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5 July 2007
Background
In May 2007, ICA responded to the ALP's small business policy (click here). In our commentary we recognized that the federal ALP has made a significant shift from its historical position (largely against independent contractors) to a new understanding of independent contractors. This is most welcome. However, many of the ALP's formal policies are statements of general principle that require clarification and the presentation of detail before full comprehension can be achieved.
To aid clarification, ICA approached the Shadow Minister for Service Economy, Small Business and Independent Contractors, Dr Craig Emerson, to see if the ALP would be prepared to answer more detailed questions. He was more than happy to do so. The questions we put (see below) were directed to the core and vital policy issues that affect independent contractors. The answers provided are refreshingly short, to the point and, in most instances, provide a great degree of clarity. There is an additional issue that is still being explored and we will make comment upon it when this is clarified.
[Note: ICA recently put a similar range of questions to the Coalition Government which we will also publish with our commentary.]
General comments
The concern that ICA has long had with ALP policy has stemmed from a 'fudging' of the definition of independent contractors. There has been a refusal by the ALP to accept the clear definition applied under common law that independent contractors are people who earn their living through the commercial contract. This has meant that although the definition of independent contractors has been a straightforward matter of law, it has nonetheless often been subject to political, legislative and industrial manipulation. This has damaged the ability of independent contractors to go about their lawful commercial business activities. Question 5 (below) addresses this central issue of definition. The answer from the ALP is historically significant.
(a) The ALP accepts that independent contractors are people who work through commercial contracts. This is also the clear position of the International Labour Organisation.
(b) The ALP accepts the approach of the Independent Contractors Act---that is, that the common law is the legitimate system in place for definitions and that this should be retained. This is also consistent with the International Labour Organisation.
With this additional clarity provided by the ALP, a new political consensus has emerged in which both major political parties accept that:
- Common law provides the definitions of independent contractors (self-employed people) and employees.
- Independent contractors find their protections through the operation of commercial law.
- Employees find their protections through the operation of employment law.
This growing consensus provides a sound basis upon which the regulation of independent contractors' commercial activities and the protections afforded to them can proceed. Subject to more detail, it holds enhanced prospects for reducing transactions costs for the self-employed and for those who engage them. It means that free market activity regulated by competition policy can better function at the small business end of the market. It is this emerging consensus based on legal facts that is most important.
The ALP has also clarified some central tax and industrial relations issues. One vital industrial relations issue, however, still requires further clarification. Comments on the specific questions appear below.
Questions to clarify ALP policy on independent contractors
- Question: The ALP supports the principles behind the alienation of personal services income legislation. Does this mean that the ALP supports the existing personal services income tax legislation or are changes proposed? If changes are proposed, what would these involve?
ALP reply: No changes are proposed.
ICA Comment: The response is positive. The reforms to alienation of personal services income tax have taken some time to settle down, but ICA believes that they appear to be working well. A strong degree of clarity in the laws has emerged and further changes are not warranted (more ICA information is available here).
- Question: The ALP supports the ability of small business and independent contractors to bargain collectively and to have choice about who represents them in collective bargaining. Does this mean that choice in representation will not be restricted in any way, including preference towards unions or any specified associations?
ALP reply: No preference will apply. Independent contractors will have free choice.
ICA comment: This is positive which ICA supports.
- Question: The ALP supports collective bargaining for small business under the Trade Practices Act. Would the ALP extend this to force or require independent contractors to use unions if and when they choose to bargain collectively?
ALP reply: No.
ICA comment: This is positive which ICA supports.
- Question: Can the ALP confirm that unions will not be able to interfere in the negotiation of commercial contracts for independent contractors unless with specific and individual authorization from each individual contractor?
ALP reply: Yes.
ICA comment: This is positive which ICA supports.
- Question: ALP policy recognizes that independent contractors are governed by commercial law. However, ALP policy also appears to hold that the industrial relations system should be extended beyond a narrow definition of employee to include those in employment-type relationships. These policy statements could potentially be in conflict. The traditional identification of transactions subject to commercial law are those transactions occurring under a commercial contract as found under common law. Can the ALP guarantee that the definition of a commercial contract (and hence an independent contractor) will be that as defined under common law?
ALP reply: The common law definition has been used by the current Independent Contractors Act and there are no plans to change it.
ICA comment: This is positive. ICA strongly supports this. See the extended comments above.
- Question: The Independent Contractors Act overrides State industrial relations and employee-type legislation that treats independent contractors as if they were employees for industrial relations purposes. Will the ALP retain this aspect of the Independent Contractors Act and extend it to cover all independent contractors?
ALP reply: Owner-drivers and TCF contractors are the only exemptions. This will be our policy.
ICA comment: ICA objects to the exclusion of owner-drivers and TCF contractors from the protections of the Independent Contractors Act. We disagree with both the Government and the ALP on this issue (see ICA's position here.) But it is positive that the ALP is guaranteeing that further exclusions will not occur.
Question: Will the ALP outlaw clauses in industrial instruments that prohibit, restrict or control the use of independent contractors?
ALP reply: Labor does not and will not have a policy of closed shops. Labor supports the rights of working Australians to join or not join a union.
ICA comment: The answer relates to freedom of association and the right to work in relation to union membership, and to this extent it is positive. However, ICA has continuing concerns about whether or not industrial instruments (awards, enterprise agreements, etc.) can contain clauses which impose restrictions on the numbers of independent contractors allowed to work and/or clauses which control the pay rates to independent contractors. This has been a traditional process by which unions have used 'backdoor' forms of discrimination against independent contractors exercising their right to freely go about their legitimate business. The situation has in the past been particularly oppressive in the construction industry. The workplace reforms introduced by the Government put a stop to this discrimination. ICA strongly supports the reforms.
Question: Will the ALP outlaw and prevent unions imposing service or other fees on independent contractors?
ALP reply: No imposition of fees will be allowed.
ICA comment: This is highly positive which ICA supports.
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