Grant Chapman (SA, Liberal Party) Share this | Hansard source

The bills we are debating this evening, the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, are landmark pieces of legislation. They will work to complement the suite of new workplace relations laws under Work Choices and were proposed by the Howard government prior to the 2004 federal election in our paper Protecting and supporting independent contractors.

This legislation intends to reflect the principle held by the government that genuine independent contracting relationships should be governed by commercial and not industrial or workplace relations law. It is for this reason that the bill stands apart from the workplace relations legislation we passed earlier in the year. The object of this legislation is to protect the freedom of independent contractors to enter into services contracts. In this we are reminded that everyone’s life opportunities are diminished by restrictions on the freedom to work. We should provide an appropriate framework for individuals to pursue the lifestyle of their choice. This is to be achieved in this legislation through the recognition of independent contracting as a legitimate form of work arrangement that is engaged in on a commercial basis. This legislation prevents interference with the terms of genuine independent contracting arrangements.

Under the principal bill, independent contractors are defined, as has been accepted under common law, as holding a contract for services. They are different from an employee who holds a contract of service. It is through this definition that independent contractors can be broadly defined yet subject to effective protections which an individual could expect under a commercial contract.

Clause 3 sets out the objects of the bill: firstly, to protect the freedom of independent contractors to enter into services contracts; secondly, to recognise independent contracting as a legitimate form of work arrangement that is primarily commercial; and, thirdly, to prevent interference with the terms of genuine independent contracting arrangements. I have to say this legislation is particularly important in the light of moves by state Labor governments—such as the Rann Labor government in my home state of South Australia a year or two ago—to prevent genuine independent contracting arrangements from coming to fruition and force people back into an employer-employee relationship which they did not want.

The ideas relevant to this legislation were brought down in the International Labour Organisation recommendation entitled ‘National policy of protection for workers in an employment relationship’, which was handed down in June of this year. In spite of the fact that independent contractors are not formally recognised by the International Labour Organisation, it has responded to the challenges presented by the growth in independent contracting. It effectively has endorsed the status of independent contractors by declaring that employment law should not interfere in the commercial relationship. Clause 8 of the ILO recommendation states:

National policy for protection of workers in an employment relationship should not interfere with true civil and commercial relationships, while at the same time ensuring that individuals in an employment relationship have the protection they are due.

This recommendation, from a well-known arm of the United Nations, lends legal credence to the argument that the rights of independent contractors are worthy of being guaranteed under specific laws. It enshrines as customary what this legislation sets out to achieve: the right of all individuals to pursue working relationships as they please. The recommendation by the ILO is to be expected, given the growth of independent contractors both in the Australian economy and, indeed, across the world. The Productivity Commission estimates that independent contractors currently account for somewhere between 800,000 and maybe as high as 1.9 million people in our workforce. The work of independent contractors contributes to a range of strategic industries. Workers in the transport, textile, clothing and footwear, construction and information technology industries will be affected beneficially by the implementation of this legislation, and the industries in which they operate will become as productive as possible following the implementation of the bill.

All independent contractors will be engaged under transparent agreements that will protect their interests, preserve their rights and penalise the dishonesty or misfeasance of any party. The bills will introduce a single piece of legislation for independent contractors across the nation, supplanting the inconsistencies that currently exist under state laws. These distinctions mean that drivers in some industries are employees while in others they are contractors. One who installs window blinds may be considered an employee whereas one who installs a bathroom sink may be a contractor. The Howard government believes these arbitrary distinctions between industries and particular forms of work are a disincentive to entrepreneurship, restricting what the employee may rightly expect of themselves. Following the implementation of a three-year awareness program, the affected individuals will be required to become independent contractors or be defined as employees before the changes are fully implemented. This will encourage those who provide independent services to expand their operations if they choose, while not forcing their hand. It will provide a source of dynamism to the Australian economy that ensures individuals are able to pursue their lifestyle and working ambitions as they choose.

The Labor opposition has raised concerns that retaining the common-law definition of ‘independent contractor’ may lead to some workers being unfairly distinguished as contractors. Certainly, the definition of ‘independent contractor’ remains broad in the bill—and appropriately so—but within that broad definition appropriate safeguards have also been provided. In state deeming provisions being overridden, independent contractors are protected from the provision of sham contracting arrangements. The Office of Workplace Services will be empowered to ensure employers do not disguise the role of an employee as that of an independent contractor in order to avoid their legal obligations. In addition, there will be penalties for employers who knowingly make false statements in order to persuade employees to become independent contractors. Hence, independent contractors will be only those who are legitimately engaged as such from the outset and, in turn, as the economic climate requires.

The dynamism that will be underpinned by this amendment will ensure Australia remains at an economic optimum and internationally competitive in an economy increasingly requiring the work of independent contractors, given the developments in technology. The expectations that are placed on parties within services contracts will be fair and clarified and vociferously enforced by the Office of Workplace Services. The current regime of state based anti-avoidance measures that compel contractors to undertake the work for which they are contracted will be abolished. This follows the intention of the government, as was set out under Work Choices, to provide greater choice for all individuals to pursue the working arrangements most suitable for them.

An exception under the provisions of this legislation has been made for certain owner-drivers and also for textile, clothing and footwear outworkers, who are, due to the nature of their industries, required to fulfil contractual arrangements because businesses have to guarantee that their deadlines will be met. In addition, these same outworkers will be guaranteed minimum wages and conditions across the country, as they are seen—by some—as particularly disadvantaged in terms of their skills and, in the case of drivers, their transient lifestyle. This, in my view, is a contentious aspect of the legislation. I certainly welcome the minister’s commitment to an inquiry next into whether owner-drivers in New South Wales and Victoria should remain excluded from this independent contractor legislation or whether they should come under its umbrella. It is my belief that they should operate under this legislation and I hope that that proves to be the outcome of the promised inquiry. In my view, it would have been preferable for their exclusion from the provisions of this bill to have been the subject of a sunset clause, after which they would have come under its provisions unless further legislation removed that sunset provision following the promised inquiry. The legislative procedure relating to the inquiry should have been reversed, with further legislation required to exclude New South Wales and Victorian owner-drivers from its provisions, rather than, as will be the case, further legislation being required to include them.

Despite this shortcoming, I believe that the bill is a major step forward and that it will ensure that contractors have the capacity to flourish. It is essential to overcome the inconsistencies of state laws which unfairly place contractors under industrial law and which undermine the potential of our economy and of the individuals within it to prosper. This amendment is a clear and succinct response to the growing role of independent contractors in the labour market. It enshrines in law the right of individuals to engage in contracts for their services. All individuals undertaking the same service should be subject to the same rights and obligations. Therefore, as I said, the legislation is a major step forward—despite that particular shortcoming which I addressed—and on that basis I commend the bill to the Senate.