This note analyses laws which license labour hire services and sanction those who fail to obtain licenses, or contract for labour hire services with parties who do not hold such a licence. While employment remains the primary means of regulating work, a significant percentage of the workforce are retained as bailees, homeworkers, independent contractors and on-hire workers.
Workers who are not in standard employment relationships are often regarded by organized labor and the International Labour Organization as precarious and more vulnerable to exploitation. How law, organized labor and the State should respond to non-standard work is almost always divisive and often comes as a wave following a high-profile event. Following some significant high-profile abuse cases involving labour hire workers, Australian parliamentary inquiries were launched and have confirmed that worker exploitation is occurring in this industry. Their findings, while not surprising, provided the political impetus for regulatory intervention. While the Australian labour hire licensing reforms will be of interest for Australian and comparative lawyers, the exterritorial operation of these laws will have impact on businesses based beyond Australia’s shores.
The emergence of labour hire licensing laws
Similar to the United States, Australia is a federation with Federal and State legislatures with constitutional power to pass laws over the regulation of work relationships. The Federal Australian Government is currently governed by the Liberal–National Coalition, which is a right of centre political party. The Liberal–National Coalition strongly opposes the passage of any labour hire licensing schemes. For example, the Shadow Industrial Relations Minister in South Australia strongly opposed the passage of South Australia’s Labour Hire Licensing Bill 2017 (SA) and explained that his side of politics remained ‘implacably opposed’ to such measures.
The States of Queensland, South Australia and Victoria are governed by the pro-worker Australian Labor Party. On 17 September 2017 Queensland was the first jurisdiction in Australia to enact labour hire licensing and similar legislation gained royal assent on 12 December 2017 in South Australia. While the Labour Hire Licensing Act 2017 (SA) has obtained royal assent, and the Labour Hire Licensing Regulations 2018 (SA) have been posited, the South Australian regime is not yet fully operational. The registration forms have been available from 1 March 2018, however the labour hire licensing regime will not be enforced and fully operational until 1 February 2019.
In contrast to South Australia, Queensland’s Labour Hire Licensing Act 2017 (Qld), and the Labour Hire Licensing Regulations 2018 (Qld), commenced operation on 16 April 2018 and enforcement will commence 60 days later. In February 2018 the Victorian lower house of Parliament passed the Labour Hire Licensing Bill 2017 (Vic) and on 19 June 2018 the bill passed the upper house with minor amendments. The Labour Hire Bill 2017 (Vic) will now go back to the lower house. As Queensland’s labour hire licencing regime is the only scheme fully in force at the time of writing, this note will focus on the laws in that jurisdiction.
Territorial and exterritorial application: who provides labour hire services?
Queensland’s labour licensing regime has territorial and exterritorial application to the extent permitted by law. The way in which the Queensland labour hire licensing scheme is structured will capture a number of businesses outside Queensland and beyond Australian shores. The requirement to have a license in Queensland arises whenever labour hire services are provided in Queensland.
Labour hire services are provided for when a worker performs work for a person. Section 7 of the Act explains that this requirement for work includes an agency that provides fruit pickers to farmers, a group hire operation that provides apprentices to employers, or an employment agency which on-hires temporary administration staff to a business.
There is no requirement for the business that provides work to be based in Queensland. Indeed, section 7(2) expands the notion of who provides services to include all workers, whether or not they are employees, and where the worker is supplied ‘directly or indirectly through 1 or more agents or intermediaries’. Not only does section 7 regulate a move away from using the employment relationship as the trigger for regulation, it also lifts the corporate veil on worker supply chains.
Labour hire licensing laws impacting on the gig workforce
The Labour Hire Licensing Act 2017 (Qld) defines a ‘worker’ by reference to the performance of work, rather than by reference to an employment relationship. Accordingly, whenever a person enters into an ‘arrangement’, where the provider will pay the individual ‘in whole or part, for’ work performed for a third party, then that individual is a worker of the provider. This definition importantly does not require there to be privity of contract between the provider and the individual, nor that the individual be exclusively remunerated by the provider. Section 8 anticipates regulations excluding classes of workers. The Labour Hire Regulations 2018 (Qld) reg 4 explains that labour hire arrangements do not exist where a business provides a worker to another on a temporary basis, such as a lawyer on secondment with client, or a worker working for different parts of a single corporate group.
The labour hire licensing scheme regulates many in the gig workforce. There is considerable attention paid to whether or not gig workers are employees. In the case of Mr Michail Kaseris v Rasier Pacific V.O.F the Fair Work Commission held that an Uber driver was not an employee; note however this driver was unrepresented and this was a single commissioner. Illustrating the unsettled work status of gig workers, on 12 June 2018 the Federal Fair Work Ombudsman commenced prosecution against the gig platform Foodora, for sham contracting, when it represented gig workers as contractors and not employees. While gig workers may not be employees, they definitely are paid by the gig platform, which hires their services out to third parties. This makes businesses such as Airtasker subject to Queensland’s labour hire licensing laws. Indeed, many major Australian businesses are using gig workers precisely in the same way in which they previously used labour hire workers. For example, one of Australia’s largest retail chains, which uses Airtasker, has reached a memorandum of understanding with a national union about how workers’, including gig workers’, workplace rights will be protected.
Penalties for non-compliance
Australia has a robust approach to enforcing labour rights, including state and individual enforcement, large fines and even jail. The labour hire licensing scheme reflects this trend and provides a maximum penalty for those who fail to operate with a license, if they are an individual, to a fine of $130,439 and up to three years imprisonment, and if they are a corporation, to affine of $378,450. If a person ‘enters into an arrangement’ with a labour hire agency that does not hold a valid license (licensing can be checked on a government website), then the person is subject to the same sanctions as if they were operating without a license themselves. The use of the phrase ‘arrangement’ is important as this will capture circumstances where a person does not have privity of contract with the party providing the labour hire services. Considering one Australian dollar buys around $0.70 USD, these fines are large, and combined with the exterritorial application of the Queensland regime, creates considerable risk for many entities who would otherwise have left details of how work is arranged in Queensland to a local labour supplier.
When reading the Labour Hire Licensing Bill 2017 (Qld) for the first time the relevant minister argued that if you need a license to sell motor cars and real estate you should need a licence to sell human capital. Whether or not these laws are required, they will soon be operating in three of Australia’s six state jurisdictions and could very well spread. Labour hire agencies will need licenses in all jurisdictions that adopt these laws and those that contract with such entities will need to ensure valid licenses are held. Labour hire licensing will become a regulatory burden for some and a way of protecting workplace rights for others and provide an interesting experiment in how new and precarious forms of arranging renumerated work can be regulated.