Do Auto Club Breakdown Contractors Need Labour Hire Licences?

Adac breakdown assistance

The background

Like me, you might be wondering how that question even arises. It shouldn’t be a problem because it should be clear to anyone who hasn’t been overthinking it, that a motor mechanic business is not a labour hire businesses. It should be clear that the labour hire licensing laws, which have now been established in three states,[1] didn’t come about because of any real concern about worker exploitation in automobile club roadside assistance schemes.

But you can throw clarity out the window as soon as you get legislation that tries to cast the widest possible net without too much thought about what it might catch.

And to cast that net, Victoria and South Australia included a provision in their licensing schemes that says you need a licence if you’re supplying workers to another person to perform work in and as part of the other person’s business or undertaking.

Integration test

The critical wording is, “perform the work in and as part of the business or undertaking of the other person”.

It’s sometimes called an “integration test”, and it helps to distinguish ordinary contracting for the supply of services from labour hire. It distinguishes the kind of thing motor mechanics do in their own workshops or on roadside callouts from the kind of thing a labour hire provider does when it sends its workers to help out in that workshop or at the roadside.

The provisions in the different states vary slightly in the way they are expressed, but we needn’t worry about that just at the moment.

The problem also arises in Queensland, where the legislation doesn’t even provide guidance in the form of the integration test.

The question

So, if you are a motor mechanic business that is contracted to an automobile club (or anyone else for that matter) to provide a roadside assistance service, how do you tell if you are supplying workers to perform the work in and as part of the business or undertaking of the host automobile club, rather than in and as part of your own business?

It’s complicated!

If you ask the Victorian Labour Hire Authority, assuming you’re able to get a response before the cut-off date for lodging licence applications[2], they’ll probably tell you that they don’t give legal or business advice. They might, however, direct you to some scenarios which they’ve developed to help explain what they think their general definition of labour hire services means… and leave you to work it out for yourself.[3]

What you’ll read repeatedly is that “no one factor is definitive” and that it’s necessary to “look at the engagement as a whole”.  You’ll see examples of construction workers being sent along to do work alongside workers of a building firm being treated as labour hire workers regardless of whether the firm that sends them self-identifies as a building and construction firm or a labour-hire firm.

Positive factors

You’ll see that the Authority has identified a few positive indicators for identifying a labour hire relationship:

  • the work performed by the workers is a key function of the host’s business;
  • the work performed by the workers is the same as the work performed by the host’s own employees;
  • the host supplies the materials, and directs and supervises the work;[4]
  • the workers are doing work that the host is responsible for completing.

So, you look at the arrangement as a whole, weigh up a set of factors like that, and you reach a conclusion. Should be easy!

Secondee exception?

Once you’ve reached a conclusion. you might have to decide whether any of the regulatory exceptions apply. That can get tricky because they differ from state to state.

But one exception you might consider is the “secondee exception“. I’ve written about that in the context of footy clubs and their loan players.

In Victoria, you’d want to have a good understanding of the contractor’s employment arrangements, the breakdown mechanic’s expectations about continuing employment and whether the mechanic primarily performs work other than as a roadside assistance mechanic. if you’re a host, you’d want some assurance about those things and you’d want notification of any changes.

In Queensland, this would be the in-house employee exemption. it has much the same features as the Victorian secondee exception but only applies if the provider supplies the in-house employee to the other person to do work on a temporary basis on 1 or more occasions. There would have to be some doubt about whether it applies to a roadside mechanic whose primary job is to support an auto club’s breakdown service.

Grey areas

The examples that the regulator gives are mostly the easy ones which fall neatly on one side or other of the boundary. It’s the ones in the grey area that are going to cause the headaches. And that’s why we’re asking the question.

A closer look

Go back and look at the factors that the Victorian regulator identified.

Now imagine that:

  • the auto club provides a 24/7 roadside assistance service for its members (and for members of the public who sign up on a call-out);
  • the club employs its own workers to provide the service in metropolitan areas and during certain hours;
  • the motor mechanic’s business is contracted to provide a “seamless” service to the club to supplement the club’s service and to extend its coverage into areas, and at times, when the club’s own employees aren’t operating;
  • the club allocates an exclusive territory to the mechanic for the purpose of the club’s service; but, from time to time, the mechanic is required to extend service into another territory controlled by the club or to work alongside the club’s own employees – e.g. in order to meet response times during periods of peak demand, or to provide back-up in the club’s areas and during its operating hours;
  • the club requires the mechanic’s vehicles that are used in providing the roadside assistance service to be liveried exclusively in the club’s colours, and may even restrict their use for other purposes;
  • the club requires the mechanic’s staff to wear club uniforms when attending roadside callouts;
  • the club requires the mechanic’s staff to promote club services and authorises them to sign up motorists to club membership and other club services;
  • the club requires the mechanic’s vehicles to stock specified parts or parts that are supplied by the club’s preferred suppliers;
  • the club requires the work to be completed according to KPIs and procedures set by the club;
  • the club operates a complaints handling process and can arbitrate disputes that arise between the mechanic and motorist out of club-authorised services provided by the motor mechanic.

If you’re an auto club or a motor mechanic who’s contracted to an auto club or a roadside assistance service, you probably understand the detail of those arrangements far better than I do. You can likely say whether the scenario I’ve painted is realistic.

Breakdown!

But here’s the question: Keeping in mind that “no one factor is definitive” and “looking at the engagement as a whole”, what would the regulator say about whether the motor mechanic needs a labour hire licence in that scenario. What would it say about whether the club should only be dealing with licensed labour hire providers?

And if all it’s got to say is that it doesn’t give legal or business advice, then that’s not likely to be good enough.

If you apply the tests yourself and the answer you get is “maybe”, “possibly”, or “probably”, what are you going to do?

Safe options?

The safe options would seem to be to apply for a licence and/or change the basis of your service. But you’ll need to be quick. The scheme is already running in Queensland, and the prohibitions against unlicensed dealing will kick in for Victoria on 30 October 2019 and for South Australia on 1 November 2019.

If you’ve applied for a licence before the cut-off date (or if your provider has applied for a licence before the cut-off date), you might be able to continue to provide services until the licence application has been decided.

South Australia – Good sense starting to show

If you’re wondering about how this works in South Australia, you might be encouraged to learn that South Australia has a very sensible exception that applies if the provision of labour-hire services is not a “core function” of the provider.

Unfortunately, there’s not much guidance material to tell you 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. But the South Australian regulator can move quickly to establish exemptions by Gazettal – and has done so already on several occasions. It may be worthwhile raising the issue through that channel.

One day the courts will tell us

In the meantime, the rest of us will be left with the cost of uncertainty as we wait for a Supreme Court to make the fact-sensitive inquiries that are needed to tell us what the legislation means and how it applies in grey areas into which the regulators haven’t dared to venture …yet.

And let’s hope we can avoid a breakdown.

 

Andrew C. Wood

 

[1] Queensland, South Australia and Victoria.

[2] 29th October 2019.

[3] Tip: MAke sure you read and compare all the scenarios. If you get it wrong, there are hefty fines. If you get it wrong in Qld or SA, there are hefty fines and prison sentences – though you’d be very unlucky to receive a large fine or prison sentence for an honest mistake. The Qld regulator, sensibly, seems to have adopted the practice of issuing warnings before prosecution.

[4] Even though the legislation expressly says that it doesn’t matter who controls performance the work.

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