New labour hire laws in Australia – is your business compliant?
New legislation introducing labour hire schemes will impose an additional regulatory burden on businesses that fall within the scope of the laws.
The trend towards insecure work in Australia has resulted in an increased reliance on casuals, short-term contracts, independent contractors, the gig economy, foreign workers and labour hire employees. Recent reforms to protect vulnerable workers have resulted in amendments to the Fair Work Act and the implementation of a Modern Slavery Act. On 17 July, the Australian Labor party announced that, if elected, it will introduce legislation to ensure that labour hire workers receive the same pay and conditions as direct employees.
A series of parliamentary enquiries has resulted in the introduction of three state-based labour hire schemes which, while directed at traditional labour hire models, are likely to have a far broader application to business supply chain and contracting arrangements across industry.
While there are some exemptions for certain arrangements (for example, secondees in Queensland and construction contractors in Queensland and South Australia), the scope of the legislation is by no means clear.
The penalties for a breach of the legislation range from $130,000 plus three years imprisonment for individuals, to more than $500,000 for corporations.
Businesses should audit their operations carefully in light of the new schemes and identify whether the laws apply. Contractual arrangements and documentation should be revised as part of this process.
Maddocks is currently advising clients on their obligations under the new schemes in Queensland, South Australia and Victoria. We can assist clients with all aspects of compliance, including tailoring service agreements and procurement arrangements.
What will these laws do?
The schemes are similar across the three states in that they impose a new regime with the following requirements:
- providers of labour hire services will be required to hold a licence, with each state to have a publicly accessible register of licensed providers
- those hosting workers will be required to only use licensed providers
- to obtain a licence, providers need to pass 'a fit and proper person test' and – depending on which state scheme applies – may need to demonstrate financial viability or show compliance with various laws
- compliance will be monitored – which may include complying with rigorous reporting requirements – and may be investigated, with rogue operators who do not comply or attempt to flout the scheme liable for hefty penalties.
Who is covered by these schemes?
In terms of what it means to be a ‘provider’ or a ‘worker’, and what ‘labour hire services’ are, some key concepts are consistent across all three states, such as:
- a person (a provider) provides labour hire services if, in the course of conducting a business, the provider supplies a worker (or workers) to another person (a host) to perform work
- a person is a worker where the worker and a provider have an arrangement where the provider supplies the worker to a host to perform work and the provider is obliged to pay the worker for the work
- an arrangement may fall within the scope of a scheme regardless of whether:
- the worker is an employee of the provider
- a contract is entered into between the worker and the provider and/or the provider and the host
- the arrangement is direct or via intermediaries
- the work is controlled by the provider or the host.
What types of arrangements are exempt from these schemes?
The schemes are extremely broad in their application and cover arrangements that are not traditionally considered to be labour hire arrangements. While each Act indicates that certain types of workers may be exempt through regulations made under that Act, Queensland is the only state so far to provide for specific ‘carve-outs’, including for secondees, high income employees and supply of workers between related companies.
What are the key differences between the different schemes?
In addition to exemptions, each state scheme has other nuances, including for the interaction of the schemes with other state legislation. For example, Queensland specifically includes arrangements with group training organisations (GTO), whereas South Australia specifically excludes arrangements with registered GTOs.
Importantly, Victoria’s definition of a ‘worker’ is broader than in the other schemes. Businesses and employers should be alive to the variations from state to state when navigating the legislation.
I think my business might be a ‘provider’ or a user of ‘labour hire services’ – what do I need to do?
If your business is a ‘provider’, you will need to apply for a licence within timeframes set out in the table below. If your business uses ‘labour hire services’, you must only engage licensed providers.
Be mindful that your business may be covered by a scheme regardless of whether your business is actually located in that state. Given the substantial penalties for failure to comply, you should carefully evaluate whether your operations are caught by the new reforms.
|Status of scheme||In force||In force||Passed and partly in force*|
|Commencement date of scheme||16 April 2018||1 March 2018||Will commence on either the day of proclamation, or 1 November 2019, whichever is earlier|
|Deadline to apply for registration||15 June 2018||1 February 2019
(while compliance was planned to commence from 1 September 2018, the State Government has advised that compliance will not be enforced until 1 February 2019 due to stakeholder concerns)
|Six months after the date of commencement (which is yet to be confirmed), but likely to be 1 May 2020
|Where does it operate?||Covers work performed in Queensland, whether or not the provider is based in Queensland.||Extends to conduct either in or outside SA that is in connection with labour hire services supplied in SA.||Applies to work performed within Victoria and to arrangements made within Victoria for work performed outside Victoria.
|Maximum penalties for breaches**||1034 penalty units (currently $134,988.70) or three years imprisonment for individuals;
3000 penalty units for corporations (currently $391,650).
|$140,000 or three years imprisonment for individuals;
$400,000 for corporations.
|800 penalty units ($128,952) for individuals;
3200 penalty units ($515,808) for corporations.
* The substantive part of the Act has not yet been proclaimed, and will commence on 1 November 2019 unless proclaimed earlier. The following parts, which are primarily procedural, came into operation on 27 June 2018: Part 1; Part 4; Part 7 (Division 2, 4, 5 and 7 only) and Part 9.
**Including for providing labour hire services without a license - noting that these are not the only provisions of each scheme attracting penalties.
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