ACTU submission to Treasury

Competition law amendments

30 September 2016

1

Overview

The Australian Council of Trade Unions represents nearly two million working people. The actions of

our affiliated unions have a direct and measurable effect on the incomes and livings standards of our

members and their families. Many more Australians have their pay and conditions of employment

shaped by the modern and historical achievements of the movement we proudly represent.

This submission is made in response to a notification we received regarding Treasury’s Competition

Law Amendments Exposure Draft Consultation. The Exposure Draft follows a report by the Harper

Competition Law Review Panel (“the Panel Report”) and a response to that report by government.

We participated in the processes leading to the Panel report and the government response through

written submissions and in a roundtable discussion with Professor Harper and his secretariat.

We note that the specific consultation questions that were published as part of Treasury’s current

process largely ignore the intersections between competition law and industrial relations law, which

is a matter of great significance to our affiliated unions. This submission therefore concentrates on

three such intersections that we have identified in the Draft Bill which Treasury has released:

Collective bargaining by independent contractors, unions engaging in anti-competitive conduct and

the proposed higher penalties for secondary boycotts.

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Collective Bargaining by independent contractors

The ACTU welcomes the intention to streamline the process for applying for collective bargaining

authorisations. We have some concerns regarding the administrative cancellation of collective

boycott authorisations and we are deeply disappointed that the amendments proposed to do not

provide the policy coherency necessary to reflect the organisation of the modern workforce.

The common law legal framework surrounding independent contractors is well rehearsed. Employees

are engaged under a contract of service. An independent contractor is engaged under a contract for

services. Employees owe common law duties to their employer which derive from the contract of

employment, for example the duties of good faith and fidelity. Employees usually cannot work for

another employer, particularly a competitor of their employer. Independent contractors and the

principal that engages them establish their commercial relationship at arm’s length and any duties or

obligations arise from the terms of the contract for service (aside from generic implied contractual

duties such as the duty of co-operation). An independent contractor is not bound to the one principal

and can provide services to a range of principals, who can be in the same industry and in competition

with one another. So goes the theory. The practice is rather more complicated.

The dry legal framework that surrounds independent contractors is premised on an understanding

that independent contractors are free agents in a commercial sense who are on an equal footing with

those who they contract to provide services for. Issues of information asymmetry, let alone other

more complex assessments of relative bargaining capacity, form no part of the common law

framework that identifies an independent contractor as a business. The framework therefore

becomes controversial and inapt when the “business” that is the independent contractor is

constituted by a single worker, as many are: 9% of employed persons as at August 2015 (over 1 million

people) report themselves to be in this category1. Where this is the case, the expression

“independent contractor” takes on the character of a convenient legal fiction which obscures the

immutable bond between a worker and their labour, in order to create a commodity in the form of a

commercial service. Without a worker in sight, most law by default recognises no labour, only

commerce.

Whilst this is not a new problem, we are potentially on the cusp of an increase in its scale, through

technological platforms that fuel the “gig economy”. Providers of such platforms are adamant that

1 ABS 6333.0

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the workers engaged through them are independent contractors. An example is Airtasker, which

actively advised its clients to pay workers hourly rates that are less than the legal minimum wages for

employees performing the same work – Airtasker’s 15% fee is then deducted from that payment.2

Once again, the law maintains the farce that these transactions are ordinary business transactions,

rather than people working for a living.

Policy makers (and, occasionally, courts) are not entirely blinded by this illusion. A case in point is the

collective bargaining authorisation provisions contained in Part VII of the Competition and Consumer

Act (hereafter, “the CCA”). The ACCC’s guidance material in relation these provisions states:

The Act encourages vigorous competition between businesses by prohibiting variousforms of anti-competitive conduct. Generally, the Act requires businesses to actindependently of their competitors when making decisions about pricing, other termsand conditions or who to deal with.

However, it is recognised that small businesses face many challenges when negotiatingwith larger businesses. At times, small businesses may feel that they have little or nobargaining power in their dealings with big business and little influence on terms andconditions, including prices.

It has been recognised that small businesses are often more likely to be heard on termsand conditions if they join with other small businesses to collectively negotiate with alarger business, rather than one-on-one. However, negotiating collectively may breachthe Act.

Businesses are able to use the authorisation process to obtain immunity from legalaction under the competition provisions of the Act for collective bargainingarrangements that are in the public interest. Alternatively, small businesses can obtainimmunity from legal action under the Act for such arrangements by lodging a collectivebargaining notification.3

Further evidence of the tacit recognition of contracting as a form of labour comes from the laws that

establish the Superannuation Guarantee system, which provide a deeming provision for those

purposes of that scheme that “If a person works under a contract that is wholly or principally for the

labour of the person, the person is an employee of that other party to the contract”4. The Australian

Tax Office, which supervises the scheme, has also issued a Ruling on the topic5, which includes the

following:

2 Unions NSW, “Innovation or Exploitation – Busting the Airtasker Myth” at p 8-9(https://d3n8a8pro7vhmx.cloudfront.net/unionsnsw/pages/3135/attachments/original/1474529110/Unions_NSW_Report_into_Airtasker.pdf?1474529110)3 Australian Competition and Consumer Commission, Guide to Collective Bargaining Provisions, 2011.4 Superannuation Guarantee (Administration) Act 1992, s. 12(3)5 SGR 2005/1, http://law.ato.gov.au/pdf/pbr/sgr2005-001.pdf

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“Subsection 12(3) was intended to extend the scope of the SGAA beyond traditionalemployment relationships to take into account some independent contractors whoprincipally provide their own labour to meet obligations under a contract. The SecondReport of the Senate Select Committee on Superannuation, Superannuation GuaranteeBills , noted (at page 146) that subsection 12(3) was 'designed to include a person whomay not be an employee in the normal sense but who is in fact not very distinguishablefrom an employee.' However, the operation of subsection 12(3) has, in our view, beenrestricted by the interpretation which the courts placed on the equivalent expression inparagraph (a) of the definition of 'salary or wages' in subsection 221A(1) of the IncomeTax Assessment Act 1936 (ITAA 1936) ('paragraph (a)')…”“The ATO view is that some contracts for services will be wholly or principally for thelabour of the individual contracted even though the individual is not a common lawemployee. Therefore, subsection 12(3) must be considered where there is no commonlaw employment relationship or where there is doubt as to the common law status ofthe individual.

Where the terms of the contract in light of the subsequent conduct of the partiesindicates that:

· the individual is remunerated (either wholly or principally) for their personallabour and skills;· the individual must perform the contractual work personally (there is no rightof delegation); and· the individual is not paid to achieve a result (paragraphs 43 to 47 discuss whena contract is one to achieve a result),

the contract is considered to be wholly or principally for the labour of the individualengaged and he or she will be an employee under subsection 12(3).”

The notion of disparity between contracting businesses was somewhat evident in the Panel Report,

even if it did not squarely admit that a “small business” might actually be an individual:

“Although collective bargaining will often be harmful to competition, it can also havebeneficial effects. Small businesses dealing with large businesses often face animbalance in bargaining power. That imbalance can result in inefficient or unfaircommercial outcomes. Permitting small business to bargain collectively in certaincircumstances can redress the imbalance in power and result in more efficient marketoutcomes.6

Further, the Independent Contractors Act clearly recognises the inherent potential for unfairness in

bargaining relationships and provides for a court to review and vary contracts on grounds including

that the contract is unfair, harsh, unconscionable, unjust, against the public interests or is designed to

avoid the provisions of the Fair Work Act or an Award or Agreement made under that Act7. In

reviewing contracts under the Independent Contractors Act, the court may to have regard to

numerous factors including the relative strengths of the bargaining positions of the parties to the

contract (and, if applicable, any persons acting on behalf of the parties); whether any undue influence

6 at p. 4087 s. 9

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or pressure was exerted on, or any unfair tactics were used against, a party to the contract; and

whether the contract provides total remuneration that is, or is likely to be, less than that of an

employee performing similar work.8

Workers who are incorrectly engaged as independent contractors when in fact they should be

employed face a number of significant disadvantages. These are disadvantages that have a direct

adverse impact on the worker themselves, but also negatively impact on the economy and social

standards.

Particularly for workers who are doing low paid jobs covered by award classifications (e.g. cleaners,

cooks, delivery drivers) the impacts of being incorrectly classified are severe. By virtue of the fact that

they are not engaged as an employee they prevented from relying on the security of the basic minima

required by the industrial relations system, particularly under the Fair Work Act. For example they are

not entitled to NES minimums, minimum wages, or award conditions. People who are ostensibly

employees are receiving less than they should. Conversely businesses are able to avoid meeting their

minimum obligations to workers and more widely to society.

This creates serious issues for the labour market in terms of not only workers, but other employers

and principals, who in an effort to compete with those in breach of the law, feel that they must also

undercut the minimum protections, perhaps by also engaging workers as independent contractors.

There are losses to society in terms of a fair share of tax being paid by business to contribute to areas

such as health and education.

In our view, there should be absolutely no ability for any worker to receive less than the national or

award minimum wage. Every worker should be provided with all rights, entitlements and protections,

afforded under the Fair Work Act, an award, or other industrial or health and safety legislation. If we

can agree (as we have for over 100 years in this country) that labour standards are inviolable and

should not be able to be contracted out of simply by labelling something that which it is not, there is

no rational basis to make distinctions between forms of labour other than a deliberate policy choice

to declare some citizens as second class. However, we recognise that our view is not shared by the

government. We therefore seek in this instance that the draft Bill be amended to provide a greater,

albeit not absolute, expression of the need to provide labour law type rights and protections to

independent contractors, in recognition of the above incremental steps that have been taken thus far.

8 s. 15

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The first and most obvious of these extensions would be to positively permit unions to represent

independent contractors in the collective bargaining processes permitted under the CCA. True it is

that much of our IR system still wears the barnacles of system devised to suit single employer mass

production establishments where the contract of employment was at the centre of every working

relationship, however the regulation of unions (as registered organisations) was adapted as far back

as 1992 to positively permit unions to enroll independent contractors as members9. Today’s union

regulation laws also provide a definition of “federal system employee” that explicitly includes

independent contractors10. The fact that unions are specifically regulated on the basis of their activity

in representing their members including independent contractors, but at the same time are prohibited

by law from representing their members who are independent contractors in collective bargaining,

should be regarded as anomalous and should be remedied. This prohibition is presently expressed in

section 93AB(9) of the CCA and is proposed to be retained in the draft Bill. An appropriate amendment

would be one that afforded independent contractors the right to be represented by registered

employee organisations where the independent contractor was not also an employer, and by

registered employer organisations where the contractor was an employer. We also urge Treasury to

consider whether the provisions governing the regulation of collective bargaining by independent

contractors who are not employers might be better located in the Fair Work Act.

Secondly, in order to provide greater policy consistency, it essential that the proposed administrative

capacity to cancel collective boycott action (Item 20 of Schedule 10 of the Bill) not be proceeded with.

At least when applied to independent contractors of the type we are concerned with, what is being

proposed there is akin to the administrative cancellation of industrial action by a government

authority in the absence of a right to be heard. This is highly objectionable. It is however curious

that Treasury, when faced with the question of what to do if businesses colluded to boycott the supply

of an essential good or service, decided that the decision maker that was empowered stop such

boycotts would have a discretion to act. Since WorkChoices, a single worker who takes unprotected

industrial action that may cause zero loss or disruption is met with a decision maker that is mandated

by law to issue an enforceable order requiring him or her to return to work11.

9 See s. 14-16 of the Industrial Relations Amendment Act 1992 Corresponding provisions in today’s law can be found in section 18B(3)(c),141(2) and 168 of the Fair Work (Registered Organisations) Act.10 See section 6 of the Fair Work (Registered Organisations) Act.11 See s. 418 of the Fair Work Act.

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Unions and anti-competitive conduct

Unions and workers presently benefit from a broad exemption to all of Part IV of the CCA Act save for

particular provisions in the main concerned with secondary boycotts and related matters12.

The exemption recognises that it is the legitimate role of unions to collectively bargain and reduce

labour market competition on the basis of wage differentials. The differentiation between labour

markets and product markets that justifies such a distinction was mentioned and endorsed both in

the Panel’s Report and in the Productivity Commission’s inquiry into the workplace relations

framework13.

The exemption is currently expressed in the following way:

“In determining whether a contravention of a provision of this Part other than section45D, 45DA, 45DB, 45E, 45EA or 48 has been committed, regard shall not be had:(a) to any act done in relation to, or to the making of a contract or arrangement or theentering into of an understanding, or to any provision of a contract, arrangement orunderstanding, to the extent that the contract, arrangement or understanding, or theprovision, relates to, the remuneration, conditions of employment, hours of work orworking conditions of employees;”14

It is important the scope of the exemption remains adapted to the expanded footprint of Part IV. The

obvious example is the proposed expansion of section 45, detailed in Item 7 of Schedule 3 to the Bill.

The section presently deals with the provisions of contracts and the making of contacts, arrangements

or understandings – each of which are covered by the exemption above. However, the proposed

expansion of 45 to include engaging in concerted practices has not been met by a corresponding

proposal to extend the scope of the exemption. This needs to be remedied. There may be other

examples where the scope of Part IV is proposed to be extended by the Draft Bill which similarly

require rectification. In addition to addressing these matters, the Draft Bill in any event would benefit

be improved by supplementation to similarly exempt the bargaining, making and approval of

enterprise agreements or proposed enterprise agreements from the scope of Part IV. This

supplantation is further suggested by the Government’s decision not to adopt recommendation 37 of

the Panel’s report, reflected both in its published response and in the terms of this Draft Bill.

12 See section 51(2)(a)13 See the introductory remarks to Chapter 21 of the Panel’s report.14 Ibid.

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Higher penalties for secondary boycotts

We remain of the view expressed in previous submissions that it is highly objectionable to increasepenalties for these laws which have already been found to be in breach of international law,specifically the ILO Convention in respect of Freedom of Association and Protection of the Right toOrganise. This contravention has been noted as such by the ILO and has been raised with theAustralian government on a number of occasions.15

We note that the Panel’s Report did not quarrel with our assessment, or that of the ILO, that the CCAsecondary boycott provisions are in breach of the relevant international obligations. Rather, it merelystated that abolishing the offending provisions or broadening the exemption referred to in theprevious section above, would “weaken the effectiveness of the secondary boycott provisions”16.

Whilst the Panel’s report attempts to draw some justification for its position from the SwansonCommittee report of 1976, it ought to be remembered (and perhaps somebody at Treasury still doesremember) that the Secondary Boycott Provisions were not in fact recommended by the SwansonCommittee. The most beneficial and rational view that could be taken of the Swanson Committeeera, in light of its deficiencies17, is that it pointed toward a desire for there to a deliberative processavailable to traders who where prejudiced by Secondary Boycott activity, which would provideremedies to those traders if the actions of the workers and their organisations that were the cause oftheir harm were found to be motivated by business interests rather than industrial interests. Therecord shows that the Government of the day responded to the Swanson Committee’srecommendations not by adopting them but by creating an enforceable legal right to penalties,injunctions and compensation in a Court (and a Court alone), a right which could be pursued not onlyby the affected trader, but also at the instigation of the Trade Practices Commission, the AttorneyGeneral, or any other person18. It also removed the expanded exemption in respect of conduct ofemployees and employer organisations. Far from being a “free market” exercise, these reforms pavedthe way for the government, contrary to its international obligations, to be an agitator and marketparticipant to contain the sphere of activity of organised labour.

Whilst we are obliged to continue to raise these matters of non-compliance with the ILO, Treasuryshould also be entirely unsurprised should the matter become a diplomatic issue if not a privateinternational law matter as a result of commitments made in the Trans Pacific PartnershipAgreement and the Korea-Australia Free Trade Agreement to abide by ILO standards.

15 See for example: International Labour Office (2012) Report of the Committee of Experts on the Application of Conventions andRecommendations, ILO, Geneva, pp. 58-59.16 at p 38817 Including for example that there were no workers representatives on the Committee and that the Committee failed to appreciate thatthere might have been any connection between the adoption of ILO Convention 87 in 1973 and the exemption of employees and unionsfrom the provisions of the Trade Practices Act as it then was less than a year later.18 Combined effect of section 45D , 77, 80 & 82 of the Trade Practices Act 1974 as amended by the Trade Practices Amendment Act 1977.

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D No: 103/2016