Forsyth, Anthony --- "The 2006 Independent Contractors Legislation: An Opportunity Missed" [2007] FedLawRw 13; (2007) 35(2) Federal Law Review 327
[*] BJuris/LLB (Hons) (Monash); Grad Dip (Lab Rels Law) (Melb); PhD (Melb); Senior Lecturer and Director of the Corporate Law and Accountability Research Group, Department of Business Law and Taxation, Monash University. Thanks to Carolyn Sutherland for her comments on a draft of this article, and to the Federal Law Review's anonymous referees for their comments and suggestions; any errors are my responsibility.
[1] In doing so, the Work Choices Act's reliance on the 'corporations power' in s 51(xx) of the Australian Constitution was upheld as constitutionally valid by the High Court of Australia in New South Wales and Others v Commonwealth [2006] HCA 52; (2006) 231 ALR 1 ('Work Choices Case'); see Andrew Stewart and George Williams, Work Choices: What the High Court Said (2007).
[2] Further details regarding these and other aspects of the Work Choices Act (for example, changes to the awards system, and new restrictions on industrial action and union activity) may be found in the special issues of the following journals: (2006) 19 (2) Australian Journal of Labour Law; (2006) 16 (2) Economic and Labour Relations Review.
[3] For convenience, independent contractors will generally be referred to herein as 'contractors'.
[4] Productivity Commission, The Role of Non-Traditional Work in the Australian Labour Market (2006).
[5] Ibid; see also Matthew Waite and Lou Will, 'Self-Employed Contractors: Incidence and Characteristics' (Productivity Commission Staff Research Paper, 2001).
[6] See, eg, Ian Watson et al, Fragmented Futures: New Challenges in Working Life (2003) ch 6.
[7] Ibid 64, 71–2.
[8] Explanatory Memorandum, Independent Contractors Bill 2006 (Cth) ('Explanatory Memorandum of the IC Bill') 6.
[9] House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, Parliament of Australia, Making it Work: Inquiry into Independent Contracting and Labour Hire Arrangements (2005); see further Joellen Riley, 'A Fair Deal for the Entrepreneurial Worker? Self-Employment and Independent Contracting Post Work Choices' (2006) 19 Australian Journal of Labour Law 246, 249–50.
[10] See, eg, WR Act ss 356 and 515(1)(g)–(h) (introduced by the Work Choices Act); Workplace Relations Regulations 2006 (Cth) reg 2.8.5(1)(h)–(i).
[11] See Riley, above n 9, 250.
[12] See Senate Employment, Workplace Relations and Education Legislation Committee, Parliament of Australia, Provisions of the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006 (2006).
[13] The original bill for the Amendment Act contained provisions that were complementary to the proposed provisions regarding independent contractors in the bill for the IC Act. However, in November 2006, a series of broader proposed amendments to the WR Act was added to the bill for the Amendment Act, and these formed part of the bill as finally passed by Parliament: see Kevin Andrews, Minister for Employment and Workplace Relations, 'Amendments to Workplace Relations Legislation and Regulations' (Media Release, 13 November 2006). Only those provisions of the Amendment Act relating to independent contractors are discussed in this article.
[14] See IC Act ss 3(1)–(2); Commonwealth of Australia, Parliamentary Debates, House of Representatives, 22 June 2006 (Kevin Andrews, Minister for Employment and Workplace Relations) ('Workplace Relations Minister's Second Reading Speech on the IC Bill'); Explanatory Memorandum of the IC Bill, 29.
[15] IC Act s 5(1); note also that under s 5(4), '[a] condition or collateral arrangement that relates to a services contract is taken to be part of that services contract'.
[16] Within the meaning of s 51(xx) of the Australian Constitution.
[18] Following the Work Choices Act amendments.
[19] Following the High Court's decision in the Work Choices Case (see above n 1), to the extent that the IC Act applies to constitutional corporations in reliance on the corporations power in the Australian Constitution, it is likely to be considered a valid exercise of that power.
[20] The term 'contract for services' is not defined in the IC Act. However, the Explanatory Memorandum of the IC Bill, 30, states that: '[i]t is intended that the term "contract for services" is to take its common law meaning.'
[21] As set out in the leading High Court authorities, Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 and Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21; see further the discussions in Breen Creighton and Andrew Stewart, Labour Law (4th ed, 2005) 284–93; Rosemary Owens and Joellen Riley, The Law of Work (2007) 136–44; Andrew Stewart, Understanding Independent Contractors (2007) ch 2.
[22] See, eg, Shirley Murphy, Independent Contractors Bill — Is there Now Certainty for Employers? (2006) WorkplaceInfo <http://www.workplaceinfo.com.au> at 23 July 2007.
[23] See Creighton and Stewart, above n 21, 291–2; Andrew Stewart, 'Redefining Employment? Meeting the Challenge of Contract and Agency Labour' (2002) 15 Australian Journal of Labour Law 235, especially 242–51.
[24] See, eg, Owens and Riley, above n 21, 145–6, 173–81; Joellen Riley, Employee Protection at Common Law (2005) 9–11. These issues are considered further in section 6 of this article, below.
[25] House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, above n 9, 56–66 (recommendations 2–4).
[26] Workplace Relations Minister's Second Reading Speech on the IC Bill; the Minister explained that the government rejected the personal services income approach as one that 'has been developed to address the specific requirements of taxation law', and was 'easily manipulated to achieve the desired outcome if a worker is seeking to be classified as an independent contractor rather than an employee'.
[27] Note also that s 9(2) provides that a ground listed in s 9(1) is not an unfairness ground to the extent that it is defined not to be a workplace relations matter under s 8(2) (see below); the effect of this is that the exclusion under s 7(1) of State and Territory laws providing for the review of services contracts on grounds of unfairness etc, does not apply to the extent that those laws provide for the review of contracts in respect of issues that are specified not to be workplace relations matters in s 8(2): see Explanatory Memorandum of the IC Bill, 37.
[28] The other workplace relations matters defined in s 8(1) are the making, enforcing or terminating of agreements (other than employment contracts) that set down employment terms and conditions, disputes between employers and employees and dispute resolution, industrial action, any other matter relating to employees and employers dealt with by the WR Act or a State or Territory industrial law, and any other matter specified in regulations.
[29] The other matters specified in s 8(2) as not being workplace relations matters are child labour, public holidays (except rates of pay for public holiday work), deductions from wages, industrial action affecting essential services, jury service, professional or trade regulation, consumer protection (including laws protecting small businesses from the unconscionable conduct of suppliers of goods and services – see further Supplementary Explanatory Memorandum, Independent Contractors Bill 2006 (Cth) ('Supplementary Explanatory Memorandum of the IC Bill') [20]–[23]), taxation, and any other matter specified in regulations.
[30] See further Independent Contractors Regulations 2007 (Cth) ('IC Regulations') reg 4, discussed in Stewart, above n 21, 28–9.
[31] Explanatory Memorandum of the IC Bill, 37.
[32] Explanatory Memorandum of the IC Bill, 32.
[33] Ibid 33.
[34] Ibid.
[35] Ibid 34.
[36] Supplementary Explanatory Memorandum of the IC Bill, [1]–[8].
[37] See IC Act s 7(2), discussed above.
[38] Supplementary Explanatory Memorandum of the IC Bill, [12].
[39] Ibid [41]–[47]. The outworker provisions of the original bill for the IC Act were the subject of considerable attention in the Senate Committee Inquiry into the bill. The government subsequently adopted the Committee's unanimous recommendation to remove proposed provisions that were considered to provide inadequate protection to outworkers, and (generally) leave this as a matter for State and Territory regulation: see Senate Employment, Workplace Relations and Education Legislation Committee, above n 12, 1–4 (Report of the Whole Committee); Laura Tingle and Mark Skulley, 'A Stitch in Time for Clothing Outworkers', The Australian Financial Review (Sydney), 28 August 2006, 7.
[40] See IC Act s 7(2), discussed above.
[41] Explanatory Memorandum of the IC Bill, 7.
[42] Ibid.
[43] Ibid; Workplace Relations Minister's Second Reading Speech on the IC Bill.
[44] See Owner Drivers (Contracts and Disputes) Act 2007 (WA).
[45] The federal Labor Opposition has introduced a bill into the federal Parliament, seeking to exempt the WA legislation from the federal override in the same way that the Victorian and NSW owner drivers' legislation are exempted: see Independent Contractors Amendment Bill 2007 (Cth).
[46] Workplace Relations Minister's Second Reading Speech on the IC Bill.
[47] See, eg, Adrian Rollins, 'Tuckey Revs up Andrews over Drivers', The Australian Financial Review (Sydney), 18 August 2006, 9.
[48] See the full list in IC Act s 8(2), summarised above.
[49] As the latter does not constitute one of the 'workplace relations matters' within the meaning of s 8(1) of the IC Act, and is in fact excluded from the definition of such matters by s 8(2)(d); this example is taken from Explanatory Memorandum of the IC Bill, 36.
[50] The following discussion is based on Explanatory Memorandum of the IC Bill, 52–4.
[51] That is, 1 March 2007; see section 1 of this article, above.
[52] However, note the position in respect of 'continuation contracts', discussed below.
[53] That is, 28 February 2010.
[54] Reform opt-in agreements are discussed further below.
[55] See the excruciatingly complex arrangements set out in IC Act s 35.
[59] These provisions are consequentially repealed by sch 2, pt 2, Item 7 of the Amendment Act.
[60] Subject to the exceptions outlined in pt 2 of the IC Act, summarised in section 3 of this article, above.
[61] See above n 1, and accompanying text.
[62] Workplace Relations Minister's Second Reading Speech on the IC Bill.
[63] See, eg, WR Act s 16(1)(d).
[64] As defined in IC Act s 5(1), discussed above.
[65] That is, only if the work covered by the contract is mainly performed by a director of the body corporate, or a family member of a director (IC Act s 11(1)(b)); therefore, incorporated contractors will generally only be able to utilise the federal services contract review process where they operate a small family business: see Explanatory Memorandum of the IC Bill, 38.
[68] Supplementary Explanatory Memorandum of the IC Bill, [29].
[69] Explanatory Memorandum of the IC Bill, 39; Workplace Relations Minister's Second Reading Speech on the IC Bill. In 2002, an income cap of $200,000 per annum was introduced to restrict unfair contract claims under s 106 of the NSW IR Act: see Creighton and Stewart, above n 21, 383.
[70] See section 3 of this article, above.
[71] Explanatory Memorandum of the IC Bill, 39; see also Supplementary Explanatory Memorandum of the IC Bill, [34].
[72] Section 39 of the IC Act makes it clear that such an application can be made even in respect of a contract entered into before the legislation came into effect. On the other hand, under reg 5 of the IC Regulations, no application can be brought after 12 months from the end of the contract (unless a court decides there are exceptional circumstances).
[73] Explanatory Memorandum of the IC Bill, 38.
[74] Given that the definition of services contracts extends to conditions or collateral arrangements (see above n 15), matters covered by separate agreement(s) to the 'main' contract could also be the subject of an application for contract review; see further Stewart, above n 21, 67–8.
[76] A provision requiring a court to have regard also to the terms and remuneration provided under other services contracts for the performance of similar work in the relevant industry was deleted from the original bill for the IC Act. The omission of that provision means that a court would be permitted, but not required, to consider this factor in reviewing a services contract for harshness or unfairness; see Supplementary Explanatory Memorandum of the IC Bill, [38].
[77] IC Act s 12(3); see also Supplementary Explanatory Memorandum of the IC Bill, [26]–[28]; see further below.
[79] IC Act s 16(2); Explanatory Memorandum of the IC Bill, 41.
[82] See the legislative note to IC Act s 16(6).
[83] See the legislative note to IC Act s 15(4).
[85] That is, 1 March 2007; see section 1 of this article, above.
[86] That is, the federal unfair contracts jurisdiction that has been replaced by pt 3 of the IC Act; see above n 59 and accompanying text.
[87] Section 106.
[88] Section 276.
[89] Although, the author notes the observation, by one of the anonymous referees of this article, that the term 'unconscionability' has been given a constrained interpretation by the High Court (in the trade practices context) in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51; see further Riley, above n 24, 157–60.
[90] Creighton and Stewart, above n 21, 379.
[91] This is expressly provided for in s 12(3) of the IC Act, reflecting the position established by relevant cases under the former WR Act unfair contracts provisions: see Supplementary Explanatory Memorandum of the IC Bill, [26]–[28]; Creighton and Stewart, above n 21, 384–5; Stewart, above n 21, 69.
[92] Creighton and Stewart, above n 21, 381.
[93] See, eg, the cases discussed in Creighton and Stewart, above n 21, 380–2; Owens and Riley, above n 21, 210–11; for further detail, see Jeffrey Phillips and Michael Tooma, The Law of Unfair Contracts in NSW: An Examination of Section 106 of the Industrial Relations Act 1996 (NSW) (2004); Joellen Riley, 'Regulating for Fair Dealing in Work Contracts: A New South Wales Approach' (2007) 36 Industrial Law Journal 19.
[94] See, eg, Explanatory Memorandum of the IC Bill, 7–9.
[95] Creighton and Stewart, above n 21, 379.
[96] See, eg, Buchmueller v Allied Express Transport Pty Ltd [1999] FCA 319; (1999) 88 IR 465; see further Stewart, above n 21, 70.
[97] See the discussion of the constitutional coverage of the IC Act in section 2 of this article, above.
[98] Workplace Relations Minister's Second Reading Speech on the IC Bill, 8.
[99] Explanatory Memorandum, Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006 (Cth) ('Explanatory Memorandum of the Amendment Bill') 5.
[100] Notes to relevant provisions of the new pt 22 also provide that 'employer' and 'employment' have the meanings given by ss 6(1) and 7(1) of the WR Act. This provides the constitutional link for determining to whom pt 22 applies: see ibid; that is, it applies to all employers, and their employees and contractors, covered by the WR Act and the IC Act (see section 2 of this article, above).
[101] Explanatory Memorandum of the IC Bill, 10; for an examination of strategies adopted by employers in this respect, see Stewart, above n 23, 251–6.
[102] Supplementary Explanatory Memorandum of the IC Bill.
[103] Explanatory Memorandum of the Amendment Bill, 5.
[104] Explanatory Memorandum of the Amendment Bill, 7. However, the reverse onus will not apply in an application for an interim injunction under s 902; see WR Act s 902(3); Supplementary Explanatory Memorandum of the IC Bill.
[105] For example, a misleading statement as to the taxation benefits that a worker might receive as a contractor: see Stewart, above n 21, 20.
[107] WR Act ss 904(1) and 905.
[108] At the time of writing, the author is aware of one legal proceeding instituted by the OWS, seeking the imposition of penalties against an employer for alleged breach of the s 900 prohibition on misrepresenting an employment relationship as an independent contracting arrangement: see OWS, 'OWS Court Action to Protect Young Worker & Deter 'Sham Contracts'', (Media Release, 25 May 2007).
[110] Explanatory Memorandum of the Amendment Bill, 5–7.
[113] See the discussion in section 2 of this article, above.
[114] See, eg, Riley, above n 9, 257–8; Stewart, above n 21, 19, 21.
[115] See, eg, Cowra Abattoir Becomes Work Choices Battleground (2006) Workplace Express <http://www.workplaceexpress.com.au> at 4 April 2006; Editorial, 'Work Choices Law Faces the First, Crucial Tests of Fairness', The Age (Melbourne), 4 April 2006, 14. The term 'case' is used rather loosely here to describe what occurred at Cowra Abattoir — that is, this episode did not lead to any court or tribunal decision, but rather, an investigation and brief report by the OWS (see further below).
[116] The Work Choices Act changes included exempting employers with 100 employees or less from exposure to unfair dismissal claims, and precluding such claims where they are related to 'genuine operational reasons' or where the dismissal occurs in the first six months of employment: see, eg, Marilyn Pittard, 'Back to the Future: Unjust Termination of Employment under the Work Choices Legislation' (2006) 19 Australian Journal of Labour Law 225.
[117] These provisions form part of the 'freedom of association' laws, now found in pt 16 of the WR Act; for discussion of how these laws were affected by the Work Choices Act amendments, see Anthony Forsyth and Carolyn Sutherland, 'From 'Uncharted Seas' to 'Stormy Waters': How will Trade Unions Fare under the Work Choices Legislation?' (2006) 16 The Economic and Labour Relations Review 215, 227–9.
[118] OWS, 'Summary of the Investigation into Alleged Breaches of the Workplace Relations Act 1996 at Cowra Abattoir', (Media Release, 7 July 2006); for a discussion (and a critique of both the law and the process through which it was applied in this case), see John Howe and Jill Murray, What the Cowra Decision Means for Industrial Relations (2006) Australian Policy Online <http://www.apo.org.au/webboard/results.chtml?filename_num=89350> at 2 August 2006.
[119] See, eg, Andrew Stewart, 'A Simple Plan for Reform? The Problem of Complexity in Workplace Regulation' (2005) 31 Australian Bulletin of Labour 210.
[120] Stewart, above n 21, 22; see also 30–1, 132–4.
[121] See, eg, Commonwealth of Australia, WorkChoices: A New Workplace Relations System (2005); cf Stewart, above n 119.
[122] See Commonwealth of Australia, above n 121.
[123] Explanatory Memorandum of the IC Bill, 10; see also Workplace Relations Minister's Second Reading Speech on the IC Bill.
[124] This is often the case in respect of 'dependent' contractors: see above n 7 and accompanying text; cf House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, above n 9, 12–13.
[125] See, eg, Creighton and Stewart, above n 21, 5–10; Hugh Collins, 'Regulating the Employment Relation for Competitiveness' (2001) 30 Industrial Law Journal 17.
[126] See Owens and Riley, above n 21, 133–6.
[127] See section 1 above; see also Stewart, above n 23, 238–9, 260–1; Commission of the European Communities, Green Paper: Modernising Labour Law to Meet the Challenges of the 21st Century (COM(2006) 708 final, 2006) 10.
[128] See, eg, Owens and Riley, above n 21, 173–5, 178.
[129] See Stewart, above n 23, 269, (for further detail on this proposal) 268–75, note also 264–8, where the author examines several other policy responses in Australia and internationally. Stewart's proposed re-definition of the boundaries between employees and independent contractors has received support from the Australian Democrats in their responses to various legislative proposals put forward by the government in recent years: see, eg, Senate Employment, Workplace Relations and Education Legislation Committee, above n 12, (Australian Democrats' Minority Report) 29–31, (Attachments 1 and 2) 40–2.
[130] See, eg, Owens and Riley, above n 21, 178–9.
[131] See Commission of the European Communities, above n 127, 11–12.
[132] On present indications it seems that the federal Labor Opposition does not intend to address the employee-contractor distinction in any meaningful way either: see 'ICA Likes What it Hears from Labor' (2007) 1593 Workforce 8, reporting that the relevant Labor spokesperson has said that it has no plans to change the current common law test. Labor has announced only that (in a significant shift from its initial opposition to the IC Act) it intends to retain the regulation of genuine independent contractors through commercial rather than industrial law, and protect them from sham arrangements, if it wins the federal election due to be held in late 2007: see Adrian Rollins, 'Independence Day Arrives', The Australian Financial Review (Sydney), 30 April 2007, 5; Brad Norington, 'ALP Wins on Contractors', The Australian (Canberra), 14 May 2007, 2; Patricia Karvelas, 'Applause for Labor IR Pledge', The Australian (Canberra), 6 July 2007, 2.