Published: 14 October 2011
Companies erode job standards through independent contractors
The Labour Lawyer correspondence continues to leak...
Dear Federal Minister for All Things
The position of independent contractors, as distinct from employees, requires attention.
A number of matters are clear:
- There has been a significant increase over the last 10 years in the number of individuals working as independent contractors, both in raw numbers and in the proportion of such workers compared to employees;
- The adoption of independent contractor status is frequently at the initiative of the principal, not the contractor, and the contractor offer involves onerous "take it or leave it" conditions;
- The principal routinely require individuals to establish their own company and/or take out an ABN and invoice for work performed;
- The legal distinction between employee and independent contractor remains difficult to define and contractual and associated arrangements are frequently designed to exploit that uncertainty;
- Avoidance of superannuation obligations is rife as individual independent contractors are often unaware that they are entitled to superannuation payments if their contract is wholly or principally for their labour, even if they are not employees at common law;
- The capacity for groups of independent contractors to bargain collectively with major corporations (e.g. telecommunications industry; racing industry) is unfairly and unreasonably constrained. The law and ACCC requirements have failed to recognise the development of classes of independent contractors whose bargaining and negotiating interests are effectively the same as that of employees;
- The sham contracting provisions of the Fair Work Act have had little impact on corporate practices of cost saving by the conversion of employees to independent contractor status;
- The effectiveness of the Independent Contractors Act has been gutted by a recent decision of the Federal Court in which the Court decided that any remedial orders that the Court could make in the event that an independent contract was held to be unfair, must be prospective and could not operate to compensate for conduct which the contract operating fairly should have prevented. Hence the Court is limited to varying an unfair contract into the future;
- With the Government's decision to exclude business-to-business contracts from the Australian Consumer Law introduced earlier in the year, and the gutting of the Independent Contractors Act, there is no effective "unfair contracts" jurisdiction accessible to the overwhelming majority of independent contractors.
It is fair to say that a significant proportion of independent contractors are being exploited and there are no effective remedies. The reality and the structure of the independent contractor labour force is far removed from the image of the independent Australian having a go in their own business.
The attention of Government is required to this matter.
The Labour Lawyer
Dear Labour Lawyer,
You may not have noticed but the Government has had a few things on its plate at the moment.
Unfortunately they did not include Tony Abbott's head.
Senator Nick Sherry has released a discussion paper touching on the matters you raise.
The paper advances options for developing a better disputes resolution procedure for self-employed/small business people. The objective is to develop a low cost national business-to- business disputes process.
Justice Perram in Informax International P/L v Clarius Group  FCA 934 found albeit reluctantly, that the remedial provisions of the Independent Contractors Act are limited. He held orders cannot be made under the Act to compensate an independent contractor for conduct that is unfair under an unfair contract. The Act merely allows for the reform of the unfair terms of the contract for the future. As the Judge said the provisions "authorise prospective amendments to contracts which are harsh or unfair, thereby reforming the bargain between the parties into the future."
I accept that the decision demands careful attention for its practical implications.
I do note that the General Protections provisions of the Fair Work Act extend to protect independent contractors from adverse action if they exercise workplace rights such as making an application under the Independent Contractors Act.
Thank you for your interest. I will not be raising the matter with Mr Rudd.
The Minister for All Things