Businesses that provide labour hire service must now hold labour hire licences as a result of the Labour Hire Licensing Act 2018 (Vic) (Act)1. This article explores how these new laws affect parties in a supply chain, where the supply or procurement involves the provision of labour.
By way of background, the new laws arose from the Victorian Government’s inquiry into the labour hire industry in Victoria, which was commissioned in 2015 (Inquiry)2. The Inquiry investigated the practices of labour hire providers with a focus on sham contracting, insecure work and abuse of visas that avoid workplace protections. The Inquiry found significant evidence of exploitation of workers in the labour hire industry. Numerous recommendations stemmed from the Inquiry, one of which was the implementation of a labour hire licensing scheme in Victoria.
The new laws now require a business (a provider) to hold a labour hire licence if that provider supplies labour to another business (host) to perform work for that host.3
Businesses that provide the following services will require a labour hire licence:
- Traditional labour hire providers – where a provider supplies one or more individuals to a host to perform work in and as part of a business or undertaking of the host, and in which the provider pays the individual for performance of that work;4
- Recruitment – where the provider recruits or places one or more individuals with a host to perform work in and as part of the host’s business and in which the provider both procures or provides accommodation and pays wages to those individuals;5
- Contractor management – where the provider recruits or places one or more individuals as independent contractors to perform work in and as part of a host’s business or undertaking and the provider manages the contract performance by the independent contractors;6 and
- Deemed labour hire – where individuals are taken to perform work in or as part of a labour hire business or undertaking if they perform activities in commercial cleaning, horticultural, and meat/poultry processing industries.7
Broad definition of ‘worker’ and the impact on subcontractors
The Act’s broad definition of a labour hire service provider has the effect of requiring subcontractors not traditionally thought to be labour hire service providers to now be classified as such and therefore require a licence under the scheme.8 As stated in the Explanatory Memorandum to the Act:
The definition…is intended to ensure that the Act covers the different kinds of working arrangements into which an individual may enter.9
It will cover types of engagement arrangements, such as subcontracting arrangements, where the individual or individuals supplied perform work in and as part of the host’s business or undertaking.10
The Act specifically states that businesses may be characterised as providers regardless of whether a contract has been entered into between the provider and the host and whether the individuals are supplied directly or through an intermediary.11
Who won’t need a licence
A business that provides individuals to a host to perform work that is not part of the host’s business will not be a provider and therefore will not require a licence under the Act.12 The Explanatory Memorandum to the Act gives examples of an accounting firm that provides an accountant to perform a business’s tax return or a plumbing business that provides a plumber to fix a dishwasher.13 Both the accountant and plumber are conducting the business of their providers and not the host and therefore are not labour hire service providers.
Comparison to other states
Corresponding licensing schemes have already been introduced in Queensland14 and South Australia15. Subtle differences exist between each states legislation. Whereas Queensland legislation covers work only provided within Queensland16, legislation in South Australia and Victoria have the potential for work outside of each respective state to be captured by the legislation.17 Each State scheme provides that exemptions can be made in the regulations. In Victoria the following individuals are not labour hire workers and therefore businesses providing such individuals to hosts will be exempt from licence requirements:18
- Classes of secondees;
- Persons provided to related party businesses provided that the related parties are conducting the same business;
- Management directors of body corporates with no more than 2 directors;
- Public sector employees seconded or transferred pursuant to the Public Administration Act 2004;
- Students within the meaning of Division 1 or 2 of Part 5.4 of the Education and Training Reform Act 2006; and
- Persons undertaking vocational placement within the meaning of the Fair Work Act 2009.
How to obtain a licence
To obtain a licence providers must prove they are a ‘fit and proper person19‘ by making declarations that their business complies with its legal obligations in respect of its personnel including taxation, superannuation, occupational health and safety, workplace, migration and employment law.20 Once a licence is granted, the provider will be published in the Register of Licensed Labour Hire and will be required to report to the Labour Hire Licensing Authority every 12 months.21
Supplying labour without a licence, or engaging an unlicensed provider incur significant penalties under the Act. The maximum penalty for an individual is 800 penalty units ($128,952) whereas corporations may incur 3200 penalty units ($515,808).22
The licensing scheme will have wide reaching effects on supply chain agreements throughout Australia. Businesses should review their supply chain arrangements to ensure that they are complying with the new laws.
This article was written by Teresa Torcasio, Partner and Chantelle Radwan, Law Graduate.
1 Labour Hire Licensing Act 2018 (Vic) (Act)
2 Industrial Relations Victoria, Department of Economic Development, Jobs, Transport and Resources, Report of the Victorian Inquiry into the Labour Hire Industry and Insecure Work (2016) (Inquiry)
3 Act, s13
4 Act, s7(1)
5 Act, s8(1)
6 Act, 8(2)
7 Labour Hire Licensing Regulations 2018 (Vic), r5(1)
8 See s7 & 8 of the Act.
9 See discussion of cl7(2) in the Explanatory Memorandum, Labour Hire Licensing Bill 2017 (Vic)
10 Ibid, discussion of clause 7(1).
11 Act, s7, s8 & s9.
12 Act s7(1); see also discussion of cl7(1) and 8(1) in the Explanatory Memorandum, Labour Hire Licensing Bill 2017 (Vic)
13 See also discussion of cl7(1) and 8(1) in the Explanatory Memorandum, Labour Hire Licensing Bill 2017 (Vic),p.3
14 Labour Hire Licensing Act 2017 (Qld)
15 Labour Hire Licensing Act 2017 (SA)
16 See Labour Hire Licensing Regulation 2018 (Qld)
17 Labour Hire Licensing Act 2017 (SA), s 4; Act, s6
18 Labour Hire Licensing Regulation 2018 (Vic), r4
19 Act, s22
20 Act, s23
21 Act, s34.
22 Act, s94(2)