Australia: The Independent Contractors Bill 2006

Last Updated: 5 December 2006
Article by Heinz Lepahe

In Australia there are a significant number of independent contractors, with estimates ranging from 800,000 to 2 million. The Federal Government has long criticised the states for their legal arrangements governing contractors. The criticism comes from the fact that state laws drag contractors into the sphere of employment law regulation.

On 22 June 2006 the Federal Government introduced the Independent Contractors Bill 2006. The intention of the Bill was to shield independent contractors from state and territory industrial laws.

What’s in the new Bill?

1. Safeguards against contractors wrongly falling into the employee basket

The Bill excludes the operation of state and territory deeming provisions where laws allow a tribunal to deem a certain category of contractor as employees. The effect of these changes is to stop state tribunals deeming contractors to be employees and, thereby, creating a legal personality of employment contract where the contractor never intended such arrangement to be entered in too.

There are two important exceptions to the exclusion of the deeming laws:

  • Contract outworkers in textile clothing and footwear are excepted on the basis that they are recognised as a unique and vulnerable category of outworker within the Australian working community. As a result, the Bill provides a default minimum rate of pay for such contract outworkers.
  • Transport owner drivers for whom employment law conditions have been set by industrial tribunals in both New South Wales and Victoria.

2. A federal unfair contracts regime, which purports to override state unfair contracts laws

State unfair contracts laws currently exists in New South Wales and Queensland. The proposed federal contracts laws would allow contracts involving independent contractors for the harsh or unfair to be varied or set aside. Compensation is not a feature of the new federal bill. This is a major departure from existing state unfair contracts provisions, which traditionally provide for significant compensation where contracts have been found to be harsh, unfair or unconscionable.

3. No tolerance for misrepresentations

It will be an offence under legislation to misrepresent an employment relationship as an independent contractor relationship and an offence to dismiss employees in favour of contractors.

A maximum fine of $33,000.00 per offence has been provided for in the Bill.

Determining relationships… employee or contractor?

There is little doubt that the federal Independent Contractors Bill 2006 will change the landscape in regulating contractor arrangements, at least as far as New South Wales and Queensland is concerned. Significantly, the Bill will only cover those employers and employees who are covered by the WorkChoices legislation.

The multi factor test will be used to determine the service type. A number of indicia are taken into account to assess whether an arrangement is a contract of service (employment) or alternatively, a contract for services (independent contractor). A multi factor test provides criteria including control, the mode of remuneration, whether invoices are provided, provision of tools and maintenance of equipment, hours of work, tax arrangements, the ability to delegate work, whether there is a truly independent relationship and an assessment of who bears the risk.

The principal authority for the multi factor test is the case of Hollis -v- Vabu, a High Court decision of 2001 in which the High Court warned of the consequences for employers getting it wrong.

The High Court raised the spectre of retrospective liability for income tax, fringe benefits tax, payroll tax, superannuation, workers compensation and other legal obligations. This could be the case where an employer had treated a worker as an independent contractor when, in fact, the worker was a common law employee.

A transitional period

The Independent Contractors Bill 2006 allows parties to a contract a transitional period to rearrange their relationship.

That period ends when:

  • the contracting relationship ends, if that is within three years; or alternatively
  • three years after the Bill commences; or
  • at any earlier time if the parties agree.

When the transitional period ends, a contractor will no longer be entitled to be provided with employee-like entitlements such as award wages or leave. The employer will be obliged to pay out any accrued entitlements. If an employee unilaterally converts from employee to independent contractor during the transitional period, then in addition to being paid accrued entitlements, the employee could be entitled to a redundancy payment or a remedy at state law such as reinstatement.

Employers will need to be very precise about the application of the complex transitional period rules as they are likely to apply in different ways for different workers

What do government and industry leaders think about the Bill?

The Independent Contractors Bill is said by government to protect the freedom of contractors to bargain with their principals and prevent workplace relations systems being used to determine their status. To that end, the Federal Government has indicated that it will spend $15 million over four years on an independent contractor’s education and enforcement campaign.

Workplace Relations Minister, Kevin Andrews, has made it clear that in addition to an education campaign, existing compliance and enforcement roles will be enhanced to deal with increased requests for assistance and to investigate and enforce penalties for sham arrangements under the Independent Contractors Bill. That means that employers will be facing increased audit pressure on their relationships with both employees and contractors, and employees need to be vigilant to ensure that their arrangements stand to the test of scrutiny. The enforcement role is undertaken by the Office for Workplace Services.

The New South Wales government has labelled the Independent Contractors Bill 2006 a sham itself. Minister John Della Bosca indicated that there was a fear that the new laws would make it easier for companies to sack their workforce and re-employ them as contractors to escape their workplace health and safety and workers’ compensation responsibilities and not pay superannuation.

Similarly, the ACTU has attacked the new Independent Contractors Bill as a further threat to job security. ACTU president, Sharon Burrow, said the new laws would make it easier for big business to replace existing workers with so called independent contractors.

As can be seen from the above, the institutions involved in workplace regulation i.e. state governments and the ACTU, do not support the new Independent Contractors Bill 2006 and given their respective prosecutions of the High Court challenge to the Work Choices legislation, resistance to the Contractors Bill can also be expected to be maintained.

Get it right!

This is a critical area for employers to get right. Before employers embark on any significant change to either their employment or contractor arrangements, they should get appropriate legal advice to avoid exposure for legal liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions