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

A number of comments have been made in relation to the Democrat amendments moved by Senator Murray. As he put it, it is a contest of ideas. I intend to go back to what we are proposing and then deal, in that context, with Senator Murray’s amendments.

Clause 3(2) of the bill currently provides that the legislation would achieve its objects by providing that the rights, entitlements, obligations and liabilities of parties to a services contract are governed by the terms of the contract, subject to, among other things, the rules of common law and equity as applying in relation to that contract. This provision makes it clear that the Independent Contractors Bill 2006 does not exclude the usual common-law and equitable remedies available to parties to a contract.

The amendment proposed by the Australian Democrats would alter the objects provisions and remove the reference to these entitlements. This would create uncertainty about the status of fundamental contractual rights that are usually accessible by any person who enters into a contractual arrangement. On this basis alone, the government does not support the proposed amendment. However, the Democrats go further by proposing the insertion of a new provision that would make the operation of the bill subject to a new definition of ‘employee’ that is proposed to be inserted into the Workplace Relations Act by proposed Democrat amendments (1) to (3) to the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006.

The government does not support this definition of ‘employee’ and, as a result, does not support the application of it to the Independent Contractors Bill 2006. This definition does not approach the question of the person’s status with an open mind, as the common law does, but requires a court to presume that a person is an employee unless they can prove otherwise. The government opposes any amendment that places an increased burden on independent contractors to prove their status. This is a disincentive to flexible working arrangements.

More fundamentally, however, the government opposes the definition of employee proposed by the Democrats because that definition would include an exhaustive list of factors that point to a person being either an employee or an independent contractor. This is less flexible and narrower than the existing common-law test that allows consideration of all relevant factors and circumstances impacting upon the relationship between the parties. The government will not support amendments that reduce flexibility by departing from the long-established and well-understood common-law tests.

Amendment (2) proposed by the Australian Democrats would seek to unnecessarily confine the meaning of ‘services contract’ as defined by clause 5 of the Independent Contractors Bill 2006. In effect, the amendment would mean that a contract is not a services contract where it is for the supply of labour within the meaning of the definition of employee that is being proposed by the Democrats. As currently drafted, a person cannot be a party to a services contract if they are a common-law employee. Subsection 5(1A) of the legislation requires a party to a services contract to be an independent contractor. Because of this, the government considers that an additional provision stating that a person cannot be a party to a services contract if they are an employee is unnecessary. However, more fundamentally, the government does not support the operation of the Independent Contractors Bill being confined by reference to the definition of employee proposed by the Democrats. This definition does not approach the question of a person’s status, as I have indicated before, with an open mind, as the common law does.

That is all I need to say in relation to the technical aspects of the amendments. However, a number of issues have been raised such as why we would have a common-law definition as opposed to that which is used for income tax assessment purposes. The government position is that they are substantially and indeed materially different. The test in the Income Tax Assessment Act was developed with taxation and revenue considerations in mind and not suited for use in the Independent Contractors Bill.

There are two reasons for that which I would like to advance. Firstly, for tax purposes the test only applies retrospectively. It determines a worker’s status for the previous tax period based on the nature of the income earned in that time. This is problematic in the context of the Independent Contractors Bill as parties to a contract need the ability to determine their status at any point in time. It is not practical for them to wait until the end of the tax year to find out whether they are entitled, to or obliged to pay, annual leave entitlements, superannuation, workers compensation insurance et cetera. Secondly, to apply the tax test, the principal must know details of all of a worker’s sources of income and claim base for the previous 12 months. As this information is particular to the worker, not the hirer, it would make it difficult for a hirer to know whether the person they have engaged in fact satisfies that test. The common-law test is a simpler, more flexible and better understood method of distinguishing an employee from an independent contractor. Indeed, the High Court has ruled in relation to the common-law test of what an independent contractor is. As much as these things can ever be settled, I think the common law is relatively stable.

It would be fair to say that the Labor Party’s approach, especially in relation to this, is to seek to have as many people as possible classified as an employee as opposed to an independent contractor. I do not think that would necessarily be the motivation of Senator Murray. From the Labor point of view, that is a difficulty they confront.

I forget who raised during the discussion the issue of implementation of the provisions, but I simply indicate that the government has allocated $15 million over four years for compliance and education concerning these bills, including assisting people to assess their status as an independent contractor.

In relation to the possibility of sham contracts being entered into, there are substantial new penalties for sham independent contractual arrangements in this legislation. As a government we are concerned that opportunistic behaviour is dealt with and that there is an appropriate disincentive for that. But, having said that, we do support flexibility, and the bill reflects that independent contracting is a commercial relationship. It strikes me as somewhat surprising that we believe that independent contractors have sufficient nous, skill and capacity to negotiate the purchase of their tools, their prime mover—