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NSW WorkCover destroys entrepreneurs

10 February 2011


For many years the New South Wales government has been destroying small businesses through its WorkCover laws. It has failed to fix these to make the laws clear about who owes premiums. Instead it harasses, intimidates and bankrupts self-employed, small business people.

Summary of the problem and harassment

Under the New South Wales workers' compensation laws, a business does not pay premiums for self-employed contractors that it might engage. For example, if a high-rise building uses contract cleaners, the owners of the building do not pay premiums. The contractors have their own workers' compensation policy and pay their own premiums. But the NSW laws contain all sorts of confusing 'buts'---so much so that it's not completely clear if and when premiums have to be paid. Here's WorkCover's fact sheet.

On many occasions, self-employed small business people engage contractors in their business. This is how self-employed entrepreneurs create, build and run their businesses. The contractors they use have their own workers' compensation policies.

But then the NSW WorkCover Authority conducts audits and declares that premiums have to be paid for the contractors. People are sent massive bills dating back years. Small business people are particularly targeted by WorkCover. To challenge the bill one first has to pay the bill and the review is conducted by WorkCover. Small business people cannot afford expensive legal challenges. WorkCover has bankrupted large numbers of small business people in this way. It amounts to harassment.

Here's just one typical story.

June Gibson: A victim of NSW WorkCover

June and her husband David live on the Central Coast of New South Wales. Their battle with WorkCover resulted in the loss of their business, their retirement nest egg and their house. They now live in rental accommodation. Their story is typical. June explained to us in 2007 how difficult it was to discuss with WorkCover the engagement of just one contractor who they had paid only $490. Here are June's notes from 2007:
    My husband and I have run our own bricklaying business for many years. During that time we engaged both employees and self-employed independent contractors to assist us in the work on an on-off basis, depending on the work we had. We were consumers of the services of WorkCover NSW in their provision of workers' compensation arrangements.

    We were required to pay workers' compensation premiums for our employees but not for the self-employed independent contractors. Up until 2000, the Australian Taxation Office required anyone who engaged self-employed persons in the building industry to withhold and remit tax under the Prescribed Payments System (PPS). We did this for all the self-employed independent contractors we engaged.

    Up until 2000, we took as evidence of self-employment of the persons we engaged our holding of PPS forms and tax remittance. We did not pay workers' compensation premiums on any person we engaged where we had a PPS form, but we did pay premiums on all employees. We were audited by WorkCover NSW on two occasions. On each occasion the auditors accepted the PPS forms as evidence of self employment, which meant that workers' compensation premiums were not required to be paid. The use of PPS forms as evidence of self-employment in the building industry was common practice.

    In 2004 WorkCover NSW conducted another audit covering the years 1998 to 2003. We again supplied the PPS forms. However, this time, WorkCover determined that only trade contractors who held an Australian Business Number (ABN) were self-employed. The problem with WorkCover's reasoning was that ABNs did not become operative in Australia until 2000. In the building industry ABNs replaced PPS forms in 2000.

    We submitted that one person who we engaged in 1998-99 as a self-employed independent contractor, and for whom we held a PPS form, was a person for whom we should not pay workers' compensation premiums. Further, this person was, to all intents and purposes, a self-employed person who ran his own business, advertised his business and had multiple clients. This information about him has been discussed with WorkCover. However, they still insist that the lack of an ABN allows them to declare him not to be self-employed. The person in question is prepared to come to a hearing to provide evidence that he is a self-employed person running his own business.

    We have discussed this issue with WorkCover on repeated occasions and are prepared to continue to discuss it with them. However, in 2006, WorkCover informed us that if we did not pay the alleged debt, they would bankrupt us. We have found the approach by WorkCover NSW to be very intimidating. They apply rules that are unclear and which they change to suit their circumstances. We find their approach one of harassment in which appeals against their decisions are confined to internal WorkCover NSW processes to which we are denied input. We seek consideration by an independent body external to WorkCover NSW.

    We asked for an order that WorkCover NSW do not demand payment from us for premiums on the amount we paid the contractor. The amount we paid him was $490. If we had been required to pay premiums, the amount due would have been $68.60 (ie, multiply the amount paid by 14%).
Here is a newspaper article about June which shows that the original bill from WorkCover was for $54,000. WorkCover reduced this to $10,000 after two years of disputation---but by then the activities of WorkCover had destroyed their business.

Other small business people

There are many other similar stories to be had from files we have studied. Many cover bricklayers because WorkCover seems to have focused on them, in particular. We don't mention their names here or give full details, but their stories in one way or another are very similar to what happened to June Gibson. All of the bricklayers in the examples below were self-employed.
  1. In 2006, a self-employed bricklayer received a bill for $9,000.
  2. A western Sydney bricklayer who speaks little English was audited via fax. He had no face-to-face interviews with the auditor. He did not understand what was going on but received a bill for $64,000.
  3. Another western Sydney bricklayer was back-audited for five years and received a bill for $150,000.
  4. And another western Sydney bricklayer, who had gone out of business, was back-audited 5--7 years. He paid the bill of more that $10,000.
  5. A central coast small business supplying homes with fixtures, fittings and homemaker products was audited going back 7 years. It received an assessment alleging under-declared remuneration of $714,000 based on the allegation that contractors were allegedly employees.
  6. A husband-and-wife business in south Sydney underwent a five-year audit with an initial total bill exceeding $200,000. In one instance they were billed for a contractor who did some work for them, but was operating a business in Queensland and covered under Queensland workers' compensation. At one stage they received a bill for another $31,000 without supporting evidence as to why. They are paying off the debt because they cannot afford to fight WorkCover. Their business has closed and their marriage broken up as a result of the financial pressure.