No protection for contractors

The Howard Government is in a quandary over its election promises to “protect” the independent contractors in the Australian workforce. Over recent years there has been no shortage of rhetoric about the need to boost the trend towards contracting. But beyond a general notion that independent contracting is to be encouraged and unions kept out at all costs, the Government has really struggled even to articulate what it has in mind for a group whose interests they claim to champion.

Apparently, translating the rhetoric of freedom to contract into tangible results has proved even more difficult. Legislation was promised months before the last election and a parliamentary inquiry on the topic reported in August last year, but still the best the Government can do is say that contractors will see the final shape of this so-called protection “as soon as possible”.

The Government has not shown much reluctance about moving other policy settings into place to encourage independent contracting. For example the tax system certainly has its advantages for those who can perform their work as contractors (allowable deductions and income splitting) as opposed to the bracket creep-bound PAYG taxpayer. And now, with the introduction of WorkChoices, employee taxpayers can watch their industrial work rights diminish in direct proportion to the PAYG tax-base. Under this Government structural disadvantage for ordinary wage earners is almost total.

So what sort of deal can independent contractors expect from the Federal Government? Will the new form of regulation be anything other than the old formula of pure cut-throat competition? Probably not.

First, it seems that rather than improving on the rights and remedies that contractors already have, the Government will actually cut them back. The obvious example is the unfair contracts remedies available to contractors under state law. These laws have given easy access to the industrial courts for small contractors to quickly pursue their grievances against bigger contractors. They have provided remedies against harsh or unfair contracts and often proved a valuable tool for independent contractors.

Given the Government made two unsuccessful attempts to repeal the much weaker and lesser-used federal provisions (in 1996 and 1999), it is almost certain that smaller contractors will now lose these remedies. The same might also be said for other state laws such as workers’ compensation, anti-discrimination and occupational health and safety, which, rather than act as a burden on small independent contractors, actually work to their benefit (to give the small guy some rights against the bigger companies).

The Government is also promoting its changes for contractors with the slogan that commercial contractual arrangements are best regulated by commercial law not employment law. In other words forcing the small sub-contractors into the strict black letter law system where legal costs become astronomical - this is the exact turf the big corporations like to fight the small guys on.

The real net benefits to small contractors will turn out to be very limited indeed. In addition recent amendments to the Trade Practices Act allow contractors limited collective bargaining rights, but explicitly deny them the choice of conducting their bargaining through a trade union. The Housing Industry Association immediately hailed the decision to exclude unions as a victory for small contractors, even though in that respect the new law limited the rights and choices of the very people whose interests the HIA purports to advance. Contractors pinning their hopes on the HIA organising them into an effective bargaining outfit will have a long wait ahead of them.

Striking the right conservative balance has also proved difficult for other reasons. Some in the Government’s ranks, like Treasury, will recognise the tax revenue implications of driving workers onto a system of individual contracting. But almost without exception they have had to give way to their colleagues pushing the industrial relations contractor imperative.

The contractors issue also exposes the tension between the hardliners who go so far as to argue that inequality of bargaining power (for contractors and employees alike) is a non-issue, and those with the survival instinct who recognise the political damage that can be inflicted on a Government that locks in structural disadvantage for the little guys.

But behind this issue are the real politics and the reason why yet again, the Government’s words, and their meaning, have parted company. On the one hand the Government wants to be seen to be catering to the small independent contractor constituency that they like to claim as their own - those “Howard battlers” who work one-out or the small family operated businesses that dutifully complete their Business Activity Statement on the kitchen table. On the other, the Government knows it cannot give small contractors so much “protection” that it affects and upsets their real constituency, the large companies with whom the small contractors do business.

No-one should be surprised if at the end of the day the small-time independent operators are the ones who lose out.