Secondment exceptions in the Australian Labour Hire Licensing Schemes: Do sporting clubs need licences for their loan players?

Rugby 03Throughout this week, I’ll be publishing some commentaries on the exceptions to the labour-hire licensing schemes currently operating in Queensland, Victoria and South Australia. The commentaries are not legal advice and shouldn’t be relied on as though they were. I hope, rather, that they’ll promote some necessary discussion and further questions.

I’ve already looked at the incorporated worker exception. Today, I’ll be discussing the  “secondment” exception. I’ll be doing it by posing the question: “When Melbourne Storm sends a player to “lace up” for Sunshine Coast Falcons, will it need to produce its Victorian and Queensland labour-hire licences?” 

Background

Storm and Falcons are two Rugby League clubs. Storm is based in Victoria, Falcons in Queensland. Storm is an NRL club with professional players, Falcons plays in the Queensland Cup competition with mostly semi-professional players. From time to time players contracted to play with Storm are sent north, by arrangement between the two clubs, to play for Falcons – e.g. when they’re returning to NRL competition after a lay off for injury and the like.

Labour-hire?

At this point, it’s starting to look a lot like a familiar triangular labour-hire arrangement. A worker (Storm player) is supplied to another person (Falcons) to perform work (play footy) in and as part of the business or undertaking of the other person (Falcons).

It doesn’t matter that the clubs are in two different states – both states have labour-hire licensing schemes that operate beyond state boundaries.

It doesn’t matter whether the player is an employee or independent contractor according to the strict legal distinction. It doesn’t matter if there is no contract between the Storm player and Falcons. It doesn’t matter whether the work is performed under the control of Storm or Falcons. And it doesn’t matter whether Storm places the player directly with Falcons or does so indirectly through one or more intermediaries. (Just wait until we get on to the AFL draft scheme!).

It does matter, however, that the player is a “worker” for Storm – i.e. the player is an individual and Storm is obliged to pay the player in whole or in part for the work, either directly or indirectly through one or more intermediaries.

So, let’s say, on the face of it, that we’re talking about a labour-hire arrangement. If that’s right, Storm might need a Victorian licence as well as a Queensland licence. Falcons would be prohibited from acquiring “labour-hire services” from an unlicensed provider.

Now, this is all hypothetical of course! I’m not suggesting for one moment that either club is operating in contravention of prohibitions contained in either the Victorian or Queensland Labour Hire Licensing Acts.

But you can perhaps see the problem that arises when labour-hire licensing is introduced on a universal coverage basis without being targeted to the sectors where it’s really needed. Did anyone think this would be an outcome when the schemes were proposed? Of course, they didn’t. The States were urged to adopt targeted schemes. The Victorian Forsyth Inquiry even recommended it.  But those urgings and recommendations were ignored.

So, what we’re left with is the possibility that the schemes in both States (and in South Australia) cover this type of arrangement. And that is why the exceptions are extremely important.

The Secondment Exception

Queensland, Victoria and South Australia each have a version of a “secondment” exception. The exceptions are not identical. If we consider them against the background of our hypothetical football club scenario, we can begin to see how they differ and what some of their limitations might be.

Queensland.

Queensland created its exemption under reg 4(1)(c) of its Regulations as an exception to the definition of a “worker”. If an individual is not a “worker” for a provider, it follows that it would not be an offence for an unlicensed person to supply that individual. It’s a bit indirect, but it works – that is if you don’t look too closely at the definition of provider!

In Queensland,  an individual is not a “worker” for a provider if he or she is an in-house employee whom the provider supplies to another person to do work on a temporary basis on one or more occasions. Queensland doesn’t use the expression “secondee” or “secondment”,  but you can see how the supply of an in-house employee might equate to a secondment in these circumstances.

The Queensland regulations give examples of a lawyer who is “seconded” to work for a client for a period of time and a consultant who is supplied to another business to conduct a review for the other business.

So that could fit our hypothetical Storm player. However, there are some limitations that arise from the way in which an in-house employee is defined in reg. 4(2).

Firstly, the worker needs to be engaged as an employee by the provider on a regular and systematic basis. The legal distinction between employment and independent contracting does seem to matter here. So, it will be important to be able to categorise the player’s engagement by Storm correctly.

Secondly, the worker needs to have a reasonable expectation that his or her employment with the provider will continue. That could get tricky if the player is out of contract or is already lined up to go to another club next season!

Finally, the worker must primarily perform work other than as a worker supplied to another person to do work for the other person.  That could get tricky if the player is a fringe player, who primarily plays on loan for an affiliated club.

Now, you should be able to see how the example that we’ve chosen to look at highlights the limitations of the exception. The exception sort of works, but it will not work in all cases and needs to be handled carefully and with some sophistication.

Victoria

Victoria similarly created its exception under reg 4(1)(a) of its Regulations as an exception to the definition of a “worker”. Again, if an individual is not a “worker” for a person, it follows that it would not be an offence for an unlicensed provider to supply that individual. Neither would it be an offence to host that individual from an unlicensed provider.

In Victoria, an individual is not a “worker” for a provider if he or she is a secondee, other than where the provider is predominantly in the business of providing the services of workers to other persons.

This is a little easier to apply and doesn’t seem to have as many hazards as the Queensland exception. We can safely assume (I hope because I follow them) that Storm is not predominantly in the business of sending its players to play for other clubs. That being the case, it could rely on the reg. 4(1)(a) exception in claiming that it is not a Victorian labour-hire provider in this situation and would not seem to require a Victorian licence.

However, that might not get it over the difficulty of being regarded in Queensland as an interstate labour-hire provider that requires a Queensland licence to supply a player to Falcons.

Now, if you step away from our hypothetical football scenario for a moment, you can probably think of situations in which supplying the services of workers to other persons is the predominant business of the provider. An events medical management firm that predominantly supplies doctors, physios, nurses, and pill testing staff to sporting and entertainment events might fit the bill in this instance and therefore require a licence.

Chicken sexers!

Chicken sexers – the people who go to chicken hatcheries to count the wing feathers or squeeze feces out of newly-hatched chicks to determine their sex – had to be specifically exempted under the GLAA regulations in the UK. It’s a highly specialised task – apparently. And probably something you don’t want to do at home or back at the office.

So, yep! Without an exemption chicken sexers probably fall within the class of workers who are supplied to do work in and as part of the business or undertaking of another person and would be “workers” for the purpose of labour-hire licensing legislation.

Who would have thought it? Certainly not the people who legislated the universal licensing schemes we now have in Australia!

South Australia

South Australia created its exception by an administrative decree published in the Government Gazette on 6 June 2019. You do have to browse through the Government Gazette in SA to find the exemptions because the ALP government, when it left office did not set up any regulatory exemptions.

In South Australia, the exemption is expressed rather differently. It operates as a direct exemption from the requirement to hold a licence in cases where the provision of labour-hire services is not a “core function” of the provider.

It is a much wider exemption that its Queensland and Victorian counterparts. But there is no definition or guidance material to inform a decision about whether the supply of an individual to do work in and as part of the business or commercial undertaking of another person is a “core function” of the provider or not.

A core function need not necessarily be the or even a predominant function. Keep in mind the context in which we are discussing this. It may very well be a “core function” of a provider to develop and retain talent. Certainly, I think that could be argued in the case of a professional sporting franchise or club. And if lending players out to other clubs is the means by which that is done, then player loans are a core function and fall outside the South Australian exception.

Managing the exemption

If you are a provider who seconds workers to clients or places them out “on loan” there are several things that you will probably need to think about:

  1. You will certainly need to know whether you fall within the coverage provisions of the Acts that apply to you. Remember, there may be more than one Act if you are involved in interstate operations.
  2. Once you know if you come within the coverage provisions, you will need to go deeper and work out if the exceptions or exemptions apply to you. Remember, you probably only need one non-exempt transaction to be caught by the licence requirement. I say “probably” because the situation is now very unclear in South Australia because of its “not core business” exception, which seems to be applied impressionistically, as more of a vibe than as something that can be quantified with any certainty.
  3. In Queensland, you will need to look very closely at the limitations of the in-house employee exemption. While, in Victoria, you need to evaluate the “predominant business” of the provider to see if it includes worker secondments.
  4. You might be wondering if you could structure your operation to supply only workers who are exempt through the secondment/ in-house employee exceptions. I think that would almost certainly fail because if that’s what you’re doing it becomes your core business (SA), predominant business (Vic) or the primary work of your workers (Qld) and, on each count, fails an important criterion for exemption.

As with most of the exceptions, it should be apparent that this one comes with plenty of traps and pitfalls. Those will eventually be sorted out when courts have to interpret the legislation.

In the meantime, I hope this commentary will have helped to spark some discussion and draw some attention to the type of issues that seem likely to arise. If you’re interested, I’ll also be covering this topic and others in a series of workshops planned for August through to October 2019, when the Victorian scheme comes into full operation.

 

30 July 2019

Andrew C. Wood

 

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