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CLAUSE NOTES
Workers Rehabilitation and Compensation
Amendment Bill 2012
Clause 1: Short Title
This clause provides that the short title of the amending
legislation is the Workers Rehabilitation and Compensation
Amendment Act 2012.
Clause 2: Commencement
Under this clause, the amendments are to commence on a date
to be proclaimed. The intention is that they will commence on
1 July 2013. This will give insurers and self-insurers sufficient
time to prepare for the changes.
Clause 3: Principal Act
This clause provides that the Principal Act referred to in the
Bill is the Workers Rehabilitation and Compensation Act 1988.
The Bill is making amendments to that Act.
Clause 4: Section 4 amended (Application of Act)
This clause amends section 4 of the Act by removing
subsection (5)(c).
Section 4 sets out the application or scope of the Act. It
specifies when the Act applies and who it applies to. In
subsection (5), there are a number of categories of persons
who are specifically excluded from the application of the Act
(i.e., the Act does not apply to them). One of those categories
is domestic servants who are excluded from coverage in
circumstances where they are working for a private family and
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have not completed 48 hours' employment with the same
employer at the time of injury.
Under this proposed amendment, section 4(5)(c) is to be
removed. The reason for doing this is that the provision is
out-dated (it was carried over from the 1927 Workers
Compensation Act) and would have limited application in the
present day. The Bill includes a new provision to better
address the coverage of persons who carry out work for or a
private or domestic nature, e.g. house cleaning, gardening (refer
to clause 5 below).
Clause 5: Section 4AA inserted (Services of a
private or domestic nature)
This clause inserts a new provision into the Act section 4AA.
This new provision clarifies coverage under the Act in relation
to persons who carry out work that is of a domestic or private
nature. It is intended to cover the situation where a
householder engages someone to carry out short periods of
work relating to their home or family such as basic house
cleaning, gardening or baby-sitting. These types of
arrangements were never intended to be covered by the Act.
Whilst it has never been tested, it is arguable that such
arrangements are currently excluded by section 4B. Section 4B
specifically deems out contractors where the value of the
contract is less than $100. However, section 4B is to be
amended under this Bill as there has been considerable
uncertainty about how it applies. Under the proposed
amendment it has been substantially redrafted to clarify
coverage of labour hire workers and contractors who are
engaged wholly or principally for labour (see clause note for
clause 6 below).
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The proposed amendments in relation to section 4B would
potentially extend coverage under the Act to persons
(contractors) engaged to carry out domestic services. This
would mean that householders who engage them would be
obliged by the Act to take out workers compensation
insurance.
To prevent this situation, the proposed new section 4AB
makes it clear that a person is not a worker for the purposes
of the Act if he or she provides services that are of a domestic
or personal nature for another person at a residence occupied
by that person for less than 8 hours in any week. "Services of a
domestic or personal nature" is defined to include:
cleaning;
cooking;
gardening;
providing care, supervision or education to a child (e.g.,
baby sitter, music teacher, tutor);
assisting in the maintenance, care or enhancement of a
person's body; and
providing companionship.
It should be noted that this exclusion only applies to
contractors who would otherwise be deemed to be workers
under the proposed new sections 4B and 4BA. Workers who
are employed under a contract of service to provide domestic
or personal services will still be covered by the Act, e.g. carers
who are employed by an incapacitated person to help with
showering and dressing etc, nannies.
Clause 6: Section 4B substituted
This clause removes the existing section 4B and replaces it with
two new provisions a new section 4B and section 4BA.
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The existing section 4B deems contractors, who meet certain
criteria, to be workers for the purposes of the Act. The
criteria are:
the work to be carried out must exceed $100 in value;
the work must not be incidental to a trade or business
regularly carried on by the contractor in the contractor's
own name or under a business or firm name; and
the contractor must not sublet the contract or employ
any worker.
Section 4B provides an exception where the contractor takes
out his or her own personal accident insurance. In such a case,
the contractor is not taken to be a worker, and hence does not
come under the Act, for the period of the insurance cover.
Section 4B was introduced into the Act by amendments which
commenced in 2001. It was intended to clarify which
contractors are workers for the purposes of the Act.
Unfortunately, there has been some confusion about the
operation of section 4B. In addition, there has, in recent years,
been an increase in the use of contracting arrangements as an
alternative to direct employment. These factors have led to
uncertainty about coverage under the Act.
The proposed new provisions are aimed at clarifying the law
and providing greater certainty.
Proposed new section 4B Employment-like
relationships
Under the proposed amendments, the existing section 4B is to
be removed and replaced with a new provision.
The proposed new section 4B deems a contractor to be a
worker where there is an obligation on the person engaging
the contractor to make superannuation contributions in
respect of that contractor (subsection (1)).
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This is aimed at providing consistency with requirements under
superannuation legislation. If there is an obligation to make
superannuation contributions in respect of a person engaged to
do work, then there will also be an obligation to take out
workers compensation cover for that person.
It should be noted that the emphasis is on having a legal
obligation to pay superannuation rather than the actual payment
of superannuation contributions. The fact that a person isn't
paying superannuation contributions does not necessarily mean
that they don't have a legal obligation to pay them.
It is hoped that consistency with superannuation obligations
will make it easier for employers to comply with the legislation
rather than having different tests for different types of
employment obligations. It will also make it clear that a
worker for the purposes of the superannuation legislation is a
worker for the purposes of the workers compensation
legislation.
The new provision also (subsection (2)) deems a contractor to
be a worker where the contractor:
is wholly or principally remunerated for his or her
personal labour or skills;
is not engaged to achieve a specific result; and
must personally perform the work and cannot delegate it
to another person.
This is intended to capture contractors where the relationship
is very similar to an employee/employer relationship despite
the fact that there is a contract for services rather than a
contract of service.
All three factors must be present for a contractor to be
deemed to be a worker under this provision. For example, if a
contractor is wholly or principally remunerated for his
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personal labour or skills and cannot delegate the work, but is
engaged to achieve a specific result, then he will not be a
worker for the purposes of the Act.
Another important point to note is that it is the nature of the
relationship itself that is crucial for determining whether these
criteria are met rather than just the terms of the contract.
This is the way in which courts have viewed these types of
matters in the past in determining whether there is an
employer/employee relationship.
As with subsection (1), there is a connection with
superannuation. The Superannuation Guarantee (Administration)
Act 1992 (Cth) (section 12) extends the definition of employee
to a person who works under a contract that is wholly or
principally for the labour of the person. The Australian
Taxation Office has interpreted the term "contract that is
wholly or principally for the labour of the person" by reference
to the three factors listed above (Superannuation Guarantee
Ruling 2005/1). These three factors were derived from the
relevant case law in Australia.
SGR 2005/1 provides an explanation of each of the three
criteria as follows:
(1) Wholly or principally remunerated for labour
Labour includes mental and artistic work as well as physical
labour. "Wholly or principally for labour" means that where a
contract is partly for labour and partly for something else (such
as goods, materials, equipment hire etc), the contract will only
meet this criteria if it is principally for labour. SGR 2005/1
construes "principally" as meaning chiefly or mainly.
(2) Not engaged to achieve a specific result
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SGR 2005/1 refers to the concept of being engaged to achieve
a specific result as meaning that the contractor is free to use
their own means (by third party labour, plant and equipment
etc) to achieve the contractual outcome. Payment is often a
specified contract price payable on satisfactory completion of
the services, as opposed to payment by an hourly rate.
However, the contract price could also be payment by
reference to the volume of something delivered or the
contract price could be based on an estimate of the time and
labour cost that is necessary to complete the task.
(3) Must personally perform the work
SGR 2005/1 suggests that the power to delegate or
subcontract is a significant factor in determining whether
someone is an employee or independent contractor. It is an
indication that the person is a worker if they are contractually
required to personally perform the work. If the person has
unlimited power to delegate the work to others, with or
without the approval of the other party to the original
contract, then this is a strong indication that the person is an
independent contractor. The power of delegation referred to
is not just a case of a worker arranging to swap shifts or
delegating some tasks to another worker. In the case of an
independent contractor delegating work, the contractor will be
responsible for paying the party the work has been delegated
to.
Subsection (3) of the proposed new section 4B makes it clear
that the fact a contractor has an Australian Business Number
(ABN) is not determinative of whether or not they are a
worker.
Subsection (4) prevents section 4(5)(a) from applying to
contractors who fall within the scope of section 4B. Section
4(5)(a) is an existing provision which excludes casual workers
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employed otherwise than for the purposes of the employer's
trade or business.
Proposed new section 4BA Contractors under labour
hire arrangements
The proposed new section 4BA is aimed at providing greater
clarity about the application of the Act in relation to labour
hire arrangements.
In recent years, there has been an increase in the use of labour
hire arrangements in lieu of traditional employer/employee
relationships. Under these types of arrangements, a person
(the contractor) is engaged by a labour hire agency to provide
services for the benefit of a third party or parties. Although
the contractor is performing work for the third party (host
employer), there is no direct contractual relationship between
the contractor and the host employer. The host employer has
entered into a contract with and pays the labour hire agency
for the services. The labour hire agency pays the contractor
for their labour.
These types of arrangements have led to difficulties where
contractors have been injured and sought workers
compensation. There have been cases where despite the actual
nature of the contractor's day to day work being no different
to that of a person employed under a contract of service
(employer/employee relationship), the contractor has missed
out on workers compensation because it was determined that
the contractor was not employed by either the labour hire
agency or the host employer.
The new provision is intended to resolve this issue. It
specifically deems a contractor engaged under a labour hire
arrangement to be a worker employed by the labour hire
agency if the following criteria apply:
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the contractor has been engaged under a contract for
services by the labour hire agency;
under the contract, the contractor is to perform work
for a someone other than the labour hire agency (a third
party);
there is no contract to perform the work between the
contractor and the third party; and
the contractor does all or part of the work personally.
Where the labour hire agency is a corporation and the
contractor is an officer of that corporation (in accordance with
the definition in section 9 of the Corporations Act 2001 (Cth)),
then the provision will not apply. It should be noted that the
contractor who is an officer of the corporation may still be a
worker for the purposes of the Act under other provisions.
Subsection (2) of the proposed new section 4BA makes it clear
that the fact a contractor has an Australian Business Number
(ABN) is not determinative of whether or not they are a
worker.
Subsection (3) prevents section 4(5)(a) from applying to
contractors who fall within the scope of section 4BA. Section
4(5)(a) is an existing provision which excludes casual workers
employed otherwise than for the purposes of the employer's
trade or business.
Clause 7: Repeal
This is a standard repeal provision to remove the empty shell
of the Bill after all its provisions have been transferred and have
come into effect in the Principal Act.
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