Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share 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.

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