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Fighting for Independent Contractors' Rights

The attack against independent contractors at the June 2003 Governing Conference of the International Labour Organisation

A Briefing Note. May 2003


Are independent contractors a problem? ILO Agenda 2003
The ILO Governing Conference of 2003 will include debate on the 'scope of the employment relationship'. The debate is guided by an ILO discussion paper alleging that people who work outside the scope of employment regulation, but who work in 'employee'-like ways are unprotected. (To download a copy of the ILO paper, click here [450k PDF file].)

Bad Solution
The inferred solution is to bring non-employees into the reach of employment regulation by extending the definition of employment to selectively capture the commercial contract. The solution is opposed by independent contractors because:
1) There is no problem. Independent contractors are protected.
2) The 'solution' will destroy independent contractors' rights.

ILO Unrepresentative Independent contractors are excluded from ILO voting.

Attacking independent contractors Capturing the commercial contract within employment definitions effectively destroys the right of people to work as independent contractors.
  • The determining factor of independent contracting is that individuals break from the employment contract [contract of service] to work under the commercial contract [contract for services]. This basic right to access the commercial contract is threatened by the ILO proposals.
  • Independent contractors' rights to access business-tax regimes are threatened by the ILO proposals


    • Attacking security of commercial contract
  • The ILO 'solution' threatens the contractual building block of commercial activity.
  • The contract for services is the contract that underpins commerce.
  • It is heavily regulated, but differently to employment contracts.
  • Regulating the contract for services as if it were employment distorts and damages commercial regulation and activity.


    • About the ILO
  • Established at the end of WW2 to address labour issues.
  • Operates under United Nations auspices. Annual budget $US480m.
  • Creates labour conventions that are open for individual countries to adopt.
  • Decisions are made through the Governing Conference in June of each year.
  • Each nation sends 3 groups of representatives: (a) Government (b) Unions (c) Employers.


    • The ILO operates within a conceptual and historical framework which contends that workers are contractually dis-empowered employees who need their contracts regulated by the state to protect them from empowered employers. Independent contractors, however, are contractually empowered workers whose existence challenges the ILO employee regulation paradigm.

    Historical Background
  • The ILO arguments have been around in academic labour circles since the 1960s, are based on the concept of the 'dependent' contractor, which is defined by academics as an independent contractor working for only one client.
  • Until about the mid-1980s the dependent contractor argument was confined mostly to academia because the vast bulk of workers were employees.
  • With the rise of independent contractors, employment regulators have discovered the dependent contractor issue. The ILO 2003 debate represents the current peak in the regulators' employment extension argument.
  • The demand for employment regulation extension does not come from independent contractors.


    • Those pushing for employment regulation extension make several erroneous claims:

    Claim
    That working for one client constitutes dependency.
    This is wrong.
    The idea of dependency involves multiple factors, including psychological, physical, time-related and others.

    Claim
    That the common-law definition of employment is vague, imprecise and confusing.
    This is wrong.
    Evidence from judicial rulings shows clarity and precision in the definition.

    Claim
    That independent contractors are unprotected.
    This is wrong.
    Independent contractors access commercial contract protections through commercial regulation regimes. The protections are substantial.

    The invention of the dependent contractor idea is unsustainable in law and damaging both to the quality of debate and regulation outcomes.

    Regulation types
    If the regulation debate is to make sense, regulation issues must be considered on a case-by-case basis. Attempts to create one, uniform catch-all umbrella misleads and damages quality outcomes.

    Substantially different policy issues apply, depending on the regulations being addressed. For example:

  • Equal Opportunity
  • Anti-discrimination
  • Occupational Health and Safety
  • Worker's injury insurance and compensation
  • Security benefits for those without work
  • Tax collection and equity
  • Contract terms


    • Regulation of these issues needs to be considered separately for employees and independent contractors given their alternative contractual frameworks.

    Australasia as a Case Study
    Since about 1995, Australia and New Zealand have experienced an aggressive push by employment regulators to apply the dependent contractor argument and so extend the reach of employment regulation to independent contractors on a selective basis. The push has been opposed by independent contractors, rejected by the courts and largely rejected by legislators. Debate has been considerable and covered most of the arguments raised in the ILO discussion paper.

    New Zealand.
    In 1990, legislative attempts were made to extend the employment definition beyond common law. The proposals caused considerable community debate, were referred to a parliamentary committee and were rejected.

    Australia
    Tax. An argument often mounted is that independent contractors avoid tax. This issue was robustly addressed and resolved in 2000 to 2002 in Australia using precedent-setting tax system redesign, which gives independent contractors access to business-tax status, creates equity with employees and improves the tax collection system.

    Judicial testing. Over about a three year period (1998-2001) and involving about 5 major court cases, arguments were placed before Australian courts that the common law definition should be extended. Arguments previously run at the ILO were used in justification. The arguments received superior court consideration and were ultimately and firmly rejected.

    Queensland. This Australian State introduced legislation in 1999 that enables 'contracts for services' to be selectively declared employment. The legislation is modelled on proposals currently before the ILO. After several test cases, which involved opposition to the applications from independent contractors affected, the president of the tribunal charged with hearing the applications has expressed the view that the provisions are unworkable. In a demonstration of the nonsense of this activist legal approach, a corporation in Queensland has been declared an employee under the legislation.

    New South Wales. Legislation to turn contracts for services into employment services were attempted in 2000, were heavily opposed by independent contractors and were withdrawn.

    Victoria. Legislation to turn contracts for services into employment services were attempted in 2001, were heavily opposed by independent contractors and the community and were withdrawn.

    South Australia. Proposals for legislation to turn contracts for services into employment services are being considered in 2003 and are strongly opposed by independent contractors.

    (NB: Australian legislation that 'deems' employment for worker injury insurance and some tax regimes does not affect common-law definitions.)