Wednesday, November 18, 2009

Contractors across the ditch

Occasionally it is interesting to glance across the Tasman. In Australia independent contracting has a considerably higher political profile than in New Zealand. Indeed in Dr Craig Emerson Australia has a Minister for, among other things, independent contractors. The reason for this profile appears in part to be due to the lobbying activities of groups that either use or claim to represent independent contractors such as the Housing Industry Association and the Independent Contractors Association. The latter is a small but very vocal body which purports to represent the many hundreds of thousands of contractors in Australia: apparently it is committed to promoting a free choice between the “powerlessness and bondage of employment” and the “equality and liberation of shared power under independent contracting.” While the description of employment may ring some bells the description of independent contracting seems a tad overoptimistic particularly for that group of contractors who are better described as “disguised employees” or “dependent contractors. Nevertheless it seems that both the Labor and Coalition parties have become committed to supporting ‘the choice of Australians to pursue a career as independent contractors’.

Shae McCrystal of Sydney Law School, suggests that in Australia independent contractors are increasingly seen as a distinct class of small business actors deserving their own regulatory attention. The Howard government for example passed an Independent Contractors Act, mainly to limit the ability of the states to apply employment-like protection to contractors, but the Act which is still in force does allow contractors covered by it (don’t even ask about Australian constitutional complications) to challenge unfair contracts – in a recent case contracts with owner-drivers were held to be unfair when they allowed the principal to require upgrades to trucks (from singletrailers to B-doubles) where there was no provision for reasonable compensation for the extra expense. The new Fair Work Act 2009 provides some limited protection by prohibiting misrepresenting employment as an independent contracting arrangement and dismissing an employee in order to re-engage them as a contractor.

Nevertheless, as in New Zealand, dependent contractors are caught between a rock and a hard place. They are excluded from the protective coverage of labour legislation, including the right to form unions and to bargain collectively, while trade practices legislation generally regards any efforts to collectively improve conditions of work as unlawful. In a recent article, “Is there a 'Public Benefit' in Improving Working Conditions for Independent Contractors? Collective Bargaining and the Trade Practices Act 1974 (Cth)”, McCrystal looks in some detail at the position of contractors under Australia’s trade practices legislation. Groups of contractors may apply for permission to engage in conduct that might otherwise breach Act but for an application to be successful the Commission needs to be satisfied that any public benefit from the conduct is outweighed by the likely public detriment. Such applications have almost always failed.

McCrystal summarises the position as follows: “The public benefit test does not accommodate the argument that improved control over working conditions can be a public benefit in and of itself, especially where it ultimately increases the cost of service provision. Additionally, the competition regulators appear unable to conceive of countervailing bargaining power as a public good of itself. Potentially coercive collective action operating in opposition to strong market power is considered too great an anti-competitive risk to be allowed. Parties with no market power may, if a notification is allowed, collectively try to pursue efficiency gains provided that the collective does not seek to exercise any muscle. Groups with existing market power, however theoretical, cannot combine.”
McCrystal's article can be downloaded without charge from the Social Science Research Network Electronic Library at:]

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