Labour Hire: What the Federal Election Means For Your Business

Labour Hire: What the Federal Election Means For Your Business

Despite a victory in the 2019 federal election, most Australians see the Coalition win as a surprise. Our reelected Prime Minister, Scott Morrison, called it a ‘miracle’. With Labor the odds-on shoe-in, the business community were anticipating a raft of legislative changes specifically in relation to labour hire. But now? Well… read on.

Labour hire legislation (which we’ve covered multiple times before) was high on the Australian Labor Party’s agenda: a key Labor election promise was the commitment to casual workers receiving the same pay and conditions as full-time employees. Now that those promises have remained unfulfilled (for the next three years at least), what does it mean for organisations that not only supply labour hire services, but use it on a regular basis?

To meet the growing uncertainty faced by many organisations, Moray & Agnew Lawyers hosted a seminar this week to discuss what a Coalition victory means, the legislative ramifications, and what organisations can do to mitigate their risk.

What has the Coalition promised?

Many experts believe that a Coalition victory in last weekend’s federal election will pave the way for less red tape and reduced uncertainty over workplace legislation. The Coalition rose to victory on a platform of economic strength, and proposed simplification of the tax system. As part of this broad undertaking, they specifically committed to legislation for the labour hire sector; according to Moray & Agnew, this includes:

  • Providing funding to the Fair Work Ombudsman to target employers attempting to avoid employee entitlements
  • Providing casual conversion rights for more casual employees under the National Employment Standards (NES)
  • Potentially implementing targeted, industry-specific federal labour hire licensing.

Overall, the direction of these policies targets employers and providers who are deliberately shirking their responsibilities, particularly in low-wage jobs.

This is contrasted with Labor’s policies, which promised a much larger number of regulatory changes, and broadening the scope to include highly-paid white collar professionals, focusing on issues like casual conversion and pay-rates. As they have repeatedly said, ‘same job, same pay’, regardless of whether you’re a contractor or an employee.

Although a Coalition win has meant less legislative change in the labour hire industry, they still propose to increase pressure on some employers for dodgy dealings and unscrupulous arrangements.

Labour Hire Licensing Laws and Sham Contracting

Following the federal election outcome, the government is now focusing on two core areas: labour hire licensing laws and sham contracting.

The Labour Hire Licensing Scheme (state body) protects vulnerable labour hire workers from exploitation and regulates the provision of labour hire services. Labour hire licensing is a subset of workforce relations; it’s highly complex and it’s open to interpretation.

The scheme imposes obligations of providing and using labour hire services, specifically:

  • Providers of labour hire services must not operate without a licence
  • Hosts of labour hire services must only use a licensed provider
  • Providers of labour hire services must report annually on their labour hire activity, including number of workers, visa types, services, industries and locations.

This is managed by the Labour Hire Authority (state-based body), and breaches of these obligations attract significant penalties. In fact, the Coalition announced that it will introduce new criminal sanctions, in addition to increasing civil penalties, in instances of serious underpayment of workers.

Sham contracting arrangements have also been high on the Coalition’s agenda. Sham contracting is when an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is often done to avoid responsibility for employee entitlements, payroll tax and other legislative obligations.

While the Fair Work Commission specifically targets exploitation of workers, there are fears that contingent workers will double dip – that is, get a higher salary from casual loading, while at the same time argue for annual and sick leave. A precedent was set for this issue last year in WorkPac Pty Ltd v Skene (2018), where the court found that a casual labour hire worker was an employee entitled to annual leave payments under the NES.

However, given the federal election win, the Coalition will introduce regulations to stop casual workers double dipping, ensuring employers are not required to pay entitlements on top of casual loading. The move is designed to provide improved clarity about entitlements. Where an employer has paid an identifiable loading to casual employees, under the new legislation it could be offset against any subsequent claim for sick or holiday pay.

What Organisations Can Do To Protect Themselves

The first thing all organisations must do, if they provide labour hire services in Victoria, Queensland or South Australia, is sign up. In Victoria, from October 2019, all organisations using labour hire workers, must not use unlicensed providers.

Organisations must also ensure that any provider they use is licensed, by checking the online Register of Licensed Labour Hire Providers. It’s always a good to annually check that your provider has retained their labour hire licence, but do note that there is a defence built into the legislation if a provider previously had a licence, but lost it afterwards.

Additionally, to mitigate casual conversion risk, organisations are recommended to make casual loading explicit in contracts. What this means is up for debate – some organisations are putting the specific dollar amount of the loading into their contracts. At the heart of this question is whether a person is a casual worker or a full-time employee, a distinction that can be uncertain in some cases. The resounding advice is to document everything, strive for clarity in all contractual arrangements and seek legal advice.

As an organisation that exclusively deals with contingent workers, CXC invests significant time and resources into remaining compliant with all legislative workplace requirements. We have an ongoing commitment to ensuring our business operates in accordance with all applicable labour hire licensing laws. We achieve this in a number of ways, specifically:

  1. Employing in-house staff with a high level of expertise in the obligations that are required to be a licensed labour hire provider. This expertise covers all relevant legislation including Workplace Health and Safety, Fair Work obligations and immigration requirements
  2. Engaging external experts from time to time, who provide advice on the formulation of our policies and procedures, including PricewaterhouseCoopers, AI Group and FCB Lawyers
  3. Monitoring our existing policies and procedures and conducting regular reviews of the legal requirements to ensure that our compliance approach remains robust and up-to-date.

Regardless of your level of contingent worker use, the federal election result now demands that you give careful consideration to your usage or offering of labour hire. Although the federal election has not opened up the industry to extensive labour legislation changes, the penalties for getting it wrong are still severe.