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

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

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 provisions suggest 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/

 

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.
Continue reading

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

Queensland’s Labour Hire Licensing Bill: A Report Card on the Parliament’s F&A Committee’s Public Hearing.

Man reading newspapers with superimposed punctuation symbols uid 1461028

I’ve just finished viewing the televised replay of the Queensland Parliament’s Finance & Administration Committee’s public hearing regarding the Labour Hire Licensing Bill conducted in Brisbane on Thursday, 22nd June 2017. It makes absorbing viewing for anybody, with about four hours to spare and an interest in novel regulation that sets the benchmark for labour hire regulation in other states and territories.

Here are a few of my impressions of what happened.

Regulating for the Mood

About twenty presenters came forward to give evidence to the Committee regarding what they hoped the Bill might achieve; what they thought it would achieve; and what they thought it would fail to achieve.

I thought the Queensland Council of Unions’ opening comment pretty much set the prevailing mood:

If this industry had been able to regulate itself, obviously this sort of legislation would not be necessary.

A hit. A very palpable hit!

Although it’s not as if the industry hasn’t asked to be given the tools that would allow it to do that in the form of a nationally applicable prescribed industry code under the Competition and Consumer Act, or well-founded requirements for an industry developed certification scheme.

The QCU advanced a fill-the-gaps view of the role of labour hire that might have been true about 40 or 50 years ago, when the supply of “temps” to fill in for temporary work absences or overloads was bread and butter business for the industry.

However, that view doesn’t provide a satisfactory foundation upon which to base this legislative scheme, because it fails to appreciate the demands for flexibility and adaptability in contemporary supply chain operations. And it ignores the need for the more sophisticated auxiliary labour arrangements that are required to support those operations.

The QCU then went on to equate most types of outsourcing and casualisation to labour hire, without much distinction as to whether the business model used was one of labour hire or something else.

But that might not have mattered a great deal, because the Bill, itself, doesn’t seem to recognise that there is a distinction, which is a pity.

In failing to make a distinction between supply and use models of workforce services, the Bill spoils its own attempt to meet either of its objectives and will leave workers exposed to exploitation by the unscrupulous labour hire provider, who reinvents itself as an unscrupulous labour workforce contractor – that is to say, the other type of gangmaster that the Bill hasn’t quite come to grips with, yet.

Support for Objects

Virtually all presenters accepted that the objects of the Bill, namely to protect workers from exploitation and to promote the integrity of the labour hire industry, were worthy of regulatory support.

Although Ai Group did make a submission that the Bill should not include the object of protecting workers from exploitation, I didn’t get the sense that Ai Group was advocating carte blanche for labour hire providers.

Rather, it seemed to me that Ai Group was taking the more sophisticated position that regulatory protection and enforcement were properly the province of the regulatory bodies at both State and Federal level that already have lead agency responsibility, and substantial power under their governing legislation, to enforce compliance and to prosecute non-compliance.

The Ai Group objection, as I understood it, was that the Bill merely added additional layers of regulation and punitive measures that were not justified and that would disturb the complex balance of rights and responsibilities that existing regulation already created.

I sensed that Ai Group was contending that the purpose of protecting workers from exploitation, under this legislative proposal, would have been better served by concentrating efforts on promoting the integrity of the industry. That is to say, by supporting positive measures to promote the industry.

That view was supported by other presenters, who felt that the chief executive’s enforcement powers were limited to checking-up to make sure that license holders were complying with legislation that was the responsibility of other bodies; and that it amounted to little more than vicarious activity conducted on behalf of regulators, who had the primary responsibilities – if not to actual interference in other regulators’ territory.

Nevertheless, the Anti-Discrimination Commission of Queensland came out strongly in support of the Bill. Though we later heard from the Queensland Law Society that the ADCQ was already sending anything that looked “industrial” to the Fair Work Commission or the QIRC; and that the QLS thought that was the proper approach.

The point about how the Bill should be targeted was made in a slightly different manner, but convincingly, by the RCSA representatives, who contended that regulatory effort and resources would be dissipated to the point of uselessness under a universal scheme and would be far better directed towards improving standards of business conduct and industry performance in sectors, where it was needed most.

Other Presenter Highlights [with observations]

The following are a few of what, for me, were highlights of the presentations made to the Committee.

Unions Team (QCU, NUW, AMWU & United Voice)

Unions will likely intervene in licence applications if they know applicants aren’t complying with their obligations and the chief executive would be assisted by having information that the unions could supply.

The unions could not imagine how a licence scheme could operate on a limited sector basis.

[ACW: Although quite clearly it does under the UK Gangmasters Licensing Scheme.]

The FWO doesn’t have the resources to enforce its legislation.

ADCQ

A broad-based scheme rather than a limited sector scheme is preferred.

An amnesty arrangement may be needed to encourage vulnerable workers to come forward and leave exploitative arrangements without fear of prosecution.

Ai Group

If the Committee wants to know why exploitation has continued in spite of existing regulatory measures, it should ask the relevant regulators … and their political masters.

The wide meaning given by the Bill to labour hire services provider will have the consequence that small business plumbers, who provide back up support for each other will need to have labour hire licences.

[ACW: A good point! The same could be said for doctors and medical staff who provide roster cover for each other. Hardly seems to warrant licensing. Hope someone will remember to specifically exclude them in the regulations. It’s going to be a long list!]

Unions, having an active interest, will tie up licence applicants in review proceedings.

Group Training Organisations that are already regulated under the Further Education and Training Act 2014 should be exempted from the requirements to hold licences.

[ACW: This seems to be a good point. GTOs and PEOs under the Act already have employer responsibilities and are well regulated. Because they have an obligation to pay their trainees/apprentices (within the meaning of cl. 8 of the Bill), they are brought within its coverage.

The training organisations that need to be regulated are the ones that aren’t regulated under the Act and don’t have those obligations; and which are sometimes found aligning themselves with gangmaster businesses. These are the type of training organisations that are often at the centre of jobs scams which the ACCC prosecutes. But, unfortunately they’re not caught by the Bill and the Bill does nothing to protect workers from exploitation at their hands.]

AMMA

A true calculation of the regulatory burden of reporting needs to take account of the fact that workers may have been engaged in multiple short-term projects within a single reporting period.

There is a difference between recording the information and making it publicly available through reports. Some of the information will be sensitive personal information.

RCSA

The meaning given by the Bill to labour hire services provider is too broad and will catch businesses that should not be caught.

It will also result in many exploitative direct-hire arrangements, such as were identified in the 7-Eleven investigation, not being caught by the Bill.

The Bill will fail to achieve its objectives, unless its coverage is targeted to the sectors most at risk.

The proposed $2 million that will be spent annually on maintaining the scheme would only be a drop in the ocean under a universal coverage scheme.

The Bill doesn’t fix a window of time for interventions. Under clause 94(2)(a)(ii), interventions can be made within 28 days of the intervenor becoming aware of the decision – which could be any time at all.

[ACW: The position might not be quite so dire as that. Cl. 94(2)(a)(ii) applies to a cl. 93(1) applicant – i.e. a person to whom an information notice is required to be given and who will most usually be the applicant. The “open” time frame only applies if the applicant has not been given the information notice. A third-party intervenor, such as a union or welfare organisation, would be a cl. 93(2) applicant and therefore caught by the 28-day period that runs from the day when the decision is published in the Register. See cl. 94(2)(b)].

Users of labour hire services need to be engaged in the process, though the Bill does not give guidance about that.

Investment in enhancing industry performance – e.g. through schemes such as the certification scheme proposed by RCSA – will be more effective in improving standards, providing assurance and represent a better investment in combatting exploitation and promoting the integrity of the industry.

HIA

Unlike professional business licensing schemes, the Bill proposes no competency standards. All the proposed scheme does is duplicate existing compliance obligations under the overlay of licensing regulation.

Information placed on the public register may be appropriated for industrial purposes such as union recruitment programmes.

 [ACW: There is perhaps a greater risk of information in the reports being used for that purpose, though one would want to know what additional matters are likely to be prescribed by regulation for inclusion on the public register.]

Business competitors may become third party intervenors in licence applications.

[ACW: That seems unlikely in light of cl 94(3), which excludes other licence holders from intervening. However, there seems to be nothing to stop a licence holder separately incorporating a “social conscience” that would not need to have a licence and would therefore be able to intervene. It also seems possible that businesses that might not require licenses under the current scheme – e.g. harvest contractors who do not supply workers; but who assemble workforces to undertake short term projects and therefore provide a (substitutable) service in competition with labour hire providers – could intervene to protect their own patch. Note that under the GLA scheme, these types of harvest contractors ARE included in the licensing scheme coverage.]

Growcom

The meaning given by the Bill to labour hire services provider is too broad and will catch businesses that should not be caught – e.g. a farmer who loans a worker to his mate, Farmer Fred down the road.

[ACW: This could even apply (technically) to a farmer who provides workers to fight a bush-fire on a neighbouring property. Remember that, under cl 7(1), the farmer doesn’t have to be in the business of providing workers – it’s enough if, in the course of conducting his own business (running and protecting his farm), he supplies his worker to another person.  I doubt that regulations are ever going to be able to carve out all the exceptions that would be required under the flawed definition of labour hire services provider that presently appears in the Bill].

Harvest contracting appears not to be caught. Growcom pleaded with the Committee to make sure the definitions are clear because these alternative business models will become more common if they are not captured by the scheme.

Clause 93, which permits intervention by interested parties, is susceptible to the making of vexatious complaints.

Salvation Army & Freedom Partnership

Protection against exploitation needs to be extended to catch the exploitative practices of workforce logistics providers such as accommodation and transport providers.

The Salvation Army would use the information contained in cl. 31 reports to provide pastoral care and outreach to workers.

[ACW: Whilst there are few, who would dispute the value of the work done by the Salvation Army and its Freedom Partnership connexions, other observers, of a secularist persuasion, may entertain doubts and fairly ask, “Who else might want to make use of this information; and for what purposes?”]

Some labour hire providers have claimed to be a church in order to lure workers into exploitative arrangements.

[ACW: This is a grim reminder of the practices of the Nineteenth Century “Sugar Slave” recruiters who, by pretending to be missionaries, reportedly lured Polynesian workers on board their vessels to sing hymns; locked them in the hold and took them off to Queensland to work as indentured labourers. There is much ugly history that Queensland is perhaps still trying to live down. 

These are stories that should not be forgotten and there is a need to take account of them in order to better appreciate the policy behind the Bill. It is vital that the Parliament gets this legislation right.]

All parties need especially to be aware of the hardship and vulnerability to exploitation to which workers are exposed during “down time” due to wet weather or other work interruptions, when workers continue to incur high accommodation expenses that they are then unable to pay. The risk of slipping into debt bondage in such circumstances is high.

Queensland Law Society

QLS cautions against casting the regulatory net too widely and too heavily.

The Committee is correct to note that exceptions could easily be created by regulation made under clause 7(4). But we will need to see the regulations.

[ACW: That is true as a matter of legislative mechanics; but the real problem is that no one will think of all the situations that require regulatory exclusion. Who would have thought about the chicken sexers (excluded under GLA exclusion regulations); or Growcom’s Farmer Fred Down-the-Road; or the bushfire example, the plumbers, or the doctors providing roster cover for each other?]

Any information published about workers’ locations should be limited to broad geographical (regional) reporting using ABS regions, rather than reporting towns or addresses. Privacy needs to be taken into account to a greater extent than is presently indicated by the Bill.

QCAT is not well-resourced to deal with industrial questions that might arise in respect of licence applications, conditions, or interested-party interventions.

The Bill should be as comprehensive as possible in order to avoid everything being left to regulations, or the exercise of administrative discretions.

The Bill should include detailed criteria to guide the exercise of the chief executive’s discretions.

[ACW: At the moment, the Bill only says that conditions imposed by the chief executive are not to be inconsistent with the Bill. That falls a long way short of the requirements of the Legislative Standards Act 1992, which requires that legislation should make rights and liberties, or obligations, dependent on administrative power only if the power is sufficiently defined and subject to appropriate review. On this point, Queensland’s Legislation Handbook explains at para 7.2.1:

 “Depending on the seriousness of a decision made in the exercise of administrative power and the consequences that follow, it is generally inappropriate to provide for administrative decision-making in a Bill without stating criteria for making the decision …”

I don’t think anyone’s suggesting that the consequences of imposing licence conditions, or failing to comply with them, are not serious matters. So, where are the criteria?)

If the regulations deal with substantive issues, then there must be ample opportunity for public response and time to advise clients affected by the new laws before they take effect.

The Bill might also make provision for sunset review.

Report Card

In summary, whilst there was much fruitful discussion, there is still much work yet to be done.

Perhaps the greatest weakness in the legislative proposal is the fact that the Bill is not yet supported by the level of detail that is needed to guide the exercise of discretion, or to understand the true scope of the Bills’ coverage, or to establish standards and conditions for the holding of licenses.

Anyone who is interested in a more technical review of the issues raised at the public hearing, might like to read my companion post: Queensland’s Labour Hire Licensing Bill: Issues arising from the FAC Public Hearing 24/6/2017 (forthcoming).

It will remain the case that, until we see the regulations and perhaps until we know what some intervenor says are the conditions that should be imposed upon a license holder, we just will not know how the terrain of the labour hire industry may be likely to change under the influence of this proposed legislation.

Andrew C. Wood, Hon FRCSA (Life)

Queensland’s Labour Hire Licensing Bill 2017: What about the conditions?

Politician 2

Anyone interested in how Queensland’s new Labour Hire Licensing Bill 2017 will affect the labour hire industry, would do well, right now, to call for some frank and open discussion about the conditions, which the Queensland government intends to impose on license holders. That’s because the only thing standing in the way of a radical overhaul of the labour hire industry is the chief executive’s discretion concerning what those conditions will be and how they will be imposed.[1]  And we have not yet heard much about it.

Unlike some other jurisdictions, where licensing conditions are established by legislative instrument,[2] Queensland intends to establish conditions merely by exercise of administrative discretion.

There is little guidance in the Bill about what the conditions might be, other than that they must not be inconsistent with the broad objects of the Act, which are to protect workers from exploitation and to promote the integrity of the labour hire industry. So pretty much anything that can satisfy those broad criteria is up for discussion.

The width of the license conditions is hinted at by provisions, which say that they can include, but are not limited to, the imposition of bonds and requirements for compulsory insurance.[3]

Very little more is said about the conditions in the explanatory memorandum to the Bill; and nothing of note was said by the honourable Minister, when introducing the Bill to Parliament.

The ability of strangers, claiming an interest in protecting workers from exploitation or promoting the integrity of the labour hire industry, to intervene if they are dissatisfied with the grant of a license (or the sufficiency of any conditions attaching to it) gives further grounds for concern, as it exposes the licensing and appeals processes to the contested agendas of industrial parties and social reformers.

Queensland’s workers and businesses, and those dealing with them, are entitled to know what they can expect; and at the moment, nobody is saying much.

So, here’s a short list of some conditions that could conceivably be imposed under this scheme; and about which some pertinent questions should perhaps be asked:

  • restrictions on providing workers during industrial disputes[4]
  • abolition of temp-to-perm/ contractor-to-perm and agency switching fees[5]
  • restrictions on restraints of trade that protect agencies’ worker connections and client connections[6]
  • restrictions on the use of payroll companies to pay workers’ remuneration[7]
  • prohibitions on charging fees for services provided to workers equivalent to those contained in the employment premiums provisions of Queensland’s Industrial Relations Act and its Private Employment Agents (Code of Conduct) Regulation 2015[8]
  • restrictions on advertising – including requirements for local advertising[9]
  • restrictions on the supply and acquisition of labour hire services that might presently fall outside the scope of matters that can be included in modern awards and enterprise agreements.[10]

There are, of course, many other conditions that could be imposed under the broad discretion that is to be given to the Chief Executive. Casual conversion requirements and provisions of the type contended for in the Secure Employment Test Case (2006) readily come to mind.

The real concern in all of this, is that the conditions may be used as means to circumvent the delicate, though sometimes precarious, balance which the Fair Work Act 2009 (Cth) establishes about what matters pertain to employment and are matters in respect of which industrial parties may engage in lawful industrial action.

Neither is it entirely clear that the mechanisms set out in section 26 of the Fair Work Act, or in section 109 the Constitution, would operate to strike down conditions of the type mentioned in the list on the grounds of inconsistency, where the conditions are imposed by administrative action on a case by case basis only. That, however, is a question for another time.

For the moment, it’s enough to note that the Bill leaves much still to be explained. And it is time that proponents of the Bill did so – in my opinion.

Andrew C. Wood

 

[1] Clause 29(1) of the Bill gives the chief executive a discretion to impose, vary or revoke conditions on a licence for the reasons, and in the circumstances, the chief executive considers appropriate.

[2] See e.g. the Gangmasters (Licensing) Act 2004 (UK) on which some attempt has been made to model the Queensland Bill; and the Gangmasters (Licensing Conditions) Rules 2009 (UK) (“G(LC) Rules”) for which there is no equivalent in Queensland and for which the chief executive’s discretion is to substitute.

[3] See clause 29 (2) of the Bill.

[4] See cdtn 10 of the G(LC) Rules.

[5] See cdtn 12 of the G(LC) Rules.

[6] See cdtn 9 of the G(LC) Rules.

[7] See cdtn 11 of the G(LC) Rules.

[8] See cdtn 7 of the G(LC) Rules.

[9] See Conduct of Employment Agencies and Employment Business Regulations 2003 (UK) reg. 27A.

[10] The explanatory memorandum to the Fair Work Act 2009 made it clear that terms containing a general prohibition on engagement of contractors, labour hire personnel or casuals were not intended to be regarded as “permitted matters”. See also R v Commonwealth Industrial Court; ex parte Cocks (1968) 121 CLR 313 regarding restrictions or qualifications on employer’s right to use independent contractors or labour hire workers.