Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Hansard source

I thank honourable senators for their contributions to this debate. In summing up on these two bills, the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, I note that many senators have made a contribution and I will take issue with some of the comments that have been made. It may be helpful if we reflect first on the government’s intention in relation to the bills. The government’s intention and firm commitment is to ensure that those who choose to work as independent contractors may do so without excessive regulation. These bills are built on the tenet that independent contracting arrangements are commercial arrangements and should not be governed by industrial legislation. This belief is reflected in our approach of having stand-alone legislation for contractors rather than including non-employment relations reforms in existing workplace relations legislation.

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

I would now like to reflect on a number of the issues raised during the debate. First of all, there was some talk about the common law definition. The use of the common law definition of an independent contractor will be that which is in the Independent Contractors Bill. There has been some criticism of the bill’s retention of the common law distinction between who is an employee and who is an independent contractor. This criticism has called for the proposed legislation to provide a statutory definition of these terms. The government carefully considered the feasibility of a statutory definition, and had regard to the recommendations of the relevant House of Representatives committee.

The government considers that the common law is the best arbiter of the distinction between an employee and an independent contractor. The common law test looks at the totality of a relationship between a person and their hirer, not just the formal contractual arrangements between the parties. It considers all the relevant circumstances of the particular relationship, making it both flexible and fair. It is highly unlikely that a statutory definition would, as has been claimed by some, reduce the number of disputes over the status of any worker. There will always be some doubt around the fringes of the definition that will result in a court having to determine the true nature of a person’s status.

In retaining the common law definition, the government has rejected the use of the incorporation of the alienation of personal-services income test to determine who is an independent contractor for the purposes of the Independent Contractors Bill. Senator Siewert asked yesterday why the government has not accepted this recommendation. In response to the honourable senator, I say that this test has been developed to address taxation policy needs and is unsuitable for use in the context of this bill. Not only does the self-assessment nature of the alienation of personal services income test leave it open to potential manipulation, but it also requires a hirer to know details of each and every one of a worker’s income sources. This is knowledge that a hirer cannot reasonably be expected to have and demonstrates the impracticality of the use of this test in the context of this bill.

I would also like to respond to Senators Murray and Polley, who have asked why the proposed bill does not recognise so-called dependent contractors. This is, with respect, an academic rather than a legal concept, used to describe a person who provides a service to only one, or primarily one, entity and who should therefore be treated as an employee. However, the dependent contractor concept is fundamentally flawed because it fails to recognise the reality that some contractors are comfortable working for one principal or are engaged on a long-term contract. Furthermore, the concept of dependent contracting has no recognition at common law.

Secondly, let me address the exclusion of state and territory laws that deem independent contractors to be employees. The government opposes laws which deprive a person of the right to choose the manner in which they work. Deeming laws prevent a person from being an independent contractor, irrespective of the way in which they structure their business. They force people operating in prescribed industries to operate as employees. The Independent Contractors Bill will return freedom of choice to all working Australians, giving them the ability to select the working arrangements that best suit their individual needs. The Independent Contractors Bill includes transitional arrangements for workers affected by the state deeming laws at the time the proposed legislation takes effect. People covered by the transitional arrangements will continue to be deemed to be employees for up to three years. However, they may elect to switch off the state laws at any time within that period by executing a written agreement with their principal.

I should note that the Independent Contractors Bill will not override state laws that deem outworkers to be employees. The government recognises that outworkers are a particularly vulnerable section of the Australian labour market who deserve additional protections. On that note, I thank Senator Troeth and her committee for the work that they did. Whilst on the topic of outworkers, I will take a moment to set out the particular protections provided for them under the Independent Contractors Bill.