Contractor Management Companies under Victoria’s Labour Hire Licensing Scheme.

Victoria’s Labour Hire Licensing scheme may cause some headaches as it tries to extend its coverage to contractor management service providers. That’s because there’s likely to be uncertainty about what a contractor management service provider actually does.

Section 8(2) of the Act provides:

 (2)     A person (a provider provides labour hire services if—

(a)     in the course of conducting a business of providing contractor management services, the provider recruits one or more individuals for, or places one or more individuals with another person (a host ) to perform work in and as part of a business or undertaking of the host; and

(b)     the individuals are workers for the provider, within the meaning of section 9(2)(b).

The explanatory memorandum, which accompanied the legislation in its passage through Victorian Parliament somewhat unhelpfully explained:

Contractor management services” is not defined in the Act, but has its ordinary meaning, which covers services whereby a business recruits independent contractors on behalf of a third party (host) and, following engagement of the independent contractors by the host, continues to manage the performance of the contract between the independent contractors and the host. This might include, for example, providing administration and payroll functions, supervision functions or performance management functions in relation to the independent contractor.

But what if the contractor appoints the business to manage the performance of the contract (or parts of it) – i.e. the business is a contractor appointed CMC (it happens)?  Does it make a difference?

And what if the contractor is not an individual (as required by s. 8(2)(a) and 9(2)(b)), but is an incorporated worker instead?

What if the provider recruits the incorporated entity and leaves it to the incorporated entity to recruit or provide the individual – perhaps under the reg.4(1)(c) exception?

Does the incorporated worker exception still apply if the contractor is supplied as a cleaner in a commercial premises? (see reg. 5(a)).

What other outsourced functions, apart from administration and payroll functions, supervision functions and performance management functions, amount to contractor management services according to the “ordinary meaning” – whatever that is? Would the provision of safety inductions be enough? Would onboarding assistance, or “performance monitoring” for the purpose of managing a candidate replacement guarantee be enough?

These might be the sorts of questions that the Authority would be keen to dismiss as questions “asked by clever lawyers” – as though that were a bad thing. But thank goodness there are some who are asking them and attempting to answer them… because, at some point, they’re going to be contested as matters of black letter law and not merely as a “vibe” picked up from a current affairs programme, a campaign manifesto, or a regulator’s website.

And before we ever get to that point, there’ll be plenty of providers, hosts, and contractors wanting to know where they stand.

If you want to participate in this discussion or learn from it, why not register for WorkAccord’s Intermediate/Advanced Level Webinar on 29 May 2019.

The link below will take you to the Eventbrite registration page, where you can find out more details about the webinar.

https://www.eventbrite.com.au/e/labour-hire-licensing-contractor-management-payroll-outsourcing-tickets-60801308350

The webinar will be recorded and can be accessed on demand following the live presentation.

The cost is $145 for live participation (including access to the recording) and $95 for the recorded version only.

As always, there’s a limited number of complimentary free tickets available, which people registering for the webinar might like to offer to their clients or staff. Please contact me if you’d like to take up one of the complimentary tickets.

I hope you can join me.

Andrew C. Wood

 

Will your outsourced payroll arrangements alter your requirements to have a labour hire license? Probably not.

As attempts by Australia’s labor states to create a multi-jurisdiction, labour hire licensing scheme gain critical mass, it is becoming more important, and perhaps a little easier, to make comparisons and ask questions at a practical level rather than merely at a policy or ideological level.

One such question, which seems to be causing concern amongst industry participants, relates to the involvement of payroll providers in labour hire arrangements. Kudos, therefore, to the industry participants, who have appreciated the detail and complexity of the legislation well enough to formulate the following question:

Will our outsourced payroll arrangements alter our requirements to have a labour hire license?

The answer is, “Probably not”.

Let’s say you provide labour hire services – i.e. you engage a worker and supply that worker to another person (a host) to do work.

Your engagement of that worker creates an obligation – and it’s your obligation – to pay your worker for her or his work. You can’t escape that obligation by entering into a pay-when-paid-by-client arrangement. And, importantly, you can’t escape it by outsourcing your payroll function to a third-party payroll provider. It’s still your source obligation; and it is sourced in the work/wage or work/remuneration bargain that you made with your worker.

Neither, in most cases, can you transfer your worker to the payroll company. As the High Court has reminded us:

No worker is an asset in the employer’s balance sheet to be bought or sold.

So, whilst ever you continue to engage the worker, you have a payment obligation – even if a payroll company is going to perform it for you.

Now, I’ve heard it suggested from time to time, that terms and conditions of appointment of a payroll provider often attempt to shift responsibility for engaging the worker onto the payroll provider. They might say something like:

 You, the payroll provider, agree that you employ the worker and are responsible for all employer obligations.

In my opinion, you will have to be especially careful if your terms of business say anything like that – and that’s so regardless of whether you are the payroll provider or the labour hire provider.

The work/wage or work/remuneration bargain is made between the engager and the worker. It’s not something that you can transfer on paper – even if you have a paper consent from the worker and payroll provider – because the paper transfer and consent might not reflect the reality of the situation if it’s actually you, who continue to supply the worker to your client and are getting paid for it.

Even though there may be some very limited circumstances in which you could successfully transfer a worker’s engagement to a payroll company, it may still be important for you to ensure that you have a licence.

Remember, you can’t transfer a worker whom you haven’t first engaged. How did the worker become engaged with you in the first place? Did you advertise, or hold out that you were willing to provide labour hire services? Under all three state schemes, you must not advertise or hold yourself out as willing to provide labour hire services unless you have a licence that is in force.

If your attempt to appoint a payroll provider is designed to circumvent or avoid an obligation imposed upon you by the labour hire licensing legislation, you may also have committed an avoidance offence. Your client, and indeed your payroll provider, may be obligated to report the attempt as an avoidance arrangement under the reporting provisions of the legislation.

If you DO successfully transfer the worker to the payroll company, remember:

  • It’s probably not just the payroll function that you have transferred – it’s likely to be pretty much the whole show; and it might be difficult to know what your client will be paying you for.

Ask yourself: Are you still providing what you agreed with your client you would provide? If you’re no longer providing what you agreed with your client to provide, you might find that your agreement with your client (including its terms and conditions) will be swept aside by a court, as happened in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd.[i]

  • Perhaps you’re being paid a type of pay-as-you-go placement fee and you’re really acting in the role of a private employment agent (PEA) providing placement services.

Ask yourself: Do your terms of business support that characterization of your arrangement; and do they accurately reflect the arrangement?

  • Even if that is the case, you may still require a labour hire license if, as a PEA, you are doing anything more than merely providing a recruitment or placement service.

For example: If you are arranging safety inductions, PPE,  accommodation,  transport, message handling to coordinate worker attendance at the worksite etc, you will not have the benefit of the private employment agent exception under the Queensland and South Australian legislation; and you may be caught by the extended coverage provisions in the Victorian legislation that relate to PEA’s, who arrange accommodation; or Contractor Management Companies, who recruit and place independent contractors.

  • You may also require a PEA licence in those states and territories that still have them.

Ask yourself: Do you need and do you have a PEA licence?

  • Your arrangement is likely to convert the payroll provider into a labour hire provider if the payroll provider now has to supply the worker to the user or “host”.

Ask yourself: Does your payroll provider have a labour hire licence? If not, you may need to consider whether you have an ancillary liability arising from placing workers with unlicensed labour hire providers. The ancillary liability penalties can be as severe as those imposed upon the principal offender.

  • You may have made a type of split placement – i.e. you have placed the worker operationally with the host, but administratively with the payroll provider. In doing so, you may have implicated your client in the offence of dealing with an unlicensed labour hire provider if either you or your payroll providers are unlicensed.

If your attempt to transfer the worker to the payroll company was NOT effective, – and there may be a number of reasons why it will not be effective – then you would clearly remain the labour hire provider. You will need a licence – even though the payroll provider is paying the worker.

The interactions between payroll arrangements and the coverage and avoidance provisions of the labour hire licensing legislation are complex and are affected by nuances in definitions, exclusions and extensions. That will mean that payroll providers (and labour hire providers) will need to exercise special care to understand the effects of a transfer of payroll responsibility from a labour hire provider. They will need to be thoroughly familiar with the legislation and will need to scrutinize the terms and conditions upon which the transfer of payroll responsibility takes place.

But wait! There’s more…

So far, we’ve only been discussing the situation where a labour hire provider appoints a payroll provider. There’s also the possibility that the payroll provider might be appointed by the client (host) or even by the worker. There’s the additional possibility that the payroll provider is, in fact, the worker’s own incorporated entity. That’s a whole other story!

Teacher 3

 

 

Andrew C. Wood

 

[i] [2015] FCAFC 37 per North and Bromberg JJ at [paras 215 to 218].

This is an opinion piece intended to promote public discussion. It is not, and should not be relied on as legal advice. If you do want legal advice, please seek it from a lawyer, who is familiar your industry and with the laws that apply in the jurisdictions where you carry on business. Your industry associations or local Law Societies may be able to help you to find professional legal advisors, who can assist you.

 

Victoria Introduces its Labour Hire Licensing Bill 2017…and cracks are starting to show.

Victoria’s Labour Hire Licensing Bill 2017, introduced into State Parliament on 13 December, is the third labour hire licensing scheme introduced this year as part of a labor State push to establish a common pattern of labour hire licensing regulation.

South Australia’s Labour Hire Licensing Act 2017 is set to commence on 1 March 2018.

Queensland’s Labour Hire Licensing Act 2017 is set to commence on 16 April 2018.

Victoria’s Labour Hire Licensing Bill 2017, if it is passed, has a proposed commencement date of no later than 1 November 2019, but may be proclaimed earlier.

Despite hopes of establishing a common scheme, cracks are starting to show.

Some of the cracks may be smoothed over by regulations that have yet to be released for comment in South Australia and Queensland. Others may be smoothed over by administrative fiat in those States that are intending to create an administrative power to grant various exemptions (S.A. and Vic).

Some cracks may be smoothed over by accommodating mutual recognition arrangements; and some might only be smoothed over by legislative amendment.

Furthermore, detailed analysis of the legislative schemes reveals some glaring gaps – e.g. the failure to regulate substitutable workforce contracting services; and some apparent inconsistencies – e.g. the inconsistency created by regulating only the supply of a worker where the work is done in and as part of the host/client’s business whilst simultaneously extending the definition of worker to include independent contractors. The issue, here, is that genuine independent contractors perform their work in and as part of their own businesses.

Many of these issues will only come to light when the legislation is tested in the course of prosecutions and licence decision reviews and appeals. Nevertheless, it is worthwhile to to take note of them – especially for businesses that operate across state borders or may be relying on interstate advice – and bring them into the  field of public and industry dialogue.

A good place to start might be a side-by-side comparison of the main coverage provisions of the three state schemes – as far as we know them at this stage, without the benefit of regulations and with the Victorian Bill still awaiting its second reading debate.

So, I’ve had a go at representing some similarities and differences in table format. To do it, I’ve had to standardise some of the terminology. I’ve opted for:

Provider = the person who needs the licence;

Worker = the person who performs the work;

User = a person who takes the benefit of the supply of a worker for the performance of work.

The “user” terminology was the most difficult to arrive at. In the Queensland and South Australian Acts, this party is usually referred to as “another person”. Victoria uses the expression “host”. Both of those terms are problematic in their application to labour contracting chains, where several layers or tiers of supply are involved; and the nature of the services being supplied up the chain may switch between labour hire services and sub-contracting services before reaching the point where the work is actually performed.

I’ve therefore opted for the “user” terminology because it applies to labour contracting chains operating through intermediate users to an end user. However, to my mind, the term remains problematic because of the possibility of confusion with user models of gang-mastery that are regulated under the UK Gangmasters Licensing Act but have so far escaped attention in Australia.

Using my standardised terminology, one could say that common to all Australian schemes is the proposition that:

A person is a labour hire provider (provider) if, in the course of conducting a business, the person supplies a worker to another person (user) to do work…

At that point, the schemes begin to diverge around details of:

  • situational application – e.g.whether in and as part of the user’s business;
  • additional coverage;
  • exclusions; and
  • worker definition.

The table represents my attempt to illustrate these points of departure. To read it click  here or on the link below.

https://recruiterscasebook.files.wordpress.com/2017/12/qld_sa_vic-comp_cov.pdf

The expression, “c.f.”, where it is used in the table, indicates that a comparable outcome is achieved by slightly different means.

I’d love to learn of your thoughts and comments.

Businessman & Newspaper

 

 

Andrew C. Wood

Unfair terms in standard form small business contracts in the independent contracting sector – First questions.

With only eight weeks to go until the unfair terms in standard form small business contracts reforms take effect on 12 November 2016, and with the ACCC having indicated that the independent contracting sector is clearly in its sights[1], I am hoping that someone is looking at how this is going to play out for independent contractors and their principals in the recruitment, on-hire, and contracting industries. 

I might be about to ask more questions than I can answer; but let me ask them anyway and see if they bring a few issues into sharper focus.

Continue reading

“I’m a PAYG Contractor” (Australia) – You’re a what?

A lot of questions start, “So, if a PAYG Contractor…” and then run on as though everybody was quite certain of what that was.

Contractor is a generic term, the boundaries of which are imprecise. It frequently refers to a person who performs work on contract, rather than in ongoing service or by ongoing office. In the case of a contractor, the contract and the work are largely coterminous  – i.e. their boundaries are closely aligned.

Contractors may be dependent (a colourful description) or independent (a legal term of art). They may also be employees. Not every contractor is an independent contractor.

Independent describes the status or autonomy of the contractor.

PAYG describes only the Australian tax system that is applied to the contractor.

PAYG Contractor is therefore not a precisely defined or distinct species of worker, though employment services industry participants often use the expression as though it were – and build business models around that misconception.

If you have a question that starts off, “So, if a PAYG Contractor…” try to work out what the work relationship really is. In most cases once you have done that, the answer will come to you pretty quickly – though you might not always like it!

Andrew  C Wood

10 September 2015