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Independent Contractors Bill 2006: Summary

26 July 2006

Prepared by Independent Contractors of Australia

This is a summary of the Bill for the layperson. It has been prepared by ICA to help improve understanding. The Bill has some complex legal clauses, particularly with relation to transition issues. This summary is a guide only. It is not complete.

From the Independent Contractors Bill:

Part 1
    a) Protect the freedom of independent contractors to enter 'services contracts'
    b) Recognize independent contracting as a legitimate form of work that is commercial
    c) Prevent interference with the terms of genuine independent contracting arrangements
Sect 3 (1)
'Services' contracts governed by
    a) Common law and equity law
    b) Laws of the Commonwealth
    c) Laws of the States and Territories, except where those laws treat independent contractors as employees
Sect 3 (2)
Independent contractor is not limited to a natural person---for example, can be a director of a family corporation Sect 4
'Services contract' is a contract for services where one party is
  • A corporation (or)
  • The Commonwealth (or)
  • A Territory body corporate (or)
  • A resident in a Territory (or)
  • The work is in a Territory (or)
  • The contract is entered into in a Territory
NB 1: Does not touch contracts between two large corporations.
NB 2: The independent contractor must perform the work---in other words, doesn't apply to supply of goods-only services.
NB 3: Applies only to commercial contracts.
NB 4: Does not apply to contracts in any State between two individuals or an individual and a trust.
Sect 5 (1) (2)

Voiding State/Territory IR Laws
Part 2
Voids State/Territory laws that treat independent contractors as employees for industrial relations purposes.
  • Overrides/nullifies/makes redundant IR employee/employer deeming
  • State/Territory unfair contract provisions are unenforceable
NB 1: Transition period applies, except for the voiding of unfair contract provisions (see below).
NB 2: State/Territory unfair contract provisions are replaced by new Federal unfair contract provisions (see below).
Sect 7 (1)
Some State/Territory laws not voided
  • NSW IR Act in relation to owner-drivers
  • Victorian Owner-Drivers Act.
  • Clothing outworkers
  • Any State/Territory law Commonwealth regulated as not voided.
NB1: Subject also to transition issues (see below).
Sect 7 (2)
Regulations may void other laws
This may cover laws not currently voided (for example, as listed in Sect 7(2))
Sect 10
Laws not affected
  • Equal opportunity, Anti-discrimination, Superannuation, Workers' compensation, OHS, Child labour, Public holidays, Deductions from wages or salaries, Essential services, Jury service, Professional/Trade regulations, Consumer rights, Tax, declared by regulations
Sect 8 (2)

Unfair Contracts
Part 3
Sets up an unfair contracts process through Federal Magistrates and Federal Courts. Mediation services also available. Sect 11-17
Unfair contracts process does not apply to
  • Private or domestic work
  • Two (non-family) corporations.
NB: For unfair contracts process to apply, work must be performed by a director/family member of corporation.
Sect 11
Who can make an application?
Only a party to the contract
Sect 12
What is 'unfair'?
For the purposes of the Federal unfair contracts, courts must consider:
  • Relative bargaining strengths of parties
  • Any undue influence, pressure or unfair tactics
  • Payment to an independent contractor that is less than that which an employee would have received---based on industry standards and market rates.
  • Anything Courts considers relevant.
Sect 15
Court may order
  • Setting aside whole or part of contract, or vary contract
  • Correction of unfairness
Sect 16
No Costs
Each party must cover their own legal costs, etc. (unless 'vexatious' litigation).
Sect 17

Clothing Outworkers
Part 4
Specific provisions made for clothing outworkers.
  • Applies to all states but NSW and Victorian clothing outworker laws not overridden.
  • Outworker remuneration underpinned by Fair Pay Commission.
  • Liabilities are tied to contracts. No liability where no contract.
Sect 18-30

Transition 3 Years or 'opt-in'
Part 5
  • Federal unfair contracts laws have immediate effect and void State/Territory unfair contracts laws
  • Other State/Territory laws not voided for three years, unless independent contractor and engager sign an 'opt-in' agreement
  • Anyone who had accrued 'entitlements' would have to be paid out
  • If unfair dismissal laws apply, they continue for existing contracts
Sect 31-37
Pre-reform contract
Contracts entered into before the Act is proclaimed have State/Territory IR laws (except 'unfair') applying to them for three years unless 'opt-in'.
Sect 31 & 35(4)
Parties to 'services contracts' may sign an agreement that 'they no longer want the State or Territory contractor laws to apply'. Once signed, cannot be withdrawn.
Sect 33 & 35
No coercion on opt-in
It is an offence to coerce, threaten or knowingly make false statements in relation to an opt-in agreement. Penalties under Crimes Act.
Sect 34
Last contract applies
Clarifies that the contracts operating closest to the Act's commencement date are relevant during the transition period.
Sect 35(2)

From Amendments to Workplace Relations Act:

Sham Arrangements
Part 22
If a person misrepresents an existing or proposed employment relationship as independent contracting, it is illegal. Protection from sham contracts applies to all independent contractors. No exclusions.  
Reverse onus of proof
Persons accused are deemed guilty and must prove their innocence by proving that they:
  • Believed that the contract was or would be commercial
  • Could not have reasonably expected to know that the contract was in fact employment
900 & 901
Not Dismiss
An employer must not dismiss or threaten to dismiss an individual for the sole or dominant purpose of engaging the individual as an independent contractor.
No false statement
A person must not make a false statement to persuade or influence an individual to enter an independent contractor arrangement.

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