this account. I think the comments that they made about individual people in the union movement are quite unjust and disparaging and not befitting the level of debate that should occur about a bill that has significance for a lot of working people.

The minister claimed in his second reading speech that unions are opposed to independent contractors and have used industrial relations and political tactics to try to restrict their natural growth and force contractors into the traditional industrial relations system. Really, nothing could be further from the truth. Neither the union movement nor the opposition has any argument about genuine independent contracting arrangements freely entered into where people conduct their own businesses under a commercial contract. But the situation is far more complex than this in the real world and far more muddied—far more muddied than the minister’s simplistic statements in his second reading speech would have you believe and far more muddied than the very superficial comments made about this bill by the member for O’Connor this morning.

I want to go to the substance of the argument, try to convince people about the distinction between independent and dependent contracting and argue that dependent contractors are nothing more than employees who often have been forced into a dependent contracting arrangement because they do not have bargaining power to resist that approach from their employer. It is true that, over the last two decades, we have seen a big expansion in non-standard work arrangements. We know that in our country workers have been protected historically by industrial and workplace regulation when they enter into a contract of employment; quite distinct from the self-employed, who are involved in contracting their services out to a number of clients and who have been seen traditionally as in business for themselves and operating under commercial contracts.

So we have this quite clear distinction: you are either in an employment contract—and you are a worker or an employee—or in a contract for services, where you are seen to be independent and in business for yourself. While one does not argue about the use of non-standard work arrangements in circumstances where the traditional employment relationship is not able to meet the needs of a changing workforce, it is, in my view, folly in the extreme to not recognise and understand that these non-standard arrangements are increasingly used by employers to undermine the traditional employment relationship and the protections that have been attached to it. In this way, by making people dependent contractors, employers can evade their responsibilities by contriving situations of ‘disguised employment’. I will address these sham arrangements in more detail a little later.

In the growth of the labour hire industry we have seen employers shift much of their responsibilities to the third party, the labour hire operators. The lack of regulation allows this industry to be used as a means of reducing workers’ wages and conditions—not by all labour hire firms, because some are very reputable. In the absence of effective regulation, you have shonks out there in the labour hire industry who have used that industry as a means of competing on wages and conditions. The industry has grown beyond its original purpose of supplementing labour on a short-term basis that operated through our traditional temp agencies to a means of now replacing entire workforces by unscrupulous operators in an unregulated industry. That is one form of non-standard work arrangement.

The other that is dealt with in this bill is what we call the contracting arrangement. Historically and traditionally, contractors are seen as people who conduct their own business or enterprise and who are engaged to perform work under a commercial contract. The ABS use the term ‘own account’ worker. They note, as the minister does, that there has been quite a growth in people described as ‘own account’ workers, reaching a figure in the vicinity of 936,000 such people in November 2004.

According to estimates from the Productivity Commission, around 10 per cent of people in employment today work as self-employed contractors, the largest group being tradespeople and professionals. That sounds fine and reasonable, and we have heard how we have to nurture the entrepreneurial spirit and support people who want to go into their own businesses. There is no problem with that at all. Where it is growing and where it is a genuine independent contractor arrangement, that is fine. As we know, contractor arrangements do not have the rights and responsibilities that go with an employment relationship. But the real point of the debate is this: the distinction between contractors and employees is increasingly blurred, with the terms ‘independent contractor’ and ‘dependent contractor’ now used to distinguish between contractors who clearly run their own business in an independent manner and those who are contracted to supply their labour to a particular principal in a controlled or dependent manner. In that huge growth of contractors, it is now estimated that up to 41 per cent of contractors are in fact dependent contractors—that is, nothing more, nothing less than what we have known traditionally as employees who, in a proper and fair system of regulation, would be protected in an employment contract, not in a commercial contract. It is through contracting that employers have been able to evade their responsibility to their employees by contriving situations.

As I said earlier, there is nothing inherently wrong with an independent contracting arrangement if both parties freely enter into it with a proper understanding of the nature and effect of such a relationship. Genuine independent contractors conduct their own business or enterprise and are engaged to perform work under a commercial contract. Such an arrangement does not attract the rights and responsibilities of an employment relationship. But in sham arrangements—and this is what I want to focus on—the worker is often unaware that this contracting arrangement transfers responsibility from the employer to the individual worker for obligations such as taxation, superannuation, workers compensation, insurance and public liability insurance.

It is a pity that the member for O’Connor is not in the chamber, because I will cite one example and ask him to tell me whether these people are workers or independent contractors. Back at the time of the Olympics, a multinational catering company tried to avoid paying award wages—which they would be responsible for under an employment contract—to their catering employees, some of whom were as young as 15, by attempting to turn them into independent contractors. When the mums and dads woke up to what was going on, they contacted the unions to complain that their children were being required to take out an ABN and would be paid only on a commission basis. That was contrary to the award which applied to the employer at the time. That is a simple illustration of what I am talking about in terms of sham arrangements, where people who normally would be covered by an employment relationship—where the employer has obligations for tax, super and workers compensation—turn that arrangement around, transfer the responsibility from the employer to the individual worker and somehow deem them to be independent contractors. What a joke—if it was not so serious!

In the Financial Review some 10 years ago—this is how long these scams have been going on—under the headline ‘Huge financial penalties if contractors deemed employees’—that is, if you get caught out by abusing the laws—a tax consultant at Deloittes stated:

Due to the steadily increasing volume of employment legislation and regulation, more businesses are using independent contractors and outsourcing to do work previously done by full time employees.

No wonder. He argued there were plenty of tax advantages to employers, pointing out that:

... businesses using contractors were not required to pay payroll tax, superannuation contributions, workers compensation and were usually saved the administrative burden of PAYE tax.

In a note of caution he said:

... it was impossible to be absolutely certain that all contractors legally remained contractors, rather than employees, but business could greatly increase their ability to survive an ATO audit by adopting a number of basic precautions.

And he went on to elaborate. So there we were, 10 years ago, with tax consultants advising business to be very careful about how they constructed these sham arrangements, which transfer all these obligations to the poor individual worker. They were saying, ‘Be careful, boys, because if you get caught out you might face a penalty from the tax office.’ As acknowledged by the tax expert, the distinction between contractors and employees was becoming increasingly blurred. It is now estimated, as I said earlier, that up to 41 per cent of contractors are in fact dependent contractors—that is, people who do not run their own business in an independent manner but who are contracted to supply their labour to a particular principal in a controlled and dependent manner, just like the young catering employees, aged 15, whom I referred to earlier with respect to an attempted sham arrangement. Some legal academics state:

... with a modicum of care and ingenuity it remains possible for business to obtain work from individuals who are virtually indistinguishable from employees, in terms of their close connection to the organisation and subordinating to its managers and supervisors, yet whom the common law does not characterise as ‘employees’. This can in most instances be achieved simply through a well drafted contract that is designed to look as much like a client/contractor agreement as possible.

I think that says it all, and I think the inherent dangers posed in this bill apply to many classes of workers out there who today are genuine employees but who under these sham arrangements are somehow considered to be independent contractors.

The limitations in this bill arise from the philosophy behind the legislation: the belief by this government that contractors should be regulated solely through the Trade Practices Act and be subject to laws designed to apply to corporations and businesses. Why should those 15-year-old employees who worked during the Olympic Games not be subject to the protections of industrial law but be seen to be caught up in the ambit of laws that apply to businesses and corporations? What a joke. It denies the reality that many independent contractors are earning their income primarily through their own labour. They are not running their own business or making a profit but rather selling their labour to one person. Frequently that income comes just from the one source. In this position they are indistinguishable in practice from the traditional employee—other than that the traditional employee is still bound by a contract of employment that provides rights and protections. It is precisely for these reasons that, to their credit, a number of state jurisdictions have used deeming provisions to extend the traditional worker protections and entitlements to various classes of so-called contractors.

In my own state, the New South Wales act deems certain types of workers to be employees. It includes a range of specific occupations such as cleaners, carpenters, joiners, bricklayers, plumbers and, very importantly, clothing outworkers. As we know, clothing outworkers are one of the most vulnerable groups of workers. It is quite proper that they have been deemed to be employees under IR legislation in New South Wales, Queensland, South Australia and Tasmania. This means that they are entitled to all the benefits which are attached to being an employee, even if they are employed under a contract for service—and more often than not on very low rates of pay and in shocking conditions. The New South Wales government itself believes that if there were not these deeming provisions, there may in fact be a significant degree of inequality in the bargaining power between the worker and the provider of work. That is why some state tribunals also have jurisdiction in relation to the issue of unfair contracts.

The case of owner-drivers in New South Wales highlights the inequality in the bargaining relationship for many contractors and why such protections have been legislated. Unlike the member for O’Connor, who obviously is very happy to see wages driven to the bottom with no minimum protections at all, owner-drivers understand very clearly the inequality in their bargaining power. Owner-drivers are single-vehicle operations, the vast majority of whom perform work exclusively for a single operator, the principal contractor. They are highly dependent upon those with whom they contract. Owner-drivers are price takers in the market. This dependence leads to an inequality in bargaining power and the associated potential for exploitation.

Unlike earlier government speakers, I want to place on record my congratulations to the Transport Workers Union. They have highlighted very effectively in the community the enormous pressures that owner-drivers face, particularly long-haul drivers, in trying to meet the conditions of their contracts of employment—often at great risk to themselves and their families. There is the use of amphetamines in that industry and the consequent risks to safety and safe driving that that poses. Is there anything wrong with the fact that state governments have legislated to protect the interests of people and to ensure that there are some minimum standards that apply to ensure that the bar is not so low that their lives and the safety of others are put at risk? While maintaining existing legislation and protections in New South Wales and Victoria for owner-drivers in this legislation, the government intends to review the situation in 2007. I say to the TWU that I would be very cautious about the efficacy of those protections in view of the comments made by the member for O’Connor in the debate this morning. He made it clear that he and others are urging the government to accept only a two-year sunset clause on the protections applying to owner-drivers.

At the end of the day we need to realise that sham arrangements have led to huge numbers of people who should be classified and treated as workers, as employees, under an employment contract, but who have had rights and responsibilities transferred from the employer to the worker under sham arrangements to the benefit of the employer at the expense of the individual worker. The bill fails to properly recognise and understand these disguised sham employment arrangements. It denies the reality that many contractors are indistinguishable in practice from employees, though denied the protections that other workers receive through industrial law and regulations.

In conclusion, I oppose this bill and the philosophy behind it which seeks to regulate workers through the trade practices and commercial law. The bill does not properly deal with sham arrangements. The bill will make it easier for an employer to use contract arrangements to avoid their proper and legal employer obligations such as the payment of superannuation, workers compensation and the like, and it will deny large numbers of workers the ability to protect their interests as workers.

Louise Markus (Greenway, Liberal Party) Share this | Link to 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.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

Before I go through the detail of the Independent Contractors Bill 2006 and cognate bill and what they propose to do, I make the very obvious point that this legislation is about the government roping in those workers left in the community who as yet have not been directly impacted on by the Work Choices legislation. This is a way for government to rope in those last few workers who are out there either as independent contractors or as employees who would be independent contractors. It also ties in a number of small businesses.

The bill is part of the government’s suite of reforms to reduce wages and conditions and to strip away unfair dismissal laws and the protections for workers provided by state based legislation. It is to make life harder. I cannot see any other purpose for the legislation. I have certainly heard nothing from government speakers on the bill that would say to me that there is some good intent in it about protecting workers—whether they are independent contractors or small business people. I have heard nothing about it protecting their wages, their hours of work, their conditions, their entitlements or their superannuation. I have heard nothing about it protecting or enhancing their quality of life at work or the balance between work and family. We do not see any of that in this bill or in any other part of the government’s Work Choices legislation.

Speaking about choices, when government members come into the House they cannot help but use the word ‘choice’. It is now a meaningless word, thrown up by government members, and means: if you are forced to do something, you are given a choice. My definition of what that word means is according to what the government do. They give you a choice between accepting something or nothing. That is not choice. It is not real choice; it is not choice of any kind.

What this so-called independent contractors legislation will do is leave people out on their own. They are going to be independent, all right. They are going to be completely on their own, with no protection. There will be no protections under law—no real protections for their wages and conditions, their ability to work, how they work or their hours of work. They will be on their own. That is the message that independent contractors are going to receive from the government when this legislation passes this House.

In an excellent media release, our shadow minister for industrial relations, Stephen Smith, said that these laws amount to nothing more than the Howard government’s latest attempt to slash wages and strip away the conditions of working Australians. That is exactly what it does. On the other hand, Labor genuinely supports people who want to start their own business. There is absolute support for workers who want to start their own business and who have the skills and capacity to go out on their own. They should be supported by government. It should not be made more difficult for them with the introduction of legislation such as this.

If the government are trying to create something beneficial for small business and contractors, they are not going to achieve it through this legislation; it will do precisely the opposite. In fact, the legislation will provide more power to the big end of town, the big market players, who have enormous economies of scale and power over their employees. They will start to push people out of the traditional, normal relationship of employee-employer into so-called independent contracting jobs.

You do not have to be Einstein, an industrial genius or someone who fully comprehends all the complexities contained within these laws to understand that, in a normal employer-employee relationship, the employer is bound to carry the burden of superannuation and a whole range of entitlements such as sickness benefits and other things that workers expect as an entitlement, as a right. They are part of the employment contract. For the productivity that workers provide, they are given in return not only a salary but also some assurances and some protection. They can have a life of their own. They can borrow money for a home loan—of course, these days that is more and more difficult. That is the central theme of the employer-employee relationship.

These proposed laws will fundamentally change that forever. They will push people out into so-called independent contract jobs but, really, all that will happen is that on a Friday afternoon you will finish working for the big company and on Monday morning you will restart with the same company, wearing the same uniform and doing the same job with much the same conditions, except that now you will be deemed to be an independent contractor. That will mean that perhaps you will be paid a little bit more per hour—perhaps not; there is no guarantee of that either because the minimum set by this government is $12.75 per hour. But as an independent contractor you have to carry the burden of your own superannuation payments and you have to carry the burden of dealing with the Australian Taxation Office. You, the employee, the so-called independent contractor, will have to carry the burden of providing for yourself. You will have to insure yourself so that if you fall sick you are covered in those instances where you may not be able to meet your mortgage payments, which otherwise you might have been able to do had you fallen sick and taken a day off under your normal entitlements.

That is what this legislation does: it pushes people out. It makes their lives less secure and it slashes their wages and conditions. There is no question about that. Nowhere in this bill does it argue against that and nowhere in this bill does it put in place any frameworks, legal or otherwise, that will protect people. I think that is the disgraceful part about this bill.

As I said earlier on, it is just part of the government’s full suite of extreme industrial relations legislation. Just because this legislation is about so-called independent contractors, people should not view it as being any different from the workplace relations bills, acts and laws that the government has put in place. The intent is identical. The intent is about removing rights, entitlements and any balance of power from an employee, a person working for wages, and rebalancing that power in favour of the employer.

I have no beef with employers and good bosses. I have many in my electorate whom I either am friends with or know, and they are excellent employers and excellent companies. They do the right thing not only by the economy and the region in which they operate but also by their employees because they understand the importance of a solid employer-employee relationship. They understand productivity gains and growth; they understand what makes this country great. They understand why we do enjoy today a good, strong economy, although that is turning very fast and is questionable under the leadership of this government. They understand that it is because there are workers out there, working hard. There are people out there being productive, efficient and globally competitive.

Does this bill propose to enhance that in any way? No, it doesn’t. Does this bill actually propose in any way to put forward legislation that would improve productivity? Productivity is the key to growth and growth is the key to employment. That is how we manage to maintain our living standards in this country and the quality of life that we so enjoy. But these are fragile qualities that can turn and change, and we are seeing that now. We are seeing 10 years of dereliction of responsibility by this government. We are seeing now, 10 years after inheriting a great economy, a growing economy, 10 years of dereliction starting to turn things. We are starting to see underlying inflation on the rise. That will cause some massive problems.

We are starting to see interest rates rise. You often hear the government talk about interest rates—they used to talk about interest rates but they are a bit more ashamed to talk about interest rates these days; they are a bit more quiet—of six per cent. Supposedly, six per cent is low. It is low as a number, but it is very high when compared with the rest of the world. Interest rates always need to be looked at in global terms because it is the cost of money. How much does it cost to borrow money? What is money worth? In global terms six per cent in Australia is very expensive. You do not have to look any further than the families around the kitchen tables in Australia right now who are doing their sums on the supposedly low interest rates and realising that they cannot afford them anymore. They realise they are struggling. Another quarter of a percent, that tiny little bit, may be the straw that breaks the camel’s back in terms of people being able to afford their mortgage interest payments.

No more evidence was needed than the Reserve Bank of Australia this week confirming what we have known for some time: it is more expensive to pay interest payments today as a proportion of your income than it was to pay 17 per cent back in 1989. Some people say, ‘Wow! I can’t believe that. I didn’t know that.’ The evidence is there: it is more expensive today. That is the real cost to families.

This legislation does nothing to serve anybody. Interestingly, if you look at the Productivity Commission report done on employment surveys, and which has specific data about independent contractors, you see that over recent years there have been between 750,000 and about 900,000 independent contractors in the data for how many people are in those types of employment arrangements. That number is starting to climb very high. It is now closer to 1.9 million employees deemed to be independent contractors, and it could possibly be well over the two million mark in 2006. These are figures for 2004.

Is that a good thing for Australia, is that a good thing for independent contractors, and is that a good thing for workers? I suspect that for many it is, because they are people who are in genuinely independent contract type arrangements where they basically run a small business. They are their own small business. They are an independent, sole operator type of small business. But I think the larger extent of this growth in the numbers is a case of people being pushed out of their traditional contract of employment and onto one-off, flat rate fees, onto the labour only types of contracts.

Is that good? I think it will be detrimental for a lot of people. We have only to look at a number of categories—for instance, owner-drivers, in particular, and taxidrivers. There is a whole range of people who struggle with that halfway house in their employment status: what they are deemed to be under law, particularly tax law and what they can claim, and what they actually are under federal law. This legislation will only further confuse independent contractors and workers. It will further blur the lines between people who deserve a fair go in terms of having proper wages, conditions and protection and people who will be marginalised—people who already struggle, people who are not wealthy, people who are at the lower end of the wage scale who, under these proposed laws, will come under this category of independent contractor and who are in reality nothing at all like a true independent contractor. There are plenty of incidents that demonstrate this.

Definition is really important here and a common-law test will be applied. Who is defined as an ‘independent contractor’? Certainly a person who has a degree of control over their own work would in my book be an independent contractor. In many cases, that will not be the case under this legislation and it will not be the case for many people who are deemed to be an independent contractor. Also, workers who are wearing the uniform of the company will finish work on Friday as an employee and start on Monday as an independent contractor, wearing the same uniform, driving the same truck and doing exactly the same work. They will be left to fend for themselves, thrown out in the cold and may be told: ‘You have this warm fuzzy feeling inside and you can call yourself an independent contractor. You are a small business person, but you will earn less money and have the burden of extra work. You have to work more hours because you are under a contract to deliver a particular type of product, under a certain set of conditions and for a set amount of money. You have to work harder. You just work a lot harder for the same money, if not less.’ Independent contractors will have to provide their own vehicle, tools and equipment—all of the things that you would not expect an employee to supply—where previously the company would have provided the tools and machinery, whatever was needed to carry out the work. So there is a range of issues concerning definition. I think that is going to be a huge problem and cause a great deal of confusion, worst of all meaning that a lot of people are going to be exploited. People will be exploited under these laws because they will not understand where they fit in the legal framework.

What is even more confusing is that the state governments provide, under their industrial relations laws, specific deeming of categories of workers so that they are protected. You would think we would protect people from unscrupulous employers, but we need to protect them from unscrupulous federal governments such as this government. There will be some problems where federal legislation overrides state based industrial laws. That is a great shame because state based laws provide protection for workers and an understanding of the difference between a real independent contractor and an employee and the benefits that that carries. I mentioned earlier but I will mention again the relationship with the Australian Taxation Office, because of rules for personal services income: what type of person are they under law and how can they deal with their tax affairs? If you are a small business person you really do come under a different category with a range of claimable deductions and ways you can organise your business. You could split income between partners in the business or with your spouse or family, depending on how you arrange your business.

An independent contractor, you would imagine, would be protected under this legislation and there would be some clarity about how they could organise their business; but the reality is that that is not the case in this legislation. Most people will find that they come under the pay-as-you-go tax arrangement. In tax law, PAYG people are employees. So with that warm fuzzy feeling, which I talked about earlier, the boss might tell you: ‘Now you’re an independent contractor. You have all these new-found freedoms and powers. You’re just going to get a heap less money and the tax office will still deem you to be an employee. You’ll have no other benefits, no rights. You’ll have to pay for your own super and make sure you never get sick. And when we do not like you anymore, because no unfair dismissal laws apply to independent contractors, the only recourse you will have will be to go to court at huge expense.’ That is something that these people could not afford to do. So there is a minefield of legal problems and entitlement problems for people who are going to be missing out completely.

Unfortunately, this will override state powers and provisions that protect workers such as milk vendors, cleaners, carpenters, joiners, bricklayers, painters, bread vendors, outworkers in the TCF industries—who are particularly exploited workers—who need all the protections that can be afforded them by the federal government, by state governments and by the courts. Those people will be the losers from this legislation. Timber cutters and suppliers, plumbers, drainers, plasterers, blind fitters, council swimming centre managers, supervisors, truck drivers, lorry drivers—a whole range of people who would traditionally work for an employer will be pushed out to do it on their own as an independent contractor.

If the employer or the contractee rather than the contractor—there is no longer an employer as such—decides that they no longer require your services, they will just terminate the contract. There are no unfair dismissal provisions and the fact that the contract may have been unfair in the first instance will have no bearing. To deal with that you would have to get help from legal experts. There will not be a heap of avenues to pursue. There certainly will not be any protection. While there is provision in this bill to deal with those issues and there will be fines for exploiting people, when you get down to the practical nature of how these things work, independent contractors are not going to have the access to that knowledge or the capacity to use it. It is not their role. It is not what they are about. A milk vendor is not going to be arguing the underlying unfairness of the contract for milk deliveries. Their job is to deliver milk, not to be a legal expert. They are not going to have the finances either to go to court, nor should they have to, nor should the burden be on them to prove their case. The few safeguards in this legislation are weighted heavily in favour of the contractee and will do very little to protect independent contractors. Unfair contracts will be another blow to ordinary people trying to remedy any cases where there is wrongdoing in place.

Currently outworkers are deemed to be employees, and this is very important in terms of the relationship between the federal legislation and the state industrial legislation. Outworkers are deemed to be employees regardless of whether or not they are an independent contractor, to afford them the protection they deserve. This will be undermined by this bill.

This bill does nothing to help workers or independent contractors. This government says to people, ‘You are on your own.’ There will be no support and no protection. You will get bare minimum pay. Your entitlements will go.’ Nobody is going to be fooled by this, certainly not independent contractors when they have a closer look at their finances at the end of the month or at the end of the year. This legislation is a disgrace. (Time expired)

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

Listening to the member for Oxley and, earlier, to his colleague the member for Throsby, there is no doubt the Independent Contractors Bill 2006 is a bill which goes to the heart of the political division in this country. This bill is about enshrining the rights of the individual to work under conditions of their own choice without governments or unions imposing limits and constraints on their freedom to contract—something that is opposed by the member for Oxley and his Labor Party colleagues.

This bill demonstrates the coalition’s commitment to freedom of choice in the workplace and that long-held Liberal ideal of encouraging entrepreneurship, self-reliance and self-sufficiency. I quote the Prime Minister from his first parliamentary speech:

... Australia built on deep respect for the individual ... The right to succeed, to accept responsibility, to work harder if they wish and to be rewarded for it. The individual’s success is the community’s success ...

To reiterate: the purpose of this bill is to preserve and guarantee for Australian workers the freedom to contract, the freedom to operate as a genuine independent contractor and the freedom to engage work through on-hire arrangements.

The Labor Party are not interested in freedom of choice, and this is demonstrated by their support for and by the union movement, where ‘no ticket, no start’ is the catchcry and workers do not even get to choose which union they join. More telling perhaps than coalition support for this bill is Labor’s opposition at the state and federal level, where they demonstrate their commitment only to the power, prestige and wealth of the union movement—not for the benefit of workers of this country; rather, for their own base political purposes.

Workers in Australia are voting with their feet. Australians are abandoning the union movement. There are now more independent contractors in our workforce than there are union members. This is a huge concern for the Labor Party. The good news for workers in our national economy is that people are choosing—in fact, they prefer—to work outside the traditional employment framework. This means that our labour force is more flexible, more responsive and better able to react to and satisfy the needs of consumers.

Independent contractors are an important part of our modern, dynamic Australian workforce. Trade unions, therefore the Labor Party, are fundamentally opposed to independent contractors, although I note that some unions have independent contractors as members, perhaps in opposition to their constitution. Independent contractors are not interested in joining unions. The unions have used any means possible, from industrial tactics to political manipulation of all too willing state Labor governments, to force independent contractors into the traditional industrial relations systems. I agree with Minister Andrews that the current complex and competing state and federal systems allow far too much interference by third parties in what are essentially private commercial business arrangements. We have already started moving towards this under Work Choices, which prevents federal awards and agreements from restricting the use of independent contractors or labour hire workers, for example preventing businesses from engaging workers outside award arrangements.

I read with particular interest the Department of Employment and Workplace Relations discussion paper on independent contracting which was put out last year, and I endorse much of what was said. It was pointed out in that paper that independent contracting arrangements have a very real benefit for contractors, employers and the economy as a whole, which include employment opportunities. Often a significant proportion of an employer’s total labour resources will not be required all the time. Contracting allows flexibility, it reduces the need for excessive overtime in busy periods and it reduces labour hoarding. Contracting can also give employers the flexibility to address processes more quickly, which provides greater scope for developing improved ways of doing things. It also allows for more flexible labour use, particularly where job descriptions have become fixed by excessive detail and rigidity. Contractors themselves can benefit from specialisation in particular areas and activities where an employer is not able to do so. Our economy is made more efficient and flexible when people are able to start up small businesses, to respond to rapidly emerging opportunities and to meet the demands of consumers more effectively.

I have a particular interest in this bill. My electorate of Hasluck is home to many independent contractors—hardworking individuals who have made the choice to work for themselves. They want the flexibility; they want the independence of being self-employed. I have received many representations from these constituents, who are very concerned to preserve and protect their rights as independent contractors. I spent nearly 20 years of my life representing businesspeople in the plumbing and painting industries—mainly self-employed workers who valued their independence and the flexibility offered through independent contracting arrangements. I know the value of these workers to our economy and in our community but, most importantly, I know that their choices and their freedom to operate as independent contractors should be respected and not overridden by Labor governments and unions.

I have worked for myself for a good part of my working life. I started my first contracting business as an 18-year-old in rural Australia and then I worked for many years in the building and construction industry. As a member of the House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, I was proud to contribute to the very detailed inquiry report Making it work, which was tabled in this place one year ago. Submissions were received from every state and territory, and I am pleased to see almost all the recommendations of the committee enshrined in the legislation before us today.

The Independent Contractors Bill seeks to enshrine in legislation the rights of individuals in this country to contract their services for payment without being deemed to be employees. It upholds the principle that independent contracting arrangements should be governed by commercial law, not industrial law. Why are the Labor Party so keen to summarily deem independent contractors to be employees? Why are they disregarding the rights and choices of so many Australian workers?

Independent contractors make up 28 per cent of the private sector workforce in Australia, or nearly two million workers. Labor have a particular interest in ensuring that this number does not grow and that the advantages of working as an independent contractor are reduced to nothing, because every worker who chooses to be an independent contractor is one fewer potential member for unions. The bill enables these people to be self-reliant and to not be reduced to a number—the lowest common denominator in a collective of mediocrity such as the union and labour movements in this country. Labor will do anything to help their union mates, including trampling over the rights and individual aspirations of Australian workers.

The Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006 make use of constitutional heads of power—in particular, the corporations power—to override certain provisions of state legislation which restrict the use of independent contractors. This fulfils the Howard government’s promise, made prior to the 2004 election, to protect the right of individual independent contractors throughout Australia to enter into contracts of their choice, and to preserve independent contracting as a legitimate form of work.

For the information of the member for Hotham, these bills deliberately do not seek to define the terms ‘independent contractor’ and ‘employee’ other than to reaffirm that they should hold their common-law definitions. The common law has evolved over hundreds of years and has developed complex and exacting legal tests to identify and determine employment status. These tests take into account the entirety of an individual’s circumstances and cannot be meaningfully replicated in legislation.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

Mr Crean interjecting

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

It is typical that the member for Hotham wants to regulate and define everything so that you cannot move outside of it. As I said a little while ago, he wants to reduce everything to the lowest common denominator—a level of mediocrity that most Australians do not want anymore. They do not want the labour movement representing them, defining them or telling them who they are or what they can do. You need to move on.

This approach was recommended in the committee’s report Making it work—and I support the retention of the common-law definitions. A distinction between employees and independent contractors has been made in common law for a very long time. A subtle distinction is that employees are engaged under a contract ‘of’ service whereas a contractor is engaged under a contract ‘for’ service. This essentially semantic distinction is the expression of a range of common-law tests which take into account the totality of the relationship between the two contracting parties. The matters considered range from the level of direction provided by the employer to whether the employee or contractor provides their own tools. The tests are most clearly set out in the Australian common law in the High Court cases of Hollis v Vabu Pty Ltd and Stevens v Broadribb Sawmilling Company.

I noted that, in his second reading speech and in the text of the bill, the minister has not implemented the committee’s recommendation to include some elements of the tests used by the Australian Taxation Office to determine independent contractor employment status. The ATO requires that some independent contractors be taxed as though they were employees. However, independent contractors will not be taxed as employees if they are found to be running a personal services business, as defined by the ATO. While I agree with the minister that the test used by the ATO is a self-assessment, is easily manipulated, was developed to address tax issues and is much narrower than the common-law tests, I still believe some measure of consistency between employment status for the purpose of contracts, industrial rights and taxation can and should be achieved.

The Howard government is enshrining the rights and protections in separate legislation in recognition—

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

Mr Crean interjecting

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

I am glad to see the member for Hotham agrees with that—

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

Mr Crean interjecting

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

Order! I remind honourable members that it is inappropriate to interject and to respond to interjections.

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

My apologies, Mr Deputy Speaker. The Howard government is enshrining the rights and protections in separate legislation in recognition of the importance of independent contractors in our economy. The decision to not merely include these provisions in the Workplace Relations Act reflects the independent and commercial nature of these contracts, clearly setting them apart from industrial law.

This legislation is important to introduce consistency across state borders and to remove barriers imposed by state Labor governments. The legislation will remove the state governments’ deeming provisions—which are arbitrary in nature, deeming some independent contractors to be employees and others to be contractors, often without any underlying logic. This has led to some absurd situations such as independent contractors who drive buses being deemed to be employees whereas taxidrivers are not. In my home state of Western Australia, the state government has been seeking to effectively deem independent contractors through its industrial relations legislation by expanding the definition of ‘employee’ to include, for example, outworkers, labour hire workers and contract cleaners. In Queensland, section 275 of the Industrial Relations Act 1999—

Ms Catherine King (Ballarat, Australian Labor Party, Shadow Parliamentary Secretary for Treasury) Share this | Link to this | Hansard source

Mr Deputy Speaker, I draw your attention to the state of the House.

The bells having been rung—

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

Order! A quorum not being present, the chair will be vacated for 10 minutes and the sitting will be resumed after that time.

The House having been counted and a quorum being present—

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

As I was saying earlier, section 275 of the Queensland Industrial Relations Act 1999 gives the Queensland Industrial Relations Commission the power to declare persons who work under a contract for service to be an employee—a great example of what I have been talking about in terms of Labor governments responding to their union mates and taking away incentives for, and the aspirations of, individuals to be self-employed and taking away the freedom and the choice to be so. It is worth repeating that every worker who chooses to be an independent contractor is one fewer potential union member. Our legislation enables such people to have their own individuality, be self-reliant and not be reduced to a number—the lowest common denominator in a collective of mediocrity such as the unions and labour movement in this country.

The Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006 allows penalties to be imposed on employers who try to avoid their obligations under employment law by disguising their employees as independent contractors or who coerce their employees to become independent contractors. The penalties in this bill for so-called ‘sham’ contracting are harsh, sending a clear message to unscrupulous employers that this behaviour will not be tolerated. These protections address our responsibilities under international law through International Labour Organisation conventions with regard to disguised employment. Independent Contractors of Australia believe that the independent contractors bill is consistent with and reflects ILO recommendations. In fact, in their commentary on the bill, ICA said the bill ‘applies a highly robust process for combating disguised employment relationships’.

The prosecution of employers and employees who misuse independent contracting arrangements is important to preserve the integrity of independent contractors nationwide. There is no doubt that unscrupulous employers may occasionally attempt to coerce employees into sham independent contracting arrangements for whatever reason, and this bill take steps to ensure that those employers are dealt with and that effective deterrents exist to help prevent such behaviour.

One of the groundbreaking elements of this legislation is the introduction of a single nationwide unfair contracts jurisdiction. Existing federal unfair contract provisions will be moved from the Workplace Relations Act to the independent contractors bill. This is a more appropriate approach, given these provisions relate to commercial contracts rather than industrial agreements. State unfair contract jurisdictions will be overridden wherever possible using the corporations powers. These bills, along with the Work Choices legislation, ensure the flexibility and responsiveness of Australia’s labour market and thereby strengthen our economy. (Time expired)

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

I think we have just seen during the honourable member’s contribution the contempt that the government holds for this parliament—a government that could not provide a quorum when it was called, a government that will not provide speakers in key debates in this place. You would not have thought there was a more important issue out there in the Australian public than petrol prices, yet the government could manage only three speakers on that bill—three government speakers to 23 speakers on this side. You would have thought the increased deployment of troops to Afghanistan was an important, serious national issue. The government was able to scrape only one speaker—

Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

Mr Pearce interjecting

Greg Hunt (Flinders, Liberal Party, Parliamentary Secretary to the Minister for the Environment and Heritage) Share this | Link to this | Hansard source

It was a good speech though, let me say!

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

It may well have been a worthy contribution, but there are not worthy contributors joining you. Yesterday, of course, we saw that outrageous abuse in question time, particularly by the Leader of the House. We felt that the government should be held to account. We could not call quorums yesterday because there were no people speaking on the government’s side in any debate that we conducted! And that is why we have had the quorum called today.

This is an important focus for legislation. Labor opposes the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006 before us because, under the guise of protecting contractors—which I happen to believe is a worthy objective—the legislation in fact does the opposite. The bills strip away the rights and protections of Australian workers and the nature of the workplace. The Australian workplace is changing and we do have to acknowledge that. There has been a huge increase in the number of contractors and independent workers. We recognise this as an essential development in terms of our evolving economy and the calls for greater flexibility and diversity in the way in which people perform their jobs.

It is ironic that this government purports to be the champion of small business, of the contractor, of the entrepreneur, but, oddly, this legislation does nothing to protect them or to benefit them. In fact it strips away those protections which are indeed now afforded by state legislation. The truth of it is that only Labor will protect the rights of individual workers, whether they are regarded as traditional employees or as independent workers. We believe that contractual arrangements and non-traditional or non-standard work practices should meet a fairness test and should recognise the central role of work in most Australians’ quality of life. These contractual arrangements should not be supported where they undermine the employment relationship and such basic entitlements as the right to bargain collectively, the right to fair and decent wages and conditions, the right to be free of harassment or discrimination, the right to proper training to perform the work required as well as, of course, the right to appropriate occupational health and safety standards.

These bills are another step down the road to stripping Australian workers of their rights and of their protections. It makes it easier under this legislation to regard an employee as a contractor and so take away those basic entitlements. The bills purport to protect independent contractors but in fact do no such thing. It is another example of the government’s doublespeak. Just as it argues its industrial relations legislation is about work choices, it in fact offers no choice. If the employer is not prepared or willing to bargain collectively, that is the end of the matter. That is the end of collective bargaining in this country—at the whim of the employer. It re-weights the system in favour of the employer. This legislation does likewise in relation to contractors: it re-weights it in favour of the person they are contracted to.

This legislation is driven by ideology—not by good management practices, not by fairness, not by the standards for a civilised society. It is driven by the blind belief of this government in working solely to a free market as distinct from recognising collective responsibilities. We understand better than anyone in this place the importance of getting that balance right. It is what the labour movement has striven for in terms of opening up its relationship with employers to try to find the appropriate balance to drive productivity and to drive profit but to distribute fairly and to not have people exploited. There is a place for both approaches, but this government is driven by its hatred for unions. I was surprised to hear the previous member’s denigration of unions, given the great contribution that they have made to this country over many periods of our history. It is about pushing industrial relations to the extreme to re-weight the system. The government has done it in the Work Choices legislation; it is now doing it in the Independent Contractors Bill 2006 and the amendment to the Workplace Relations Act.

To understand how this issue regarding contractors has emerged within the workforce, I remind the House of a dispute that occurred last year. It involved my old union, as a matter of interest, and a company called Kemalex. Just when the workers were negotiating a new enterprise agreement, back in April last year, the company told the union that any new workers would be treated as independent contractors. The fact is these new employees were, in every way, workers—factory production line workers on minimal wages, with hours and duties all dictated by the company. They had a workforce that previously were treated as employees, but new employees, doing exactly the same thing, following the same commands and the same orders, were going to be called independent contractors. As independent contractors they would have to get an ABN and they would lose their rights to sick leave, annual leave, long service leave et cetera. They were mostly migrant women. The point here is that the company tried to categorise employees as contractors, when clearly they were not.

There was a lengthy dispute associated with that company. I think the company has simply pulled up stumps and moved to another state to avoid the circumstances. But the fact of the matter is that this legislation before us today will make it even easier for the employer to redefine his employment relationship. What is fair about that? Why should an employee who has given long and loyal service to the company wake up one day and be told, ‘You’re no longer an employee; you are an independent contractor, but we want you to do exactly the same functions as you were doing before.’ We have to get certainty into the system.

Interestingly, this issue of the burgeoning growth of independent contractors and of labour hire companies has been the subject of important parliamentary inquiry and scrutiny. The House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation—of which the member for Hasluck, who preceded me in this debate, is a member—reported on 17 August in an important document called Making it work. It was an inquiry into independent contractors and labour hire arrangements. The Senate Employment, Workplace Relations and Education Legislation Committee is also inquiring into this bill. It begs the question: why are we debating this bill now before that inquiry reports?

Unlike the member for Hasluck’s assertion, it is not correct to assert that the recommendations of his House of Representatives committee have all been adopted. They have not. There was a dissenting report of that committee—and I will come to aspects of that in a moment—but there were aspects of the report, some 16 recommendations, which received unanimous endorsement. One of those went to an attempt to further define ‘independent contractor’ beyond the common law to pick up elements of the taxation definition that the member for Hasluck referred to. Why do we not have in this legislation some attempt to define or codify what constitutes an independent contractor? If we accept that it is important to have legislation covering independent contractors in recognition of the emerging workforce development, why shouldn’t we as a parliament seek to define what we are talking about? That is what legislation is. It is not a question of hamstringing people; it is about giving clarity to the circumstance, giving certainty so that these sham arrangements—an example of which I have referred to already—cannot happen.

Interestingly, recommendations 2 and 3 of that House of Representatives committee have not been adopted in this legislation. I go further, because I think it makes common sense that we seek to define the distinction between running one’s own business and working for someone else. I think it is a terribly important distinction and differentiation to make in our workplace arrangements not only for the purposes of the commercial activity but for the purposes of people’s entitlements and protections. Different laws do apply in different circumstances. Whether a person works as an independent contractor or as an employee, particularly an independent contractor for one employer, why shouldn’t that person be entitled to the same rights and conditions as though that person were an employee? It is about attempting to get clarity in definitional terms so that those protections can be afforded so that we know the employment circumstance or otherwise that we are talking about.

This legislation has two important flaws: first, its reliance on the common-law definition of independent contractor to define the services contract and, second, its overriding of the deeming provisions contained within state and territory industrial relations legislation. This uncertain definition comes about because of the circumstances in which we seek to ascertain whether a person is working as an employee—in other words, working to a contract of service or working as a contractor, whereby they provide a contract for services to produce an agreed result. That is the conceptual differentiation in this; it has been recognised in the common law.

The trouble is that this is a definition that increasingly has become blurred. I might say that this legislation will blur it even more. The result of that is that we often get seemingly arbitrary and unpredictable outcomes. The view has been advanced that the real problem with the judicial approach—that is, just leaving it to the courts rather than to the parliament; and why should the parliament not have a view on these things—is that it enables one or both of the parties in a work relationship, and usually it is the employer, to evade obligations that would otherwise be imposed by awards and statutes. As Breen Creighton and Andrew Stewart put it, and I quote them because this is relevant:

There is nothing wrong in principle with allowing the parties to categorise their contractual arrangements as they choose. But in many cases it is only the “employer” who both understands the nature and effect of the arrangement, and stands to gain from it.

In other words, in leaving it to the courts you put more power in the hands of the person who has access to resources and legal advice and a strategic view as to what they want to get from tipping the arrangement in their favour. It re-weights the system in their favour. This is another example of the inequality of the bargaining power between the employer and the employee. Creighton and Stewart go on to say:

The advantages accruing to a worker who “freely” agrees to a non-employment arrangement are often illusory. While it may in some circumstances be possible to earn more as a contractor than as an employee, and even to reap certain tax advantages, it is important not to underestimate the real value of the statutory and award benefits foregone.

The point I am making is that the employer is better placed to understand the legal and financial significance of the status of the employee, usually to the employer’s advantage. This bill makes no attempt to codify or define the relationship. It does not provide any certainty and it is part of a strategy to make it easier to strip away people’s basic entitlements. The House of Representatives Making it work report recommended that the government maintain the common-law approach but that it should adopt aspects of income tax law—a point conceded even by the member for Hasluck when he made his contribution; and it ought to have been, because he agreed with it in this unanimous recommendation—such as the alienation of personal services income tests to identify independent contractors. If it is appropriate to have it applied for taxation purposes, why not start to pick it up for the purposes of identifying tests that determine whether or not a person is an employee or a contractor? It should not be difficult to codify that which the common law has spelled out by way of tests. I think it is important for the parliament to try to do that.

The other flaw in this legislation is that, this legislation aside and the common-law uncertainties taken into account, there has been in state and territory legislation the realisation that some attempt has to be made to define. And so we have state and territory legislation that does what is called deeming—it deems certain people to be employees. These are the deeming provisions. That does give certainty in those jurisdictions. But what does this legislation do? It overrides it. So, where a state has taken steps to bring certainty and clarity, this legislation will override it. This legislation has the effect of overriding state law deeming such contractors to be employees, with the consequent denial of access for them to the protections provided by state industrial relations laws. So, where the states have attempted to define and codify, this bill overrides them. The government wants to provide clarity but it ignores the common-law tests and an attempt to codify it. It ignores the taxation test, despite the unanimous recommendations of the House of Representatives committee, and it overrides state legislation.

This bill should be withdrawn. It is an inadequate response to a very important issue. We believe that the consideration by the House of Representatives committee, as well as by the Senate, should be allowed to proceed before we go further with this bill. I suggest to this government that it withdraw the legislation and that it talk with the opposition about how we can get clarity; that is important for all those in the equation. It is important not just for employers but also for people—and for their entitlements and for clarity and certainty within the system.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

I would like to say at the outset that every so often there is a debate in the parliament and both sides of politics take different positions. The Labor Party here appears to be going back to the old concepts of class warfare of the 1890s. The member for Hotham is no doubt speaking from the heart, but the reality is that the Labor Party is so completely out of touch with modern working arrangements in Australia that we have heard a troglodytic speech from the honourable member for Hotham.

The government made an election commitment in 2004 to introduce separate legislation governing independent contractors and on-hire arrangements. One only has to cast one’s mind back about 10 years to see that the Labor Party made a whole series of promises prior to getting elected and then broke those promises. We in government deliver on our election commitments. We place a high level of priority on keeping faith with the Australian people. Prior to the 2004 election the government said that, were we to be re-elected at that poll, legislation similar to the legislation currently before the House would be placed on the statute books by this government. The government’s proposal of the Independent Contractors Bill 2006 indicates that we want to clarify, make certain and protect the status of independent contractors in order to provide for certainty and choice for a significant number of Australians who are working in fields as diverse as housing construction, transport and information technology.

It is simply a fact that more than one million independent contractors are currently in the Australian workforce. This government and, indeed, this parliament would be entirely neglecting our collective responsibility if we did not bring in legislation to recognise that people today are no longer working under the old working arrangements. This government—and I am sorry to hear that the opposition does not—respects the rights of genuine independent contractors to manage their own affairs and enter into their own agreements with their clients if that is their preference, just as it respects the rights of employees to be accorded the relevant legal protections. Independent contractors are a crucial component of a modern economy and of a modern, flexible labour force. One would have thought that was an axiom, yet one has to be disturbed by a situation where the Labor Party is opposing this legislation. It is as though it is seeking to make sure that independent contractors are no longer able to run their own businesses, as they do, and ought to in effect become employees once again.

The government wants to protect through this legislation the freedom to contract, the freedom to operate as a genuine independent contractor and the freedom to engage work through on-hire arrangements. The government’s proposal for an independent contractors bill is intended to clarify and protect the status of independent contractors to provide for certainty and choice. The Labor Party, through weasel words, is seeking to have this legislation withdrawn. What it would really like is for it to be mandatory that independent contractors be employed as workers in the future. That is unacceptable.

Honourable members who have looked at the Notice Paper would be aware that there are two bills: the principal bill and a bill amending the Workplace Relations Act 1996. The principal bill recognises and protects the unique position of independent contractors in the Australian workplace by supporting their freedom to enter into arrangements outside the framework of workplace relations laws. This outcome will be achieved in a number of ways—that is, by excluding certain state and territory laws which seek to limit the ability of genuine independent contractors to enter into commercial arrangements or which seek to draw independent contractors into the net of workplace relations regulation, by providing a transitional scheme for workers deemed by state or territory laws to be employees and by providing a national services contract review mechanism for independent contractors.

Again, the Labor Party would want you to believe that this government has no respect for the rights of workers, but the bill retains under state legislation protections for contracted outworkers in the TCF industry. In addition, where contracted TCF outworkers are not covered by a law providing for some form of minimum remuneration, they will be covered by the wages guarantee in the Australian Fair Pay and Conditions Standard. The principal bill will only exclude state and territory laws with respect to workplace relations matters. Despite what some opposition luminaries have suggested, the bill will not interfere with non-workplace relations matters in state or territory laws. These matters include taxation, workers compensation, occupational health and safety and superannuation and go to any definition of an employee for those matters. (Quorum formed) As I was saying before I was interrupted by the honourable member for Ballarat, who was wasting time of the House by calling for a quorum, the amendment bill will complement the principal bill by prohibiting sham contracting arrangements, where employers seek to disguise the employer-employee relationship as an independent contracting relationship and thereby avoid the legal entitlements that are due to employees.

In his speech the member for Hotham seemed to be saying that the government was riding roughshod over the rights of workers. This government is seeking a balanced approach; it is seeking to implement an election promise. The amendment bill will: insert a new part into the Workplace Relations Act 1996 that prohibits sham employment arrangements and provides penalties where sham arrangements do occur; make consequential and transitional amendments relating to textile, clothing and footwear outworkers; and provide consequential amendments relating to unfair contracts in the Workplace Relations Act and the Building and Construction Industry Improvement Act 2005.

The incidence of independent contractor arrangements is becoming substantially more significant. I mentioned a figure of more than one million independent contractors. Actually, estimates of the number of independent contractors in Australia range up to 1.9 million. It could well be that up to 19 per cent of Australian workers are independent contractors.

The Labor Party gets concerned because people are voting with their feet and walking away from union membership. While unions might well have played a very important role 100 years ago, today unions have become insufficiently focused on positive outcomes for workers and have been playing politics and ideology, with the net result that, unless people are forced by circumstance to join a union, generally speaking they believe that their union membership fee would be better used if it remained in their pocket. That is why, particularly in the private sector, the proportion of union membership has dropped below 20 per cent. That is an ongoing situation. Given their connection with the Labor Party and given their significant control over the Labor Party both now and historically, the unions are quite desperate. Every so often you find the Labor Party comes into the parliament and essentially acts as the mouthpiece for the union movement. The speech by the honourable member for Hotham is an indication that that old ideology held by the trade union movement and the Labor Party is not dead but ongoing. That is the situation. The Labor Party is proving itself to be irrelevant and once again shows itself to be a party of the unions—controlled by the unions and operating for the unions. That is a matter of some concern.

There are a number of provisions in the bills. There is a definition of an independent contractor. In the principal bill this definition is not broadened beyond its common-law meaning, and courts will look at the whole of the relationship between the parties and consider a range of indicia, such as the control of the worker over the work, economic independence and the description of the relationship in a contract. The opposition would have us believe that sham arrangements, whereby people who for all intents and purposes are employees will be deemed to be independent contractors, will continue to occur. I am pleased to be able to assure the honourable member for Hotham and those opposite that the definition of independent contractor in the principal bill is not expanded beyond its common-law meaning. So any concerns that people might have through the scaremongering tactics of the opposition in relation to this matter are entirely lacking in validity.

The indicia that courts are required to consider under the common-law test include the degree of control the worker has over the work and the degree to which the worker is integrated into and treated as part of the principal’s enterprise. For example, if the employer wears the principal’s uniform and represents the principal’s enterprise to the public, this supports the worker being found to be an employee. Another matter to be looked at is whether the worker is making a significant capital contribution—such as using his or her own motor vehicle or carrying the maintenance and the running cost—to the enterprise. Also relevant is how the principal pays the worker. For example, payment by results supports a finding that a worker is an independent contractor, whereas payment on an hourly basis supports a finding that a worker is an employee.

Other factors to be considered are whether the worker has an obligation to work and the provision of leave, superannuation or other entitlements. These entitlements usually only apply in employment situations. The place of work is another factor. If the worker works at his or her own premises, this supports the worker being found to be an independent contractor. Other relevant considerations are whether the worker has the right to delegate work to others, whether income tax is deducted from the worker’s pay by the principal, whether the worker provides similar services to the general public, whether there is any scope for the worker to bargain for his or her remuneration, whether the worker is providing skilled labour or labour that requires special qualifications—if so, this supports a finding that the worker is an independent contractor—and whether the issue of deterrence of future harm arises, for example where the principal is in a position to reduce accidents by efficient organisation and supervision. This may support a finding that a worker is an employee.

I am pleased to reassure the honourable member for Hotham that the court will determine the appropriate weight to be attributed to the indicia depending on the circumstances of the case and then come to a considered conclusion about whether the worker is an employee or an independent contractor. The government’s policy position is that genuine independent contractors should be governed not by industrial law but by commercial law—because they are not employees, that is the appropriate way to go. As they are independent contractors they are running their own business and work under commercial and not employment contracts.

This legislation is not extreme. It is fair and reasonable and reflects the workplace situation of 2006. It recognises that up to 18 per cent of working people are in fact operating as independent contractors. A government which did not legislate to protect and entrench the position of up to 1.9 million Australians is a government which would be failing in its responsibility to the Australian people.

These bills are strongly worthy of support. They are bills which seek to implement a promise made by the Australian government to the Australian people at the last election. We are delivering on our mandate. We were elected to office by the Australian people to implement a range of promises. The promise being implemented by this legislation is one of them. We are entitled to have this policy implemented and we seek the support of the parliament so that we are able to keep faith with the Australian people in this manner. I commend the bills to the House.

Daryl Melham (Banks, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to oppose the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. I begin my remarks by quoting from the minister’s second reading speech, in which he said:

The coalition believes everyone’s life opportunities are diminished by restrictions on the freedom to work.

I do find the comment incongruous from a government whose sole purpose in this parliament has been the imposition of restrictions through its appalling Work Choices legislation. This legislation has already had such a deleterious impact on the lives of so many Australians. I first spoke on the so-called Work Choices bill on 9 November 2005. At that time I warned:

With this legislation the government has come down fairly and squarely on the side of the employers ... The government does not even pretend to be fair in this situation.

This trend began with the discriminatory attack on the building and construction industry; it continued with the attack on all workers covered by federal legislation and now continues with this piece of worthless legislation. The net effect of the independent contractors bills is to ensure that basic rights are ripped away from contractors. These rights include those which are so fundamental that they should defy definition: annual leave, workers compensation, long service leave, superannuation, sick leave and paid public holidays.

The term ‘independent contractor’ is somewhat misleading. Many of these contractors are not independent. The legislation does not seek to define the term ‘independent contractor’. Instead, it relies on the common-law definition. At common law employees are engaged under the contract of services, whereas contractors are engaged under a contract for services. In other words, an independent contractor is generally engaged on a labour only contract, usually determined as a one-off flat rate. Generally the independent contractor remains responsible for a number of aspects of the relationship that would usually be the responsibility of an employer. This is problematic. Most recently we have seen examples of how this relationship is demonstrably not independent—to the detriment of the contractors. Figures from the Productivity Commission based on the ABS forms of employment survey estimate that there are 787,600 independent contractors in Australia, 8.2 per cent of all employed persons.

Technicians installing for Foxtel, for example, pay for all their materials—a van, tools and petrol. There has not been an increase in their contract rates for over 10 years. Optus workers were made redundant earlier this year and re-applied for their jobs as independent contractors. There is no doubt that Optus management was sure that the company would not suffer financially as a result of this change—indeed, rather the opposite.

Owner-drivers delivering Tooheys beer faced a 42 per cent cut when Linfox took over this year. The vast majority of owner-drivers, for instance, are single vehicle operators who are highly dependent on the employers to whom they contract. Often owner-drivers only work for the one employer. They can only work for that operator and must take the price they are offered. There is little independence in terms of bargaining power, and the contractors are vulnerable, never more so than if this legislation passes both houses. Many trucking families live on overdrafts as they struggle to pay off the huge debt incurred in purchasing a vehicle. Surveys have found that around one-third of people could not find permanent work and three-quarters believe that these arrangements are simply used by their employer to avoid any obligations to their staff.

In my own electorate there are a number of owner-drivers. Their stories, provided to me through the TWU, are a clear illustration of why this legislation must be defeated. Adam works in the general transport industry and has invested $300,000 in his business. He believes that deregulation will mean a decrease in rates for many drivers. Adam also believes that he will have to increase an already high workload—in excess of 70 hours a week.

David, with 17 years of service and $100,000 invested, also believes that driver rates will be negatively affected and is concerned about his ongoing vehicle repayments, maintenance and fuel costs, which still need to be serviced. He says:

I think it’s a disgrace that a government that says its on the side of small business has just kicked so many, right in the guts.

Another owner-driver, Ian, sees the introduction of this bill as a direct attack on his ability to collectively bargain. He said:

My mates have stuck up for me in the past but I guess after this, I’m on my own.

Andrew is also concerned about the impact on collective bargaining. Andrew said:

Now I am going to have to pay solicitor fees to go to court when before my union was able to represent me for free. I thought I had the freedom to choose.

Another constituent, Ali, a courier with $150,000 invested in his business, is worried about the fact that the deregulation will see an increase in the number of unsustainable operators. Ali works in the very competitive courier industry, where ease of entry and little product differentiation means that there is always a high turnover and a high level of unsustainable operators—drivers working for very low rates to build a client base. He also sees it as an attack on his ability to resolve disputes in an easy and affordable way:

If I went up against a company outside the commission—I wouldn’t win, I couldn’t pay the big bucks, I’d spend two weeks income to win back a day.

I understand that the legislation now excludes owner-drivers from New South Wales and Victoria. This has been as a result of significant lobbying, not the least of which has been from the Transport Workers Union. The comments and stories I have quoted are from my own constituents in Banks in Sydney. I would be very surprised to find that these do not represent the views of owner-drivers across Australia.

In the 1960s the particular vulnerabilities of owner-drivers were recognised—by a Liberal government. A commission of inquiry established that there was an ‘overwhelming case’ for the regulation of owner-drivers. The inquiry recognised that, while owner-drivers were contractors, they operated in a dependent relationship with the employing companies.

The current New South Wales act—the Industrial Relations Act 1996—recognises enforceable minimum standards providing the certainty of at least cost recovery; the prevention of unfair destructive competition by preventing undercutting across a site or industry sector; the capacity for incentive systems to flourish above the minima on either an individual or an enterprise level; protection against arbitrary termination of the contract; no-cost and timely access to the Industrial Relations Commission for the resolution of disputes about various matters, including goodwill; and the capacity to recover goodwill where termination of the contract has resulted in that goodwill being unfairly extinguished. This system has had bipartisan support in New South Wales since its inception.

In Victoria, an inquiry was established in 2003 which established that significant disadvantage exists amongst owner-drivers, requiring legislative intervention. The Victorian government passed the Owner Drivers and Forestry Contractors Act 2005 to remedy this situation. Some of the critical elements of this act include: the provision of an information booklet to the owner-driver prior to the entering into of a contract; the provision of published rates and cost schedules to the owner-driver prior to the entering into of a contract—this identifies the typical fixed and variable overhead costs for that class of contractor and the base hourly and casual rate that would typically apply to that class of contractor; that contracts must be in writing and include the guaranteed minimum hours of work; the rates to be paid and the minimum period of notice applicable; the creation of the capacity for owner-drivers to appoint a negotiating agent; the establishment of codes of practice in relation to owner-drivers and hirers; the prevention of unfair business practices through the articulation of a series of tests in relation to unconscionable conduct; and the establishment of a low-cost, accessible dispute resolution procedure under the auspice of the Victorian Small Business Commissioner.

As I understand it, it is the government’s intention to preserve existing New South Wales and Victorian arrangements and protections—and, on behalf of those people in my electorate who are impacted, I am very pleased. Nonetheless, the exclusion begs the question: if it is unacceptable for the independent contractors of New South Wales and Victoria, why is it acceptable for the independent contractors of the other states and territories? It shows the typical short-sightedness of this government. I also note that the government will review this exemption in 2007, which opens up the prospect of whether the review will be before or after the next federal election. The likelihood is that the exemption will be rescinded—I am a pessimist. The Australian Labor Party oppose these bills. We note that it is a continuation of the government’s attack on the conditions of Australian workers, and we will continue to oppose such unfair legislation.

Luke Hartsuyker (Cowper, National Party) Share this | Link to this | Hansard source

I rise to speak on the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. I welcome this opportunity to address the House on a measure that is extremely important to working men and women throughout Australia. I use the phrase ‘working men and women’, though some may find it strange in this context, because I wish to highlight the changing nature of employment in the Australian economy and the change in attitude that has enabled us to make so much progress in the last 10 years. I believe that the phrase ‘working men and women’ now covers a far wider section of society than some of the old class warriors on the other side of the House and in the labour movement would have us believe.

It is worth noting the figures given to the House earlier this week by the Minister for Education, Science and Training and Minister Assisting the Prime Minister for Women’s Issues. More than one million new jobs for women have been created since 1996, and there are now 4.6 million women in employment—a 28 per cent increase since 1996. The working men and women of Australia are increasingly grasping the opportunities and the benefits of the modernisation of the Australian economy. They realise that old definitions and the old ways of doing things are no longer good enough. They realise that they cannot stand still while the rest of the world shakes off the old attitudes that have retarded growth. They realise that, if we ignore what is happening in the rest of the world, we do so at our peril.

Let me remind members why this government brought in the Work Choices legislation—part of the government’s reform agenda, of which this bill is a further element. The reason was that an increasingly global economy is also an increasingly competitive international scene. The benefits that we have seen since 1996—namely higher wages, more jobs and better living standards—have come from successfully dealing with competition. We all recognise that we have a huge opportunity in selling our natural resources into the rapidly growing economies of India and China, but not everyone seems to recognise that we could not have taken advantage of that opportunity if our ports and docksides were still crippled by a range of restrictive work practices. We have to recognise that, as these economies grow, they will not only take our resources but also compete with the wider range of sectors in our own economy, and they will be competing against companies within this economy from a far lower cost base. This is not to say that we should, or can, compete with them on the basis of cost alone. But what we have to do is remove the impediments that restrain us from achieving our full potential. We have to be lean, fit and fast on our feet.

As I have said in this House before, we are a country of only 20 million people. In a global economy, we simply cannot afford to have six separate industrial relations systems. China’s population is estimated at more than 1.3 billion. We have only 20 million. The European Union does not have six separate state systems. It has 25 member nations, and they are considering harmonising toward a central workplace relations system. Resisting or ignoring these trends is pure folly. Of course, many in the union movement resist out of pure self-interest. The thrust of Work Choices and the Independent Contractors Bill is to provide flexibility with safeguards. So let me now turn to the union reaction to one way in which flexibility is provided for both employees and employers.

As I have said, our future prosperity depends on being able to compete in international markets. I think we would all agree that Qantas is certainly a company that has to do this. Against a background of sharply rising fuel costs and operating in a market which is threatened by terrorism, Qantas is provided with quite a challenge. Qantas realises, if it is going to compete in an international market, it has to have world competitive practices in every aspect of its operation, and that means in relation to its workforce as well. The company has signalled that one of the remaining ways in which it will be able to compete more effectively is to have a look at the way that it has 38,000 employees on 45 different enterprise agreements. I know Qantas is very keen on, and sees very much the benefits of having, Australian workplace agreements.

This issue has also arisen in relation to Jetstar. Jetstar would be provided substantial benefits through the use of AWAs. But we know what the unions’ attitude is to AWAs. We know what the opinions of the Australian Labor Party are towards AWAs. Their approach to this is to rip them up, if they ever get the chance. I would be interested to know what the Australian Labor Party and the unions would say to the some 2,800 applicants who have sought the 200 jobs at Jetstar on AWAs. Would they be wanting to tear up those AWAs that have been provided with those 200 jobs? I think they would.

As we have heard recently in the House, almost one million AWAs have been entered into. The Australian Labor Party and the union movement would have such AWAs torn up. It is interesting to note that the mining industry—one of our most successful export earners—attributes a substantial proportion of its success to the labour flexibility that is offered by AWAs. It is estimated that the abolition of AWAs would cost some $6.54 billion, according to the Mines and Metals Association. It would be interesting to see the impact of a loss of $6.54 billion on the bottom lines of companies which are employing Australians, paying tax and producing the wealth which enables this country to prosper.

But what does the Australian Labor Party do? It just resolves to simplistically tear up these arrangements—to tear them up and retreat behind the walls of Fortress Australia, to bury their heads in the sand and to ignore the way in which the rest of the world travels. Unfortunately for the Australian Labor Party, Fortress Australia is not a refuge any more. The global economy means that we have to compete. We cannot put up barriers. The Independent Contractors Bill is very much a part of ensuring that we have the sort of flexibility that enables people to contract, to come up with efficient outcomes for their customers and to provide a much more efficient economy.

The writing is on the wall. We cannot afford to tear up AWAs. We cannot adopt the strategy of Fortress Australia. The Australian Labor Party in their stance choose to ignore the evidence which they have before them. They choose to ignore the government’s record unemployment. Our record unemployment is most impressive. We have unemployment at record 30-year lows. We are achieving higher wages. We are achieving higher standards of living. The government have achieved much of this through reform of the labour market—reform that is being fought by the Australian Labor Party and the union movement every inch of the way.

The unions and the ALP have said that the sky will fall in. They have said that there will be mass sackings. They have said that a whole range of adverse consequences would occur through the introduction of Work Choices. They indicated that it is a bit like putting termites into your house. They cannot ignore the fact that in the order of 50,000 jobs are being created a month. The sky has not fallen in. Mass sackings have not occurred. The empty rhetoric which has been put forward by the Australian Labor Party and by the union movement is being exposed for what it is—nothing but empty rhetoric. Whether we are talking about AWAs or provisions for independent contractors, the rhetoric is the same. It is nothing but scaremongering. They believe that something that is good for employers cannot possibly be good for employees. They say that a provision that helps small business, just by its very definition, has to be somehow bad for employees.

But we as a nation have moved on, including the 1.9 million working men and women who have chosen not to be union members but to manage their affairs as independent contractors. There are now more independent contractors than there are union members in the Australian workforce. This government, through this legislation, is going to help those people by giving them the freedom to run their own businesses as they see fit, not being dictated to by a union which they do not wish to be a member of. As with Work Choices, we need to rationalise the current situation by removing the inconsistencies that currently exist between the states, by removing the barriers that state legislation presents to those wishing to set up their own business as contractors and by reducing compliance costs, which place a proportionally larger burden on the small business sector.

The current system tends to try to force independent contractors into the traditional industrial relations system, which is simply not appropriate. If an individual has taken the decision to become a contractor or an entrepreneur, they should be free to negotiate their own terms and conditions. Both they and their business partners should be able to reach an agreement without the restriction that a contractor should be treated as an employee, with all that that entails. It is only by providing this kind of freedom to negotiate that both partners can take advantage of the flexibility that independent contractors can offer and that is necessary for us to remain a globally competitive economy.

So the bill will ensure that independent contractors operate under commercial arrangements, rather than employment arrangements. It will override state and territory legislation that deems contractors to be employees for industrial relations legislation, and it will ensure that sham arrangements are not—and, I repeat, not—legitimised. It is clearly a nonsense that in New South Wales, for example, a carpenter could be regarded as an employee, whereas elsewhere in Australia the same carpenter may choose to be an independent contractor. That also applies to another 12 categories of workers. Just as Work Choices banned clauses in awards and agreements which set out to prevent the recruitment of contractors or to impose conditions upon them, this bill will override state legislation to ensure these deemed workers operate in a less restrictive environment.

Those currently deemed to be employees under state law will continue as such for three years, unless they decide to become an independent contractor in the meantime. This will give them a chance to consider the new arrangements and, if they wish to, make the necessary changes. As I said, we should reduce the burdens on those running their own businesses as much as possible, and this breathing space will give them plenty of time to make that transition.

On the one hand, then, the bill will enable those who wish to operate as independent contractors to derive the full benefit from their independent status, to take full advantage of the opportunities of the dynamism of the Australian economy and to strike whatever agreements best suit their personal and working environment. On the other hand, it also offers protection to those who might suffer by being forced into a position of independence and provides restraints on employers seeking to avoid their obligations.

Just as the Work Choices legislation recognised that there were both good and bad employees, and good and bad employers, this bill will provide a civil penalty for those employers who try to evade their responsibilities by declaring genuine employees as contractors through sham arrangements. The Office of Workplace Services will take up the cases of those employees who are disadvantaged in this way. Interestingly, in the light of those false allegations that Work Choices actually set out to abolish awards, there will be penalties for the breach of an award if it is found that a person was treated as a contractor when they were in fact an employee and had not been paid their full entitlements as such. These penalties will also be incurred for breaches of the Australian Fair Pay and Conditions Standard where that applies. These range from $6,600 for an individual to $33,000 for a body corporate.

There will also be safeguards for contractors as the bill will signal a move toward a single system for dealing with unfair contracts and a move away from the duplication and confusion that flows from overlapping state legislation. The corporations power will be used to override state regimes, and the Federal Magistrates Court will be given the power to hear unfair contracts cases, thus giving contractors easier and cheaper access to remedy under the law. This will apply to both incorporated independent contractors, who do not have access to the federal system at present, and to those operating as natural persons.

There are also two groups of workers who, rightly, will receive special consideration under this bill. Currently most states regard outworkers in the textile, clothing and footwear industries as employees. Clearly, those who work on their own, have little opportunity to organise with their coworkers and may be unable to work their way through the supply chain of subcontractors in the event of having to claim any money owed to them, are a special case. The Independent Contractors Bill will therefore not affect state legislation that is specific to outworkers, but the Fair Pay and Conditions Standard will apply to those outworkers where they are not covered by a law providing some form of wages guarantee. This again shows that, far from removing all the safeguards for workers, this government believes in providing protection for workers in a vulnerable situation.

This bill retains the special provisions for owner-drivers in New South Wales and Victoria. Owner-drivers have historically been recognised as having particular vulnerabilities and requiring special protections. Many work for only one commercial partner and face interest payments on large loans needed to buy their vehicles. The provisions that currently stand in the state legislation of New South Wales and Victoria to determine contracts and for dispute resolution will remain. However, it is right that we should try to achieve consistency across the whole country. I welcome the review that will be undertaken with the aim of rationalising these particular laws. It is worth noting the comments by Labor’s workplace relations spokesman, Stephen Smith, who said this morning in his usual uninformed way:

... many owner drivers in the transport industry, for example, it takes away very many of the state-based protections for dependent contractors.

This, in the good opposition spokesman’s inimitable style, is, as usual, completely wrong. As I have just noted, the protections for owner-drivers in New South Wales and Victoria, the only two states which have such legislative protection, will be maintained by this legislation—not taken away but maintained. Once again the shadow minister has got it completely wrong. At least this point has been acknowledged by the New South Wales Transport Workers Union secretary, Tony Sheldon. In a media release on 3 May, he said:

... the Independent Contractors Act will maintain protections for NSW owner-drivers.

It would be good if the Australian Labor Party at least talked to their union mates now and again. This lack of attention to detail by the Labor frontbench is why they seem to get it so wrong. So often on workplace relations they get it wrong—they just do not understand the issues, and they do not understand the debate generally.

In conclusion, these bills, together with many of the provisions of the Work Choices legislation, will benefit many small business people and encourage those thinking of going into business. They offer them more freedom and more flexibility. They reduce the administrative burden. They provide safeguards and redress. For many areas in regional and rural Australia, such as my electorate of Cowper, the vast majority of businesses are small businesses. They make up the bulk of the local economy. The more people we can encourage to set up business—whether they operate as a single independent contractor or whether they employ a number of people—the better. In a modern economy, independent contractors are working men and women. Entrepreneurs are working men and women. Jetstar cabin crew are working men and women. Working men and women need to have the freedom to determine conditions that reflect their particular circumstances and which enable them to make the maximum contribution to the economy and to their own families and finances. I commend these bills to the House.

Debate (on motion by Mr Brough) adjourned.