Victoria’s Labour Hire Licensing Proposal: Any hope of an even playing field? Not much.

Victoria is the next cab off the rank with labour hire licensing. And there’s not much time to get submissions in before 6 December. Much of what is described in the consultation paper follows the now familiar pattern in Queensland and South Australia.

It is clear that Victoria is giving a bit more thought to what the exceptions might be and is seeking submissions about them. That’s an encouraging sign. But, it might be difficult to say much about the exceptions until the government reveals a working draft of its primary coverage provision.

It will be worth watching closely to see if Victoria can develop a definition of “labour hire provider” that comes to grips with the question asked in Queensland and still not answered:

“What is there to stop an unscrupulous labour hire supplier from simply re-inventing itself as an unscrupulous labour contractor?”

Judging from the consultation paper, it looks like Victoria is aiming to regulate supply forms of gangmastering/ labour hire and may ignore the substitutable use forms of gangmastering, which are common in cleaning, horticulture, trolley collection and other sectors at risk of the type of exploitation that licensing schemes are intended to prevent.

Let me explain.

The labour hire licensing schemes proposed for Queensland and South Australia prevent (for example) a farmer from dealing with a labour hire provider that employs a worker, whom it sends to the farm to work on the farm in the farm business, unless the labour hire provider has a licence.

To make this clearer, South Australia has recently introduced the following example as an amendment to the coverage provision in its Bill in order to explain what it has in mind:

Guy runs a plumbing business and has an employment contract with Tracey under which Tracey is paid to come to work each day at the plumbing business and be assigned work. Corey runs a grape growing business at which there is a problem with the plumbing. Corey enters into a contract with Guy to diagnose and fix the problem at the business and so Guy sends Tracey to Corey’s grape growing business to do the work. Guy does not provide labour hire services in sending Tracey to do work at Corey’s business.

We can all see that. But you can also see that that approach would  exclude:

Guy runs a grape harvesting business and has an employment contract with Tracey under which Tracey is paid to come to work each day to pick grapes at farms where Guy is providing harvest services. Corey runs a grape growing business at which there are grapes ready for harvesting. Corey enters into a contract with Guy to harvest the grapes and so Guy sends Tracey to Corey’s grape growing business to do the work. Guy does not provide labour hire services in sending Tracey to do work at Corey’s business.

That exclusion is significant if we are talking about a licensing scheme that is designed to prevent exploitation and even up the playing field.

It’s significant because licensing schemes that are imposed solely on supply models don’t prevent labour providers from assembling gangs of workers, housing them in squalid conditions, charging them outrageously for food, transport and accommodation, working them without breaks under a contracted overseer, outsourcing payroll to an associated entity and taking deductions from their pay – if, instead of supplying the worker to the farmer to work in the farm business, the provider merely undertakes to harvest the farmer’s crop using the workers in its own business, whilst buffering the whole arrangement through a chain of sub-contracts and outsourcing arrangements that reduce transparency and accountability.

That’s because the labour provider hasn’t supplied a worker; it has simply used a worker. And it seems that this may not amount to an avoidance measure, because the use form of gangmastering is not covered by the labour hire provider definitions that have been put up so far.

Again, to help illustrate the gaps, let’s see if we can highlight some of the essential pieces of the UK Gangmasters scheme that are missing from the Queensland and South Australian proposals (as we’ve been doing for some months) and now seem likely to be missing from this new Victorian proposal.

GLA s. 4(4)  – A person acts as a gangmaster if he uses a worker to do work to which this Act applies in connection with services provided by him to another person.

 

GLA s.4(5) – A person (“A”) acts as a gangmaster if he uses a worker to do any of the following work to which this Act applies for the purposes of a business carried on by him

(a)        harvesting or otherwise gathering agricultural produce following

(i)   a sale, assignment or lease of produce to A, or

(ii)  the making of any other agreement with A,

where the sale, assignment, lease or other agreement was entered into for the purpose of enabling the harvesting or gathering to take place;

(b)        gathering shellfish;

(c)         processing or packaging agricultural produce harvested or gathered as mentioned in paragraph (a).

 

As you can see, they’re not talking here about supply (there’s another sub-section for that).  And there’s a very good reason for it. It’s because the gangmasters, who assemble and run harvest gangs do not supply workers to farmers. They use them themselves and their use of those workers is just as prone to exploit  workers’ vulnerability as any other labour provider model.

In Australia, the three attempts at labour hire licensing that we’ve seen to date have become caught up in the rhetoric about “labour hire” and appear to have been limited by text book understandings of labour hire that have not kept pace with developments in the workforce services market.

They continue to talk about the tripartite supply model of labour provision as though it were the only model worth talking about. Whilst they imagine that there may be other models, they seem unable to clearly distinguish between them; or find  markers that might give meaning to those distinctions.

They seem to have lost sight of the type exploitation that they are trying to prevent and the distribution of that exploitation across different and largely substitutable service models. There seems to have been a critical failure to come to terms with the composition and structure of the workforce services market in this country.

The schemes have been blinkered by  attempts to create a model that covers all industry sectors – including those in which there has been no evidence of egregious exploitation that would warrant the imposition of a restrictive licensing scheme.

In doing so, they have lost the ability to create clear markers between labour contracting that needs to be regulated to even up the playing field and other forms of contracting that do not.

To cover the defect created by their lack of sophistication, they  simply double down on the tripartite supply model,

So, they end up being too wide and untargeted, whilst simultaneously leaving huge gaps, or blind spots, where the risk of exploitation remains uncontrolled or ignored.

It needs to be stated plainly. You don’t create an even playing field for labour hire providers in the workforce services market by imposing on them a restrictive licensing scheme that fails to regulate the supply of substitutable workforce services operating in the same market.

That’s why the UK gangmaster licensing scheme covers both supply and use forms of gangmastering. It’s also why an industry sector specific scheme makes a lot more sense… that is if you’re really trying to target sectors at the greatest risk of exploitation.

Queensland rushed its legislation through parliament ahead of the election and missed the opportunity to address its shortcomings.  In South Australia, the penny is starting to drop, but still has a long way to fall. Victoria has a chance to get it right, but hasn’t given itself much time to do so, with submissions on exceptions due by 6 December and no sight of the draft legislation yet.

Let’s see how this one goes from here. We shouldn’t have to wait too long!

 

Andrew C. Wood

“No Refund” terms & conditions result in $750,000 fine, injunctions and costs orders.

If your terms and conditions expressly or impliedly exclude refund remedies under the Australian Consumer Law, you might be in for a nasty shock.

In a recent case, the Australian Federal Court imposed, by consent, fines of $750,000, injunctions and costs orders (totaling a further $50,000) on MSY Group Pty Ltd, MSY Technology Pty Ltd and M.S.Y. Technology (NSW) Pty Ltd for publishing, including on the companies’ website, business terms and conditions that impliedly excluded remedies available under the Australian Consumer Law (ACL).

As a result, the Court declared that the respondents:

  • “engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL;
  • “made false or misleading representations in relation to the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of s. 29(1)(m) of the ACL; and
  • ” made false or misleading representations in relation to a requirement to pay for a contractual right that is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy in contravention of s 29(1)(n) of the ACL.

What is especially important about this case is that the Court held that a contravention of these ACL provisions could occur, where MSY’s terms of business and representations:

… impliedly represented to consumers that their rights were limited when that was not the case.

…were silent in response to the consumer’s reference to their specific ACL rights and impliedly represented that MSY … was not required to provide an ACL remedy to consumers.

(My underlining).

The decision creates a risk for businesses that insert additional or alternative “remedies” – such as candidate replacement “guarantees” or indemnities – into their terms of business (or who answer questions raised by consumers about their remedies for defective services) and say nothing about the availability of the ACL remedies in circumstances where the ACL remedies apply.

The ACCC has been active, recently, in challenging unfair terms and conduct that may be in breach of the ACL. If it’s been a while since you last had your terms of business reviewed, you might do well to have your lawyers review them for you against the background of recent developments in this area.

And if your customer-facing staff are not familiar with the ACL remedies, it might be worth investing in some training.

It could be a lot less expensive than the $800,000 in fines and costs ordered in this case!

Andrew C. Wood

Uber drivers confirmed as “employees” by UK Employment Appeal Tribunal.

silhouette-of-scaleOn 10th November 2017, the UK Employment Appeal Tribunal delivered its judgment in Uber & Ors v Aslam & Ors [PDF].   The decision will be of interest to agencies and workers operating in the “Gig economy. Here is a brief summary.

Background

Members of the Uber Group had appealed from an earlier decision of the Employment Tribunal, which found that Uber drivers in London were “workers” within the meaning of the Employment Rights Act 1996, the Working Time Regulations 1998 and the National Minimum Wage Act 1998; and that any Uber driver who had the Uber app switched on, was within the territory in which they were authorised to work (London) and was able and willing to accept assignments was working for Uber London Ltd.

Appeal

A key ground in Uber’s appeal was that the Employment Tribunal had mischaracterised the true relationship between Uber and its drivers – that rather than being one of employment, it was one of agency in accordance with which Uber provided booking services as agent for its drivers.

Uber pointed to provisions in its suite of contracts and terms of businesss, which it contended supported its view.

Outcome

The Employment Appeal Tribunal disagreed and dismissed Uber’s appeal. At the time of writing it is understood that Uber intends to take a further appeal to the UK Supreme Court.

Take-away points

In the meantime, there are a few quick points that can be made about the EAT decision.

  1. It is the reality of the situation that matters. The Appeal Tribunal said:

[The Employment Tribunal] was entitled to disregard the terms in the written agreements and the labels used therein.

…the true agreement between the parties was not one in which [Uber London Ltd] acted as the drivers’ agent.

  1. Control still matters. The Appeal Tribunal said:

 The [Employment Tribunal]…was entitled to look at all factors to determine whether this was a case in which the … Uber drivers were entering into contracts with passengers as part of their own business undertakings. Seeing that they were subjected to control on the part of [Uber London Ltd] was an indication that they were not.

  1. These matters will continue to be decided on a case by case basis. The Appeal Tribunal said:

Inevitably the assessment [the ET] had carried out was fact-and context-specific.

Moving forward

It will be interesting to see what the Supreme Court makes of this.

Whilst, it would seem possible, in theory, to construct an agency relationship of the type which Uber contended for in this case, one might wonder whether Uber would have done better to construct the agency and booking service between it and the riders, rather than between Uber and the drivers.

It could also be important to recognise that this might not really be a case, where the Employment Appeal Tribunal said that the written documentation doesn’t matter … it’s perhaps more a case of making sure that the written documentation gets it right – i.e. that it reflects the true relationship between the parties.

 

Andrew C. Wood

 

Proposed amendments to South Australia’s Labour Hire Licensing Bill 2017 bring some clarity to intended coverage… at last. But it’s not all good!

It is encouraging to see the penny starting to drop, with notice of some recent amendments to South Australia’s Labour Hire Licensing Bill 2017 filed in Parliament last week.

The amendments revise the definition of labour hire services provider by emphasising that a supply occurs, where the worker performs the work in the third person’s [client’s] business. Sub-clause 6(1) of the Bill will now read:

A person provides labour hire services if, in the course of conducting a business, the person supplies, to another person, a worker to do work in a business or commercial undertaking of the other person.

The amendment makes it clear that a tripartite arrangement involving agency (as provider), worker and third person is intended; and starts to align the legislation more closely to employment agency arrangements found in South Australia’s Payroll Tax Act and in the payroll tax legislation of NSW and Qld.

At the same time, however, the change signals a clear departure from the UK’s #gangmaster model, where the bipartite use form of gangmaster labour contracting is regulated along with the tripartite supply form, which is associated with traditional labour hire.

In many ways, that departure seems a pity; because a worker, who is used as part of a gang that is assembled by a provider of harvesting, chicken processing, cleaning, or trolley collection services (for example) may lose protection because it will not always be clear that they are working “in the business or undertaking of the other person” – i.e. the third party (client). They are more likely to be working in the business or undertaking of the provider.

What seems not to be recognised by either Queensland’s Act, or the South Australian Bill is that the type of exploitative conduct, which the legislation is designed to stop, extends across both different types of gangmastering.

The question was asked by Queensland Parliament’s Finance & Administration Committee during the public briefing on the legislation back in June:

“What is there to stop unscrupulous labour hire firms simply re-inventing themselves as unscrupulous labour contractors?”

The answer now, both in Queensland and more clearly so in South Australia, would appear to be, “Nothing”.

So, the penny may be starting to drop; but it still has a long way to fall.

That has to be a matter of concern, with the legislation proposed for commencement in South Australia on 1 March, 2018 and in Queensland on 16 April, 2018 and not a lot of time to do much about it.

Businessman & Newspaper

 

 

 

Andrew C. Wood

Labour Hire Licensing Acts (Qld & SA): Application to incorporated independent contractors

Blackboard IICsWith Queensland’s Labour Hire Licensing Act 2017 set to commence on 16th April 2018, and South Australia’s even earlier on 1 March 2018, it would be worthwhile for agencies, who on-hire incorporated independent contractors, to review their contractor arrangements to see how they might be affected. 

Provider of labour hire services

It has been assumed that, in a traditional tripartite arrangement, the agency is the party who enters into a commercial arrangement to supply a worker to a client. That’s reflected in the definition of  labour hire services provider contained in s. 7 (1) of the Qld Act.

“A person (a provider) provides labour hire services if, in the course of carrying on a business, the person supplies, to another person, a worker to do work.”

South Australia’s equivalent provision is similar in its focus on the supply of a worker to another person.

Application to incorporated independent contractors

But those provisions are just as capable of applying to incorporated independent contractor entities that supply their nominated workers to the agencies, or at the agency’s direction, to the agency’s clients.

APSCo Taxonomy

These are the type of contractors that, in APSCo’s taxonomy, are referred to as “Pty Ltd Contractors” and described –

“An independent contractor that is an incorporated company, which employs an individual to perform services and supplies them to an end user client. Alternatively, a third party company may act as the incorporated entity structure (i.e. payroll service provider). The company is responsible for the individual’s superannuation, tax and any insurances (as applicable and agreed between the parties).”

 Supply terminology

A question immediately arises as to whether the pronoun, them, refers to the individual or to the services.

If the reference is to the individual, then the APSCo definition seems pretty clearly to contemplate that, in the course of carrying on its business, a Pty Ltd Contractor supplies workers to another person to perform work.

If that supply comes within the meaning of “supply” as it is used in the Act, then it would seem to follow that the Pty Ltd Contractor is a provider of labour hire services and requires to be licensed.

Risk of offence if no licence

It would also seem follow that the agency that acquires the services of a Pty Ltd Contractor may commit an offence (Person must not enter into arrangements with unlicensed providers), if the Pty Ltd Contractor does not hold a labour hire provider’s licence granted under the relevant Act and is not exempt.

If, instead of referring to the workers, the pronoun them refers to the services, it will still be necessary to examine the arrangements under which the services are performed in order to determine whether they are performed by the individual working in the end-user’s business. If that is the case, there may be a supply of a worker to the end-user and the Pty Ltd Company would need to be licensed, as would the agency.

RCSA

In RCSA’s taxonomy these workers are referred to as “On-hire Contractors (Incorporated)” and described –

“An individual independent contractor engaged as an employee of a company which is typically controlled by the same individual as a sole or joint Director. There are examples where the individual will be an employee of a larger, multiple employee, company where the company nominates a key person for the completion of the work on assignment.”

Nomination terminology

The RCSA definition of On-hire Contractors (Incorporated) does not use supply terminology. Instead, it uses the terminology of “nomination” often associated with one of the key tests of a genuine independent contracting relationship – namely the power to delegate.

However, it may amount to the same thing as a supply if the nomination results in an individual’s services being provided “to help the client conduct its business in the same way, or much the same way, as it would through an employee”.[i]

Risk of offence

In that case, the incorporated entity, in the course of its business, is likely to be supplying its nominated person to the end user and therefore required to be licensed.

Once again, there would be a similar risk of committing the offence if the agency secures the services of On-hire Contractors (Incorporated) that are not licensed under the Act.

Industry definitions not determinative

Of course, neither the RCSA definition nor the APSCo definition is determinative of the question that needs to be asked. They simply represent attempts, from within the industry, to describe a common work model. To that extent, they both provide useful insights that may help agencies to analyse more closely the arrangements that they have with this class of workers and determine the extent to which the licensing requirements of the Act will need to be met.

The problem stems not from the RCSA definition, nor from the APSCo definition, but rather from the largely unexplored and unintended consequences of the Acts.

Administrative consequences

If the Acts do apply in the way their coverage provision suggests they might, the administrative consequences – understood in terms of the cost and effort of administering a scheme that requires incorporated independent contractors to be licensed – are enormous and have been greatly under estimated.

A regulatory solution

One simple solution might be to exempt this particular class of worker (or provider) by regulations made under the Acts.

However, one difficulty with the Queensland Act is that it might not be available unless the supply of a worker by the incorporated entity is not a dominant purpose of the business ordinarily carried on by it. That might not be so easy to establish, given the type of entity that we are discussing.

Need to examine contractual arrangements

One further issue, which agencies will need to look at closely, concerns the contractual arrangements that exist between the agency, the worker, and the worker’s incorporated entity.

It will be vitally important to correctly identify whether it is the agency, the worker or the worker’s incorporated entity that is providing the substantial services – be they IT services, event planning services, design services, project management services, etc – to the client.

This may not always be clear, or accurately reflected, in the documentation that exists to support those contractual arrangements – if, indeed, any documentation exists at all.

Need to examine payment “obligations” between incorporated entity and worker

Finally, given the restricted definition of worker contained in both Acts,  it may also be necessary for agencies to examine closely the arrangements between the incorporated entity and the worker, which give rise to any obligation on the part of the incorporated entity to pay the worker, in whole or in part, for the work.

In that respect, it may become important to be able to distinguish payments made by the incorporated entity to the worker for the work from shareholder dividends, trust distributions or other remuneration that is not so clearly “for the work”.

Again, there may be limited documentation – and what documentation there is between the incorporated entity and its nominee may be inaccurate or unclear. In many instances, it might not be the sort of documentation that would usually be provided to agencies – though there may now be some incentive to ask for it!

Time is running

These are just some of the issues that agencies who work in this space will need to consider and resolve in the six months or so that remain before the legislation commences.

Given the number of contractors potentially involved and the variety of the arrangements under which they may work, that is not a very long time.

 

Andrew C. Wood

 

 

[i] For a discussion of this point see Wood, AC,  H.R. & Recruiters’ Casebook,  Lessons for Labour Hire Providers: JP Property Services Pty Ltd v Chief Commissioner of State Revenue (2017) 21 October 2017 https://recruiterscasebook.com/2017/10/21/lessons-for-labour-hire-providers-jp-property-services-pty-ltd-v-chief-commissioner-of-state-revenue-2017/

 

JJ Richards & Sons Pty Ltd admits it’s time to take out the garbage.

Last month, I wrote that recruiters, who use standard form terms of business, might take note that the Australian Competition and Consumer Commission (ACCC) has started taking court action to enforce the unfair terms in standard form small business contracts provisions, which were introduced into the Australian Consumer Law in November last year.

One of the companies against which the ACCC took action was JJ Richards & Sons Pty Ltd, a large privately owned waste management company (JJR & Sons). ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224 (13 October 2017). The case moved forward very quickly, seemingly with JJR & Sons admirable co-operation.

On 13 October, JJR & Sons admitted that each the following terms in its standard form waste management contracts caused a significant imbalance in the parties’ rights and was not reasonably necessary to protect its legitimate interests.

  • Automatic renewal;
  • Unilateral price variation (after notice);
  • Agreed times (for waste collection – best endeavours but no liability);
  • No credit without notification (JJR & Sons charged customers if they attended for waste collection but were unable to gain access, etc);
  • Exclusivity (customer not to engage another waste removal firm);
  • Credit terms (entitlement to suspend services with no corresponding right to withhold payment for failure to provide services);
  • Indemnity (wide ranging hold harmless provision); and
  • Termination (clause preventing customer from terminating whilst payments outstanding).

As a result, the Federal Court of Australia held that each of the impugned terms was void and imposed orders (by consent):

  • restraining JJR & Sons from relying on the impugned terms;
  • restraining JJR & Sons from using standard form contracts containing an impugned term;
  • requiring JJR & Sons to publish corrective notices;
  • requiring JJR & Sons to provide a copy of the Court’s orders to each person who was a small business that entered into one of the impugned contracts after 12 November 2016. (There were 26,000 contracts. It will be up to JJR & Sons to work out how many of them were with customers, who employed fewer than 20 persons – i.e. were “small businesses”!); and
  • requiring JJR & Sons to establish an Australian Consumer Law compliance program to be undertaken by each employee or other person involved in its business. who deals with Australian customers in order to minimise the risk of future reliance on unfair terms.

Many recruitment, contracting and staffing services providers might be aware of similar terms to those that were impugned in this case. Hopefully, they won’t be in their own terms of business because they will have taken the opportunity over the last twelve months to have them reviewed. If they haven’t, then perhaps … it’s time to take out the garbage!

Publication1

 

 

 

Andrew C. Wood

Lessons for Labour Hire Providers: JP Property Services Pty Ltd v Chief Commissioner of State Revenue (2017).

Queensland has passed, and South Australia is considering, labour hire licensing laws that apply to labour hire providers, who supply workers to another person to perform work.

Neither the Queensland nor the South Australian legislation develops the notion of what it means to “supply a worker”. That notion remains problematic because workers are not mere commodities that can be supplied in any ordinary sense of the word.

What has been missing from the legislative developments in Queensland and South Australia has been a detailed legal analysis of the rights that are exercised; the obligations that are triggered; and the effects that are created whenever a so-called “supply” takes place.

In this article, I draw on some of the legal analysis that has taken place when courts have tried to give meaning to similar expressions contained within payroll tax legislation.

In particular, I look at the recent New South Wales decision of JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 (12 October 2017) and examine the extent to which the reasoning of the court in that case might provide useful insights into the direction of legal argument and the nature of the “fact sensitive enquiries” that will be necessary when applying the labour hire licensing legislation.
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ACCC taking action to enforce new unfair business terms laws

locked-into-contractRecruiters, who use standard form terms of business, might take note that the Australian Competition and Consumer Commission (ACCC) has started taking court action to enforce the unfair terms in standard form small business contracts provisions, which were introduced into the Australian Consumer Law in November last year.

Two proceedings have now been commenced in the Federal Court, where the ACCC is seeking declarations that some standard terms are unfair and void, together with injunctions, publication orders, compliance program orders and costs.

One proceeding is against Servcorp, a large provider of serviced office facilities; the other is against JJ Richards & Sons Pty Ltd, a large privately owned waste management company.

Amongst the business terms coming under attack are:

  • terms binding customers to subsequent contracts;
  • terms permitting unilateral increase in prices;
  • indemnity or hold harmless terms;
  • exclusivity terms; and
  • terms permitting one party to unilaterally determine whether the contract has been breached.

Frequently, terms such as these reflect an approach to contract drafting that was considered “smart practice” in the past. But that approach will need to change under the influence of consumer law and demands for more sophisticated relational contracts.

It will be interesting to see how the proceedings unfold and what future actions the ACCC may take, having indicated, last year, that the contracting sector is one of the sectors that it is targeting.

 

 

 

Andrew C. Wood

A Labour Hire Licensing Bill for South Australia. Seriously.

So, (sighs!) South Australia is next in line to be drafting a Bill to “crack down on dodgy labour hire operators”.

Nothing wrong with cracking down. However, South Australia already has legislation, which requires employment agencies to be licensed – though it exempts labour-hire and group training schemes from its coverage.

Why not just remove the exemption? Is that too easy? Or can you just never have too many licences?

And as for all the talk about how the licence fee is going to partially fund enforcement – the fee for a two-year employment agents licence in South Australia is $14.80.

There’d be precious little funding of the enforcement effort for that!

We’ll have to wait to see just how serious this proposal turns out to be – especially if, as claimed, it’s aiming to be “complementary” to Queensland’s clunky scheme.

Businessman & Newspaper

 

 

 

Andrew C. Wood