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Submission to Victorian Owner-Drivers Inquiry
16 June 2004
Independent Contractors of Australia (ICA) welcomes the opportunity to make a submission to the Victorian inquiry into owner-drivers. Owner-drivers are an important part of the independent contractor community and it is for this reason that Independent Contractors of Australia responds to some of the issues raised in the inquiry.
By way of background, independent contractors constitute some 28 per cent of the private-sector workforce (Aust Bureau Statistics 2000. Defined as 'not employees'). ICA supports government efforts to understand this sector and to ensure that legislative and regulatory responses are appropriate to the status of the self-employed.
Within this context, ICA believes that it is neither appropriate nor necessary that employee-like industrial instruments be applied to the self-employed. Owner-drivers fall into this category. There are, however, issues worth considering which ICA believes can be addressed within existing (non-industrial) regulatory frameworks.
1. About Independent Contractors of Australia (ICA)
ICA is the first (and probably the only) organisation in Australia exclusively dedicated to the interests and rights of independent contractors. ICA has subscribers who come from the owner-driver sector and is networked with owner-driver organisations.
ICA was formed in July 2001 and incorporated as a non-profit organisation under the South Australian Associations Incorporation Act.
ICA has three principal aims:
(1) To conduct education campaigns to assist independent contractors and the community at large to understand the legitimate status of independent contractors and the important issues relating to them.
(2) To act as a network for industries structured around or dependent on independent contractors.
(3) To lobby for the rights of independent contractors.
ICA operates through its Website at www.contractworld.com.au.
The ICA committee is drawn from across Australia, with representatives from a range of industries including farming, IT, housing/construction, transport, labour hire and others.
2. What/Who is an independent contractor?
An independent contractor is a person who works under and through the commercial contract, known at law as the contract for services. This is defined and found through common-law legal processes. An independent contractor can operate as:
A natural person.
A natural person working within a partnership.
An owner/operator of a structure (company or trust).
An independent contractor can be supplying services or goods or both.
An independent contractor is not an employee, is his or her own business, takes commercial risk and is regulated through commercial law. Owner-drivers fall into this category.
A description of the differences between the employment contract and the commercial contract is available on our Website (Subscribers click here).
3. Owner-Driver Issues
Owner-drivers are classic small-business people. Owner-driving is one of the great pathways available to individuals who want to become their own boss. It can be entered with relatively low financial investment and produces immediate cash-flow. Being your own boss, however, is not easy, but it offers the rewards of independence and is one of the important elements facilitating economic growth and prosperity.
Regulation of owner-drivers needs to be kept within the parameters of appropriate commercial regulation and common-law protections, where sanctity of contract and protection from unconscionable contract are already afforded.
Industrial relations or employee-type regulation should not be applied to owner-drivers because, by its nature, that type of regulation inhibits (some would say prevents) people from becoming their own boss by stipulating prices and managerial processes.
If industrial relations-type regulation were to be applied to Victorian owner-drivers, this would have the effect of diminishing the capacity to be self-employed, thereby limiting competition in the transport sector. It would, in effect, deny people their right to start up their own business as an owner-driver.
4. Evidence of disadvantage?
In relation to the Inquiry's terms of reference, we comment specifically on (c )
"whether there is any disadvantage incurred by owner-drivers employed under a contract for services, as compared to drivers engaged under a contract of service."
ICA has concerns that the question may infer a presumption of disadvantage to drivers working under a contract for services. In this respect, this term of reference we believe is slanted. If balance were to prevail, equal weight should be given to consideration as to whether drivers employed under contracts of service are disadvantaged in comparison to self-employed drivers. But this question is not asked. This could lead to a suspicion that the terms of the Inquiry already presuppose an outcome---namely, that owner-drivers are disadvantaged. If this were the case, this would be a serious concern.
What is defined as a 'disadvantage' does not seem to be explained in the Inquiry terms of reference. This makes an analysis and contribution difficult.
Presumably 'disadvantage' can be:
a) Financial. If this is to be assessed, ICA believes that rigorous and extensive analysis of incomes received by owner-drivers in comparison to employees over extended periods of time must be the methodology. The sample sizes should be large, and incomes over a full year should at least be included. Care should be taken to ensure that owner-driver-to-employee comparisons are like-for-like---in other words, similar jobs, hours of work, type and style of work, etc.
It would not be legitimate for allegations of financial 'disadvantage' to be assessed on a simple comparison of transport award rates and payments allegedly paid to owner-drivers on an hourly or week-by-week comparison. This would be excessively simplistic.
By way of background, ICA has generally found that much of the research on independent contractor issues where allegations of 'disadvantage' have been made, has been of low quality and lacking in methodical integrity. If allegations of financial disadvantage are to be used as a basis for additional legislative or regulatory intervention, the allegations must move beyond allegation to strongly verifiable fact.
b) Goodwill. If financial considerations are to be assessed, consideration of goodwill should be included. An owner-driver can build a saleable business not only in terms of the assets (vehicle, etc.) but also in a developed client base. Stable client 'runs' are regularly bought and sold in the owner-driver area. This is a potential financial advantage enjoyed by owner-drivers but not available to employees. Investigation of these goodwill assets should be included in assessment of 'disadvantage'.
c) Personal integrity. Is this to be assessed in an analysis of 'disadvantage? One of the great advantages of being self-employed is the sense of self-worth and self-pride achieved. Do owner-drivers have a greater sense of self-worth than employed drivers? This is an imponderable and it may be difficult to assess. But it is, nevertheless, one of the great non-financial aspects of being self-employed and it should be a consideration in a fair analysis of 'disadvantage'.
In summary, when considering 'disadvantage', ICA is concerned that the inquiry applies rigorous processes to its analysis and that any research it undertakes as well as conclusions drawn from that research are open to pubic scrutiny and testing.
5. Other laws. Other jurisdictions
We comment on terms of reference (b)
"... how industrial laws applying in Victoria to owner-drivers compare to the relevant laws in other Australian jurisdictions."
Owner-drivers in Victoria generally do not come under industrial relations laws other than the unfair contracts provisions of the Federal Workplace Relations Act. As commented earlier, it is not appropriate for industrial relations laws to apply to owner-drivers.
This does not mean that owner-drivers are, or should be, unregulated through other legislative means---particularly occupational health and safety. However it is not appropriate for OHS issues for the self-employed to be addressed through industrial relations legislation. For owner-drivers, OHS issues are (and should be) regulated through relevant road laws and OHS legislation.
In respect to OHS, ICA is generally impressed by the thrust of the Maxwell Review in its approach to persons who are not employees. ICA has responded to the Maxwell Review. For owner-drivers, OHS issues should be addressed within the ambit of the Maxwell Review outcomes.
6. 'Dependent Contractor'
The Inquiry background statement uses the term 'dependent contractor'. ICA rejects the use of the term. 'Dependent contractor' does not have any legal meaning and is just as unhelpful to a sensible discussion of legislation and regulation as the contrary term 'independent employee'. Because regulation and legislation must be based on legal concepts, ICA believes that 'dependent contractor' should not be a term used for defining workers for regulatory purposes.
The idea of 'dependency' is a social and economic concept which, in the context of this Inquiry, does not assist analysis. Everyone in life is 'dependent' on others in some way or other. In business, all businesses large and small are 'dependent' on their clients, but that in no way derogates from legal independence. Economic and social dependency in the business environment is totally unlike the legal dependency inherent in the employment relationship.
7. Dispute Resolution
In relation to items (2) and (3) of the terms of reference, ICA is pleased to see consideration of contract-dispute resolution.
ICA believes that existing commercial law processes for resolving contract disputes generally operate smoothly for owner-drivers. There may be issues that need investigating. It is, however, not appropriate to move contract-dispute resolution for owner-drivers into the industrial relations jurisdiction. Employee dispute resolution is appropriately handled through industrial relations legislation.
There may be value in considering an extension of the jurisdiction of the Victorian Small Business Commissioner which could be conveniently and effectively widened if any gaps in commercial dispute resolution for owner-drivers are identified.
ICA would support quality research among owner-drivers, to see if contract disputes are common and how effective current formal and informal processes for resolving contract dispute are. Verifiable, quality research should seek to identify if there is a need to expand the scope of the Small Business Commissioner's jurisdiction to include owner-drivers, assess the likely volume of demand that could exist, and hence assist to determine an effective budget that would need to be allocated to the Commissioner's office.
8. Employment and business competitiveness
ICA submits that independent contractor drivers constitute an important part of the Victorian transport industry. An owner-driver is one of the fundamental types of small business in the community and a mainstay of the transport sector contributing to competitiveness and productivity. As a matter of principle, the Government should reinforce the right of people to seek to become self-employed as owner-drivers and support the commercial status of independent contractor drivers. The extension of industrial relations legislation to owner-drivers is not appropriate.
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