The Labour Hire Licensing Act 2017 (SA) (Act) commenced in South Australia on 1 March 2018.
The Act creates a mandatory licensing scheme with harsh penalties (including jail time) for non-compliance. The scope of the Act is extremely broad and will affect many businesses across South Australia which have not traditionally been considered to provide labour hire services, including businesses which provide or utilise secondees.
What are the requirements under the Act?
The Act states that (amongst other things) a person must not:
- Provide labour hire services except as authorised under a labour hire licence (Licence);
- Advertise that they are willing to provide labour hire services unless authorised to provide such services under a Licence;
- Enter into an arrangement for the provision of labour hire services with another person who is not authorised to provide such services under a Licence; or
- Enter into an arrangement with another person for the supply of a worker if the person knows, or ought reasonably to know, the arrangement is designed to avoid an obligation under the Act.
A person may apply for a Licence through Consumer and Business Services and by paying an initial $562 application fee and an annual fee of $225 for a natural person or $1,226 for a body corporate.
Certain designated entities (such as industrial associations, local councils or government bodies) may object to an application for a Licence if the person applying for the Licence is not a fit and proper person within the meaning of the Act.
A person may apply for an exemption from the requirement to comply with the Act by completing an on line form through Consumer and Business Services. However, there is currently no commentary or guidance in respect of the circumstances where an exemption may be granted.
Labour hire providers who do not comply with the labour hire laws may be liable for a range of significant penalties. These include fines up to $400,000, suspension or cancellation of a Licence and up to 3 years imprisonment.
Who will be affected by the new labour hire laws?
The Act applies to persons (including businesses) who are involved in the “provision of labour hire services”. The manner in which this phrase is defined is important in identifying the scope of the obligations imposed by the Act.
Section 7 of the Act states that a person (a provider) provides labour hire services if, in the course of conducting a business, the provider supplies to another person a worker to do work in, and as part of a business or commercial undertaking of the other person.
An individual is a worker under section 8 of the Act if the individual enters into an arrangement with the provider under which:
- The provider may supply, to another person, the individual to do work; and
- The provider is obliged to pay the individual, in whole or part, for the work.
The definition of labour hire services in the Act is primarily directed at engagement arrangements which are generally referred to as “on-hire”. However, the Act states that this definition also includes other engagement arrangements where the nature or structure of the engagement or arrangement involves a worker being supplied in circumstances where the provider has a pre-existing agreement with the worker under which the provider may (from time to time and at the provider’s discretion) send the worker to work in another person’s business or commercial undertaking but be paid by the provider for the work.
The scope of the Act is, therefore, extremely broad and appears to capture some working relationships which were never previously considered to be labour hire in nature (such as secondment arrangements).
What should my business be doing now?
The South Australian Government has received a number of submissions from stakeholders raising various concerns in relation to the scope and operation of the new laws. In particular, there has been criticism that the Act disproportionately expands the scope of what constitutes “labour hire services” and inadvertently captures a vast array of businesses that are not traditional labour hire organisations.
Importantly, there have been calls for the definition of labour hire services to be amended to exclude genuine secondment arrangements and organisations where labour hire services are not provided as a dominant or primary function of their businesses. These suggestions are consistent with the labour hire licensing laws in other jurisdictions (such as Queensland).
Compliance with the Act was initially planned to commence from 1 September 2018. However, to enable proper consideration of the submissions which have been received, Consumer and Business Services has advised that it will not enforce the licensing requirements under the Act prior to 1 February 2019.
Consumer and Business Services has also made a commitment to provide further information following consideration of the issues raised by the various stakeholders.
In the circumstances, this is an important issue for businesses to monitor over the coming year. In particular, this affects businesses which provide on-hire services and any businesses that have secondment agreements in place (as commonly utilised by lawyers, consultants, engineers and accountants). Businesses may wish to wait until more information is made available by Consumer and Business Services before taking any further substantive action, such as applying for a Licence or an exemption.
If you have any concerns about how these new laws may affect your business, please contact us.
This article was written by Clare Raimondo, Partner and Jessica Nicholls, Senior Associate.
P: +61 8 8205 0565