Workplace Relations Update - July 2006

• New employer record keeping requirements

• Did you know…

The much talked about Independent Contractors Bill 2006 (Bill) was introduced into Parliament on 22 June 2006. Also introduced was the Workplace Relations Legislation Amendments (Independent Contractors) Bill 2006 (Workplace Relations Bill) which sets out consequential amendments to the Workplace Relations Act 1996.

In his second reading speech, Minister Andrews identifies that the principle of the Bill is "to ensure that genuine independent contract relationships should be governed by commercial not industrial law."

Part 3 of the Bill sets up a national jurisdiction for the review of "services contracts" on the grounds that they are unfair and/or harsh. The jurisdiction will be vested in the Federal Court of Australia and Federal Magistrates Court (court).

What is a services contract?

A services contract is a "contract for services" to which an independent contractor is a party that relates to the performance of work by the independent contractor and that has the requisite constitutional connection.

For the "contract for services" to have the requisite constitutional connection one of the parties to the contract must be:

• a constitutional corporation within the meaning of paragraph 51(xx) of the Constitution;

• the commonwealth or a commonwealth authority;

• a body incorporated in a territory;

• or the work concerned is wholly or principally performed in a territory; or the contract was entered into in a territory; or at least one party is a natural person who resides in a territory or a corporation that has its principal place of business in a territory.

Who/what is an independent contractor?

The Bill does not answer the complex question of whether a person is an independent contractor or an employee. This is left to the court to determine applying the common law test. The leading Australian authorities are the case of Stevens v Brodribb Sawmilling Co Pty Limited and Hollis v Vabu Pty Limited (Crisis Couriers No. 2). The test operates by looking at the whole relationship between the parties not only the written contract. This is the so-called multi-factor test.

Are there limits on the independent contractors that can access the jurisdiction?

Yes. Whilst an independent contractor that is corporation can access the jurisdiction, access is limited to those corporations where a director of the corporation, or member of the director's family, is the relevant person who mainly performs the work under the contract. The purpose of the limitation is to restrict large corporations bringing claims under the part.

In addition, the jurisdiction cannot be accessed where the services contract relates to the performance of work for private and domestic purposes for the other party to the contract.

When will a services contract be unfair or unjust?

The terms "unfair" or "unjust" are not defined. However, there are a number of matters which the court may have regard to when reviewing a services contract to determine whether it is unfair and/or harsh. These are:

• the relative strengths of the bargaining positions of the parties;

• whether a party was subjected to any unfair tactics, undue influence or pressure;

• whether the contract provides for remuneration that is less than the remuneration of an employee performing similar work; and

• any other relevant matter.

What can the court do if it finds that a services contract is unfair and/or harsh?

The Court may make an order setting aside the whole or part of the contract or an order varying the contract. The purpose of any order is to place the parties to the contract in the position they would have been in had the contract not been unfair and/or harsh.

In addition, there is limited scope for the Court to order costs. For example, where an application is made vexatiously or without reasonable cause.

The Bill seeks to exclude a range of state and territory industrial laws that apply to parties to services contracts. The excluded laws are those laws affecting the rights, entitlements, obligations or liabilities of a party to a services contract in relation to a "workplace relations matter". The Bill defines what constitutes and what does not constitute a workplace relations matter.

Matters that do not constitute workplace relations matters include discrimination, superannuation, workers’ compensation, occupational health and safety, child labour, public holidays (and more). This means that state and territory laws dealing with these matters (ie. non-workplace matters) that apply to service contracts will continue to apply.

In addition, state and territory laws that deem a party to a services contract to be an employee or that provide for the services contract to be voided, set aside or varied for unfairness are also excluded.

The Workplace Relations Bill introduces a new Part 22 to the Workplace Relations Act 1996 setting out anti-avoidance mechanisms by imposing penalties on employers who seek to avoid their obligations under employment law by disguising their employees as independent contractors or who coerce their employees to become independent contractors.

A workplace inspector or union can apply to the court for the imposition of a penalty for a breach of the Part. The Bill proposes a maximum penalty for an individual is $6,600 and for a body corporate is $33,000.

• Owner-drivers
– Existing New South Wales and Victoria laws with respect to owner-drivers are not excluded by the Bill (ie. they are preserved).

• Transitional arrangements
- There are transitional arrangements for persons who, at the time the provisions commence, are independent contractors at common law but are deemed under state or territory law to be employees or who have employee style entitlements under state or territory laws. The relevant state or territory laws continue to have effect until the end of the contracting relationship, or otherwise end of 3 years after the commencement of the act if the relationship does not end before then or at any earlier time as agreed by the parties. However, state or territory laws dealing with unfair contract rights will be excluded.

You should undertake a review of your independent contractor arrangements and consider how the proposed new laws will impact on these arrangements.
By Mark Sant & Nicole Linton

NEW EMPLOYER RECORD KEEPING REQUIREMENTS

On 1 June 2006 the Federal Government introduced amendments to the Workplace Relations Regulations 2006 (Regulations) in relation to the record keeping obligations of employers.

Previously the record keeping obligations required an employer to keep and maintain records in relation to:

• all employees’ daily start and finish times;

• total numbers of hours worked during each day; and

• the employees’ nominal hours and any variations to those hours.

The purpose of the Regulations is to provide for the making and preservation of records relating to the employment of employees, the inspection of records by workplace inspectors and the preparation of employee pay slips.

The regulations are designed to protect workers by allowing employees and workplace inspectors to access employee records and to ensure employees receive all minimum entitlements guaranteed by the Australian Fair Pay and Conditions Standard.

Employers are now only required to keep records of:

• the total number of hours worked each day (being the hours that the employee was required or requested to work by the employer) by an employee who earns a base annual salary of less than $55,000 (indexed); and

• daily start and finish times for employees entitled to overtime loading under an industrial instrument (eg. a workplace agreement or award) or common law contract.

For the purposes of determining whether an employee’s base annual salary is less than $55,000, salary components such as superannuation, allowances, bonuses, loadings and penalty rates are not to be taken into account.

Prior to 26 September 2006 employers cannot be prosecuted for a breach of the Regulations.

If employers breach the Regulations in relation to record keeping requirements, workplace inspectors may issue an infringement notice or may initiate court proceedings seeking an order that the individual or body corporate pay a pecuniary penalty.

Prior to the amendments a workplace inspector could only initiate Court proceedings in the Federal Court or the Federal Magistrates Court. Pursuant to the new amendments, Court proceedings may now also be initiated in a District, County or Local Court, a magistrate’s court the Industrial Relations Court of South Australia or any other State or Territory Court that is prescribed by the Regulations.
By Kate Skinner & Craig Boyle

DID YOU KNOW...

The Australian Industrial Relations Commission has determined in the matter of Perry v Savills (Vic) Pty Limited PR973103 that "the restructuring of positions so that an employee’s position is no longer available does not, in itself, establish operational reasons for the termination of an individual employee’s employment. The termination must be "genuinely" related to the employer’s operational requirements in the sense that the termination is a logical response to those requirements." Importantly for employers this case highlights the need to proceed cautiously when relying on "operational reasons" as a justification for termination.

Under the Superannuation Guarantee (Administration) Act 1992 ( the Act ), the operation of section 12(1)(a) extends the definition of common law employee and employer. Under section 12(3), the Act provides that if a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.

On this basis it is important that when entering into subcontracting or independent contracting arrangements that considerable thought be given to the type or style of services to be performed and that where those services principally relate to the provision of labour that consideration be given to ensuring that superannuation obligations are met in order to avoid hefty penalties.
By John-Anthony Hodgens, Brisbane.

This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.