Employer of Record Arrangements: Not the panacea you were hoping for?

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Recently, I was asked to comment on how an employer-of-record (EoR) arrangement might affect an on-hire firm’s employment and labour hire licensing responsibilities. It seems that there’s a bit of a view circulating to the effect that, if you put in place one of these EoR arrangements with a payroll company, you can avoid both sets of responsibilities. Frankly, I doubt that you can.

And if you try to do so, I think you could end up with egg on your face… or worse still, with residual employment obligations (for tax, super, redundancy, unfair dismissal and the like), as well as leaving yourself open to a range of claims for anything from involvement in misleading conduct in respect of an offer of employment[i] all the way through to sham contracting and labour hire licence avoidance.

Employer of Record (EoR)

Firstly, let’s clarify what I mean by an EoR.

Corporate Groupings

An EoR is a third party that appears “on the record” as the employer of your workers. It’s a common arrangement within corporate groups of related entities. One entity in the group will go “on record” as employer for workers in the group.  It will handle payroll and will probably be the named employer in the employment contract. It will issue pay slips and pay summaries and remit tax and super.  These arrangements are often unravelled in insolvency proceedings, where group entities that thought they were shielded from employer responsibilities can be left having to pay up.

Payroll Services Providers

It’s also a common feature of many arrangements made by on-hire firms for the appointment of a payroll services provider. The contract of appointment might even include the individual worker as a party and might go to considerable lengths to insist that the payroll company must employ the individual. I’ll talk some more about those contracts (and some of their common flaws) in a later post on the topic.

Incorporated Worker Entities (IWEs)

You can also encounter aspects of employer-of-record issues when you’re dealing with a worker owned and controlled through which the worker operates. 

We’re talking, here, about those entities that are effectively the alter ego of the individual who actually performs the work.  Usually, the entity is engaged to provide the required services (e.g., ITC services) and it is left to the entity to employ or engage the individual worker.

If that’s the arrangement you’re working with, you’d want to make pretty sure that the IWE has employed the individual and that the terms of the employment are comprehensively set out in a written contract between the IWE and the worker. Otherwise, you might find that any looseness or uncertainty, or any mistake about the form of contract used, opens the door to an inquiry about whether you, in fact, might be the employer.

We’ve now looked briefly at three different arrangements under which a third party might be identified as the EoR, and we’ve looked at the sort of things that the EoR might be doing.

But, for present purposes, none of that means that the EoR is necessarily the true employer.

The True Employer and How To Find It

The true employer will be the entity which, on an examination of the totality of the relationship, actually controls the work relationship. 

Now, you’re probably going to say that the Golden Trio of recent High Court Cases[ii] put an end to the multi-factor/ totality of the relationship test, and that we can only now have regard to the terms of the contract. 

Well, that is mostly true … if we’re trying to decide if a worker is an employee or an independent contractor – that is to say, if were trying to decide the work status question.  

But it seems it may not be true if we’re trying to answer the different question of who is the employer – the employer identity question.  At least, that’s what the NSW Supreme Court recently said in Spitfire Corp.[iii]

And it seems that the FWC is now finding reasons to distinguish the Golden Trio Cases – even on the work status question.[iv] So, unless your contract is wholly in writing, pretty tight, not a sham, and not unsuited to the use to which you’ve put it, you might still find yourself having to answer some embarrassing questions about how your relationship actually works.

A Panacea?

Taking all this into account, can we be confident that entering into an EoR arrangement with a related entity, a payroll provider, or an Incorporated Worker Entity will relieve an on-hire provider from its employer or labour hire responsibilities.

I don’t think we can. That’s my take on it.

But you can make your own mind up about that!

Andrew C. Wood


[i] Australian Consumer Law s. 31.

[ii] WorkPac Pty Ltd v Rossato (2021) 95 ALJR 681; [2021] HCA 23 (“Workpac”); Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (“Personnel Contracting”); ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (“ZG Operations”).

[iii] In the matter of Spitfire Corporation Limited (in liq.) and Aspirio Pty Ltd (in liq) [2022] NSWSC 340 (“Spitfire Corp”).

[iv] See Waring v Hage Retail Pty Ltd [2022] FWC 540, where, at paras [52] to [56] Deputy President Anderson summarized the principles in the High Court’s decisions in Personnel Contracting and ZG Operations. DP Anderson’s summary was subsequently cited with approval by the Full Bench in Azad v Hammond Park Family Practice Pty Ltd T/A Jupiter Health Warnbro [2022] FWCFB 66 at para [14]. Hage Retail is noteworthy because of the way in which DP Anderson applied the legal principles to the facts of that case in order to find scope to conduct an inquiry which extended well beyond the strict terms of what purported to be the employment contract.

Labour Hire Licensing & Payroll Providers: A simplified or simplistic explanation?

A female temp desk consultant looking over some documents, whilst discussing an assignment with her labour hire worker.The worker is wearing hi vis jacket , and their safety clothing is scattered about the office.

Discussion of the topic, “Who needs a labour hire licence” often gets diverted by red herring issues about whether a payroll provider is the employer, or at least the employer-of-record, and whether the worker is an employee or not.

My simplified or perhaps simplistic explanation of the licensing schemes is that, regardless of whether you are an on-hire firm or a payroll provider, you’ll need a licence if:

  • you have an arrangement with an individual to supply the individual perform work for someone else;
  • the individual qualifies as one of your “workers” (as defined); AND
  • your arrangement with the individual includes an obligation to pay the worker for the work.

This is what we call having a labour hire “supply arrangement”.

There are some subtle variations between the four existing state and territory schemes. There are also additional circumstances in which you might need a licence in Victoria.

Now, some payroll providers do have such an arrangement; others don’t.

Payroll providers which do have such an arrangement with a worker would seem to need a licence.

Those which don’t would not seem to require a licence. Indeed, I’m aware that this is a view that has been confirmed by at least one scheme regulator and that some payroll providers may be in a position to provide regulator confirmation that they do not require a licence. Of course, it’s always important to make sure that you fully understand the facts and circumstances on which that confirmation is given. Don’t assume that one-size-fits-all in this space.

The fact that a payroll provider, which has such an arrangement, requires a licence will not necessarily relieve the on-hire firm that appoints the payroll provider from having a licence as well.

It won’t matter whether the individual is an employee of the person who has the arrangement or not.

The supply of the worker can be direct or indirect; and it needn’t be contractual.

And if the arrangement needn’t be contractual, then it would seem to follow that the payment obligation needn’t be contractual either. Perhaps a moral or equitable obligation, arising from representations or a loose understanding, would suffice.

So, it would seem to make no difference to the licensing requirement whether the payroll provider is the employer or not.

The focus of the inquiry is always on identifying the presence of the labour hire supply arrangement/s. The involvement of multiple parties: typically, on-hire firms, payroll providers, and incorporated worker entities (IWEs) just makes the inquiry that little bit more difficult.

I’ll say something more about contracts with IWEs in a later post. That’s a whole other story!

Andrew C. Wood

A National Labour Hire Scheme … Really?

If anyone is talking to you about a national labour hire licensing scheme, just ask them what they would do with the four current state and territory schemes.

Perhaps the only justification for visiting the regulatory burden of a another licensing scheme on the Australian labour market would be that it might pave the way to dismantle the four existing schemes – at least in part. One set of regulatory burdens in place of four. Maybe that could be justified. But can you see anyone actually doing it?

And even if it could be achieved, what would stop the states and territories from retaining local schemes to licence labour hire supply to their own public sectors, which are substantial users of labour hire services – though some of them might not like to admit it.

Those with longer memories might recall the measures that were included in the intergovernmental Competition Principles Agreement to encourage the dismantling of anti-competitive state licensing schemes during the Hilmer reform era. Perhaps that’s a history that should be revisited.

Andrew C. Wood

Tuesday TalkAbout is Returning

Hooray! The veil has been lifted on the keenly anticipated autumn collection of Tuesday TalkAbout, which features four webinars on essential topics for recruitment and staffing professionals.

New Inclusions for Extended Discussion

We’ve updated the engagement design to include an extended Q&A session, when you can ask the questions that you’ve been wanting to ask and we’ll see if we can put you on the right path to getting the information you need.

We’ll also be providing prep materials to registrants on the Friday before the webinar so that you can join in, already having a basic understanding of the topic we’re discussing and so that you can formulate questions specifically tailored to your interests.

You can even join in discussion, before or after the webinar, via one of our two moderated LinkedIn forums so that you can follow through on questions that are of particular interest to you.

Finally, for webinar attendees, we’re including a post-webinar 15 minute complimentary phone chat, when you can raise those “quick questions” that you weren’t able to raise in the public session. Appointments do need to be made via the WorkAccord website, and the booking “window” will be open only in the week of the webinar (Mon to Fri) whilst appointments are available.

Autumn Collection:

Independent Contracting On-Hire: Where to from here? (29 March 2022)

The Australian High Court’s recent decisions in CFMMEU v Personnel Contracting and ZG Operations Australia Pty Ltd v Jamsek have certainly NOT made life easier for on-hire agencies who, overnight, may have discovered that workers whom they thought were their contractors are, in fact, their employees.

So, what can you do about that? You plan your service model restructure – that’s what you do. But there are plenty of questions to be answered as you set about doing that.

You can find out more about the webinar and register via the Eventbrite portal here.

Labour Hire Licensing Five Years On: What we know and still need to know. (26 April 2022)

Since 2017, we’ve been learning to live with four separate licensing schemes. What have we learnt and what do we still need to know?

Join us as we examine the performance of the four state and territory schemes and examine some of their more difficult aspects – taking a closer look at difference at the difference between labour providers who need a licence and mere “intermediaries” who don’t.

We’ll talk about:

  • the Victorian extensions
  • the worker exemptions
  • the data on licence conditions, refusals and cancellations
  • the prosecution cases so far – who is getting prosecuted and why
  • the challenges of regulatory over-reach in a federal system

We’ll talk about avoidance; how you might detect it; and what you need to do about it.

You can find out more about the webinar and register via the Eventbrite portal here.

Talking Privacy: What recruiters need to know (3 May 2022)

It’s Privacy Awareness Week. So what better time to schedule a privacy refresher for recruiters, whose day-to-day work involves the handling of large amounts of personal information ?

In this session we’ll be looking at the different privacy frameworks that apply to recruitment operations – especially those using cloud-based technologies, artificial intelligence, and offshore processing or sourcing.

We’ll talk about:

  • what is really “necessary” and how necessity operates to limit the type of information you can collect, use or disclose
  • ID scanning
  • data breach notification
  • what case determinations are telling us
  • responsibilities as a contracted service provider to government agencies
  • privacy impact assessments – when and why you need to conduct them

You can find out more about the webinar and register via the Eventbrite portal here.

Care & Support Sector Workforce & Governance Reform: What it means for recruitment & staffing agencies (31 May 2022)

The Care & Support Sector (Aged Care, NDIS & Veterans Support) is undergoing significant workforce and governance reform. What is going on and what does it mean for recruitment & staffing agencies? Will it be business as usual, or will the changes affect the way you need to operate?

In this webinar, we’ll be reporting on the state of the reforms and examining the role of recruitment & staffing agencies as “facilitators of care”.

We’ll ask whether there still scope for “all care, no responsibility” service models, and start to explore the changes you may need to be making to your agency’s operations and networks.

You can find out more about the webinar and register via the Eventbrite portal here.

Australian Labour Hire Licensing in under 100 Words

Photo by Marius-Laurentiu Butan on Pexels.com

This is the first of our October posts in which we’ll try to untangle the distinction between labour hire providers who need licences and intermediaries who don’t.

The distinction is complex. There’s no way of avoiding that.  But it helps if we have a base template that we can use to organize and interpret the similarities, differences and subtleties of the four schemes we are considering.

The Base Template

My challenge is to describe as much of the four state and territory licensing schemes as I can and as accurately as I can in under 100 words.

Here’s my attempt. Note that X is always a provider, and Y is a host or hirer.

Australian labour hire licensing schemes concern arrangements where X supplies, to Y, workers whom X is obliged to pay for the work performed for Y.

South Australia limits the arrangements to prescribed work.

Victoria extends the arrangements: where X is a placement agency that procures accommodation for workers it places with Y and Y must pay them; and where X manages the contract performance of workers whom it recruits, or places with Y, regardless of who pays.

Arrangements between X and Y and between X and its workers need not be contractual and may be made indirectly through intermediaries.

Focus on the Arrangement

The template directs attention to the whole arrangement under which labour hire services are supplied, rather than merely to the narrow transaction between provider and host, or provider and worker. That is useful, when we consider the difference between providers and intermediaries, because the intermediaries stand outside the narrow transaction.

Positioning the Intermediary

Typically, an intermediary is positioned in the arrangement between:

  • a provider and a host; or
  • a provider and its workers

but is not a provider itself.

Intermediary service network roles facilitate the supply of a labour hire service. They include roles such as sourcing & screening, contractor management, accommodation provision, and payroll.

In some cases, which we’ll look at in more detail in later posts, performance of an intermediary role can result in the person who performs it becoming a provider.

Think about the Victorian extensions referred to in our template.

Think about the Queensland provision that exempts suppliers who are merely private employment agents (direct placement agencies).[1]  What if they are doing something more? What if they are handling payroll, resulting in their having an obligation to pay the workers for their work? Does the template help to demonstrate why these questions might be important?

Take Away Lesson No.1

We can say, then, that good governance of labour hire workforce arrangements has to start with a clear and detailed understanding of:

  • what everyone is doing; and
  • the source of their obligations and responsibilities.

We can’t exercise good labour hire workforce governance and we won’t be able to distinguish between providers and intermediaries if we’ve not examined ALL of the contractual and non-contractual aspects of the arrangement under which the workers are supplied or placed in the workforce.

Feedback

What do you think?  What changes would you make to this base template?

I think it’s about three-quarters of the way there.  The missing bits include definitions, exceptions, and deeming provisions. 

We’ll continue to develop this template as we explore its elements in more detail in later posts. Nevertheless, I hope it gives us something to work with and helps to place intermediaries roughly in their correct positions. 

Andrew C. Wood


[1] Labour Hire Licensing Act 2017 (Qld) s. 7(3)(a).

Labour Hire Intermediaries: Untangling a Knotty Topic

Photo by Marius-Laurentiu Butan on Pexels.com

Throughout October, we’re going to untangle what, I think, is one of the most difficult topics in labour hire licensing. It concerns how we distinguish between a labour hire provider who requires a licence and a mere intermediary who doesn’t.

Typically, the topic arises in the context of multi-party service network supply arrangements, where different parties are responsible for sourcing, engaging, supplying, managing, paying or accommodating workers who perform work for a labour hire host.

The topic is difficult because:

  1. There is no consistent definition of what it means to supply a worker.
  2. There is no definition of what an intermediary is.
  3. There is no authoritative decision about what it means to have an obligation to pay a worker in whole or in part for the work – one of the key distinguishing features of a labour hire provider.
  4. The obligation, whatever it is, can arise from an arrangement that doesn’t necessarily have to be a contract, and which may be made indirectly through one or more agents or intermediaries.
  5. Guidance provided by regulators fails to distinguish consistently between labour hire and workforce contracting.
  6. Guidance provided by regulators is sometimes confused about who is the host;
  7. The Victorian extension of the licensing requirements to accommodation providers who recruit workers (e.g. backpacker hostels who recruit workers for local employers) and to contractor management services providers who also recruit workers add further layers of complexity and confusion.
  8. The Victorian provisions, which deem certain beneficiaries of the work performed by some classes of workers (e.g. commercial premises receiving cleaning services) to be hosts, creates adds to the confusion about who is exercising what role in a service network.
  9. There can be uncertainty, once various deeming provisions and exceptions are taken into account, about whether there can be more than one labour hire provider in respect of the same worker.
  10. Intermediaries, to the extent to which they become involved in labour hire arrangements, may have obligations to ensure labour hire providers (wherever they are located in the supply network) are properly licensed and may be obliged to pass on licensing information to ensure that neither the intermediaries nor their clients become involved in the unlicensed supply of labour hire services;
  11. The extraterritorial operation of the various labour hire acts will often mean that where the issue arises in interstate supple transactions the rules and interpretations of more than one jurisdiction will need to be considered;
  12. The problem, to the extent to which it arises under labour hire licensing laws in Qld, S.A., Vic or the A.C.T., may intersect with additional private employment agency licensing laws in S.A., W.A., and the A.C.T., and with private employment agency regulation in Qld – triggering either exemptions or requirements for dual licensing.

There’s enough there, I think, to keep us occupied while we attempt to untangle these problems in small steps and arrive at some answers that might help smooth the way to more certain and effective supply arrangements. 

So, if you’d like to join the conversation, head across to the RCSA-hosted Labour Hire Licensing & Regulation (Aust & N.Z.) LinkedIn Group, where I’ll be moderating discussion. Alternatively, you can post a reply here or on my blog, The Recruiters’ Casebook.

Let’s talk soon!

Andrew C. Wood

“Employer-of-Record” vs “True Employer”

The recent NSW Supreme Court decision in Branded Media Holdings[1] holds some important lessons for recruiters and others who are considering the use of outsourced employer-of-record (EoR) services – especially if they imagine that using EoR services will protect them, in all cases, from liability as the “true employer”.  That’s because statutory and common law liabilities generally rest with the true employer, irrespective of where formal documents might be trying to direct them

In Branded Media, liquidators and deed administrators of two related companies sought directions from the court as to the identity of the employer of specified employees within the Branded Media Group.

The companies were Branded Media Holdings Pty Ltd (in liq) (Holdings) and Brand New Media Pty Ltd (subject to a deed of arrangement) (BNM). The liquidators and deed administrators’ position was that Holdings was the employer.

The Commonwealth intervened to contend that BNM was the employer. The Commonwealth had advanced more than $1 million in respect of the employees’ unpaid entitlements under the Fair Entitlements Guarantee Act 2012  and stood to recover a substantially higher amount if BNM was held to be the true employer.

The contest was clouded by uncertainty because, whilst the formal documents recorded Holdings as the employer, day-to-day management of the work relationship was conducted by BNM.

The court held that the true employer was BNM. Some telling factors included:

  • Holdings did not conduct any business by which it generated income;
  • Holdings was not the recipient of the services of the employees;
  • the employees provided their services to BNM;
  • Holdings was wholly dependent upon BNM to meet its financial obligations;
  • Holdings did not operate any bank accounts;
  • Holdings did not in fact pay the employees;
  • BNM in fact paid the salaries and wages of the employees;
  • BNM had its logo on some employment forms;
  • business cards used by the employees bore the logo of BNM;
  • the sign-off section of emails sent by the employees referenced BNM;
  • the website referencing the Employees referenced BNM.

You might already be getting a sense of how some of those factors might play out in a case where a staffing agency supplies workers to one of its clients, managing their shifts, providing them with agency uniforms, and binding them to agency policies; but arranging for those workers to be employed “on-the-record” by an outsourced payroll company.  

The Branded Media case is important because the Court clarified the principles that are used to determine which of the two companies was the actual employer. In doing so, it made clear that:

The Court must look to the “substance and reality” in identifying the true employer in these circumstances and would look beyond contractual documentation and to the reality of the manner in which the parties conducted themselves in order to do so.[1]

[The Court may also] have regard to whether the suggested arrangement had an “intelligible business objective” which is “consistent with the financial and administrative organisation of the business”.[2]

The case is also helpful to the extent to which it clarifies that employment-of-record is not a distinct category of employment, but nothing more than an expression to describe an arrangement by which certain of the true employer’s statutory or contractual responsibilities are performed by someone else.

Such an arrangement will not necessarily relieve the true employer of those responsibilities if the EoR fails in performance. And some liabilities, such as the employer’s vicarious liability at common law, may continue to rest with the true employer to the extent to which they derive from the true employer’s notional control of its employees.

The need to identify the true employer will also arise in the context of labour hire licensing prosecutions to the extent to which it may be necessary to determine whether workers of an unlicensed provider who has sought to outsource the obligation to pay its workers to an EoR payroll company may be left with the residue of the statutory obligation to pay sufficient to necessitate the holding of a licence -despite having passed to the EoR a contractual obligation to pay the workers.

Andrew C. Wood


[1] In the matter of Branded Media Holdings Pty Limited (in liquidation); In the matter of Brand New Media Pty Limited (subject to a Deed of Company Arrangement) [2020] NSWSC 557 at [14] adopting Counsel’s submission to that effect.

[2] At [26], developing a further dimension to the test which may be effective to challenge sham arrangements directed at avoidance.

Labouring the Point: “Workers” and the obligation to pay

A female agent sits at a desk whilst discussing an assignment with a labour hire worker.The workeris wearing hi vis jacket.

One of the more intriguing features of the Australian labour hire licensing schemes concerns the definition of a “worker” and the requirement that a person is only a worker for another person (the provider) if the provider is obliged to pay the worker, in whole or part, for the work.[1] Whether such an obligation exists should be relatively easy to determine in most cases. But it will not always be so; and the issue may sometimes be clouded by the involvement of intermediaries.

Take the case of a labour hire agency’s worker who is engaged through a payroll company that provides outsourced “employer-of-record” services. Where does the obligation to pay the worker lie? Is it with the agency or the payroll company? Does a statutory obligation to pay perhaps rest with the agency as the “true employer”[2], whilst a contractual obligation lies with the payroll company?  

You can already see that we are now having to distinguish between contractual and statutory obligations.

If the payroll company is found to be the “true employer”, is the agency necessarily off the hook? What happens if the payroll company fails to pay – perhaps because of insolvency? Could a restitutionary claim against the agency, as someone who has benefited from the work to the extent that it was paid by the host for supplying the worker – give rise to an equitable obligation on the part of the agency to pay the worker? Would the obligation be to pay “in whole or in part for the work”? What questions of characterisation arise? And to what extent are those questions resolved by the express legislative provisions in South Australia, Victoria and the ACT, but not in Queensland, that the obligation may arise “directly or indirectly”?

So far, we have distinguished between contractual, statutory, and equitable obligations to pay.

Next, take the case of an agency worker who operates through a family company that is the trustee of a discretionary trust which receives payment for the supply of the worker. The trustee may be under no obligation at all to pay the worker; and any distribution under the trust, being an exercise of discretion, might not be able to be characterised as being “in whole or in part for the work”.

As I say, these are intriguing questions – at least for some! They were not answered when the legislation was being drafted. And whilst they may seem highly technical, success and failure in prosecutions and civil actions may well depend upon the answers that the courts will eventually have to provide.  

Andrew C. Wood


[1] Labour Hire Licensing Act 2017 (Qld) s. 8(1)(b), Labour Hire Licensing Act 2017 (SA). s. 8(1)(b), Labour Hire Licensing Act 2018 (Vic) s. 9(1)(b), Labour Hire Licensing Act 2020 (ACT) s. 8(1)(b).

[2] For discussion of the distinction between an “employer-of-record” the “true employer” see Gothard (recs & mgrs of AFG Pty Ltd) (in liq) v Davey [2010] FCA 1163; Re Plutus Payroll Australia Pty Ltd (in liq) [2019] NSWSC 1171;and In the matter of Branded Media Holdings Pty Limited (in liquidation); In the matter of Brand New Media Pty Limited (subject to a Deed of Company Arrangement) [2020] NSWSC 557.

Labouring the Point: Advertising Labour Hire Services

Businessman reading legislation with magnifying glass checking details for compliance

If you’re advertising your ability to provide labour hire services throughout Australia – as many agencies do – please take a moment to consider whether you could be committing an offence in Queensland, South Australia, or Victoria if you don’t hold a licence in those States.

It’s not enough to hold a licence in just one State. That appears to be so regardless of where your business is located, because all three States have a provision that says it’s an offence to advertise your willingness to provide labour hire services unless you hold their licence[1]. They’ve also bestowed inter-state operation on their labour hire licensing laws.[2]

The Australian Capital Territory’s scheme, which has not commenced yet, does not appear to have a similar provision. However, whether advertising the ability to supply labour hire services in the Territory without holding a licence could be prosecuted as an attempt to commit an offence may be a question that warrants careful consideration.

So, have a look at what you claim, on your websites and in your marketing materials, to be able to do, and get it checked out.

Andrew C. Wood


[1] Qld s, 10(2); SA s. 11(2); Vic s, 14.

[2] Qld s. 5; SA s. 4; Vic s. 6.

The Labour Hire Licensing Act 2020 (ACT) – More variations on a theme

The Australian Capital Territory has made good its intention to enact labour hire licensing legislation. This is the fourth Australian jurisdiction to enact a licensing scheme – if you count South Australia, which has just started to wind the coverage of its scheme back to imit its application tohigh-risk sectors.

So, what’s the deal in the ACT? You can spend hours on this stuff and still not know what it all means until the courts start to interpret it. But here are a few features you might want to note that give the ACT scheme its own unique character.

Status

Early days. We still need to see the regulations and application forms, which will add layers of detail.

Commencement

Probably 1 January 2021, with a 6-month transition period.

Objects

  • Protect workers from exploitation by providers of labour hire services; and
  • Ensure labour hire service providers meet their workplace obligations and responsibilities to the workers they supply; and
  • Promote the integrity of the labour hire services industry; and
  • Promote responsible practices in the labour hire services industry.

Coverage

You’re a labour hire provider if, in the course of carrying on a business, you supply to another person (the hirer) a worker to do work.

The definition is closer to the very wide Queensland model. There’s no attempt to give meaning to what “supply” means and no use of the complex integration test (to perform work in and as part of the hirer’s business or undertaking) adopted in South Australia and Victoria.

Neither is there any attempt to exclude licensed private employment (placement) agencies (PEAs) as there is in Queensland and South Australia, even though the ACT has a separate PEA licensing scheme.

This will mean that the requirement to hold a licence will often come down to whether the person supplied to do the work is a worker within the meaning of the Act. We’ll look at that in a moment.

Unlike Victoria, there’s no explicit extension of the scheme to PEAs who provide accommodation, or to Contractor Management Services providers. Although, that might be unnecessary in view of the width of the coverage.

The “Regardlesses”

Not an Indie band – but a set of provisions that say you’re a labour hire provider no matter what (regardless).  So, you would need a licence regardless of whether:

  • the worker is employed by you; or
  • there is a contract for the worker to do the work; or
  • the worker is supplied by you directly or indirectly; or
  • the work completed by the worker is under the control of you or the hirer.

All four State and Territory licensing schemes use some version of the regardlesses. They’re designed to extend coverage to tiered supply and contracting chains. They are capable of producing a lot of unintended consequences. You need to do a few worked examples to see what they lead to. But, basically, you can be a labour hire provider even though you’re not engaging the worker. That might cause a few headaches for payroll companies.

Regulations can exempt a stated person from coverage meaning that they would not have to have a licence. That’s not as good as it looks. It relates to “stated persons” rather than to classes of persons and it falls well short of anything you might have heard to the contrary about the Minister or the Commissioner having a power to declare exemptions.

Who is a “worker”?

Only an individual can be a worker. An individual is a worker for a provider if the individual enters into an arrangement with the provider under which—

  • the provider may supply, to another person, the individual to do work; and
  • the provider is obliged to pay the worker for the work—
    • in whole or part; or
    • directly or indirectly.

This definition is also pretty standard across the four licensing schemes. But it’s riddled with problems because there’s no clarity about the nature of the “obligation”. It’s easy enough if the obligation arises directly from a work/wages bargain.

But things get complicated if the obligation arises from an escrow obligation such as you might see with some of the freelancing platforms, or if the worker is not paid for the work but receives distributions from a trust or is remunerated in some other manner.

Also, keep in mind that a person can be your worker, even though you’ve not engaged them. Again, this could cause some headaches for payroll companies and contractor management services providers.

The Minister can declare that a person is or is not a worker. This is a bit easier than the power to exempt a provider by regulation. Still, it’s not an easy path and I doubt that we’ll see anything like the liberal application of the similar power to exempt by gazettal, which we saw in South Australia before the Act there was changed.

The Offences

  • Supplying a worker without having a labour hire licence – huge fine 3,000 penalty units for a corporation; 800 penalty units for an individual
  • False representation that a licence is held – 200 penalty units
  • Breach of licence condition – 300 penalty units
  • Entering into an arrangement to acquire services from an unlicensed provider – huge fine 3,000 penalty units for a corporation; 800 for an individual

Ignorance might actually be an excuse in the ACT – Consider “Kevin”.

If you’re a hirer (host) you won’t commit the offence of entering into an arrangement with an unlicensed provider if you had a reasonable excuse. Consider this example of a reasonable excuse included in the Act:

Kevin decides that he needs a cleaner for his house. He sees an advertisement on a social media site by a company offering domestic cleaning services. Kevin did not know that the company was an unlicensed labour hire services provider nor was there anything in the advertisement or otherwise to make him aware that he should check that the company was licensed.

That’s going to raise a lot of questions about what you should and shouldn’t know about the scheme. You might get away with it if you’re a householder, like “Kevin”; but my guess is that you wouldn’t want to be putting your eggs in that particular basket if you’re a business acquirer of labour hire services.

Where is the anti-avoidance measure?

It seems like a curious omission, but I can’t I can’t find an express anti-avoidance measure. I’d be interested to learn why, if anyone knows the reason. The last thing you’d want is a scheme that is tolerant of a certain degree of contrived ignorance! Maybe there’ll be some attempt to fix it in the regulations.

Fit and proper person test

A version of the now familiar fit and proper person test applies to all “influential” people for a provider. Influential people for a corporation include a person who can exercise a power to:

  • take part in a directorial, managerial or executive decision for the corporation; or
  • elect or appoint a person as an executive officer in the corporation; or
  • significantly influence the conduct of the corporation.

Think about that last point for a moment. Who could that include? Your significant shareholders? Your financiers? Your industry association? Your suppliers? Your clients? Your spiritual advisors?

It’s a pretty wide category and it’s going to take a fair bit of common sense to know where to draw the boundaries. And, of course, there’ll be outliers.

The rest of it

As to the rest of it, there’s a lot of administrative provisions about applications, licence onditions, enforcement, inspectors, appeals, the establishment of a Commission and an Advisory Committee.

You can read a copy of the Act for yourself here.

Treat it as a broad framework and expect more detail  – including information about fees – in the regulations when they become available. There’s still a bit of work to be done before we know how this scheme will actually work.

Andrew C. Wood