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Labour for hire: What you need to know

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17 Aug 2018

When you think about it, it is inconceivable to imagine certain Australian industries such as construction, agriculture and the resources sector (to name a few), continuing to function, much less survive, without the supply of labour via labour hire. Given that many Australian companies utilise labour hire services of some kind either directly or via third party contractors, and the spotlight which is continuing to be shone by unions and regulators on the protection of vulnerable classes of workers in Australia, various State governments have recently enacted legislation to reform how labour hire activities are provided.

In an effort the keep abreast of these developments, this article will examine the labour hire schemes that have been legislated so far in Queensland, South Australia and Victoria.

Queensland

In September 2017, the Queensland government passed the Labour Hire Licensing Act 2017 (Qld) (“Qld Act”), which commenced operation on 1 March 2018. On 6 April 2018, the Queensland government published Regulations with respect to the Qld Act.

The Qld Act provides that a person (including a company) must not provide labour hire services unless they are registered and hold a license in accordance with the Qld Act, otherwise they will be liable to significant fines and penalties for breach. The Qld Act defines the concept of “provides labour hire services” extremely broadly to include any “person who supplies to another person a worker to do work in the course of carrying on a business”. “Worker” is defined in the Qld Act as an individual who enters into an arrangement with the provider, for the provider to supply the individual to another person to do work, and the provider pays the individual for the work performed.

The Qld Act expressly excludes private employment agencies, the construction industry and exclusions prescribed by the Regulations. The Regulations have not excluded any particular businesses under the definition of “provider” but have made some additional exclusions from the definition of “worker”. As such, the supply of the following “workers” will not be captured by the Qld Act:

  • A worker that earns more than the high-income threshold, which is currently set at $145,400 per annum and not covered by a modern award or enterprise agreement;
  • An Individual trading through a corporate entity to provide their own services;
  • An in-house employee of a provider, whom the provider supplies to another person to do work on a temporary basis on 1 or more occasions and gives an example of a lawyer working on secondment at a client. In this regard, the Regulations provide that an in-house employee” of a provider is an individual who:
    • is engaged as an employee by the provider on a regular and systematic basis
    • has a reasonable expectation the employment with the provider will continue; and
    • primarily performs work for the provider other than as a worker supplied to another person to do work for the other person.

Given the very broad definition of “labour hire provider” and “worker” under the Qld Act and the limited exclusions, the Qld Act will cover any person or entity that provides labour to another entity, where the worker is paid by the person or entity providing their labour (whether directly or indirectly), regardless of whether the supplier of the labour would traditionally be considered a labour hire provider. As such, the Qld Act will capture the provision of personnel by any person or entity, in circumstances where the individuals concerned are based at the client’s premises 9other than by way of secondment) and essentially perform all their duties for the benefit of that particular client.

Notably, the Qld Act is expressed to have extra-territorial effect to “the full extent of the extraterritorial legislative power of the Parliament”. It is not entirely clear what is meant by this but, it is clear that the intention is that it will have effect to the maximum extent possible, and as long as there is a nexus between either the worker or the provider of the labour and Queensland, then the Qld Act will arguably apply. To this end, it is very likely that the provision of labour hire services outside Queensland by or through an entity trading in Queensland will be captured. Likewise, if the provision of the labour hire occurs outside Queensland but is for the benefit of a Queensland based entity, then there is an argument that the law will nevertheless apply. 

Relevantly, where there is a contravention, the Qld Act imposes both penalties on the provider of labour as well as the recipient of the labour in circumstances where the provider is unregistered. In this regard, it is vital that users of labour hire services in Queensland ensure they are sourcing labour hire from a properly registered provider, otherwise they themselves may be liable to significant penalties. It is clear the Qld Act has been deliberately drafted with reciprocating obligations on both the provider and recipient of labour hire, with a view to ensuring that Queensland businesses do not try and obviate their legal obligations by contracting with foreign or unregistered labour hire service providers who may exploit vulnerable workers.

The Qld Act is fully operational and if labour hire providers do not have a licensee or have not applied for a license prior to 15 June this year, they must not provide labour hire services until a licensee has been granted.  This also means that any companies using labour hire services need to check whether their current provider is licensed or has applied for a license prior to 15 June this year.

South Australia

Similarly, the South Australian government passed the Labour Hire Licensing Act 2017 (“SA Act”), and it commenced operation on 1 March 2018. The definition of “worker” and “labour hire services” are almost identical to that in the Qld Act. The Regulations however, do not contain any additional exclusions to the definition of “worker” as is the case in Queensland. In this regard, the provisions of the South Australian regime appear to be broader than that which applies in Queensland. It is important to note that in this context the secondment of employees may well be covered by the regime in South Australia. The SA Act also specifically states that it extends to conduct whether within or outside South Australia that is in connection with labour hire services supplied in South Australia.

Given there is no limitation to the definition of “worker” under the SA Act, traditional labour hire workers as well as seconded employees may well all be captured by the regime. It is also clear that given the specific extra-territorial reach of the SA Act, that off-shore labour hire would arguably be captured and thus companies who rely on labour hire would need to be vigilant to ensure they are sourcing labour from properly registered and licensed providers.

For completeness, we note that labour hire providers in South Australia have until 31 August to lodge an application for a license. However, it should be noted that under the SA Act, businesses can apply to the Commissioner of Consumer Affairs for an exemption from the SA Act.

Victoria

On 26 June 2018, the Labour Hire Licensing Act 2018 (Vic) received royal assent and commenced operation on 28 June 2018. However, licensing obligations are not yet in force and will commence in or about early 2019. The primary obligations and definitions are very similar to those contained in the Qld Act and SA Act. The Victorian Act does not, however, provide directly for any exemptions other than to allow for Regulations to deal with such matters. At the present time, no regulations have yet been gazetted by the Victorian government. However, it is important for Victorian companies to ensure they are alive to the requirements of this legislation otherwise they may be liable to significant penalties in circumstances where labour is being supplied by unregistered providers.

Key Considerations for Users of Labour Hire Services

As a consequence of the newly enacted labour hire regimes in Queensland, Victoria and South Australia and the prospect that other States and Territories may soon follow suit and adopt similar legislation, companies who rely on labour hire should do the following:

  • Audit your current providers to ensure they are properly registered and are licensed to provide labour hire services in Queensland and South Australia;
  • Review your current procurement processes to ensure that your labour hire service providers have their registration status and continue to comply with their renewal obligations which can be checked via the Regulator’s website;
  • Review your current labour hire contracts so as to ensure they include contractual obligations requiring providers to maintain registration under the regime and provide evidence of such registration upon request; and
  • Consider your broader obligations under the regimes and the implementation of procedures and protocols to manage associated risks including the obligation to report any provider attempting to supply labour through an avoidance arrangement.

Key Considerations for Labour Hire Providers

If you are a provider of labour hire services or, at times, second or outsource your employees to clients to perform particular functions, then you need to think carefully about how your business interacts with the new regimes and ensure you have, if necessary, obtained appropriate registration and are licensed to operate as a labour hire provider. In addition, we note that providers of labour hire services on a national scale will need to consider the territorial differences between the separate regimes and take extra care to ensure they are licensed to operate in each applicable State.

With respect to licensing, the applicable fees to obtain a license in Queensland depends on the licensees’ actual (or in the case of a new business, projected) annual payroll liability and is calculated accordingly. In South Australia, the fee is based on a scale. Victoria has not as yet published its regulations and consequent fees. National providers will need to be licenses separately in all the States in which they operate (currently being South Australia, Queensland and in 2019 Victoria). When applying for a license, there must be a “nominated officer” named on the application who is responsible for the day-to day carriage or management of the business to which the license relates.

To obtain a license, the applicant must satisfy the Regulator that:

  • the applicant is financially viable (this will require detailed financial information both relating to the provider and any related companies or close associates); 
  • the applicant, any nominated officer/s and (for corporations) the executive officers of the corporation are “fit and proper persons” (as defined in the Act);
  • other details regarding the business including:
    • the type of labour hire services proposed to be provided, and where they will be provided;
    • workers' compensation insurance information;
    • the existence of any work health and safety undertakings, prosecutions or convictions;
    • whether any other licenses or accreditations have ever been suspended, cancelled or had conditions imposed;
    • criminal and conviction history of the applicant and/or their associates;
    • visa and migration arrangements regarding workers; and
    • whether any sexual harassment complaints have been made against the applicant or their associates.

Once a labour hire provider has been granted a license, they will need to:

  • comply with the license conditions, including any industrial obligations and paying a yearly renewal fee;
  • report to the Regulator every 6 months. Among other things, this report must include detailed information as to:‚Äč
    • accrued leave entitlements;
    • details of any accommodation provided to workers;
    • details of any fees required to be paid by the workers to the licensee;
    • the number of notifiable incidents under work health and safety laws; and
    • whether any applications for workers' compensation have been received.

If you or your business is impacted by the new labour hire regimes, whether as a supplier or user of labour hire services, please do not hesitate to contact us for specialist advice or assistance.

This alert is not intended to constitute, and should not be treated as, legal advice.