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Our rights under attack

25 March 2011

Since mid-February we've been following the sham contracting inquiry being conducted by the powerful construction industry watchdog, the ABCC. We, along with others, have been highly critical of the inquiry process and the accompanying discussion paper. But recent events demonstrate that the ABCC inquiry is just one part of a much wider campaign attacking the right of Australians to be their own boss, to be self-employed. The issues at stake cut to the very heart of the nature of the society we choose to have and the nature of our economy.

Latest developments

The first development has been the discovery of a late submission to the inquiry by one of Australia's most senior labour law academics, Professor Andrew Stewart. The submission argues that
  • the use of common law is inadequate to define a 'sham' contract and proposes several alternative definitions and a redefinition of independent contracting.
  • those supporting the common law (business groups and those funded by business) are acting from self-interest---namely, the desire to reduce costs by exploiting workers.
  • '... the freedom to choose to work or be engaged as a contractor rather than as an employee must be constrained, if the integrity of our labour law system is to be protected.'
These are quite extraordinary claims which reveal why self-employment is under such sustained attack from some quarters. What's really being argued is that the system of labour regulation (of which Prof. Andrews is a leading light) is so essential to the functioning of society that no-one should be allowed to operate outside it. Self-employed people, as defined at common law, are not employees and so are not subject to labour regulation. The existence of these people (us) threatens the orderly functioning of society (as determined by labour regulations). Therefore the common-law rules should be rejected and replaced by ones (designed by Prof. Andrews and his followers) which capture self-employed people within the labour regulation net.

The second development has been the highly active injection into the debate of the construction union, the CFMEU. This is the same union that has suffered significant fines for extreme violence on worksites. The CFMEU refused to take part in the sham contracting inquiry being conducted by the ABCC. But it has now released a lengthy 'discussion paper' that just happens to address all the issues being investigated by the inquiry. The CFMEU argues that sham contracting is rife in the constructing sector and alleges massive loss of taxation revenue and exploitation of workers. One thing we have to say about the CFMEU is that they sometimes put together well-researched and impressive papers even if we disagree with their arguments.

In addition, the CFMEU has launched a high-profile publicity and public relations campaign which alleges that sham contracting is a widespread disease in society. Here's some of the coverage it has achieved: The CFMEU is an extremely wealthy organization and highly sophisticated in its operations. It has a vast marketing department that is very successful at generating the type of publicity it wants.

As a background to these developments, Sydney University recently released a report commissioned by the Australian Council of Trade Unions (ACTU) advising unions on how they should reposition themselves from a marketing perspective so they could attract support.

The Australian Labor Party (ALP) and self-employed people: the tension

The ALP is a political party in a state of internal turmoil. Its essential problem is that it is confused over the core vision that it has for society. This was best explained by one of the leading and most influential Left thinkers in Australia, Clive Hamilton, in 2006.

In its constitution, the ALP describes itself as 'a democratic socialist party.' But Hamilton says that '... sustained increases in living standards for the great bulk of working people have so transformed social conditions as to render social democracy redundant as a political ideology.' That is, according to leaders of the Left, socialism is dead as a guiding principle, either for society or for a modern political party.

What has happened as a consequence in the ALP is a highly complex series of disagreements and splits over the direction it should take. There are people who have simply become professional at seeking political power for its own sake. There are others who hold firmly to the socialist dream, or a version of it. And there are those who seek to study, understand and respond to the society Australia has become. It is at this point that self-employed people enter the (ALP) political equation.

Whatever their views on socialism, there is one principle that galvanises all Labor party players and that is the firm belief that strict labour law must regulate and control the way all people in Australia work. Labour regulation, however, only applies to the relationships between employers and employees. If someone is not an employer or an employee (that's us!), they do not come within the labour regulation net. Instead, they come under commercial law. The reaction to us, that is, self-employed people, is a source of great tension inside the ALP.
  • There are many people inside the ALP, including some members of parliament, who recognise and accept that we are a new and fresh way of approaching how work in society is organised. They perhaps even recognise both the potential and the reality of the entrepreneurship that we probably bring to society. We've conducted quite a discussion on this. These ALP people have been quite accommodating towards self-employed people and some positive policy outcomes have been achieved.
  • There are others who cannot believe (and in fact reject) that there is any genuineness in self-employment and that it must be a sham and an exploitative con by big business. Even if they think that there are some genuine self-employed people, they cannot accept us because to them we pose a threat to the labour regulation system (because we simply don't fall under it).
There is tension, then, inside the ALP and the Gillard Government over how they respond to us, self-employed people. Some are supportive. Others want to destroy us by creating legislation to stop us being self-employed. This tension is playing out through the sham contracting campaign.

Sham contracting, ALP tensions and political numbers

In 2009 ICA was tipped off that there was an ALP/Union committee organising a campaign against self-employed people. We first saw the public face of this with government attempts to deny self-employed people tax equity under the PSI tax rules. ICA campaigned heavily to stop this. In October 2010 the Assistant Treasurer, Bill Shorten, who was in charge of the government's proposals, announced that he would not proceed.

However, Shorten also announced that the government would launch a campaign against sham contracting. In November 2010, the newly appointed Commissioner to the Australian Building and Construction Commission, Leigh Johns, announced that he would hold an inquiry into sham contracting.

One on-line newsletter now alleges that Mr Johns is a 'Labor Lefty' with a history of active internal ALP political campaigning. We don't suggest that such a background, if true, has any bearing one way or the other on the ability of Mr Johns to act as Commissioner of the ABCC or on his integrity. It is interesting, however, that in Senate hearings Mr Johns made it clear that he is retaining his ALP membership while still being Commissioner.

Another factor in the ALP tension in which self-employed people have become ensnared is the political allegiances of the CFMEU along with the two other unions, the Electrical Trades Union (ETU) and the Australian Manufacturing Workers Union (AMWU). These three unions make up the 'radical left' end and are chief financiers of the Australian Labor Left. In a stunning strategic move, these three unions have also become major financiers of the Green Party in Australia. (See The Age, The Mercury and The Australian.)

What the three unions have done is to position themselves (largely unnoticed) at the centre of the political game in the near-hung parliament with a minority Gillard Government. The three unions have the financial and political power inside both the Gillard Government and The Greens virtually to dictate outcomes on the issues they choose. When The Greens gain the balance of power in the Senate in July this year (2011) the three Left unions will be able to exercise their power.

The only constraint on this power will be the attitude of the independents in the lower house who control the balance of power there. In this respect, the prospect for self-employed people is not good. In February the three key independents---Rob Oakeshott, Andrew Wilkie and Tony Windsor---all displayed a decided anti-small business attitude by voting against a proposal to relieve small business people from the burden of more unnecessary red tape. It should be expected that they will continue this anti-small business approach.

This paints the political 'numbers' game within the Gillard Government as it bears upon self-employed people.
  • There are some people in the Gillard Government who support genuinely self-employed people. They accept the importance of the common-law definition and (probably) recognise the entrepreneurial and innovation issues. They want to stop sham contracting, but don't want to change common-law definitions.
  • There are other people in the Gillard Government who have an obsession with stopping self-employment and will use practically any means to achieve their ends.
The government supporters of self-employed people, however, do not have the numbers to win the day. Further, their support is primarily intellectual in nature and has no supporting power base inside the ALP. This creates risk for them if they do stand up for self-employed people.

Those who detest self-employed people---principally the Left unions (CFMEU, ETU, AMWU)---are rich, highly organised, strategically sophisticated and have the numbers.

Prediction. What is unfolding. Bad scenario for self-employed people

From the foregoing it's possible to read the political future that will face self-employed people over the next 18 months or so.

There is currently a major, well-funded and coordinated campaign unfolding that seeks to de-legitimise the right to be self-employed. It's using the word 'sham' in a highly extended way to cast strong doubt over the legitimacy of anyone being self-employed as defined under common law. The campaign is:
  • Utilising the resources and inquiry of the ABCC.
  • Pulling in key academic 'authorities' who, in truth, are arguing that any form of self-employment is unacceptable.
  • Using the full resources of the institutions of government---for example, the Australian Taxation Office and the Fair Work Ombudsman---to add 'heat' to the campaign.
What can be expected is a very typical process where
  • A report or series of reports will emerge (perhaps ABCC being the first) calling for changes to legislation to alter the definition of sham contracting. This will be done by stealth and, via the back door, will effectively change the common-law definitions of self-employment.
  • These reports will be pushed around the media by the unions using their highly professional marketing campaigns and will, in particular, be pushed at the independents in the lower house (Oakeshott, Windsor, Wilkie).
  • After The Greens have control of the Senate in July 2011, at some stage legislation will be proposed on 'sham contracting' to change the common-law definitions.
  • The three lower house independents (Oakeshott, Windsor, Wilkie) will vote with the government and the legislation will pass in the Senate.
It will be 'checkmate' for Australia's 2 million self-employed people.

The doyen of economic commentary, Robert Gottliebsen, predicts that, in one area alone, a 30 to 40 per cent increase in the cost of house building will happen as a consequence. He also explains the likely decimation of self-employed consultants such as IT specialists, engineers, architects, mining specialists and the like.

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