Kevin Andrews (Menzies, Liberal Party, Minister Assisting the Prime Minister for the Public Service) Share this | Link to this | Hansard source

In summing up the debate on the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, I thank members for the contributions they have made in this chamber.

To briefly recap, the bills before the House reflect the government’s intention and commitment to ensuring that independent contracting is encouraged in Australia without excessive regulation. These bills are built on the tenet that genuine independent contracting relationships should be governed by commercial, not industrial, law. This is reflected in our approach of having a stand-alone Independent Contractors Bill rather than including the reforms in workplace relations legislation.

The bills will, firstly, recognise and protect the unique position of independent contractors in the Australian workplace; secondly, override state laws which deem certain categories of independent contractor to be employees for the purposes of state industrial relations legislation; thirdly, maintain existing specific protections under state legislation for owner-drivers in the road transport industry; fourthly, maintain existing specific protections under state legislation for contracted outworkers in the textile, clothing and footwear industry; fifthly, replace existing state unfair contracts jurisdictions with a single federal unfair contracts jurisdiction; and, lastly, protect genuine employees from sham contracting arrangements and from threatening or deceptive behaviour aimed at making them change their status to independent contractors. The passage of the bills will be accompanied by funding of some $15 million over four years to support enforcement and education activities.

I would like to address some of the matters raised during the debate. Firstly, I turn to common-law definition. A number of opposition speakers complained about the fact that the Independent Contractors Bill employs the common-law definition of who is or is not an independent contractor. In particular, the member for Hotham, who is in the chamber at the moment, would have the House believe that the common-law test has become increasingly blurred, leading to arbitrary and unpredictable outcomes. This, I posit, could not be further from reality.

The government considers that the common-law test is the best arbiter of the distinction between an employee and an independent contractor. In applying the common-law test, courts look at the totality of the relationship between a worker and their hirer, not just the formal contractual arrangements.

This ability to consider all the circumstances of a case makes the common-law test both flexible and fair. Any statutory definition would lack the flexibility of the common law. It is highly unlikely that the statutory definition would, as it is claimed by some, reduce the number of disputes over the status of the worker. There will always be some doubt around the fringes of a definition that will result in courts having to determine the true nature of a person’s status.

In particular, the government opposes the use of the alienation of personal services income test to determine who is an independent contractor for the purposes of the Independent Contractors Bill. This test has been designed to address taxation policy considerations and should not simply be transposed into the legislation for other purposes. Further, the self-assessment nature of the test leaves it open to manipulation, thereby preventing it from providing the level of certainty alleged by some.

Secondly, I turn to the overriding of state deeming laws. A number of opposition speakers opposed the overriding of state deeming laws proposed in the Independent Contractors Bill. In particular, the member for Perth, in his speech, in effect argued for the retention of the New South Wales laws that deem unregulated categories of workers such as milk vendors, carpenters, bricklayers, blind fitters and bread vendors as employees.

The government opposes state and territory laws which deprive a worker of the right to choose the manner in which they work. Deeming laws prevent a person from being an independent contractor. They force all workers in particular industries to operate as employees. The Independent Contractors Bill will override state and territory deeming laws and give people the choice as to whether they want to work as an independent contractor or an employee.

The Independent Contractors Bill includes transitional provisions for workers affected by deeming provisions at the time the proposed legislation commences. These people will continue to be deemed as employees for up to three years. However, they may elect to switch off the state deeming laws at any time within that transitional period.

However, the Independent Contractors Bill will not override deeming laws with respect to outworkers. Similarly, the transitional provisions will have no application with respect to these workers. Outworkers are widely recognised as an especially vulnerable section of the Australian labour market who require additional protections.

I turn to the outworker protections. A number of members opposite have asserted that the Independent Contractors Bill undermines the protections that apply to outworkers in the textile, clothing and footwear industry. Let me reiterate the government’s position on outworkers. The government does not intend the Independent Contractors Bill to in any way interfere with state and territory laws that afford protections to outworkers in the TCF industry.

To this end, the government agreed to my department discussing with the Textile Clothing and Footwear Union and FairWear the detail of draft amendments to make the preservation of existing state outworker laws as clear and effective as possible. The government is considering these amendments and, in that context, we are considering also the report of the Senate committee inquiry into this bill, chaired by Senator Troeth. If there are amendments to be moved, we will look to move any amendments in the Senate.

I also want to respond to the assertions of a number of members opposite about the effect of part 4 of the Independent Contractors Bill. These assertions betray their lack of understanding of the effect of part 4. Part 4 does not remove entitlements from outworkers. It simply provides for a default minimum remuneration entitlement for outworkers where their rate of pay is not already set by a state or territory law or an instrument made under such a law. Part 4 would apply in addition to any other state and territory protections, as these laws will be saved by clause 7(2)(a) of the bill.

I now turn to sham arrangements. The member for Perth has alleged that the sham arrangement provisions are in themselves shams. He said in the House on 17 August this year that the bill:

... 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 ...

This is not the case. While the government fully supports genuine independent contracting arrangements, it will not tolerate the use of sham arrangements and considers that people found to have knowingly disguised an employment relationship in this way should be subject to penalties. The government has demonstrated this by proposing four new penalty provisions. These would apply to employers who knowingly seek to disguise employment relationships as independent contracting arrangements. They would also apply to employers who deceive employees in order that they become independent contractors or who dismiss or threaten to dismiss a person for the purpose of engaging them as an independent contractor to perform substantially the same work. An employer who is found to be in breach of any of these provisions can be fined up to $33,000.

These penalties would be able to be sought in either the Federal Court or the Federal Magistrates Court by the employee, a workplace inspector or, with the employee’s consent, their union. Extra funding of $6.2 million was allocated to the Office of Workplace Services in the last federal budget to enable the office to undertake this important compliance function.

I turn now to the unfair contracts jurisdiction. Independent contracting is a commercial arrangement which should not be regulated by workplace relations legislation which focuses on the employee rather than on commercial considerations. The government considers that state unfair contracts jurisdictions have gone too far in attempting to rewrite commercial contracts which have been validly entered into by the parties. In New South Wales, for example, the Industrial Relations Commission can rewrite commercial contracts applying to independent contractors even where the terms of a contract are fair when entered into. This is totally unacceptable because it creates commercial uncertainty.

To address these concerns, the Independent Contractors Bill will, as far as constitutionally possible, override existing state unfair contracts jurisdictions and replace them with a nationally consistent jurisdiction. This jurisdiction will more appropriately focus on the commercial considerations when determining if a contract is unfair. By introducing one national system which covers independent contractors, confusion and inconsistency which arise from the duplication of state and federal laws will be eliminated.

This federal unfair contracts jurisdiction will become more accessible to parties by, firstly, allowing eligible incorporated independent contractors, such as small family-run businesses, access to the unfair contracts scheme for the first time. Secondly, it will establish concurrent jurisdiction in the Federal Magistrates Court and the Federal Court. This will enable parties to have a choice of jurisdiction, which will mean applications will be handled with less delay and expense. Thirdly, it will limit the requirement for parties to pay costs to another party except where they have instituted an unfair contracts claim vexatiously.

The federal unfair contracts provisions therefore strike the right balance between the overly prescriptive and complex New South Wales and Queensland unfair contracts provisions on the one hand and providing an unfair contracts scheme for the remaining states and territories which currently do not have their own unfair contracts jurisdictions on the other.

It has been alleged that most workers would be unable to afford the cost of commencing an unfair contracts proceeding or a sham penalty proceeding under the Independent Contractors Bill given the high fees that apply in the Federal Court and the Federal Magistrates Court. These allegations are unfounded. Under the Independent Contractors Bill, the cost of bringing an unfair contracts application will be reduced. Based on the current fee structure in the New South Wales Industrial Relations Commission, it would cost a worker $1,916 to file an unfair contracts application and have the matter set down for a one-day hearing in New South Wales. The same worker could file an application under the new unfair contracts provisions in the Independent Contractors Bill in the Federal Magistrates Court and have it set down for hearing at a cost of just $668—roughly one-third of the amount payable in the New South Wales jurisdiction.

Moreover, the Federal Magistrates Court is prevented by clause 17 of the bill from making cost orders, except in cases where proceedings are instituted vexatiously. By conferring the federal unfair contracts jurisdiction on the Federal Magistrates Court, the government has made this jurisdiction more accessible to workers.

I turn to the review of owner-driver laws. I note that a number of opposition speakers—in particular, the members for Perth, Throsby and Blaxland—have mentioned the government’s decision to review state owner-driver laws in 2007. As the government has previously announced, the Independent Contractors Bill will maintain the status quo for New South Wales and Victorian state owner-driver laws at this time. The government recognises the historical bipartisan support which has existed in New South Wales for some sectors of the owner-driver industry. As such, the bill will not override the existing protections for owner-drivers in New South Wales and Victoria, the only two states with such legislation.

Some members opposite have tried to misrepresent the bill by claiming that it treats state owner-driver laws differently. This is not the case. All existing state owner-driver laws are preserved by the bill. The proposed legislation obviously cannot preserve legislation that does not exist, and this is the reason that only the New South Wales and Victorian laws are named in part 2 of the bill. Let me be clear about the extent of the savings for owner-driver laws: it is the government’s intention to review state owner-driver laws in 2007. The purpose of the review will be to seek to rationalise these laws with the aim of achieving national consistency in this regard. I commend the bill to the House.

Question put:

That the words proposed to be omitted (Mr Stephen Smith’s amendment) stand part of the question.