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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

What the CFMEU wants....

Tuesday, March 29, 2011

Radical construction union the CFMEU is close to achieving a level of power in Australian politics that will put them at the centre of national public policy. And their list of demands, which many equate to a wrecking ball for the Australian economy, are sure to shock.

The CFMEU, along with their buddies the Electrical Trades Union and Australian Manufacturing Workers Union, are at the heart of Labor's hard left. They are incredibly smart, strategic, rich, sophisticated and politically patient. But during the great reformist days of the ALP under Bob Hawke and Paul Keating, this faction was kept under control by an even stronger Labor right.

However, over the past decade this CFMEU/ETU/AMWU force swamped NSW Labor, helping explain much of the political self-destruction of a once-mighty Labor machine. Now they are in the process of doing the same in Canberra.

For some time these three unions have also been major financiers of the Greens, who gain control of the Senate come July. On key issues, these leftist unions effectively control Green policies giving them a long-term political ace card against their old enemies, the Labor right. They will cross-leverage their power against the Gillard government from within Labor, and by positioning themselves as power supremos at Greens HQ.

The unions' latest high profile campaign against independent contractors offers a glimpse of what they'll be wanting. Last week Robert Gottliebsen described how the Gillard government's carefully orchestrated campaign to decimate independent contractors is the great home-grown threat to the Australian economy (A home-grown threat to house prices, March 24).

The campaign is allegedly against 'sham contracting', a form of fraud that involves employers inducing or forcing employees into an alleged independent contractor arrangement when they are really employees. But the detail of the union agenda reveals what some fear is a determination to eliminate independent contractors altogether. It seems the unions' new power-play is well underway.

There are two million self-employed people in Australia. Around half of those are also small business employers, and the remaining 1 million do not employee others. I am one of those---we are businesses of one. This is the group, described as 'independent contractors', that the CFMEU could wipe from the workforce.

The destructive technique is revealed in the CFMEU's recent 284-page 'report', Race to the bottom, which has two primary prongs backed by additional action.

The first attack involves redefining a sham contract under the Fair Work Act. The current law holds that an employer must have an intent to deceive for the misrepresentation to be a sham. The CFMEU want to remove 'intent'. That is, the employer would be held guilty of a sham even if it is through mistake or misunderstanding. Effectively, the CFMEU wants to create presumption of guilt.

This would be a repeat of the scandal-ridden work safety laws in NSW, as criticised in Business Spectator, which were eventually declared unconstitutional by the High Court. But the then state Labor government, seemingly under instruction from the CFMEU, refused to fix the problem.

The CFMEU's federal 'sham contract' agenda, if it is allowed to gain traction, would have outcomes like those in NSW. It will add fear to commercial dealings where self-employed people and their clients won't know whether their honest dealings will be subject to the indiscriminate wrath of a government enforcer.

The second attack involves the destruction of a self-employed person's right to equitable business tax treatment. This is a return of the Labor government's agenda on the Personal Services Income tax laws that Assistant Treasurer Bill Shorten had said would not proceed. This assurance, never supported by an official confirmation, looks like it could have been spin.

The CFMEU plan to implement the flawed PSI recommendations of the Board of Taxation, as explained by Robert Gottliebsen. They want businesses to report every transaction they have with a self-employed person and impose additional tax withholding obligations on those transactions. For the technically aware, they want to remove the results test (which looks at a range of criteria to determine whether someone is self-employed), to impose the 80/20 rule as the key test (that is, where contractors are deemed employees if they earn more than 80 per cent of their income from one client). So even if an independent contractor has more than one client, they could still be denied business tax treatment.

The CFMEU goes further still. They want to ban the subletting of contract work and effectively shut down contractor and employee labour hire. They want Fair Work Australia to enforce the superannuation guarantee levy, rather than the tax office, which oversees it now. They want head contractors to be held responsible for instances sham contracting, even if the head contractor has no idea it occurred.

These CFMEU 'wants' won't be ambit claims after July. And the implications will be far reaching.

Independent contractors are often though to be blue collar 'tradies', or younger workers. This is false. Tradies are an important block, but the overwhelming number of contractors operate in the professional and high-skilled areas, and are over the age of 35, as a recent study shows. Think IT, medicine, finance, engineering, architecture, management and design. It's this wave of mature, experienced, entrepreneurial professionals, who provide key specialist skills in the economy, that the CFMEU and government want to cut off.

In the CFMEU/Gillard government world, a business of one is seemingly a sham in itself. To them, the only acceptable work arrangement is where one party is an employer and the other is an employee controlled by industrial relations regulators. And they appear to be hell bent on crushing any competition to their social and economic construct of the world.

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