Labour Hire Intermediaries: What are they? (Part 1)

Photo by Marius-Laurentiu Butan on Pexels.com

Abstract

In this post we continue our exploration of intermediaries under the Australian labour hire schemes. We analyse legislative references to intermediaries in the key definitional provisions relating to labour hire providers and workers and identify three different type of arrangements in which intermediaries may be found. We suggest that intermediaries may be categorised as supply intermediaries; recruitment/ placement intermediaries; and payment intermediaries.

The conversation so far…

I’ve been enjoying our conversation about the position of labour hire intermediaries under the four current Australian labour hire schemes.

In the prologue to the conversation, last week, I set out 12 reasons for taking a closer look at the difference between labour hire providers who need licences and mere intermediaries who don’t. Among the reasons, I included the lack of definitions and clear guidance. Charles Cameron, CEO of RCSA, brought an additional perspective when he commented:

“…the capacity of regulators to simply define the modern labour market is greatly constrained.”

There’s perhaps a reason for that, and it might be that regulatory understandings of labour hire have not kept pace with the way recruitment and staffing firms have responded to change, continually innovating new ways of doing things and new specialisations, to improve the effective operation of the labour market.

In our first exploration of the topic, I offered a description in under 100 words of the four current Australian labour hire licensing schemes and observed that:

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.

Ian Lindgren’s feedback was insightful. Ian argued that it would be difficult to achieve clarity on this topic until:

…the definitions of the entities that form the “intermediaries” are universally accepted throughout the industry to the same degree as Provider, Host and Hirer.

So, in this post we’ll have a look at what the Acts actually say on the topic of intermediaries. Fair warniing, though, it’s not much!

“The Regardlesses”

It sounds like it could be a good name for an indie rock band. But they’re actually a set of provisions that have been inserted into each of the four state and territory labour hire licensing acts to expand their scope and as an anti-avoidance measure targeting sophisticated, multi-party and tiered arrangements that utilize intermediaries to create a buffer between provider and host, or between provider and worker.

They’re not identical across the four licensing schemes. So, I’ve simplified them a bit for the sake of representing them in the following table.

Table 1

You’ll see that the intermediaries are positioned, in these provisions, specifically in relation to the supply (Qld, SA, Vic & SA), and the recruitment/ placement (Vic) of an individual who is a worker as defined for each different type of provider.

A bit of a tangle

Taken individually, “the regardlesses” appear to make some sense. It should not matter whether the worker is an employee or an independent contractor (assuming the distinctions still hold good after the High Court hands down its decisions in two cases currently before it).

It should not matter if the work is performed under the control of the host or someone whom the host appoints to control the work (assuming that control is (and remains) one of the distinguishing features of an employment relationship).

It should not matter whether the workers are recruited, placed or supplied directly by their provider or through tiered arrangements.

But taken together, they create a tangle because a labour hire provider may be a party to a non-contractual, indirect arrangement for the performance of work that could be under the control of anybody or nobody at all.  In the midst of that tangle, it can be difficult to distinguish providers from intermediaries.

One sure thread

Our one sure thread is that intermediaries do not have workers. Only providers have workers. So who is a worker?

Who is a “worker”?

In the table below, I’ve set out the distinguishing features of the provider/ worker relationship in each of the four licensing jurisdictions. 

You will see that there are three different types of arrangement. Note their differences. Can you also see why in our October 1st post, we suggested 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?

Table 2

Some of you will have noticed that I left out the various statutory, regulatory and declaratory exceptions.  That’s a topic that we can save for a different discussion.

Take Away Lesson

When the positioning of the intermediaries is presented in this way, I think we can start to see that they can be classified into three groups. Note where the obligation to pay the worker falls for each group:

  • supply arrangements (provider has obligation)
  • accommodation/ recruitment arrangements (host/client has obligation)
  • contractor management/ recruitment arrangements (anyone can have the obligation).

Also note that three of the schemes (S.A.; Vic and A.C.T.) contemplate that payment to the worker can be made directly or indirectly through intermediaries. But it must always be an obligation to pay for the work (either in whole or in part). That is quite possibly the case in Queensland as well; but it is not expressly stated.

There may be cases where a worker is rewarded for their effort otherwise than being paid for the work. They might, for example, be rewarded by payment of directors’ fees, distribution of share dividends, or a trust distribution under their own company and trust arrangements. It might be difficult to say that being rewarded in that fashion is payment for the work or that it is any part of the arrangement made with the provider.

I think we can also identify three types of intermediaries from the legislative references:

  • supply intermediaries
  • recruitment/ placement intermediaries
  • payment intermediaries.

Next Steps

In our next post, we’ll continue our examination of the position of intermediaries by looking in more detail at the three types of intermediaries. We’ll try to develop a sense of what they are typically doing and what distinguishes them from providers. We’ll also discuss some of the more challenging arrangements, where staffing agencies may be performing mixed functions.

Meanwhile, 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

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

ACT Notifies Labour Hire Licensing Regulation 2021 … finally!

Mere days before the scheduled commencement of the ACT’s Labour Hire Licensing Scheme, the regulations have finally been notified. Unlike the regulations in other states, they don’t set out exemptions or fees.

For the exemptions, you have to go to the Labour Hire Licensing(Exempt Workers) Declaration 2021 (No1). Does that sound like there might be more? That’s hard to say.

But for starters. the following are not “workers”:

·        public servants;

·        high income workers provided that they’re not covered by an award of enterprise agreement under the FWA;

·        in-house employees on secondment;

·        internal labour-hire employees working within a group of related entities;

·        employed directors and senior managers of corporations with no more than two directors provided that the director or senior manager is the only person who is supplied by the corporation to undertake work for another person.

There are definitions that refine some of these exceptions.

For the fees, you have to go to the Labour Hire Licensing (Fee) Determination 2021 (No 1). Could be more of those too!

The application fee under s. 24 of the Act is $2,900. But keep in mind that there may also be a licence fee if a licence is  ssued. There will probably be questions. But it’s a start.

Andrew C. Wood

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

 

 

 

 

 

 

“What lessons can QLD take from how labour hire companies are regulated elsewhere?”

One really has to question the comparative methodology of yet another a publicly funded “labour hire inquiry”, which seems impliedly to justify a pro-licence position before anyone has given too much consideration to the history of regulation that has led to licence schemes in Australia and New Zealand being abandoned as anti-competitive arrangements that serve little useful purpose.  

If important lessons are to be learned, they will need be taken from comparative jurisdictions – i.e. jurisdictions, that like Australia, have lightly regulated labour markets and liberal markets for goods and services. So it might be a good idea to take lessons from jurisdictions closer to home.

Well, here are a few lessons: Continue reading