[15]
The Independent Contractors Association in their submission argued
that the Bill should be drafted in line with the June 2006 ILO
recommendation, in particular subclause 8:
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.[16]
The ICA also noted
the importance of clause 4(b):
National
policy should at least include measures to ... combat disguised employment
relationships...noting that a disguised employment relationship occurs when the
employer treats an individual as other than an employee in a manner that hides
his true legal status as an employee....’[17]
The Democrats support both of these clauses; we do not believe
they are at odds. What the clauses again draw attention to is the need for a
statutory definition of employment to distinguish between ‘true civil and
commercial relationships’ and employment relationships’.
According to Professor Stewart - who I should point out is not
only an academic researcher in labour law, but also a labour law consultant to
a national law firm that advises and acts for business - the problem is that it
is common for Australian firms to seek to obtain labour from ‘dependent
contractors’ (a person who works solely for one employer). They are, or may then in effect be, disguised
employees.
Disguised employees have all the appearance of employees, except
that they are not entitled to the range of protections provided by labour laws,
and because of that they are much cheaper to hire. Stewart notes that:
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.
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.[18]
The ACTU and others noted in their submission the increasing
number of disguised contractors. The
ACTU estimate that that between 25 and 41 per cent of contractors are dependent
contractors.[19] The APESMA submission noted a recent study
that found up to 40,000 workers currently classified by the Government as
independent contractors actually do all their work for the one employer.[20]
The Bill claims that
one of its objectives is to recognise independent contracting as a legitimate
form of work arrangement that is primarily commercial, but in fact the Bill offers no
solution as to who is a genuine contractor or employee or who is a disguised
contractor or employee. Indeed the Bill only
includes a very minimal definition of an independent contractor. Instead it defers to the common law
definition, which in any case is subject to change over time as jurisprudence
advances. Many, including the Democrats,
believe relying on the common law definition of employment is fraught with
problems.
The common law definition of an independent contractor is not a
definition as such, it is a set of principles, and it is not about 'defining'
who is an ‘independent’ contractor, but defining who is not an employee. The common law approach relies on a test
which involves the consideration of a number of court established factors or
indicia. This means effectively, a
case-by-case approach, which is an unsatisfactory way to proceed with
employee/contractor definitional disputes that affect many hundreds of
thousands of Australians.
Stewart rightly
argues that such a common law test is unreliable:
The
balancing exercise is necessarily impressionistic, since there is no
universally accepted understanding of how many indicia, or what combination of
indicia, must point towards a contract of service before the worker can be
characterised as an employee. In effect
then, this ‘multi-factor’ test proceeds on the assumption that the courts will
know an employment contract when they see it![21]
Stewart also argues
that it can result in different outcomes depending on the adjudicators’
starting point:
If
a judge (whether consciously or subconsciously) starts with the assumption that
a relationship is one of employment, and looks for factors that suggest
otherwise, they may well reach a different conclusion to one who proceeds from
the opposite direction. It is this, more
than anything else, which I believe explains how the same facts can be viewed
so differently by judges apparently asking the same questions and applying the
same basic principles.[22]
Of concern is Stewart's assertion
that any competent 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
much industrial legislation.[23] Stewart also refers
to another and even surer method of avoiding an employment relationship:
...to interpose some
form of legal entity between the worker and the client business, since in the
absence of a direct contract between the two there cannot be an employment
relationship......that entity might be a personal company, or a partnership
constructed for the purpose between two or more workers, or some kind of family
trust. Whether or not the worker is technically an employee of the interposed
entity, they cannot and will not be an employee of the ultimate user of their
services.
In
a purely legal sense there is nothing ‘illegitimate’ about either of these
arrangements.... As the law stands it is quite lawful to set out about creating a
relationship that is not one of employment. They are not 'shams', in the very
strict sense of that legal term. It is only a sham when parties construct what
they would both understand to be an employment relationship and then try and disguise it as something
else by adopting an arrangement that does not genuinely reflect their
intentions.
Nonetheless,
for the reasons advanced at the beginning of this submission, it should not be lawful to contract out of
labour regulation by exploiting these possibilities.
For an increasing number of contractors the notion of independence
is a myth, and any choice and flexibility in their arrangements have been
constructed for the benefit of those who hire them, not their own.
So not
only does this legislation not define what a genuine independent contractor is
it also does not prevent business from exploiting loopholes in the common law
that allow workers to be classified as contractors, when for all practical
purposes they are employees.
As Stewart notes, various approaches can
be and have been adopted by legislators to bring 'employment- like'
arrangements within the scope of particular legislation.
As
mentioned earlier, the states have used deeming provisions, which deem workers
in various occupations or circumstances as employees. As already noted, one
drawback is the broad brush nature of 'deeming' where some genuine contractors
may get caught up in such provisions. The flip side to this, as Stewart points out, is that business
can avoid the deeming provision by rewriting a contract and an employee can be
converted into what a common law test would regard as a non-employee.
Stewart
also points to some state payroll tax statutes which he considers very
effective in identifying employment characteristics but notes that the drafting
is so convoluted that only the most dedicated lawyers can make sense of it.[24]
In
2000 the federal government introduced the alienation of personal services
income legislation (PSI), which amended the tax laws to ensure that contractors
were taxed as if they were employees, unless they satisfied certain tests showing
they were genuinely running a business.
I note that the report of the House of Representatives Inquiry
into Independent Contracting and Labour Hire Making It Work noted the difficulties with the common law
distinction between employee and independent contractor.
The Report also analysed other possible distinctions that could be
used to distinguish an employee from an independent contractor. In particular,
the Report looked at the possibility of relying on the test used in the
Australian income tax assessment alienation of personal services income
legislation. The Report in the end recommended that the Government maintain the
common law definition and adopt components of the PSI legislation tests, to
identify independent contractors. However, the Bill does not
implement this recommendation.
In his second reading speech the Minister explained that the
Government decided not to include aspects of the PSI legislation as it is
'easily manipulated'. In their submission to the House of Representatives inquiry
into Independent Contractors, the Civil Contractors Federation identified how
tax laws are being manipulated and the need for them to be tightened.
There
are some operators who may genuinely believe that, because they have an ABN
number, they are an independent contractor for this reason alone. It is
acknowledged however that some operators who are not independent contractors
claim to be purely to obtain a taxation benefit. Minimising or avoiding
taxation is an incentive to claim to be an independent contractor and a
comprehensive formula in the Taxation legislation that proof that certain
requirements have been met would reduce this incentive.[25]
The Democrats would agree with the Minister that the PSI is still
problematic and is unlikely to fully address the problem. However it is ironic
that while the Government was quick to protect its revenue back in 2000, it
made no attempt then, and is making no attempt now, to ensure that workers who
are taxed as employees are also treated as employees for other regulatory
purposes.
The
Democrats support Stewart's assertion that a more
effective approach is to tackle the problem at source – the common law
'definition', and define employees in legislation. The aim would be to draw a
more realistic boundary between the two categories of genuine contractor and
employee and reduce the ease with which hirers can presently disguise
employment arrangements.
On 11 August
2003 and again on 22 March
2004, I moved an amendment to the Workplace
Relations (Termination of Employment) Bill No. 1 and 2 respectively, to define an employee in an attempt to bring
precarious and atypical employment into the unfair dismissal system (see
attachment 1). The Democrats drew heavily on Stewart's work in
drafting the definition.
I noted in my second reading speech to the Workplace Relations (Termination of Employment) Bill No. 1:
One would assume
that the federal government would support such an amendment [definition of
employee] as the federal system has always supported access to genuine
employees, so the government should have no objection to provisions that ensure
genuine employees—and I stress `genuine' employees—are captured by the unfair
dismissal system. To further make the point: you cannot at one level deem an
employee for tax purposes and then for workplace relations purposes exclude
them. We have made it quite explicit in our suggested amendments that any
person who is categorised as an employee for tax purposes will also fall under
this act for unfair dismissal purposes.
Neither the Government nor the ALP supported the amendment on
either occasion.
The irony of the Democrats original attempt to insert a definition
of employee in the WRA so as to bring precarious and atypical employment into
the unfair dismissal system, is that thanks to the WorkChoices legislation very
few employees are now protected by unfair dismissal law. And while the
WorkChoices reforms have paved the way for business to engage workers on fewer
minimum standards and benefits – especially the vulnerable - this legislation will basically legitimise
the engagement of disguised employees where even the minimum standards are
missing.
In his submission to the House of Representatives Inquiry into
Independent Contracting and Labour Hire, Stewart outlined a
proposed redefinition of employment similar to the Democrat-Stewart amendment
(see attachment 2).
The Democrats recognise that this is a complex area, but believe
that the current situation is unsatisfactory, and that a definition of employee
is the best solution. The Democrats recognise, as does Stewart, that the
definition does not have to be universal and that there may be particular
policy arguments why a particular type of worker should or should not be
covered, for example owner-drivers. Stewart also notes
that there will always be a case for saying that certain kinds of law — for
example, discrimination legislation — should apply to all arrangements for the
performance of work, whether by employees or entrepreneurs.[26]
I am pleased that in their dissenting report to the House of
Representatives Inquiry into Independent Contracting and Labour Hire the ALP
have come out in support of a slightly amended version of the definition as
recommended by Professor Stewart in his
submission to the same inquiry.
The Democrats also believe that that title and reference in the Bill to
'independent' contractors is a misnomer and incorrect. Given the Bill does not
define an independent contractor there is no reference as to who this Bill actually
covers. For example there was evidence to this inquiry that there are a class
of contractors referred to as 'dependent' contractors - are they covered by
this Bill?
It is worth noting that the common law determination of 'independent'
contractor does not in fact determine if the worker is an 'independent
contractor', but instead determines if the worker is a non-employee. Perhaps
genuine contractor is a better and more accurate description.
Potential losers
As touched on above, there are differences between common law definitions
of 'independent' contractor and for tax purposes which could potentially
disadvantage workers forced on to contracts. The Association of Professional
Engineers, Scientists, and Managers, Australia (APESMA) in their submission
stated:
The
legislation also represents a potential 'double whammy' to many professionals.
By moving across to contractor arrangements, professionals will lose employment
entitlements such as annual leave, workers compensation, superannuation and
professional indemnity cover, and at the same time, because the ATO is narrowly
interpreting the Federal Governments PSI legislation, these contractors may be
denied the opportunity to claim legitimate deductions for the business expenses
they incur. This issue remains unresolved while potentially thousands of
professionals may be moving across these working arrangements while being
unaware of their twice disadvantage status.[27]
The Democrats believe that a definition of employee and tightening
of the PSI criteria is needed to overcome this problem.
Shifting private costs to the
public
The Democrats are concerned that the Government has failed to
address the inevitable cost shifting that will occur from private to public
when you take people out of the employment system where superannuation, workers
compensation and income protection is dealt with, into the contract system
where in many case there is no mandatory requirement to be protected.
The obligation of contractors to make their own provisions was
confirmed by Mr Geoff Fary from
APESMA:
Yes, indeed. The
other legislation that you speak of applies to employees. Contractors by
definition are not employees and therefore have to make provision for their own
health insurance, their own workers compensation, their own income protection
and their own superannuation arrangements.
However, very few submissions, dealt with the issue of
responsibility and onus of contractors failing their obligations.
The ACTU in its submission to the inquiry noted the potential risk
to society:
The
Federal government policy ignores the fact that shifts in the labour market
have consequences for broader social and economic policy. The tax base,
compulsory retirement savings, skills development and the management of risks
involved with illness and injury at work are all linked to traditional
employment relationships. The proper governance of these matters is jeopardised
by the erosion of employment as the primary means of purchasing an individuals
work.[28]
When asked about whether this Bill should deal
with contractor obligations to provide for superannuation and insurance, Mr Anderson from the
Australian Chamber of Commerce and Industry argued that it was more appropriate
to deal with this in issue-specific law, which the Democrats are not opposed
to, but note the Government has failed to table cognate bills to achieve
this.
Senator MURRAY—I put a question earlier in the day, and
it still concerns me, that with respect to genuine contractors, I do not think
the tests or the requirements are strong enough. I am one of those who think
greater obligations should be put on contractors. For instance, they should be
able to prove that they are putting aside superannuation. They should be able
to prove that they are self-insuring for injury, because if they do not do
those two things, that cost shifts to the state in the future when they are old
or when they get injured. I do not think you qualify to be a contractor unless
you at least cover those two things off; and there is the tax issue as well.
To me, the motivation
for the Bill is questionable—I am not personally resolved in my own mind about
that—and it does not solve the problem, which essentially is to have a flexible
marketplace where individuals can choose to be employees or to work for
themselves as contractors and are entitled to take the risks and engage in the
market reflective of that. I am not content that the Bill covers off all the problems which I have
seen exist.
Mr Anderson—. To the extent that there are other
problems in terms of the rights and obligations of contractors—and you
mentioned superannuation, insurance and the like—the Bill does not deal with those. We would argue
that the Bill does not need to deal with those.
Senator MURRAY—What about superannuation?
Mr Anderson—Superannuation and the superannuation
obligations of contractors should be determined by superannuation law. They
should not be determined by creating the artifice of placing onto that contract
the status of employee so they pick up superannuation obligations from employment.
Senator
MURRAY—So where is the cognate Bill with this which says, ‘If you are a
contractor, you will pay superannuation’?
Mr Anderson—That begs the policy question that has
to be answered: should there be a cognate obligation on contractors to set aside
moneys for superannuation purposes in the way that there is on an employer to
set aside money for an employee’s superannuation? The Bill does not answer that policy question, it
does not seek to answer that policy question, and, I would argue, should not
answer that policy question, and certainly not while the Bill is being put forward.
Senator MURRAY—It is germane, because at the moment the
deeming provision says, ‘You will, on behalf of society, have superannuation
paid for you.’ If you are deemed an employee, that is what happens.
Superannuation is
put forward, in the national interest, into a scheme for later on. If you cut
people off from that, the risk shifts to you and me; it shifts to society. It
does not shift to the individual in the short term.
Surely, if
superannuation is accepted as a national policy, which it is, if you are going
to take people out of the superannuation system, you should ensure that that
element at risk is at least covered off. That is why I think it should be a
cognate bill, as an example.
Mr Anderson—If you follow the logic of that
proposition, you end up saying that this Bill should deal with the obligations
of contractors not just to pay super but to pay workers compensation insurance;
to pay tax.
Senator
MURRAY—That is right.
Mr Anderson—Those issues are not dealt with in a Bill of this character. They are dealt with
in legislation that is specific to those subject matters; I think that is the
better place to do that. Your analysis of cost shifting is a fair analysis but you
then have to ask the question: should a contractor have imposed on them by the
state the obligation to set aside a percentage of their income for
superannuation purposes?
Senator
MURRAY—Absolutely.
Mr Anderson—That is a policy question. That is not a
policy question that should be decided by reference to whether they are an
employee or not; it should be decided by reference to whether or not the state
should place that obligation on an individual who has established themself as
their own businessperson.
This is an instructive exchange but the Democrats were
disappointed with Mr Anderson's final
point made above, that the issue of responsibility should not be dealt
cognately with the issue of who is an employee and who is a contractor. We
would strongly disagree - if not here
then where and when?
Mr Sutton from the
CFMEU acknowledged the cost shifting that would occur, and that it would be a
problem that would come back to government to deal with.
Senator
MURRAY—Reading
through all these submissions, they frequently refer to—with which I
agree—where someone is a sham contractor and not genuine, that risk is
essentially being shifted to that person. But I also think as big an issue,
perhaps even bigger, is that risk is shifted to the state, because if a person
should be an employee and is not having their superannuation paid, the state is
going to have to pick that up in the future.
Mr Sutton—That was your
third leg that I forgot to mention.
Senator MURRAY—If the person
is not self-insuring and should be covered by workers compensation as an
employee, that is a risk for the state. I have not seen, incidentally, anyone
do the sums—and I wish somebody would—to calculate what the cost of this
practice is to society, if I can put it that way. What I have been looking for
and thinking about with respect to independent contractors for a long time is
how you find tests which very clearly delineate the dividing line between the
two. Of course, I am aware of how complex it is. I have read all of Stewart’s stuff; I have
read acres of the stuff. But to me it comes back to this point: there still is
not an easy measure which can be determined without going through the costly
process of accessing the courts or tribunals and all that sort of thing. This Bill does not provide
for that.
Mr Sutton—No, indeed, it
is a very complex area. I have had a long experience in this area. In fact, I
did a university thesis on it. I have been working on this area for some 30
years, so I almost regard myself as an authority in this area. I regard the
80-20 rule, as first proposed by Costello, coming out of
the Ralph report, as the best recipe I have seen.
To reinforce your point, there are hundreds of thousands of Australians,
particularly in my industry, who are breaking their back, being paid inferior
money, whose bodies are ruined by their mid-40s, and who are extremely
hard-working Australians. They work enormously long hours and are not being
covered at all for superannuation; people who need superannuation. They are not
covered for workers compensation when their bodies break down, as they do. For
the long hours that they are working, if you divide them up and compare them to
a unionised worker on a union project under a union EBA, they are greatly
underpaid. These are all the reasons. Of course, they pay substantially less
tax.
A
carpenter under the circumstances I have mentioned, who is working in the
housing industry doing carpentry, compared to one working as an employee under
a union agreement in commercial construction— just focusing on their tax—doing
similar work, one of those Australians pays a great deal less tax than the
other one. You know which one it is: it is the one who is characterised as a
subcontractor. That is another blow to revenue. That is another reason why John Ralph said that the
hole that has been opened up in what was then the PAYE tax take by the
fraudulent mischaracterisation of people as contractors, when they are not, is
a serious problem to our tax base. They are the words. That is paraphrasing the
words of John Ralph. So you are
right to say that there are a great deal of problems coming back and revisiting
the government and the general taxpayer because of the spread of abuses that
are going on out there.[29]
In their submission to the House of Representatives Inquiry into
Independent Contractors, the Civil Contractors Federation identified the
importance of genuine contractors demonstrating that they have insurance. [30]
The Government have in someways dealt with the issue of workers
compensation by not excluding state and territory deeming provisions for the
purpose of workers compensation, which I find a little ironic.
The Superannuation Guarantee
Act 1992 does not require contractors to have a superannuation fund. It
does however suggest that workers under a contract should be paid
superannuation, but as Stewart notes the
provision is weak:
s 12(3) of the Superannuation Guarantee (Administration)
Act 1992 contains a much simpler provision, obliging employers to make superannuation contributions
not only in relation to employees, but also those working under any contract that is “wholly or principally for
the labour of the person to
whom the payments are made”. In interpreting this formula, however, the courts have held that a contract for
services falls outside its scope if the principal aim of the contract is to “produce a given
result”. Since virtually every contract to provide labour can be so characterised, especially if the contract is
drawn up in the right way, the
interpretation has robbed the provisions in question of any effective content.[31]
In the Democrats view corresponding legislation needs to be
introduced to mandate that independent contractors take out insurance and pay
superannuation contributions. This should have been done cognately with this Bill.
The Democrats acknowledge that the issue of implementation and
compliance would have to be considered. The Civil Contractors Federation
suggests a Registered Contractor Number
(RCN), which would expire at the end of each year and for renewal would require
things like insurance and perhaps proof of superannuation contributions.
The Government should examine this issue before the Bill is passed.
Unfair contract provision
Contractors seeking a review of a contract they consider unfair
must make an application to a court themselves. They cannot have a union or any
other association make it on their behalf.
This is similar to the anti-choice provision in the Government's Bill to amend
the Trade Practices Act to prevent a union for bargaining on behalf on
collective groups of businesses.
The Democrats tend to agree with the CEPU's observation in their
submission that:
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 a union in work related matters, and more to do with the
Governments determination to quarantine all such workers for the industrial
relations system.[32]
The ACTU notes that the Bill adds:
a new requirement
for the Court, where it has considered whether remuneration under the contract
is less than that of an employee performing similar work, to also consider
whether the total remuneration provided under the contract being reviewed is
commensurate with other service contacts relating to similar work in the
industry. Where a contractor is receiving less than he or she would as an
employee the unfairness is not mitigated if there are a large number of
similarly unfair contracts applying in the industry[33]
Other concerns are that there is no express power to order
compensation directly. Instead the process inserts an additional and costly
step in the enforcement process.
The Bill precludes,
on the face of it, the making of orders after the contract has come to an end,
which has implications for goodwill claims.
As noted by the TWU:
there is no power in the Bill to make an order in circumstances where
unfairness has arisen by virtue of the conduct of a party or parties or through
the operation of the contract or some other reason.[34]
APESMA in their submission argued that the:
...drawback of this
mode of redress are its expense with applicants potentially subject to costly
order, its timelessness, and the extent of complex legalistic argument required
to argue these matters.[35]
The Democrats are concerned about the costs and weakness of these
provisions.
Sham
contracting
Both the ACTU and the CFMEU note in their submissions that the
sham contract provisions that accompany the Bill are weak
and will be ineffective in stamping out sham arrangements:
The ACTU note that although the onus is on the employer to
disprove the element, the complexity of the issue means that this will not be
difficult. The ACTU and CFMEU argue that the employer could reasonably argue
not to be expected to know for certain the true nature of the employment
arrangements. As the CFMEU stated:
It would not be difficult for a crafty person to
plead ignorance or fabricate an excuse for having misrepresented an employment
relationship as an independent contract arrangement.[36]
This is another reason why a definition of employment should be
devised and legislated to make it clearer to employers the ‘true nature’ of the
work arrangements.
The CFMEU also note that a contravention only occurs:
If an employer's
sole or dominant purpose in dismissing or threatening to dismiss an individual
is to engage the individual as an independent contractor, a well advised
employer would have little difficulty in putting up other reasons for a
dismissal or threat in circumstances where the real reason is simply to engage
the employee as a contractor on inferior rates and conditions.[37]
The ACTU also argue the lack of remedy for the employee who is the
victim:
In particular, an
employee who is dismissed in order to be re-engaged as an independent contractor
has no avenue to challenge the dismissal or seek reinstatement unless it can be
shown that the dismissal was because the employee was entitled to the benefit
of an industrial instrument.[38]
The Democrats believe that the sham provisions are weak and should
be amended.
Conclusion
In summary, the Democrats believe that the Bill is likely
to mean further uncertainty. An increase
in disguised contracting, greater reliance on common law litigation, reduced
protection for the increased number of contractors, and shift costs from
private to public. The Democrats will move amendments to the Bill.
Senator Andrew Murray
Attachment 1
– Democrat amendment to Workplace Relations (Termination of Employment) Bill No. 2
170CBB Definition of employee
(1) For the purposes of this Division, a person (the worker) who
contracts to supply his or her labour to another person is to be presumed to do
so as an employee, unless it can be shown that the other person is a client or
customer of a business genuinely carried on by the worker.
(2) In determining whether a worker is genuinely carrying on a
business, regard must be had to those of the following factors which are
relevant in the circumstances of the case:
(a) the substance and practical reality of the relationship
between the parties, and not merely the formally agreed terms;
(b) the objects of this Division;
(c) the extent of the control exercised over the worker by the
other party;
(d) the extent to which the worker is integrated into, or
represented to the public as part of, the other party's business or
organisation;
(e) the degree to which the worker is or is not economically
dependent on the other party;
(f) whether the worker actually engages others to assist in
providing the relevant labour;
(g) whether the Australian Taxation Office has previously made a
personal services determination in relation to the worker pursuant to
Subdivision 87-B of the Income Tax Assessment Act 1997, in connection
with work of the kind performed for the other party;
(h) whether the worker would be treated as an employee under the
provisions of any State law governing unfair dismissal which, but for this Act,
would otherwise apply to the worker.
(3) A contract is not to be regarded as one other than for the
supply of labour merely because:
(a) the contract permits the work in question to be delegated or
subcontracted to others; or
(b) the contract is also for the supply of the use of an asset or
for the production of goods for sale.
(4) An employment agency which contracts to supply the labour of a
person (the worker) to another party (the client) is to be deemed to be that
person's employer, except where this results in a direct contract between the
worker and the client in relation to that labour.
(5) Where:
(a) an arrangement is made to supply the labour of a person (the
worker) to another party (the ultimate employer) through a contract or chain of
contracts involving another entity (the intermediary); and
(b) it cannot be shown that the intermediary is genuinely carrying
on a business in relation to that labour that is independent of the ultimate
employer, on the basis of the factors set out in subsection (2); the worker is
to be deemed to be an employee of the ultimate employer.
(6) For the purposes of this section, employment agency
means an entity whose business involves or includes the supply of workers to
other unrelated businesses or organisations, whether through a contract or a
chain of contracts.
Attachment 2
– Professor Andrew
Stewart proposed
Definition of Employee[39]
A Proposed Redefinition of Employment
The following standard definition of employment is proposed:
(1) A person (the worker) who contracts
to supply their labour to another is to be presumed to do so as an employee,
unless it can be shown that the other party is a client or customer of a
business genuinely carried on by the worker.
(2) A contract is not to be regarded as
one other than for the supply of labour merely because:
(a) the contract permits the work in
question to be delegated or sub-contracted to others; or
(b) the contract is also for the supply
of the use of an asset or for the production of goods for sale; or
(c) the labour is to be used to achieve
a particular result .
(3) In determining whether a worker is
genuinely carrying on a business, regard should be had to the following
factors:
(a) the extent of the control exercised
over the worker by the other party;
(b) the extent to which the worker is
integrated into, or represented to the public as part of, the other party’s
business or organisation;
(c) the degree to which the worker is
or is not economically dependent on the other party;
(d) whether the worker actually engages
others to assist in providing the relevant labour;
(e) whether the worker has business
premises (in the sense used in the personal services income legislation); and
(f) whether the worker has performed
work for two or more unrelated clients in the past year, as a result of the
worker advertising their services to the public.
(4) Courts are to have regard for this
purpose to:
(a) the practical reality of each
relationship, and not merely the formally agreed terms; and
(b) the objects of the statutory
provisions in respect to which it is necessary to determine the issue of
employment status.
(5) An employment agency which contracts
to supply the labour of a person (the worker) to another party (the client) is
to be deemed to be that person’s employer, except where this results in a
direct contract between the worker and the client.
(6) Where:
(a) an arrangement is made to supply
the labour of a person (the worker) to another party (the ultimate employer)
through a contract or chain of contracts involving another entity (the
intermediary), and
(b) it cannot be shown that the
intermediary is genuinely carrying on a business in relation to that labour
that is independent of the ultimate employer, on the basis of factors similar
to those set out in (3) above, the worker is to be deemed to be the employee of
the ultimate employer.
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