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Barry Lane
11 April, 2005  
Choose your poison

Little Johnnie Howard’s regime embraces free choice as a central tenet of its “philosophy”. The proposed independent contractors legislation is meant to be another plank in that doctrine. However, a recent Victorian case shows that the choice for workers may be more illusory than real

image”Choice” is such a beautiful thing. It forms the bedrock of our democracy and free enterprise system and sets us apart from those horrible totalitarian regimes with command economies.

Henry Ford had it all worked out with his model “T”. Customers could choose black, black or black. Doubtless Henry took his cue from Mr Hobson (1544-1631) who told those wanting to hire a horse that they could “choose” any one, as long as it was the one nearest the stable door.

Our own version of the free enterprise system threw up such fabulous instances of choice as the two-airline agreement, the four pillars of the banking cartel, or Optus/Telstra duopoly.

With the assistance of an actuary and a lawyer one might even be able to work out which bank or telephony operator provides the most favourable deal, even though there wont be much choice with the form of the service contract because the terms invariably are on a take it or leave it basis.

At least, so far as Victorians are concerned, that latter deficiency in the law of contract might be relieved by some not-so-recent amendments to the Fair Trading Act 1999 see the new Part 2B on unfair contract terms.

Those amendments are intended to restore some choice for customers. They can choose not to be bound by some of the more onerous and odious contractual terms that are foisted upon them by the latter-day Hobsons and Fords.

Little Johnnie Howard’s government, of course, has choice as the centerpiece of its philosophy. For instance, citizens can choose whether to have private health insurance or not, and if they do, they can retain a doctor and hospital of their choice. Parents can choose to send their children to a private school, rather than a government one.

These choices come at a cost for the community, because the “private” option is underwritten by billions of dollars of taxpayers’ funds.

Last week, imbued with pro-choice zeal, Kevin Andrews, the Minister for Employment and Workplace Relations, released a discussion paper on the governments planned Independent Contractors Act. See the paper

The idea of the Act is to protect independent contractors from “unnecessary regulation by workplace relations laws”.

The minister explained it with his customary deftness:

“The government supports a workplace relations framework that maximizes choices for workers and businesses and minimizes regulatory constraints. However, the current competing and complex state and federal systems allowed too much interference by third parties in situations where people are essentially running their own businesses and we dont believe thats appropriate (emphasis added).

The minister did not identify those pesky “interfering third parties”, but I think we all know who they are.

FindLaw reported that:

One aim of the new legislation is to prevent clauses in federal awards and agreements which restrict the use of independent contractors or labour hire workers, or which seek to put conditions on their engagement, such as requiring them to have the same conditions as employees.

Another provision classifies independent contracting arrangements as commercial arrangements, not employment arrangements, under the law.

Coca-Cola Amatil Victoria Ltd v PAA Enterprises Pty Ltd may be an indication of the way Kev’s policy might play out in practice.

The sole director of the respondent, PAA, was Neil Andrew. In an affidavit filed in the proceeding Andrew deposed that in 1996 he was employed by Coke as a vending machine filler. In August 1997, Coke decided to replace its employee fillers with independent contractors. Andrew and his fellow employees were told they would be retrenched but they could, if they so chose, accept an invitation to form companies which would be then engaged by Coke to perform the same work. Andrew accepted the invitation and acquired PAA which then entered into an agreement with Coke on October 1, 1997.

The new arrangements didnt go well for the corporatised machine filler. In 2002, PAA and Andrew sued Coke claiming that the lolly-water bottler had failed to pay sums due under the contract, failed to allow PAA to service certain vending machines, interfered in the contractual relationship between PAA and its sub-contractors, failed to provide training to PAAs sub-contractors and wrongfully terminated the agreement.

Not surprisingly Coca-Cola applied for security for costs. PAA admitted that it was impecunious and would not be able to satisfy an order for costs if Coke succeeded in its defence.

The application was refused primarily because the court held that it was Coca-Cola which induced the change in status between it and Andrew and if security had been ordered, Coke would have been in a better position in relation to costs than it would have been had it not brought about the reconstruction. That reasoning was upheld on appeal.

No doubt when Coca-Cola converted Andrew and his fellow employees into corporate sub-contractors, it also converted liabilities in the form of pay-roll tax, workers compensation premiums, superannuation guarantee payments and a range of other employee related expenses into assets, namely money in the bank.

Was there an equal and opposite benefit for Andrew in exercising his choice to become an incorporated sub-contractor? Somehow, I doubt it.

Perhaps the PM and his government might be persuaded to provide some incentive for people like Neil Andrew so that they will make the right choice in the future. Somehow, I doubt that too.

Thats the thing about choice. One has to be in a position to know whether it is a real choice or a choice between arsenic and strychnine.