Gavin Marshall (Victoria, Australian Labor Party) Share this | Hansard source

I also rise to speak in this second reading debate on the Independent Contractors Bill 2006 and the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. Let me, at the outset, commend Senator Hutchins on his contribution to this debate. It comes from practical experience and an understanding of the way working relationships operate in the workplace and how this quite evil and pernicious legislation will be used to drive down the wages and conditions of working Australians. It seeks to follow the false mantra of this government, which constantly confuses productivity with profitability, because all that can be demonstrated in this legislation is a way to reduce the wages costs for employers, with no measurable offsets to improve productivity. It is simply a cost-cutting exercise to increase profits.

The principal bill, the Independent Contractors Bill 2006, seeks to exclude state and territory laws which deem as employees many independent contractors entering commercial agreements with employers. In the government’s view these state laws interfere with rights, entitlements, obligations and liabilities of parties to genuine independent contracting arrangements.

Most of the other measures contained in the principal bill are qualifications to the overriding provisions. These include the introduction of transition arrangements for those workers previously deemed by state and territory laws to be employees but who would now be independent contractors, and the retention of existing protections for outworkers and road transport owner-drivers.

The principal bill also enables application to be made to a Federal Court for the review of services contracts on the grounds that they are harsh and unfair. At the outset, that is what the government has sought to do with this bill. We do not have a problem with genuine contracting. Where there is a genuine need, a genuine contractual arrangement that forms genuine contracting is not a difficulty for us. But this legislation allows genuine employees from genuine employee-employer relationships to be established as so-called independent contractors. The policy aim of the Independent Contractor Bill 2006 is to turn as many employees as possible into contractors. It seeks to recognise independent contracts as bona fide workplace relationships which, in effect, turn natural employees into contractors. This places the worker at risk of reduced or even removed employee entitlements and conditions.

I heard Senator Troeth today assure the Senate that the Independent Contractors Bill did not affect taxation legislation, superannuation legislation, workers compensation legislation or occupational health and safety legislation. But Senator Troeth simply misses the point. While the bill does not interfere with those legislative requirements, it does enable people to be removed from an employee relationship into an independent contractor relationship, which removes the obligation of the employer to provide those provisions. It puts the onus back on the independent contractor themselves to provide those provisions and, more often than not, in circumstances where they are then simply not applied.

There are so many examples for those of us who live in the real world where people have been forced into independent contracting arrangements against their will, because it is cheaper for the employer to deem them as independent contractors, where they simply do not cover themselves for workers compensation; they do not apply any occupational health and safety standards to their own workplace, because they are the ones who have to provide it; they do not pay themselves superannuation; and they do not provide for their retirement incomes and, thus, that burden ultimately is transferred back onto the rest of the community.

Senator Hutchins mentioned this—and following up on what Senator Troeth said earlier: it is absolutely true that the taxation legislation will not view people that have been deemed independent contractors under this legislation as independent contractors. The Taxation Office has a very different arrangement. It is an arrangement that is much more in the real world and understands what is happening in employee-employer relationships out in workplace. The Taxation Office certainly will not deem most of these non-genuine independent contractual arrangements as independent contracting arrangements. It will simply deem them as employees and tax them accordingly. I guess that demonstrates, probably as much as anything else, the flaws in this bill.

It is the view of the government and employer organisations that share a close association with this government that industrial relations are greatly simplified by arrangements that put employees on to AWAs—Australian workplace agreements—or turn them into contractors. The Work Choices legislation is intended to encourage the first of these trends, and the Independent Contractors Bill is intended to encourage the later development. It is part of an ideological attack on organised labour in this country; that is what this is really about.

I heard Senator Murray earlier talk about what the government had stated as its objectives in terms of this bill. He went through a very detailed and comprehensive argument demonstrating how the government had completely failed to deliver on any of those stated objectives of the bill. The reason the government has failed to do that is that the bill is not about achieving those stated objectives; it is about taking people off good employment conditions where they can organise and provide for themselves decent working conditions and decent wages.

We have seen already, with the introduction of Work Choices and AWAs, massively high percentages of those agreements remove penalty rates, shift loadings, annual leave loadings, public holidays and much more. That has been spoken about a lot in this place already. In terms of deeming people as independent contractors, we do not even see the basic fair pay condition standard that the government has set as fair pay; it would be better described as the ‘low-pay standard’. But even with those low-pay standards that the government has legislated for—those five basic minimum conditions—if you are deemed and forced into an independent contracting arrangement that is not genuine, there is no standard whatsoever. Under an independent contracting arrangement, you can be paid less than the guaranteed minimum wage. How much less? Technically, down to zero—and that is absolutely legal.

Do you need to have annual leave provisions if you are an independent contractor? No, not at all. Do you need to have superannuation provisions if you are an independent contractor? Not under any requirement of this piece of legislation before us today. Do you need to have sick leave? You do not. Do you need to be able to demonstrate that you have some understanding and knowledge before you are put into one of these employment arrangements? Of course not.

We have seen examples where schoolchildren have been declared independent contractors when they are working as vendor sellers at football games, with no provision for safeguards of any minimum standards. It is pure exploitation. This seems to be the underlying philosophy that this government wants to force down the throat of the working people of this country. It is based on a false premise. It is based on a view that is clearly wrong—that an individual employee, whether they are deemed as a contractor or not, has the same bargaining power as an employer. That is based on a lie. That is simply not true. An individual worker in any circumstance does not have the same bargaining power as the employer who is employing them. Of course, that will lead to great exploitation and great abuse.

There were many concerns about the whole process of this bill. At the time of the bill’s referral, the minister’s office attempted to restrict the scope of the inquiry by, among other things, preventing consideration of how contractors and employees would be defined in the bill. This was considered by Labor senators and minor party senators to be such a fundamental issue that it could not be excluded from consideration. The minister was apparently advised to follow the precedents set in the committee’s consideration for the Work Choices legislation in November 2005. However, on this occasion, the Senate’s adoption of the Selection of Bills Committee report referring the Independent Contractors Bill, which set no limits on its brief, foiled the minister’s attempt.

However, the minister tried to avoid us highlighting one of the major flaws in this legislation. This bill fails to tackle the issue of who is a genuine contractor and who is a genuine employee. This legislation does not define the term ‘independent contractor’ beyond its meaning under common law. It deems that contracting relationships should be recognised under common law, not industrial law. Therefore, an independent contractor is considered to be a person who contracts for services, thus denying them the legal status and the associated protections of an employee. However, a high proportion of subcontractors are employees for all intents and purposes. They work exclusively for a single firm in continuous engagement. The government bases its support for a common-law underpinning of this legislation with regard to distinguishing between employees and contractors on the grounds that the courts over time have developed a multifactor test to make this determination.

But during the committee inquiry we received a submission from the New South Wales government which quoted an opinion by Professor Andrew Stewart. It says:

The fact is that any competent employment lawyer can take almost any form of employment relationship and reconstruct it as something that the common law would treat as a relationship between principal and contractor … thereby avoiding the effect of a wide range of regulation which is typically applicable only to employees, such as industrial awards, registered agreements, leave and superannuation legislation and unfair dismissal laws.

This arrangement places burdens on the employee that would normally be the responsibility of the employer—that is, superannuation, taxation arrangements and workers compensation—and leaves the subcontractor vulnerable to exploitation. That is it in a nutshell. That is what this legislation is actually designed to do—remove those obligations from the employer which would normally be theirs under an employer-employee relationship and transfer all those obligations back to the independent contractor as an individual, whether compensated for or not, whether they choose to be a self-employed businessperson or not. They have simply no choice when the employer decides that that is the preferred employment arrangement that the employer will employ people under.

In his own submission to the committee, Professor Stewart further noted:

By engaging a contractor, a firm may be spared the cost of providing leave and superannuation entitlements, of observing any award obligations, and perhaps too of insuring against work related injury. They may also be relieved of any exposure to unfair dismissal claims or severance pay in the event of terminating the arrangement, and a contractor is far less likely to belong to a trade union.

And that is of course the nub of the issue with this legislation. Professor Stewart continued:

Even if higher nominal pay is provided than would be the case for an employee performing the same work, the firm is likely to end up ahead … if the firm can find a way to hire someone who in practical terms works only for the firm and is under its (more or less) complete control, yet who is legally characterised as a contractor, the firm has the best of both worlds

Professor Stewart again has quite accurately described the intent and the effect of this legislation.

The government has attempted, but simply failed, to overcome this burden on workers through the provision of penalties for employers operating sham contracts. But this provision in the bill is in itself a sham. What it provides for is an individual worker having to go to the Federal Court to get a determination on whether they are a contractor or an employee. What a ridiculous proposition. For example, if you have a cleaner in a school who is deemed by the employer to simply be a contractor and the cleaner disputes that and says, ‘Not really; you tell me when to work and when to come, you tell me the wages I am going to get paid, you monitor my times, you tell me how to clean—I am an employee,’ see what happens when he pops off to the Federal Court.

I went and got a quote from Slater and Gordon to find out how much an action by a worker in the Federal Court would cost if it was going to be defended by an employer. Their written advice back to me was that it would be a minimum of $30,000 to get a determination in the Federal Court. So to simply determine whether or not they should be deemed a contractor the employee has to first find $30,000 to go to the Federal Court against the employer. Even if you get a decision in your favour, because there are no unfair dismissal laws anymore, under the Work Choices legislation you become an employee. You are then covered by the Work Choices legislation, and we all know that without the protection of unfair dismissal legislation the employer can simply concoct a reason and then terminate your employment. So the sham contracting provisions in this bill are themselves a sham because they are unworkable. They are inaccessible for the vast majority of people which this sort of legislation will affect. The whole process itself is a sham.

There should be a cheap and readily available system available to workers to pursue disputes. This is similar to the measure we saw in the anti-choice provision in the amendments to the Trade Practices Act that sought to prevent unions from bargaining on behalf of collective groups and businesses. The independent contracting legislation forbids unions acting collectively on behalf of independent contractors if they are deemed to be in that position. The CEPU in their submission to our inquiry said:

… such provisions appear to us to have little to do with protecting the interests of contractors, who may legitimately wish to seek the assistance of unions in work-related matters, and more to do with the Government’s determination to quarantine all such workers from the industrial relations system.

With all of this government’s industrial relations legislation we see the anti-union, anti-organised labour, anti-collectivism ideology coming through time and again.

This legislation also aims to override state and territory laws which consider as employees independent contractors who enter into commercial agreements with employers. The government perceives that these state and territory laws interfere with the rights, entitlements and obligations of those who enter into contract agreements. This bill creates a federal unfair contracts jurisdiction which overrides all provisions in state based industrial relations legislation which consider independent contractors to be employees. It also overrides provisions which seek to redress reduced bargaining power and protect the conditions of contractors. It does little to protect workers and it is more about overriding the states’ ability to protect groups of workers which they deem vulnerable.

One of the interesting things—and Senator Troeth talked about this—was the outworker provisions. It was recognised by all members of the committee and the government that those workers are in an extremely vulnerable position. They cannot negotiate in any meaningful way with their employer, so the government has agreed—and I welcome this—to exclude them completely from the provisions of this bill, and that is great. It recognises on one hand that there are vulnerable workers but on the other hand tries to say there is only one group of vulnerable workers, and that is simply not true. You only have to look around at the cleaning professions. These are people who work long hours under incredibly arduous conditions in a very competitive environment because it is generally considered to be a low-skill, low-educated occupation, where there is the ability to turn over staff and have people compete against each other for those conditions.

This government fails to recognise the inequity in the bargaining power between employees and employers and, as I said earlier, it tries to do this in the following ways: by destroying trade unions, smashing any organised labour and making workers vulnerable, firstly, through Work Choices and, secondly, through the introduction of independent contracting legislation.