The Bill does this by excluding the operation of:

• Unfair contract provisions currently contained in Queensland and New South Wales industrial relations laws, which relate to independent contractors;
• State or Territory laws which deem or treat independent contractors as employees for the purposes of a ‘workplace relations matter’. This would exclude the operation of section 275 of the Industrial Relations Act 1999 (Qld) which allows the QIRC to declare a class of persons performing work in an industry under a contract for services to be employees for the purposes of that Act;
• State or Territory laws that confer rights, entitlements, obligations and liabilities on a common law independent contractor or principal that are similar to those of employees or employers in an employment relationship. This would prevent State and Territory laws from being enacted which attempt to circumvent the exclusions provided under the Bill.

However, existing State and Territory outworker and owner-driver protections will not be overridden by the legislation.

There is also a three year transitional period for 'deemed' employees to arrange their affairs pending the disapplication of State laws to their relationship. Within that period, workers who are currently deemed by State laws would remain deemed unless they elect to become an independent contractor by agreement with their employer.

National Unfair Contracts System

The legislation seeks to remove unfair contract provisions from Federal and State workplace relations laws and establish a single, national contract review system (as far as constitutionally possible) enshrined in commercial law.

The new system will allow the Federal Magistrates Court or the Federal Court to order that eligible service contracts be wholly or partly set aside or varied on the ground that they are harsh or unfair. The aim is to place the parties as close as possible to the position they were in before the contract became unfair and/or harsh.

The new unfair contract provisions will not be available to an independent contractor that is a body corporate unless the work is performed wholly or mainly by:

• A director of the body corporate; or
• A family member of a director of the body corporate.

This would exclude large body corporates from accessing the unfair contracts jurisdiction. The legislation also allows for the regulations to provide for a financial cap to be imposed on unfair contract claims.

In determining whether a contract is unfair and/or harsh, the Court is able to consider the following matters:

• The relative strength of the bargaining positions of the parties to the contract, and if applicable, any persons acting on behalf of the parties;
• Whether a party was subjected to unfair tactics, undue influence or pressure;
• Whether the total remuneration under the contract was less than the total remuneration under a contact where an employee performs similar work; or
• Any other matter relevant to deciding whether the contract is unfair and/or harsh.

The unfair contracts system is to be a ‘no costs’ jurisdiction, except in relation to vexatious proceedings, to enhance the accessibility of the jurisdiction for those wishing to make applications.

Other remedies at common law and under the Trade Practices Act 1974 in relation to unfair contracts will not be excluded by the proposed provisions.

Sham Arrangements

Protections against sham contracting arrangements are to be provided by the Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006, which has also been passed by parliament. These protections will commence at essentially the same time as the Independent Contractors Act 2006. The legislation will, amongst other things, amend the Workplace Relations Act 1996 to introduce penalties for employers who seek to use such arrangements to avoid obligations to their employees.

Penalties will apply to the following types of prohibited conduct:

• Misrepresenting an employment relationship as an individual contracting arrangement;
• Making false statements to a worker to persuade or influence them to enter into a independent contractor arrangement to do substantially the same work; or
• Dismissing or threatening to dismiss a person with the sole or dominant purpose of re-engaging them as an independent contractor to do substantially the same work.

The Office of Workplace Services has jurisdiction to investigate and prosecute sham arrangements with offenders being exposed to penalties of up to $6,600 for individuals and $33,000 for corporations.

What Does this Mean for Your Business?

While the legislation supports and protects the freedom of parties to enter into independent contractor arrangements, businesses need to be mindful of potential exposure to:

• Unfair contracts claims under the proposed national contracts review system; and
• Prosecution for "sham" arrangements.

To minimise these risks, it is recommended that businesses:

• Carefully decide whether or not to engage a person as an employee or independent contractor. Obviously whether or not you engage a worker as an employee or a contractor will have different legal and taxation consequences;
• Have clearly written contracts in place which accurately reflect the relationship of the parties and the terms and conditions that are to govern the relationship; and
• Take care not to make any false or misleading statements or put any undue pressure upon existing employees to become an independent contractor.

Employers of deemed employees will have three years to consider the changes and to budget for paying out entitlements of previously deemed employees when they become 'undeemed'.

Click on the PDF link to download a full copy of this article.