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ICA Submission to Victorian OH&S Inquiry

28 November 2003

Independent Contractors of Australia (ICA) is an association formed to protect the rights of independent contractors. Independent contractors are small business people. We operate through our Website at www.contractworld.com.au.

With the dramatic changes in the nature of work and workforce engagement systems over the last 20 years or more, it is important that government regulatory regimes understand and respond to the new environments in positive and constructive ways. ICA was formed to assist that understanding.

Amongst our activities, ICA has made submissions to:
  • The Personal Services Income tax legislation reviews (and is currently involved in further reviews with the ATO and government);
  • The Cole Commission Inquiry into the construction industry;
  • The Dawson Review of the Trade Practices Act;
  • The South Australian Review of Workers Compensation; and
  • The Senate Inquiry into Insolvency laws.

  • In addition, in June 2003, ICA was appointed an observer to, and attended, the International Labour Organisation debate on the 'Scope of Employment'.

    ICA welcomes the opportunity to contribute to the Victorian Review into Occupational Health and Safety, particularly within the context of the current national review being conducted by the Productivity Commission. ICA is, however, concerned that the Victorian Review is operating with excessively short timeframes, limiting the capacity for quality consideration and input on highly important and far-reaching issues.

    Note: Reference is made in this submission to:

    (1) The Productivity Commission 'Interim Report National Workers' Compensation and Occupational Health and Safety Frameworks', October 2003.

    (2) International Labour Organisation, Provisional Record Ninety First Session. Geneva 2003. 'The Scope of the Employment Relationship. Report of the Committee on the Employment Relationship'.

    A. Are the principles of OHS being corrupted?

    A 1. OHS Principles
    The Productivity Commission describes the principles of OHS regulation used by all jurisdictions as those espoused by the Robens Committee in the United Kingdom in 1972:
    This involves a general duty of care imposed on those having control over aspects of the workplace, backed by detailed regulations and codes of practice. (p xxv)
    ... involves a principal OHS Act that codifies the duties of care that are owed under common law. ... The duty is imposed on employers, the self employed, owners, occupiers of premises and suppliers. The duty is owed to both employees and others (workers other than employees, customers and visitors) who may be affected by the worksite, activity or equipment. Workers have obligations not to put others at risk and to obey the reasonable instructions of their employer in relations to OHS. (P40)

    ICA supports this principle, re-expressed in simple lay language as: 'any human who has control of a worksite must ensure that all humans on the worksite are safe.'

    ICA believes, however, that this core principle is subject to corruption by the language, concepts, practices and legalities of 'employment'. This tendency to corruption of the Robens principles because of 'employment' comes through in the Victorian Review's discussion paper and is the focus of ICA's submission.

    A 2. OHS principles interfacing with 'employment language'
    Employment is a legal and managerial state which in many respects presupposes that an employee is a person who is less than an adult . That is, that in exchange for payment, an adult enters a work environment where they agree to surrender significant levels of control over their own actions to the managerial group (delegates of the employer) within the firm. The legal idea of employment holds that the employer has the 'right to control' the employee.

    Around the period when the Robens principles were established, employment had near total dominance of the work engagement arrangements used inside firms. Further, full-time, permanent and loyalty and career-based employment applied heavily. It was only natural that legislative draftspeople crafted OHS legislation and regulation using 'employment' language. Hence, OHS legislation almost universally identifies the 'controllers' of worksites by describing them as 'employers' and describing the persons to whom 'employers' owe a 'duty of care' as 'employees'. To embrace others who are not employees, legislation generally attempts to describe contractors and others under 'employment deeming' type language.

    This structuring of OHS legislation around employment language has created two flaws potentially limiting the full implementation of the Robens principles:

    (1) The 'employment deeming' approach creates potential confusion about the duty of careÑits range and to whom it is owed. (ie) That particular types of persons may be overlooked in legislation. The Victorian Review discussion paper's concern over the OHS status of volunteers demonstrates this possible limitation.

    (2)The identification of the 'employer' as being in control of a worksite creates possibilities that others, who are not employers but who exercise some form of control over a worksite, may escape their duty of care.

    In addressing the potential legislative and regulatory holes created by employment language and to cover the holes, legislation has tended to layer additional descriptions of classes of humans to cover all possibilities. (eg) describing contractors etc This approach, however, has tended to layer confusion upon confusion rather than creating simplicity and ease of comprehension. And the elements of legislative confusion are reflected in education and OHS administration and enforcement policies, procedures, practices and attitudes. It is probable that the confusion and lack of clarity could be a contributing factor to workplace injury. Certainly the lack of clarity would not assist good quality OHS practices.

    A 3. A changing society
    Further complicating historically structured legislation is the more recent shift away from employment and more particularly away from permanent and full-time employment. This change in the nature of work in society is well recognised and a core issue covered in both the Productivity Commission Interim Report and the Victorian Review discussion paper.

    Employment is on the decline. According to the ABS, in 2000, only 51per cent of the workforce were full-time, permanent employees. Twenty-eight per cent of the private-sector workforce were not employees. It would appear that this massive shift in the nature of work away from permanency, full-time engagement and employment is continuing. It represents a challenge to all those levels of government that regulate labour.

    OHS is challenged because the legislative and regulatory holes already in evidence as a result of the dependence on employment language are likely to be enlarged by social changes in the way in which work is organised.

    There are two possible responses to the changes:

    (1) Demonise the changes. Create legislation, regulation and enforcement practices that discriminate against the changes and try to push businesses and people into reverting to traditional (and OHS familiar) employment structures of full-time and permanent engagement. ICA believes that this approach will not improve OHS outcomes and runs a high risk of worsening OHS outcomes.

    (2) Seek to understand the changes. Work with the new forms of work engagement to ensure that any recrafting of legislation, regulations and OHS practices are aligned with the Robens principles. ICA supports this approach, believing that this offers the best opportunity to further improve OHS outcomes.

    With these views in mind, ICA has some concerns with aspects of the Victorian Review discussion paper.

    B ICA concerns with the Victorian Review discussion paper

    ICA has studied those sections of the discussion paper that seem to be relevant to independent contractors.

    The discussion paper has bundled independent contractors within the generic description of 'precarious' or 'contingent' employment. ICA is concerned about the emotive nature of the term 'precarious employment' and the assertion that worker injury is higher under 'precarious employment' than under full-time permanent employment.

    In this respect, the discussion paper runs the risk of giving the impression that the Review may have a pre-determined conclusion in relation to 'precarious employment' (and independent contractors). The section which looks at 'precarious employment' is not, however, consistent with most of the discussion paper, which instead seems to look at issues in a balanced way, and raises questions which do not appear to suggest settled conclusions.

    ICA's concerns relate to chapter 4 of the discussion paper 'Changing Work New Risks' (paragraphs 120 to 170 plus) with the following selection of quotations giving a flavour of the paper's approach.

    B.1 Quotations
    (a) 'all agree that the term 'precarious employment' is properly applied to
  • Self-employed subcontractors
  • Temporary and on-call workers
  • Labour hire or fixed-term contract workers' (par 129)

  • (b) '...85% of net employment growth is in precarious employment categories' (par 131)

    B.2 Comment: ICA believes that the terms 'precarious' and 'contingent' are demeaning and presuppose significant disadvantage for the 49 per cent of the workforce who are not in permanent, full-time employment. The lumping together of the three widely different forms of work engagement, each of which is legitimate, limits the capacity for understanding of what is occurring within each type.

    The most recent Conclusion of the International Labour Organisation on these definitional issues clearly states that self-employment (independent contractors) is not within the definition of employment (and hence by definition not appropriately classified as precarious employment). The ILO stated that 'Self-employment and independent work based on commercial and civil contractual arrangements are by definition beyond the scope of the employment relationship.'

    Further, it can be argued that all employment is 'precarious'. Full-time, permanent employment is only full-time and permanent while the business for which an employee works is financially viable. Business closure terminates permanency. ICA believes that the word 'precarious' is not helpful to understanding the changing nature of work engagement. There are deeper and more substantive social forces at play than can be labelled in this way.

    B.3 Quotations
    (c) 'The advantages of labour hire were seen to lie ... in providing access to a more compliant (because less secure) labour force...' (par 132) )

    (d) 'These changes have given rise to the phenomenon of 'job churning'' (par134)

    (e) 'Smaller businesses tend to have a poor knowledge of regulatory requirements....' (par 138)

    (f) 'Intense competition for contract-based work tends to result in 'lowest common denominator' OH&S outcomes .... and high levels of under-reporting of occupational injuries' (par 140)

    The accusations against labour hire are that:
  • 'workers appear to sustain more serious injuries or are less willing to lodge minor claims' (par 146)
  • 'are unlikely to speak out against breaches of OHS law' (par 147)
  • 'have limited access to training and few opportunities for skills development' (par 148)
  • 'may be ostracised by permanent staff' (par 150)

  • (k) 'Employment contracts now focus upon the performance of tasks rather than provision of time service.' (par 160)

    (l) 'Drivers are operating in an environment in which breaches of safety and other standards actually facilitate economic advantage' (par 168)

    B.4 Comment: ICA believes that these quotations (along with others), seem to be designed to create 'proof' that 'precarious employment' is all bad and that the 49 per cent of the workforce who are either non-permanent or non-full-time are at greater risk of injury than the permanent, full-time, employed workforce. ICA takes issue with each of the statements, which can be discussed with the Review if required.

    B.5 Quotation
    (m) 'It seems that the trend toward precarious employment has resulted in a worsening of OH&S outcomes. Of 159 studies included in a recent review of the academic literature, 88.6% found a clear adverse association between precarious employment and adverse OHS outcomes.' (par 140)

    B.6 Comment: ICA has difficulty accepting this statement in relation to independent contractors (self employed) but does not have the advantage of access to the research or time to consider the research. However, the following points may be relevant:

    (1) 'Precarious' as a sweeping definition brings in many different forms of work which have substantially different legalities, and managerial and individual behaviours. Accusing 'precarious employment' of increasing OHS risk misses the point that within the lumped definition there may be areas of high OHS risk and other areas where much improved OHS outcomes occur. For example, ICA believes that due to the difference between employment and independent contracting, independent contractors have a higher responsibility at law and in managerial terms to adhere to OHS and, as a consequences of these higher responsibilities, may produce better OHS outcomes than employees.

    (2) Questions also exist as to the nature of the occupations and work types undertaken under the subsets of 'precarious'. It may be that it is the occupation types, rather than the legal status, that leads to the OHS issues.

    (3) Further, if there is evidence of the discrimination by FT employees towards 'precarious' workers (ie, people being ostracised), it is possible that it is the discrimination itself which increases OHS risk rather than the status of 'precariousness'.

    Before ICA would accept academic assertions of increased OHS risk amongst independent contractors, ICA would need evidence of the methodology, evidence of dissection of the 'precarious' types into their subsets and evidence of studies of the different subsets. The research in relation to independent contractors needs to be resolved before public policy proceeds on an assumption of increased risk.

    B.7 Quotations:
    (n) 'Others believe that the changes in industrial relations legislation have left workers exposed to occupational risks....' (par 123)

    (o)'Union visibility in Victorian workplaces has declined' (par 125)

    B.8 Comment: ICA is concerned that these comments fit closely with the line of argument put by the Victorian Trades Hall Council (THC) in their submission to the Review. THC argues that 'the review needs to address the inequalities in the current system which allows for too many workers to be without representation, through changes in the labour market and employment relationships'. Further, THC argues for enhanced union power in relation to OHS and the extension of union officials' 'authority to be able to prosecute'.

    ICA rejects the suggestion that, in the new work environments, work safety is dependent or contingent on industrial relations systems. In fact, there are aspects of the new work environments, in particular with independent contractors, where control and responsibility are closely linked and may enhance work safety. The Review could examine the positive possibilities for OHS which might flow from new work engagement systems.

    B.9 General Comment on Chapter 4. ICA is concerned that Chapter 4 of the Review discussion paper could reflect a view which considers that:
  • The only work environments where effective OHS regulation and processes can be created are environments where firms are constructed around the traditional command-and-control 'pyramid' using full-time and permanent employees.
  • OHS regulation must superimpose heavy-handed regulation on management because management cannot be trusted to manage effectively and safely.
  • Industrial relations systems are a key element in OHS regulation.
  • Unions must be given powers of the state to act as OHS police.

  • B. 10 Countervailing evidence. Work-related deaths as an indicator
    On one major OHS measureÑwork-related deathsÑthere is evidence of improving outcomes. In the ten years between 1992 and 2001, the number of Victorian work-related deaths dropped from 46 to 29 per year. [Source: Victorian WorkCover Authority] The objective must be zero deaths per year, but the improving trend must be recognised and encouraged.

    It must also be recognised that the drop in the number of deaths happened in a period when
  • Victoria eliminated its industrial relations system.
  • Victorian union membership continued to collapse.
  • Big rises occurred in 'precarious' employment.
  • Business structures moved away from command and control.
  • Independent contracting grew significantly.

  • Further, in the ten-year period:
  • 47.6 per cent of deaths occurred in construction, manufacturing and public and community sectors; sectors which are dominated by command-and-control structures, union presence and strong industrial relations processes.
  • 33.9 per cent of deaths occurred in the agriculture sector, which has always been an area of high levels of self-employment.
  • 18.5 per cent of deaths occurred in transport (including road accident deaths) and the category described as 'other'. These are areas where independent contracting has grown significantly.

  • ICA does not claim that there is a causal link between the decline in work-related deaths on the one hand and the decline in unions and the elimination of the Victorian industrial relations system on the other. But ICA does claim that it is illegitimate to argue proof of a causal link between the rise of 'precarious employment' and work-related injuries/deaths based entirely on the legal status of the workers.

    C. Moving Forward. Constructive approaches to achieving quality OHS outcomes with new work engagement arrangements

    ICA supports the following quote from the Productivity Commission (p50):

    The National Research Centre for Occupational Health and Safety Regulation noted that there is the need of OHS regulators to pay greater attention to work relations outside the traditional employment relationship ... regulators need to develop standards, guidance material, inspection programs and enforcement strategies that accommodate subcontracting, labour hire, home based work and franchise arrangements.

    ICA agrees that accommodating the new arrangements is the process most likely to improve OHS outcomes. The starting points are

    (1) Not to demonise forms of work that are not traditional and to accept changes in work engagement arrangements.

    (2) Ensure terminology in OHS legislation and regulation is not employment-dependent, but written in language aligned to OHS principles, namely, to keep humans safe.

    (3) Ensure that all parties who are in work situations or influencing work situations including government, unions, committees and others have liability and responsibility apportioned to their behaviours.

    Within this framework ICA recommends that the following approach should be closely considered.
    One possible solution to avoid the complexity of 'deeming' and any associated issues is to abolish the concept of imposing an obligation on an 'employer' and substitute instead the notion of placing an obligation on all 'persons' to ensure the health and safety of the person's workers [more broadly defined] in the conduct of the person's undertaking. (Queensland Department of Industrial Relations. P 52 Productivity Commission)

    A reasonable question arising from all the foregoing is perhaps why each category of person (employee, contractor, employee of contractor etc) needs to be referred to at all when it is intended that all those in the workplace be protected. By specifying each category of person it leaves open the possibility for the creation of other (work) arrangements, which could be entered into in order to avoid the obligation. It seems the most effective course is to protect everyone and provide them with duties to protect themselves and others at the workplace. In that regard the employer might be specified as the co-ordinating agency or principle. (Laing p 52 Productivity Commission)

    C 1. PAYG tax as a new conceptual approach
    OHS regulators are not alone in needing to deal with new work environments. The successful approach used by the Australian Taxation Office (ATO) to modernise the income-tax withholding system may assist the Victorian OHS Review in considering more inclusive legislative and regulatory language.

    After World War 2 until 2000, the income-tax withholding system relied on the existence of employment. The Tax Commissioner's PAYE legislative power with respect to withholding imposed obligations on 'employers' to withhold income tax from 'employees' and remit the tax to the ATO. As employment declined from the 1980s onwards, the withholding system came under stress. During the 1990s the Tax Commissioner attempted to maintain the PAYE system by arguing that the legislative definition of 'employee' extended beyond that determined at common law. The High Court, however, rejected the Tax Commissioner's attempts to extend the definition not once, but ten times in ten years. PPS was created in an attempt to close revenue leakage, but it too was unsatisfactory.

    The tax reforms of 2000, however, took a different approach. Instead of demonising and working against the trend away from employment, the tax system was redesigned to embrace the new forms of work. Instead of trying to bend and contort new work forms into the old employment box, the new system of PAYG legislatively and administratively now takes in the new work forms by imposing withholding obligations in three ways:

    (1) Where traditional employment exists (full-time, part-time or casual) the obligations for withholding apply to the employer. Under employment labour hire where the labour hire business is the employer, the withholding obligations apply to the labour hire employer.

    (2) Where direct independent contracting exists, the obligation for withholding rests with the independent contractor when the independent contractor supplies an ABN to the client. Where no ABN is supplied, the client has withholding obligations.

    (3) Where independent contracting occurs through labour hire, the independent contractor does not require an ABN and withholding obligations apply to the labour hire company.

    The PAYG system has resolved the problems of legislative authority which the ATO faced without distorting new systems of work engagement. Importantly, the legislation uses employment-neutral terminology, relying on terms such as 'payer', 'payee' and 'entity.' It also uses plain English wherever possible, identifying obligations with the use of the personal pronoun 'you'.

    The withholding tax system has escaped the academic labour regulatory mindset that tries to use 'employment' as the catch-all approach to resolving all social and economic regulatory objectives in the work environment. The Australian PAYG system is a world first.

    C 2. International Labour Organisation Definition
    In 2003 the ILO came to a Conclusion on definitions of employment/non employment after struggling with the issue since 1996. The ILO Conclusion states:
    The term employee is a legal term which refers to a person who is party to a certain kind of legal relationship which is normally called an employment relationship. The term worker is a broader term that can be applied to any workers, regardless of whether or not she or he is an employee. Employer is used to refer to the natural or legal person for whom an employee performs work or provides services within an employment relationship..... Self-employment and independent work based on commercial and civil contractual arrangements are by definition beyond the scope of the employment relationship.

    This precision in definition by the ILO is helpful in indicating the limitations of employment-dependent language in OHS regulation.

    C 3 Resolving OHS definitional issues.
    ICA believes that the conceptual approach used under PAYG offers scope for OHS as does the precise language adopted by the ILO. ICA takes the view that to achieve good legislative and regulatory design, attempts to use 'employment' as the catch-all approach distort and confuse the specific objectives being targeted. Each regulatory environment should look to its specific and particular objectives and seek to embrace the new forms of work without prejudice for or against any one form, study each of the forms, and seek to align each form to the specific objectives.

    In this respect, the Review discussion paperÑfrom paragraphs 230 to 321(approx)Ñcontains relevant, helpful and balanced discussion and questions. ICA responds to some of the issues raised in those sections.

    One particularly valuable statement is that made by Professor Johnstone (in par 251) which is consistent with the approach used under PAYG:

    'What the OHS statutes need to do is to recognise expressly modern forms of capital organisation, and modern work relationships ....The OHS statutes, or more particularly regulations made under the statutes need to particularise more clearly the different organisational forms ... etc.
    If these suggested reforms are introduced, the general duties can then remain, as a 'catch all' to ensure that new forms of work organisation will be covered as and when they emerge'

    Importantly, Professor Johnstone identifies that the 'general duties' (ie) OHS objectives for safe worksites, constitute the 'catch all' as opposed to the current legislative approach where 'employment' is used as the 'catch all' phrase

  • Under PAYG, the general duty is the withholding obligation.
  • Under OHS, presumably, the general duty is the prevention of workplace injury.

  • Within this framework, the discussion at paragraph 242 in relation to employment 'deeming' and duties under ss21(1), (2) etc of the Act replicates the problems faced by the ATO under PAYE. The 'deeming' of independent contractors to be employees for the purposes of the Act is language that creates confusion in relation to responsibilities and liabilities when applied 'on the ground.' Legislative confusion adds to the potential for workplace injury.

    D. ICA recommendation

    That the Review investigate the use of legislative language that aligns the obligations and responsibilities of all parties in a work environment to the Robens principles. ICA believes that this can be achieved.


    After the Maxwell Report was published in March 2004, ICA made a further response in June 2004. Click here for details.

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