Chapter 11 - Independent contractors
Schedule 16 of the Bill would repeal sections
127A, 127B and 127C of the WR Act, which allow the Federal Court to review
contracts engaging independent contractors to perform work, other than private
or domestic work. The provisions provide for a party to the contract, or their
union, to make application to the Federal Court to review a contract on the
grounds that the contract is unfair or harsh.
This proposal was put forward by the Government
in its proposed amendments in 1996. The Democrats did not agree to the
proposal then, and it was not part of the Act that passed. The Democrats, in
their minority report in 1996 canvassed an alternative option, which we
consider briefly at the end of this section.
The Committee did not receive a great deal of
evidence supporting the proposed changes. The Business Council of Australia
noted that paragraph 127C(1)(b) had been held by the High Court to be
leaving the rest of the provisions ‘constitutionally uncertain’. However, the
Committee was also presented with evidence citing specific cases where the
Federal Court had reviewed contracts under sections 127A, 127B and the
remainder of 127C. The outcomes of these decisions were not subject to appeal
on the grounds of constitutional invalidity, so it may be safely assumed by the
Committee that the remaining provisions are sound.
The Australian Chamber of Commerce and Industry
also did not express a strong opinion on the proposed repeal, but pointed out
that the impact of the repeal ‘is significantly diminished given the
availability of review powers in other Federal and some State legislation’. However, Labor Senators note
that alternative review is not available in many State jurisdictions.
Other employers, on the other hand, did not
support repealing sections 127A-C. For instance, the Australian Catholic
Commission for Employment Relations, as an employer of independent contractors,
said that it supported these contractors having the ability to access to review
of their contracts in the Federal Court.
The Labor Senators note unions were strongly
opposed to these amendments, particularly those representing employees in the
transport and textile, clothing and footwear industries. The Transport Workers’
Union gave evidence that many of their members, who are ‘owner drivers’ of
trucks, would be adversely affected if the provisions were repealed.
The union has made application to the Court under sections
127A-127C on numerous occasions over the last few years, usually on behalf of
owner driver members whose contracts have been terminated unfairly. In such
cases, the provisions have proven to be a useful means of obtaining a more
satisfactory outcome for the owner drivers concerned, usually through
settlements achieved after proceedings have been issued. Only rarely have cases
brought by the Union under sections 127A-127C proceeded to a full trial and
determination by the Court.
The Transport Workers’ Union also provided a
specific example of where the Federal Court had used the provisions to review
an unfair contract:
...in Buchmueller v. Allied Express Transport Pty Ltd
(1999) 88 IR 465...the Court found that the contract under which the owner driver
worked was unfair and harsh because it provided for total remuneration less
than that of an employee performing similar work...Dowsett J. made the following
comments...‘there were no factors sufficient to offset the substantial
financial disadvantage incurred by the applicant. To some extent, this disadvantage
was contributed to by the applicant’s inexperience, but the bulk of it was
attributable to the unfairness of the contracts’.
The Court awarded Mr Buchmueller $13,080.00 as compensation. It
is to be noted that Mr Buchmueller had been retained in a situation where his
remuneration was $13,080.00 less than the minimum award safety net.
There is also a significant safety issue that
arises from the operation of unfair contracts in the road transport industry,
which by its very nature has potentially devastating implications for drivers
and other road users:
In the case you refer to, the WRB Transport case, we are talking
there about an employee who was driving Adelaide to Sydney without stopping and
without proper rest breaks... Having regard to the fact that the employee was
being paid by trip money, the incentive was there to keep doing trips until
such time as he fell over, and in this situation was involved in a very great
tragedy. The other leg of that argument goes to the fact that some employers require
our people to do that, otherwise they do not retain their employment.
There were serious concerns expressed by unions,
churches and community groups about the impact of the amendment on outworkers
in the textile, clothing and footwear industry:
I would like to address the
removal of the right for independent contractors to seek remedy in the Federal
Court against an unfair contract. Employers tell outworkers that they are
independent contractors which means that they then have none of the rights of employees.
Currently, even some factory workers are being told by their employers to
accept independent contractor status or no job. This bill will mean that they
cannot seek justice when they find themselves being paid $2 an hour. They will
not be able to seek recourse in the Federal Court...The fact is that exploitation
happens because the industry can get away with it.
The proposed changes...regarding independent contractors will
serve to further disadvantage vulnerable groups within the community especially
young workers and more especially young migrant workers. These proposed changes
fly in the face of the work done by the fair wear campaign to ensure
legislative protection for outworkers.
Other concerns were raised about unfair
contracts being used to disadvantage vulnerable groups within the community,
such as women and people from a non-English speaking background, or employees
of small businesses:
It is of some concern that the new laws will repeal provisions
allowing the Federal Court to cancel or vary unfair contracts. Many of the
employment contracts brought to the Centre are amazingly one sided and bad.
Employment contracts do not evolve naturally from a fair bargaining position in
the first place. This means employers can contract workers with vastly unfair
conditions without any fears of redress.
It is all right for the
likes of me as a barrister and for the likes of highly skilled tradespeople and
others who have been able to organise themselves into properly functioning
businesses to work as independent contractors, but it is an entirely different
matter for people who are typically employed as cleaners, security guards or in
some very lowly paid vocation to suddenly find themselves without any rights at
all because they have been characterised by an employer—or, in this case, a
principal—as a non-employee. So, to that extent, the modest protections that
are provided by the award system are denied them because they have lost, by
dint of really a legal technicality, their status as employees.
Even the Club Managers’ Association Australia,
an organisation representing well paid executive employees, who do not have
access to award or agreement terms and conditions expressed serious
reservations about this proposal:
At present, legislative provisions exist to protect people such
as Club Managers who are not covered by awards or agreements. It is entirely
appropriate that provisions contained in the current legislation that allow the
Federal Court to cancel or vary unfair contracts be maintained. Should such
provisions be repealed by the (Bill) our members could be seriously
The Government is hard pressed to find any
support for these amendments. Employer support is at best lukewarm, and many
employers were uncomfortable with the proposals to repeal sections 127A-C.
Witnesses from community groups, churches, law firms, State Governments and
unions resoundingly rejected the amendments as an unfair attack on some of the
most vulnerable employees in Australia.
The Labor Senators do not believe that sections
127A-C should be repealed. Evidence presented to the Committee demonstrates
that workers are often forced into unfair contracts which pay significantly
less than they would be entitled to under awards or agreements which pass the
no-disadvantage test. In this regard, the Committee notes the outcome of the
case Buchmueller v. Allied Express Transport Pty Ltd, where the Federal
Court awarded more than $13,000 to an employee being underpaid as an
Removing the ability of the Federal Court to
review contracts for ‘work’ would simply open up a loophole for unscrupulous
employers to avoid the terms of employment established under awards and
agreements, by artificially contracting out work normally performed by employees.
The Labor Senators also note that the Government
Senators have recommended that sections 127A-C be repealed because the
Government is now taking steps to crack down on employees who work as
independent contractors as part of the implementation of the Ralph
But, for this reason, it is imperative that the
sections of the WR Act allowing the Federal Court to vary or cancel unfair
contracts are not repealed.
Without protection from unfair contracts
vulnerable workers could be forced to accept contracts with employment
conditions below those of a normal PAYE taxpaying employee, but be forced to
pay the same amount of tax as a PAYE employee.
Finally, we note the recommendation of Senator
Murray in the 1996 Report of this Committee, which was quoted approvingly by
the TWU in both their written and oral submission to this Committee:
It is recommended that the Government give consideration to
establishing a new low cost dispute resolution procedure for independent
contractors under the Trade Practices Act, based on the NSW model.
We also note the commitment of the ALP at the
last election that ‘the protections of the industrial relations system should
be extended beyond a narrow definition of employees to include those in
employment-type relationships’. This issue was also canvassed in the earlier
chapter on job security.
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