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Seventh Annual Report

December 2008

2008 has been another significant year for independent contractors and Independent Contractors of Australia. Details on most of the issues and events mentioned below are on ICA's website.

Change of federal government. Political and policy settings.
The change of federal government in late 2007 has witnessed a continuity of policy towards independent contractors. This has been most encouraging. A situation has been reached where there now exists a strong measure of cross-party political agreement on some core policy principles in relation to independent contractors. Specifically, the major political parties accept that independent contractors are governed by, and regulated through, commercial law and not industrial relations law. There is an acceptance that independent contractors are individuals who earn their income through the commercial and not the employment contract.

This is an historic development given the antagonism displayed toward independent contractors by powerful sections of the Australian Labor Party in the past. It is most pleasing to see this shift in the attitude and policies of the Federal ALP. It signifies a major step away from the traditional Left-Right ideologies that have dominated ALP approaches to independent contractors---that is, that independent contractors were viewed as traitors to the class struggle. The reality is that independent contractors are businesses people, businesses of one, and they just want to get on with business. The federal ALP seems to have recognized this.

Major areas where the ALP and the Coalition have policy consistency in relation to independent contractors include
  • Retention of the Independent Contractors Act in its current form and acceptance of the definition of independent contractors in the Act.
  • Retention of the PSI (tax) laws.
  • Retention of the secondary boycott provisions of the Trade Practices Act.
These provisions prevent unions using industrial relations bans to discriminate against independent contractors Areas where the ALP will be tested on independent contractors in the future include whether or not
  • Industrial relations agreements will be allowed to impose restrictions on the use of independent contractors under the Forward with Fairness laws.
  • The laws covering the commercial construction sector reopen opportunities for a small number of union thugs to collude with construction companies to force employment and union membership upon independent contractors in the construction sector.
These will be difficult situations for the government given the political pressures it faces. It is within this framework of recognizing both the positives and the challenges, that ICA has moved forward during 2008, looking at the next level of policy development that is required. Our focus is on how business can be made better for independent contractors and those that engage independent contractors.

Two areas of focus are
  • Achievement of simple, plain-language contracts for independent contractors where the power balance that is embedded in the law of commercial contract is reflected in the contracts in use in the community. We hope that the federal government may be able to take a practical lead in this respect.
  • Simple small claims and dispute-resolution processes being developed for independent contractors. The Victorian laws are a good model in this respect.
www.contractworld.com.au
ICA's website has undergone modifications and improvements during the year. It remains an active, content-driven site with fresh, up-to-date news and commentary on independent contractor issues being added regularly. We have also created a discussion page for member and user feedback/discussion on selected topics of importance to independent contractors.

The hits on the site continue to be pleasingly high, averaging 12,800 per month during 2008.

Highlights from 2008

ATO Income-splitting test case
In early 2008, a key legal case was resolved in favour of the Australian Taxation Office when two trust companies were denied Personal Services Income tax status. ICA summarized the case and commented on the lessons for independent contractors and their tax arrangements.

Self Managed Super Funds
It became clear in early 2008 that a campaign was being conducted by self-interested parties to make the operation of Self Managed Super Funds more difficult than is currently the case. ICA is highly suspicious that this campaign is a mask by certain groups who seek to damage SMSF by forcing SMSF money into retail and industry super funds. This is a fundamental issue for independent contractors because many run their own super funds which are a primary source of their financial independence. The attack against this financial independence reflects naked greed and is a grab for money by some in the financial sector. There are some 370,000 SMSFs holding about $300 billion in funds.

ICA will be watching the outcome of the federal government's review into SMSFs. We believe SMSF operations should be made easier, not more difficult.

Jury Service
An ICA member initiated a discussion on the unfairness associated with the cost of independent contractors attending jury service. Independent contractors do not have set wages and any state-enforced absence from work results in significant loss of income which is not subsidized by an 'employer'. The core problem is that governments are not prepared to pay to compensate independent contractors adequately for their loss of income.

Unions representing independent contractors in collective bargaining
This developed as a major issue around mid-2008. It occurred because independent contractors have the ability under the Trade Practices Act to apply to the Australian Competition and Consumer Commission for approval to bargain collectively. Where approval is given, unions can act as a bargaining agent for independent contractors. As a broad policy concept it has attracted some public controversy. However, it can only be properly understood by understanding the detail. ICA has commented on this and explained the detail.

CFMEU application for collective bargaining. ICA submission
The construction union, the CFMEU, made an application to the ACCC for approval to bargain collectively for owner-drivers in the earthmoving sector in south-east Queensland. ICA made a submission to the ACCC in October arguing that the application, as presented, should not be approved.

Unfair contract judgments
A most important development in 2008 was the release of two legal judgments on unfair contract applications taken under the Independent Contractors Act. The Act is relatively new and to see two decisions occur so quickly indicates that the Independent Contractors Act was a much-needed initiative. In both instances, contracts were found to be unfair. One contract has been changed to remove the unfairness. In the other case, a payment for contract termination has been awarded. ICA has summarized and commented on both cases, looking at the lessons to be learned to assist successful commercial operations. ICA will continue to monitor future cases and will create a database dedicated to unfair contract determinations.

ATO consultative committees and meetings
ICA is an active member of an ATO small business consultative committee. A major area of our input this year has been on ATO debt collection systems for small business. We recommended that the ATO should partner with Beyond Blue on the assistance and management of depression which frequently occurs when people suffer business difficulties. We have been encouraging the ATO to be proactive in working with small businesses in financial difficulties. This will be most important during 2009 as the economy heads into a downturn.

National harmonization of work safety laws
ICA made a submission to the national review into OHS laws. This is an extremely important area for independent contractors because it's now quite common for independent contractors to conduct business in several different States. Currently, laws in different States are significantly different, creating complexity and difficulty in knowing how to comply. ICA firmly rejects the OHS laws in NSW and recommends that national laws should be modelled along the lines of the Victorian OHS laws.

Workers' compensation deeming
This is an area of huge complexity for independent contractors. The laws in some States, NSW in particular, are unclear. Normally, independent contractors are not allowed to register in State workers' compensation schemes and have to take out private accident and illness insurance. Yet some States, NSW being the main one, prosecute independent contractors for not registering and paying premiums. The NSW government has pursued this aggressively to the extent that they seem to breach their own laws when they prosecute independent contractors. That is, the legislation defines independent contractors as at common law but in administering the laws the government applies additional definitions that are not supported by the laws. This creates a kangaroo court situation for independent contractors. Naturally, small business cannot afford to battle the government in court. Reports indicate that NSW has been bankrupting up to six small businesses a day. ICA has made representations to the federal government about the matter, stating that this area is of major concern and that a national approach to resolution is required. The NSW government ignores any representation for fairness.

Comcare review
Comcare is the federal government's workers' compensation scheme. Over the last few years large private businesses have been allowed to enter the scheme giving them consistency in workers' compensation laws across their Australian businesses. ICA made a submission to the federal government's review suggesting that Comcare should be made more widely available to the broad business community. If independent contractors had the capacity to enter Comcare, many of the problems they experience in the State schemes could be resolved.

Small business loans discussions with ASIC
ICA made a submission to, and had discussions with, the Australian Securities and Investment Commission on their review of finance for the small business sector.

Definitions of an independent contractor
The Productivity Commission has been reviewing the definition of independent contractor to assist a key labour survey group (HILDA). The Hilda survey, along with the Australian Bureau of Statistics, are the two primary surveys conducted regularly covering labour use in Australia. ICA had further input into the Productivity Commission's review.

Simple dispute-resolution processes at a national level
ICA has had discussions with the federal government department in charge of independent contractor issues about contract dispute resolution. We encouraged meetings with the Victorian Fair Trading Authority on its laws and methods which we believe have proved highly successful. ICA would like to see a simple national system for contract dispute resolution for independent contractors. We are open in our views as to how this could best be achieved and have continuing dialogue with the department to see if we can assist.

ICA Services
ICA has sought to expand the range of services available through its website during 2008. The contract template services provided by People InSite were introduced in 2007. This year we added extensive new links to the ATO's website regarding PSI and SGA in particular (our thanks to the ATO for their continuing assistance).

Information Technology sector
ICA sent a submission to the ACCC supporting an application for a Code of Conduct by the Information Technology Contractors Recruitment Association (ITCRA). ITCRA is an industry member of ICA and has sought and achieved approval for a Code of Conduct to guide the IT industry in the fair conduct of trade.

The Forgotten Workforce and Independence and the Death of Employment
One of the most pleasing developments in 2008 was the creation of partnering relationships with Monash University in its academic research into independent contractors. Globally, research on independent contractors has tended to be of very poor quality. Monash has shown a lead in taking research into a new era by approaching independent contractor matters from a commercial rather than labour law perspective. The initial research, The Forgotten Workforce, was released in October. Entity Solutions, an ICA company member supported the research by partnering with ICA and Monash in a 'roadshow' in Sydney, Canberra and Melbourne which released and supported the research.

The Forgotten Workforce report was co-launched with the launch (in hard copy) of ICA's executive officer, Ken Phillips' book, Independence and the Death of Employment.



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