The 2006 Independent Contractors Legislation: An Opportunity Missed
| Date | 01 June 2007 |
| Published date | 01 June 2007 |
| Author | Anthony Forsyth |
| DOI | 10.22145/flr.35.2.7 |
| Subject Matter | Article |
THE 2006 INDEPENDENT CONTRACTORS LEGISLATION:
AN OPPORTUNITY MISSED
Anthony Forsyth*
1 INTRODUCTION
The Independent Contractors Act 2006 (Cth) ('IC Act') and the Workplace Relations
Legislation Amendment (Independent Contractors) Act 2006 (Cth) ('Amendment Act')
implement further key aspects of the federal government's workplace relations policy,
following the passage of the Workplace Relations Amendment (Work Choices) Act 2005
(Cth) ('Work Choices Act'). The Work Choices Act substantially amended the Workplace
Relations Act 1996 (Cth) ('WR Act'), introducing a national workplace relations system
for employers who are (in the main) 'constitutional corporations' or federal public
sector departments or agencies, and their employees.1 Through the Work Choices Act,
the government also: transferred responsibility for minimum wage-setting from the
Australian Industrial Relations Commission ('AIRC') to a new body, the Australian
Fair Pay Commission; provided five minimum statutory employment conditions for all
workers covered by the national system; removed much of the procedural regulation
relating to workplace agreements and substantive requirements such as the 'no
disadvantage' test; and exempted businesses with 100 employees or less from unfair
dismissal regulation.2
Running parallel with these sweeping reforms affecting the main type of working
relationship in the Australian labour market — that of employer and employee — the
government has for some time expressed a strong interest in transforming the
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* BJuris/LLB (Hons) (Monash); Grad Dip (Lab Rels Law) (Melb); PhD (Melb); Senior
Lecturer and Director of the Corporate Law and Accountability Research Group,
Department of Business Law and Taxation, Monash University. Thanks to Carolyn
Sutherland for her comments on a draft of this article, and to the Federal Law Review's
anonymous referees for their comments and suggestions; any errors are my responsibility.
1 In doing so, the Work Choices Act's reliance on the 'corporations power' in s 51(xx) of the
Australian Constitution was upheld as constitutionally valid by the High Court of Australia
in New South Wales and Others v Commonwealth (2006) 231 ALR 1 ('Work Choices Case'); see
Andrew Stewart and George Williams, Work Choices: What the High Court Said (2007).
2 Further details regarding these and other aspects of the Work Choices Act (for example,
changes to the awards system, and new restrictions on industrial action and union activity)
may be found in the special issues of the following journals: (2006) 19 (2) Australian Journal
of Labour Law; (2006) 16 (2) Economic and Labour Relations Review.
328 Federal Law Review Volume 35
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regulatory arrangements for independent contractors.3 In 2004, it was estimated that 8.2
percent of the Australian workforce (some 787,600 workers) were engaged as self-
employed contractors.4 While the number of contractors in the workforce fell between
1998 and 2004,5 it is widely considered that independent contractor relationships form
a share of the steadily growing 'atypical' or 'non-standard' segments of the labour
market.6 Particular concern has been expressed about the increasing incidence of
'dependent' (as opposed to independent) contractor relationships — that is, workers
who are formally engaged as contractors, but who in reality are more like employees
(for example, because they are reliant on only one main source of income, or are
subject to extensive control by their 'principal').7
However, in the government's view, the use of contractors and related phenomena
such as 'labour hire' arrangements, in place of conventional employment relationships,
is an important element of labour market flexibility: '[f]acilitating the use of
independent contractors and the flexible arrangements afforded by them is imperative
to … the dynamic efficiency of the economy.'8 The traditional system of award
regulation and rights of union intervention were seen as major impediments to the
freedom of business to utilise contractor and labour hire arrangements. Accordingly,
following a House of Representatives Committee Report in 2005,9 the government
introduced prohibitions on provisions in awards or workplace agreements that
purport to restrict employers' use of contractors or labour hire workers, or that specify
requirements as to their working conditions.10
A further obstacle to independent contracting identified by the government was the
extension of employment protections to contractors through a web of State and
Territory legislation.11 Removing that obstacle, and generally providing greater policy
and legislative support for independent contracting, thus became a major focus of the
government's workplace relations reform agenda in 2006. Following their introduction
into federal Parliament as bills in late June and reference to a Senate Committee,12 both
the IC Act and the Amendment Act were passed by Parliament on 5 December 2006.
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3 For convenience, independent contractors will generally be referred to herein as
'contractors'.
4 Productivity Commission, The Role of Non-Traditional Work in the Australian Labour Market
(2006).
5 Ibid; see also Matthew Waite and Lou Will, 'Self-Employed Contractors: Incidence and
Characteristics' (Productivity Commission Staff Research Paper, 2001).
6 See, eg, Ian Watson et al, Fragmented Futures: New Challenges in Working Life (2003) ch 6.
7 Ibid 64, 71–2.
8 Explanatory Memorandum, Independent Contractors Bill 2006 (Cth) ('Explanatory
Memorandum of the IC Bill') 6.
9 House of Representatives Standing Committee on Employment, Workplace Relations and
Workforce Participation, Parliament of Australia, Making it Work: Inquiry into Independent
Contracting and Labour Hire Arrangements (2005); see further Joellen Riley, 'A Fair Deal for
the Entrepreneurial Worker? Self-Employment and Independent Contracting Post Work
Choices' (2006) 19 Australian Journal of Labour Law 246, 249–50.
10 See, eg, WR Act ss 356 and 515(1)(g)–(h) (introduced by the Work Choices Act); Workplace
Relations Regulations 2006 (Cth) reg 2.8.5(1)(h)–(i).
11 See Riley, above n 9, 250.
12 See Senate Employment, Workplace Relations and Education Legislation Committee,
Parliament of Australia, Provisions of the Independent Contractors Bill 2006 and the Workplace
Relations Legislation Amendment (Independent Contractors) Bill 2006 (2006).
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