Insights

Fwd: Thinking  25 Jul 2017 Where does "work" go from here? 

Implications of the July 2017 UK Review of Modern Working Practices for Australian employers

The PDF server is offline. Please try after sometime.

 

What you need to know 

On 11 July 2017, an independent consultant to the UK Government published a Review of employment practices in the UK and whether changes are needed to keep up with modern business models. 

Many aspects of the Review's recommendations for change closely parallel Australian employment law, or represent possible extensions of current Australian employment law, such as:

  • Creating a third category of workers, between employees and independent contractors, to be named "dependent contractors"
  • Giving labour hire workers a right to request a direct employment contract after 12 months with the same hirer (host)
  • Giving individuals the right to return to the same or similar job after a period of prolonged ill-health
  • Requiring larger employers to report publicly on their model of employment, use of agency services and the number of requests from agency workers for permanent positions
  • Taking steps to ensure the employment tribunal process is less weighted against the claimant and to improve the enforcement of awards against employers
  • Making statutory sick pay a basic employment right payable from commencement of employment; and
  • Providing a written statement of employment particulars on the first day of work to all employees and dependent contractors.

Many of these issues have already been raised in Australia and there is a real possibility of others being pursued through Commonwealth or State legislation or industrial tribunals.

What you need to do 

  • Monitor how the UK Government responds to the Review, and which changes are implemented.
  • Consider the possible impact if these changes were applicable to your workforce.

The Taylor Review of Modern Working Practices in the UK

In 2016, the UK Government commissioned an independent review of employment practices in the UK and whether changes are needed to keep up with modern business models. This follows the passage of a number of EU directives, adopted in the UK since 2008, to afford protection to atypical workers (in particular "temporary agency" workers).

The Review, entitled "Good Work", was published on 11 July and contains a large number of recommendations for change. To read our UK colleagues' summary of the Review, click here.

The Review was commissioned to address concerns that employment law was failing to keep up with new working practices such as gig economy work, zero-hours contracts, multi-jobs, agency working, increased self-employment and in the wake of cases about the status of Uber partner drivers. Many of these issues are alive in Australia so it may only be a matter of time before we see similar issues being raised and pursued here.

This edition of Fwd: Thinking considers the possible impact of these recommendations on Australian employers, if they were to be adopted here.

Recommendation Possible impact in Australia

Third category of worker – "Dependent contractor"

Use control test to assess whether someone is genuinely self-employed or a dependent contractor. 

An individual who has a right to use a substitute to carry out their work can still be a dependent contractor 

Dependent contractors should be entitled to paid annual leave in real time (known as "rolled up" holiday pay)

Treat all dependent contractors for employment law purposes as employees for tax purposes

There are currently two types of worker status in Australia:

  • an employee: someone who works under a contract of employment and enjoys the full range of employment protections under the Fair Work Act 2009 (Cth); and
  • an independent contractor: someone who is genuinely self-employed and provides services to clients as part of a business on their own account.

In the UK, there is a third status of "worker" that does not currently exist in Australia. The Review proposes this status be re-named as a "dependent contractor" – being someone who neither has a contract of employment nor is genuinely self-employed, but personally performs work or services under a contract and is entitled to certain employment rights. In Australia, "dependent contractors" could include unincorporated independent contractors and single director businesses with no employees.

Depending on the specific situation, contractors may already be deemed to be covered by some Australian laws (such as workers' compensation, superannuation and work, health and safety) irrespective of how they are categorised under employment law.

The proposed emphasis on the "control test" to distinguish between independent and dependent contractors in the UK may cause confusion in Australia given the multi-factor test (including control and an ability to subcontract) that applies to distinguish between employees and independent contractors.

The proposal for "rolled up" holiday pay seems similar to portable long service leave schemes in Australia.

The tax impact in Australia of treating all independent contractors as employees is difficult to gauge. At a minimum, it is likely to increase payroll tax and PAYG. However, many dependent contractors may already be classified as employees so an employer would already be withholding tax from their earnings.

Right for labour hire workers to request direct employment contract after 12 months with same hirer (host)

More transparency over the information which must be provided to agency workers about their pay rates and who is responsible for paying them

This proposed change would involve an extension of the casual conversion rights that were recently granted by the Fair Work Commission in Australia to casual employees (see our Casual conversion rights Alert).

A change of this nature would likely be strongly supported by Australian unions, but would often undermine the very reason organisations use labour hire – to achieve workforce flexibility.

The Fair Work Regulations mandate pay slip requirements for all employees, which includes labour hire workers. So, transparency of payments should already exist in Australia.

In Australia, the current focus in this area is on introducing a licensing system for the labour hire industry (see the reviews being undertaken by the South Australian, Victorian and Queensland governments, and the recent introduction in Queensland of the Labour Hire Licensing Bill 2017).

Right to return to the same or similar job after a period of prolonged ill-health 

Some workers' compensation legislation in Australia contains a similar right.  This right is often limited to people returning to work within a specified period, such as for 24 months, after the person ceased working.

For this proposal to be practical, in our view it would need to have a time limit. For example, Australia's return to work guarantee following parental leave, contained in the National Employment Standards in the FW Act, is limited to the end of the period of unpaid parental leave taken (i.e. a maximum of 24 months).     

Require larger employers to report publicly on workforce issues

Their employment model, the use of agency services, and how many agency workers have requested permanent positions.

The Review recommends that companies above a certain size be required to publish certain workforce information.

No such requirements currently exist in Australia.  Some of this information, such as workforce model, could be seen to constitute confidential business strategy that may assist competitors if required to be publicly disclosed. 

Improve the enforcement of awards against employers

The Government should take enforcement action against employers who do not pay employment tribunal awards

Presumption that the individual's assessment is their working status is correct

Aggravated breach penalties and costs orders if an employer has already lost an employment status case on broadly comparable facts

Uplifts in compensation if there are subsequent breaches against workers with the same or materially the same arrangements

The Review recommends that a UK Government department take responsibility for enforcement of the national minimum wage, sick pay and (for those on low pay) holiday pay.

In Australia, the Office of the Fair Work Ombudsman already has similar responsibilities.

Applying a burden of proof on the employer to disprove an individual's assessment of their employment status would represent a significant change in Australia.  While there is presently a reverse onus of proof for general protections claims under the FW Act, extending a reverse onus to other alleged contraventions would represent a material change.

In respect of breach penalties and cost orders, the FWC already has discretion within the maximum penalties available to award a higher penalty for aggravating factors. However, the ability to order costs under the FW Act is very limited and would need to be expanded if the Review approach were to be adopted here. 
Make statutory sick pay a basic employment right payable from commencement of employment Under the FW Act, employees are entitled to 10 days personal/carer's per year that accrues progressively throughout the year.  While some modern awards and enterprise agreements reflect the Review's approach of an upfront entitlement, a change to the NES to require upfront accrual of paid personal/carer's leave would be a significant change for some (often smaller) employers
Provide written statement of employment particulars on first day of work to both employees and dependent contractors

In Australia, it is common for awards to require employers to provide employees with information about the basis of their employment and ordinary hours on commencement of employment or shortly after commencing work.  The FW Act also requires the employer to provide the Fair Work Information Statement as soon as practicable after starting work, and various information in regular pay slips. 

As Australia does not currently recognise dependant contractors, the extension of such provisions to this class of worker would need to be carefully considered as part of any proposal to recognise dependent contractors.

 

Authors: Julie Mills, Expertise Counsel; and Jon Lovell, Partner.  

 

Key Contacts

We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need.

This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

Get Started
WORLD MAP
  • REGION
  • OFFICE

        Forgot Password - Ashurst Account

        If you have forgotten your password, you can request a new one here.

        Login

        Forgot password? Please contact your relationship manager to find out more about our client portal.
        Ashurst Loader