New labour hire laws in Australia – is your business compliant?

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 at the national level to ensure that labour hire workers receive the same pay and conditions as direct employees.

Now, a series of parliamentary enquiries have 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. New legislation introducing labour hire schemes in Queensland, South Australia and Victoria 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 and the schemes are designed to address some of the issues arising from this trend. This article outlines who is covered by each of the schemes, what action will need to be taken by 'providers' and 'workers' and the consequences of breaching a scheme.

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.

The laws will impose significant penalties on those who engage in conduct in breach of the scheme, which include prison sentences and penalties of over $500,000.

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. Each Act indicates that certain types of workers may be exempt through regulations made under that Act. Queensland has provided for specific 'carve-outs', including for secondees, high income employees and supply of workers between related companies. Victoria has foreshadowed that it will also provide for limited exemptions to the scheme (including for secondees) by way of draft regulations currently open for consultation until 5 September 2018.

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.

* 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.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Employment team.

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