Is Eco an "independent contractor"?
81 McCorkell adopted the submissions of the State both on the question of whether Eco is an "independent contractor" and whether McCorkell was "proposing to enter into a contract for services" with Eco, which is set out in the following section. The State made these submissions in response to the allegation that it was involved in adverse action taken by McCorkell within the meaning of s 550 of the FW Act.
82 The State claims that Eco and its employees do not attract the protection of Item 4 in s 342(1) as Eco is not an "independent contractor" within the meaning of that section. The State contended that the term "independent contractor" has historically been used in contra-distinction to "employee" so as to mean the functional equivalent of an employee in that he, she or it provides services in the form of labour which would otherwise be performed by an employee. For ease of reference I will refer to the meaning contended for by the State as "the confined meaning". In support of the confined meaning being applied to the term as used in Item 4 of s 342(1), the State relied upon the textual support said to be found in the structure of the table in s 342(1) and in the use of the phrase in other provisions of the FW Act. The State also relied upon the definition of the term "independent contractor" in s 4 of the Independent Contractors Act 2006 (Cth) ("the IC Act").
83 The CFMEU contended that the term "independent contractor" as used in s 342(1) is not limited to an entity that is the functional equivalent of an employee and extends to a person carrying on the business of a contractor that provides services, irrespective of its scale. It accepted that the term is used in different ways throughout the FW Act and contended that the term takes its meaning from the particular context in which it is employed. The CFMEU submitted that the more confined use of "independent contractor" in the IC Act is mandated by the specific terms of that Act and has nothing to say about the meaning of the term in s 342(1) of the FW Act.
84 To determine whether Eco is an "independent contractor", it is best to commence by considering the words utilised in the provisions in question. The starting point is s 340 of the FW Act, where the phrase "adverse action" (later amplified by s 342(1)) is used. Section 340 is found in a division headed "Workplace Rights" and bears the heading "Protection". Section 340(1) prohibits "a person" taking adverse action against "another person" because of the prohibited reasons there identified. The nature or character of the person subjected to the adverse action is unrestricted by any qualifying criteria expressed by s 340. A "person" includes "a body politic or corporate as well as an individual": s 2C(1) Acts Interpretation Act 1901 (Cth).
85 The term "adverse action" is included in the s 12 dictionary, but the definition merely refers the reader to s 342. Section 342 provides the meaning of "adverse action" in relation to the workplace rights protections dealt with in s 340 and also the industrial activities protections specified by s 346.
86 The expressed purpose of s 342(1) is to set out the "circumstances in which a person takes adverse action against another person". That is done in a table with two columns. The heading of each column is intended to be read as the introductory words to the text in the column for each of the seven circumstances numbered as Items 1 to 7. For each of the Items, the text of the first column identifies the kind of person adverse action may be taken by ("the first person") and the kind of person or persons adverse action may be taken against ("the second person or persons"). The second column identifies the kind of action taken by the first person which falls within the description "adverse action".
87 It is apparent then that the meaning given to "adverse action" serves to confine the application of s 340, including by imposing qualifications upon the kind of person who falls within the protective scope of that section.
88 There is also a further restriction imposed on the kind of person who can take the protective benefit of s 340. Each of the prohibited reasons identified in s 340 depend upon the person against whom adverse action is taken having a "workplace right" as defined by s 341(1). In each case, the workplace right identified by s 341(1) is sourced in a workplace law or workplace instrument, other than for the case referred to in s 341(1)(c)(ii), where the right is sourced in a person's employment. Only a person who has a workplace right specified by s 341(1) and is a second person referred to in s 342(1), will fall within the protective scope of s 340.
89 The CFMEU alleges McCorkell took adverse action within the meaning of Item 4 of s 342(1). That Item identifies the first person as "a person (the principal)" and the second person as an "independent contractor" or "a person employed or engaged by the independent contractor". It also identifies the nature of the nexus between the first person and the independent contractor by identifying that there must be a transaction in prospect between them in the nature of a "contract for services". The first matter which is apparent and is made so by the use of the phrase "contract for services" rather than "contract of services", is that the relationship in prospect between the first person and the independent contractor is not an employment relationship. That makes it clear that neither the first person nor the independent contractor is an employee and that the relationship in prospect is a commercial relationship in which the independent contractor operates a business.
90 The nature or scale of the business of the independent contractor is not directly addressed but there are some indications given. The reference to a contract for services is suggestive of a business that supplies services rather than a merchant selling goods. That is reinforced in paragraph (c) of Column 2 by the reference to "services offered by the independent contractor". The business referred to is also a business that may employ or engage others to carry out its activities. That much is apparent from the description of the other second persons whose workplace rights and industrial activities rights fall to be protected, namely, persons employed or engaged by the independent contractor.
91 There is no limit suggested as to the number of persons such a business may employ. The word "engage" when used disjunctively with "employed" suggests that the business of the independent contractor may engage other contractors. That conclusion is supported by the terms of Item 6 of s 342(1), which expressly contemplate that an "independent contractor" is the kind of person who may engage other "independent contractors".
92 So far, the characteristics of the independent contractor which s 342(1) expressly contemplates, do not sit well with the notion that the independent contractor envisaged by Item 4 is limited to the functional equivalent of an employee. Nor is the State's characterisation assisted when it is recognised that the s 12 definition of "independent contractor" identifies that the kind of independent contractor contemplated includes a corporate entity.
93 One of the hallmarks of an employee is the personal performance by that individual of the services which the employee has been contracted to provide: Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24-26 (Mason J) and 38 (Wilson and Dawson JJ); Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425 and 428 (the Court). A limited or an occasional delegation of work to another person may not disqualify the existence of an employment relationship: On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 at [283] (Bromberg J); Ready Mixed Concrete (South East) Limited v Minister for Pensions and National Insurance [1968] 2 QB 497 at 515 (MacKenna J). However, a person substantially providing personal services to another through the use of employees or contractors is not an employee of the other person in relation to the provision of those services. Such a person is not the "functional equivalent" of an employee. Such a person may well be providing services which could be provided directly by employees of the recipient of the services. However, the persons who fit within that description extend to many entities providing the efforts of their employees or contractors, including corporations which hire labour and a wide range of contractors who provide maintenance, cleaning, engineering, building trades, professional and other services. The confined meaning contended for by the State is not given textual support by the characteristics of an "independent contractor" which s 342(1) itself identifies.
94 If the State's contention is correct, much must turn on the phrase "independent contractor" itself and any particular meaning attached to it in the context of the industrial relations subject matter dealt with by the legislation. For that purpose, and also for the purpose of assisting to identify the mischief to which Item 4 is addressed, it is necessary to turn to and consider the legislative predecessors of s 340 and Pt 3-1.
95 Before doing so, I should say something about the words that constitute the phrase. Whilst a "contractor" can simply mean a person who contracts, in the world of work and commerce, a contractor is likely to be thought of as a person who contracts to furnish supplies or perform work at a certain price or rate: Macquarie Dictionary (5th ed, Macquarie Dictionary Publishers, 2009) p 371. A contractor is not generally thought of as an employee. The term contractor by itself and without any assistance from the word "independent", sufficiently identifies that the entity in question is not an employee. Nor does contractor necessarily connote something akin to an employee. The operations of a contractor may be small or vast. The labour or other services provided by a contractor may be provided by a single owner/operator or alternatively by many tens if not hundreds of employees. The size or scale of a contractor's operations is in many contexts suggested by prefixes such as "principal", "head" or "sub".
96 I presume that the word "independent" came to be connected with the word "contractor" for the purpose of assisting to draw a legal distinction between a person providing services to another as the other's servant or agent and a person providing services under an "independent contract". An example of the use of the term "independent contract" is found in the judgment of Dixon J in Queensland Stations Pty Limited v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552. The phrase "independent contractor" is commonly used in the case law. It is likely that it originates from cases dealing with vicarious liability. At common law, a person is not generally liable for the negligence of an independent contractor: Stevens v Brodribb at 43 (Wilson and Dawson JJ). That proposition can probably be traced back to Quarman v Burnett (1840) 6 M & W 499 [151 ER 509], as McHugh J observed in Scott v Davies (2000) 204 CLR 333 at [37]. As his Honour identified in that passage, although the nomenclature was different at the time Quarman was decided, the defendants in that case were not liable for the acts of "what we now call an independent contractor".
97 In the discourse about vicarious liability, an independent contractor may be a self-employed individual providing personal services. Alternatively, an independent contractor may also be a substantial corporate entity carrying out work under a contract comprising labour and the provision of materials. There are many examples in the cases in which the term "independent contractor" has been used to refer to entities of that kind: Leichhardt Municipal Council v Montgomery (2007) 230 CLR 22 (a construction company engaged to undertake footpath reconstruction works); Roads and Traffic Authority v Scroop (1998) 28 MVR 233 (a company engaged to resurface a portion of a major highway); Kondis v State Transport Authority (1984) 154 CLR 672 (a company that rented out mobile cranes for use in construction work); Australian Municipal, Administrative, Clerical and Services Union (a company engaged to provide home and community care services involving upwards of 70 employees); Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 (a company engaged to install additional refrigeration at cold storage facilities owned by a port authority); Murphy v Brentwood District Council [1991] 1 AC 398 (a firm of consulting engineers retained to check the designs and calculations for the construction of 160 homes on a sloping site); S v Secretary, Department of Immigration and Multicultural and Indigenous Affairs (2005) 143 FCR 217 (a company contracted to provide general services at an immigration detention centre).
98 The term independent contractor, in its broad conception, connotes an entity that furnishes supplies or performs work under a contract that does not create a relationship of principal and agent as between the contractor and the person who contracts for the benefit of the services supplied. The word independent serves to emphasise the contractor's independence from the person for whom the contractor's services are provided.
99 However, when a term receives constant attention in a particular context it can take on a particular connotation. The term independent contractor seems most often to have been used in the cases, whether dealing with negligence, taxation law, employment or industrial law, to identify a distinction between an employee at common law and a person who is not an employee. Those cases generally involved questions of characterisation, made upon facts involving persons performing roles that are at the juncture between what the common law recognises as an employee on the one hand and an independent contractor on the other. That context called for comparisons to be made between an employee and something closely akin to an employee, but not recognised as such by the common law.
100 The connotation for the term independent contractor which that context encouraged, has entered into common parlance, including because of the increasing trend over the past half century towards self-employment and the need to distinguish the status of the self-employed contractor from that of an employee.
101 It does not matter for current purposes whether the trend to self employment was the consequence of employers seeking to escape obligations imposed by the law in relation to the employment of employees, or whether the trend was the result of genuine decisions made by individuals to provide their labour as self-employed persons. The fact is that the trend became the subject of industrial concern which was ultimately, to some extent, reflected in industrial laws. The loss of the status of an employee for an individual regarded as self-employed, resulted in the loss of access to legislative industrial protections as well as ineligibility to join and be represented by industrial organisations of employees. It is not necessary to chart the history in any great detail. It is sufficient to observe that the industrial contest over the status of individuals who provided labour but who were not recognised as employees by the common law, led to the adoption of deeming provisions in the industrial legislation of some States. Those provisions resulted in the inclusion of a range of persons not recognised by the common law to be employees, within the protective scope of industrial regulation, including by providing such a persons the capacity to join and be represented by unions.
102 These events were referred to in passing in the last major review of Australia's industrial relations system conducted in 1985. The Report of the Committee of Review on Australian Industrial Relations Law and Systems ("the Hancock Report") notes that amendments were made to the Conciliation and Arbitration Act 1904 (Cth) ("the C&A Act") in 1973 and 1974, to enlarge the scope of membership of federal employee organisations to include persons who were not employees but who nevertheless "followed an occupation in the industry concerned otherwise than as employees or employers". Those amendments were intended to deal with the conflict between federal and state unions, including by reason of a discord in membership as between many federally registered unions and their state based counterparts, which followed the introduction of deeming provisions in the industrial legislation of some States. This conflict was brought to notice in Moore v Doyle (1969) 15 FLR 59 and became the subject of consideration by the Committee of Inquiry on Co-ordinated Industrial Organisations conducted in 1974 by Mr Justice JB Sweeney. As the Hancock Report notes at [7.59] of Volume Two, with the enlarged scope of membership of federal employee organisations brought about by the 1973 and 1974 amendments, some federal organisations amended their rules "to enable them to enrol independent contractors (such as owner-drivers in the transport industry and self-employed persons 'working on the tools' in the building industry)".
103 In 1977, s 132(4) was inserted in the C&A Act. It had the effect of restricting the categories of non-employee members of federal employee organisations to persons deemed to be employees in the State based industrial legislation specified in the provision. Section 132A was also inserted into the C&A Act in 1977. It seems to be the first occasion on which the term "independent contractor" was used in federal industrial legislation. The title to s 132A was "Offences in relation to independent contractors, etc". The term "independent contractor" was not used in the text of s 132A and instead, the persons the subject of the provision were those that fell within the defined description of "eligible person". An "eligible person" was a person "engaged in activities in an industry, otherwise than as an employee; and by reason of being so engaged, is, or would, if he were an employee, be eligible to join a [federally registered] organisation". The evident purpose of s 132A was to protect such persons against discriminatory action or coercion designed to pressure them to join a federally registered union.
104 The workplace rights and industrial activities protections provided by Pt 3-1 of the FW Act can be traced back to s 9(1) of the C&A Act as enacted in 1904. Since 1904, the protective scope of provisions of that kind has been greatly expanded both in relation to the subject matter of the protections and the persons protected. Prior to the repeal of the C&A Act in 1988, s 5 of that Act contained the relevant protections. The provisions were limited in their scope to the conduct of an employer taken against an employee. The protections conferred included action taken by an employer because the employee was entitled to the benefit of an industrial agreement or an award. There was no reference to independent contractors. The position of prospective employees was not dealt with.
105 The C&A Act was replaced by the Industrial Relations Act 1988 (Cth) ("the IR Act"). The relevant protections were then set out in s 334 of the IR Act. Section 334 continued to provide protection in relation to action taken by an employer because an employee was entitled to the benefit of an award or an order of the Australian Industrial Relations Commission. A wide range of other protections from harm at the hands of an employer, not dissimilar to those now found in Pt 3-1, were also in place by that time.
106 There are two notable aspects of the protections as they stood in the IR Act. The first is that their application was extended to independent contractors in amendments made in 1992 by the Industrial Relations Legislation Amendment Act 1992 (Cth). That was done by the enactment of s 334(7A), which for the purposes of the relevant sub-sections of s 334, extended the meaning of "employee" to include an independent contractor and extended the meaning of "employer" to include a person engaging an independent contractor. Section 4(1A) of the IR Act declared that a reference in that Act to an independent contractor was confined to a natural person. The second notable feature is that the protections provided extended to prospective employees and prospective independent contractors.
107 The 1992 amendments also introduced ss 127A-127C into the IR Act. By those amendments, for the first time, federal industrial legislation provided a scheme for the review of contracts made by independent contractors ("the unfair contracts provisions"). The power to conduct such a review and make orders setting aside or varying such contracts (s 127B(1)) was reposed in the federal industrial tribunal then called the Australian Industrial Relations Commission and which is now called the FWC. Section 127A(1) of the IR Act defined the term "contract" and identified the contracts to which ss 127A-127C had application. They were limited to contracts binding on an independent contractor which related to the performance of work by the independent contractor, other than work for private and domestic purposes. A fuller account of those provisions and successor provisions which ultimately found their way into the IC Act is given in Informax at [107]-[155].
108 Amendments were also made in 1992 to the description of the persons who may constitute associations of employees to include "independent contractors who, if they were employees performing work of the kind which they usually perform as independent contractors, would be employees eligible for membership of the association". A corresponding change was made by the enactment of s 195(1A), which dealt with the membership eligibility rules of organisations of employees. The IR Act also included s 336, a provision like that earlier found in s 132A of the C&A Act, which did not use independent contractor in the text of the provision but was headed "Offences in relation to independent contractors etc".
109 It seems to me likely that when s 334 of the IR Act was extended by the 1992 amendments to include independent contractors, what Parliament had in mind when it used the term "independent contractor", was a self-employed individual personally providing his or her labour, or perhaps labour and some equipment, under a contract for services. That confined connotation of independent contractor is apparent from the use of the defined term "employee" to refer to an independent contractor and also from the subject matter dealt with by the text of s 334. There is no hint in those provisions that the fundamental characteristics of an independent contractor of the kind there contemplated, were not characteristics shared by an employee. In fact, the deeming provision used to bring independent contractors within the scope of s 334, denied any possible distinction of that kind being drawn. By limiting the contracts which could be reviewed to those related to the performance of work by the independent contractor, the unfair contracts provisions also used the term independent contractor in its confined sense. As did the membership related provisions to which I have referred.
110 The Workplace Relations and Other Legislation Amendment Act 1996 made substantial changes to the IR Act and renamed it as the Workplace Relations Act 1996 ("the WR Act"). Part XA titled "Freedom of Association" replaced s 334 of the IR Act and further extended the scope of the protections conferred, particularly in relation to conduct by industrial associations against others. Much of what had been contained in s 334 became the subject of ss 298K and 298L of the WR Act. However, the definition of employee no longer included an independent contractor and the conduct prohibited was separated into two sub-sections. Section 298K(1) dealt with employer conduct against an employee and s 298K(2) dealt with conduct by a person against an independent contractor. The prohibited reasons for conduct were spelt out by s 298L(1). An "entitled to the benefit" protection was retained. Of some note is 298L(1)(c)(i) which indentified one of the prohibited reasons as:
(c) in the case of a refusal to engage another person as an independent contractor:
(i) has one or more employees who are not, or do not propose to become, members of an industrial association;
111 By that sub-paragraph, for the first time, the scope of the workplace rights and industrial activity protections dealt with by federal industrial legislation was extended to protect against conduct taken by a person against an independent contractor by reason of the circumstances of the contractor's employees. The sub-paragraph recognised that independent contractors were persons who may employ employees. That recognition challenged the notion that the term "independent contractor", when used in the WR Act, necessarily meant a self-employed individual personally providing labour under a contract for services. Some of the provisions of s 298L(1) were suggestive of the confined meaning. For instance, paragraph (m) dealt with "the case of an employee or an independent contractor" who had "absented himself or herself from work without leave". What started to become apparent with the enactment of s 298L(1)(c)(i) was that the term "independent contractor" began to be used in a manner which required that its meaning be taken from the context given by the particular provision in which it was found.
112 The Workplace Relations and Other Legislation Amendment Act 1997 (Cth) made further changes to the WR Act. In the Minister's Second Reading speech, the Minister stated that the Bill made a number of technical amendments aimed at clarifying existing provisions and ensuring that they operated in the manner originally intended. The amending legislation did two things of some importance to my consideration. First, it amended the definition in s 4(1A) of "independent contractor" to declare that "except in Part XA" a reference in the WR Act to an independent contractor was confined to a natural person. It also inserted within Pt XA itself s 298B(5), which declared that a reference to an "independent contractor" in that Part or in regulations made for the purposes of that Part, was not confined to a natural person.
113 Those amendments were moved by the Government in the Senate. They were the subject of a Supplementary Explanatory Memorandum. In several passages, the Supplementary Explanatory Memorandum states that the amendments were designed to ensure that freedom of association protections were not limited in their application to non-corporate independent contractors. That was said to "give effect to the Government's policy intention that the freedom of association provisions apply to all contractors". When the amendments were introduced in the Senate, Senator Campbell who moved the amendments, echoed the intent expressed by the Supplementary Explanatory Memorandum: Australia, Senate, Debates (1997) Vol S187, p 7933-7934.
114 The WR Act was amended by the Workplace Relations Amendment (Work Choices) Act 2005 ("the WorkChoices amendments"). The 'freedom of association' provisions came to be dealt with in Pt 16 of the WR Act. Sections 298K and 298L were essentially replaced by s 792 and s 793 respectively. The latter dealt with the prohibited reasons to which the conduct described in s 792 applied. A refusal to engage another person as an independent contractor because the independent contractor has one or more employees who are not or do not propose to become members of an industrial association, continued as the only prohibited reason focused upon employees of an independent contractor. The provisions continued to identify separately the conduct not to be taken against employees (s 792(1)) and the conduct not to be taken against independent contractors (s 792 (5)).
115 Following the introduction of the WorkChoices amendments, s 4(2) declared that a reference to an "independent contractor" in the WR Act, except in Pts 10 and 16, and in regulations made for the purposes of s 356, was confined to a natural person. As mentioned, Pt 16 of the WR Act contained the 'freedom of association' provisions. Part 10 was entitled "Awards", and insofar as it related to independent contractors, it set out matters (referred to as "non allowable award matters") that were prohibited from inclusion in awards. Section 356 gave the Minister power to make regulations specifying content that was prohibited from inclusion in workplace agreements.
116 Section 515(g) of Pt 10 of the WR Act post the WorkChoices amendments, prevented the inclusion in any award of "restrictions on the engagement of independent contractors and requirements relating to the conditions of their engagement". Section 515(h) prohibited similar restrictions in relation to labour hire workers. Pursuant to a regulation making power in s 356, the Workplace Relations Regulations 2006 set out substantially identical prohibitions in relation to the content of workplace agreements.
117 The Supplementary Explanatory Memorandum to the Workplace Relations Amendment (Work Choices) Bill 2005 stated that the amendments to the WR Act to provide that references to an "independent contractor" were not confined to a natural person in Pt 10 and in regulations made under s 356, would have the following effect:
• the prohibition on award terms that restrict the engagement of independent contractors in section [515] would extend to terms restricting the engagement of corporate contractors;
• prohibitions specified in the regulations against agreements containing terms which restrict the engagement of independent contractors would apply to both individual independent contractors and corporate contractors.
118 The apparent legislative policy behind the prohibition on the inclusion in awards or agreements of terms restricting the use of independent contractors, is that enterprises should be free to engage such persons without restriction. It is difficult to discern any legislative intent to confine this protection given to enterprises, to the use of self-employed or individual contractors and not to apply the protection in relation to a wide range of contractors providing services of the kind which could be provided by employees or groups of employees. The protections here dealt with are to be understood as a reaction to restrictions which were commonly found in awards and agreements made in the context of employees and their unions resisting the trend to contracting out or outsourcing. I deal with that trend in more detail later.
119 In my view, the phrase "independent contractor" was not here used in its narrow sense. The juxtaposition in the Supplementary Explanatory Memorandum of "individual independent contractors" and "corporate contractors" supports the conclusion that the term was intended to have a broad meaning.
120 The unfair contracts provisions in the WR Act were removed from that Act when the IC Act was enacted in 2006. Under the IC Act, the capacity for a contract to be reviewed is limited to what is described as a "services contract". The s 4 definition of "independent contractor" explains that the meaning of that term is not limited to a natural person. However, the terms of s 11 make it clear that where the independent contractor is a body corporate, the unfair contracts provisions only apply to a "services contract" that relates to the performance of work by a director of the corporation or a member of the family of a director. The Explanatory Memorandum to the Independent Contractors Bill 2006 at [55] explains that the limitation in s 11 "contemplates that large bodies corporate would be excluded from accessing this Part as directors would not usually personally perform all or most of the work" under the "services contracts" of such corporations.
121 The legislative survey just undertaken satisfies me that at least until the WR Act was enacted, the term "independent contractor" was consistently used in its confined sense, to mean a self-employed individual personally providing work under a contract. Perhaps the term "individual contractor" or "self-employed contractor" would have been a better descriptor for the kind of person that Parliament had in mind. A wider conception of what was meant by independent contractor for some purposes, first appeared in the WR Act, where corporatised independent contractors employing employees were contemplated as falling within the description.
122 What is notable about the change made in 1996 to the WR Act with the inclusion of s 298L(1)(c)(i), is that for the first time, the provisions addressed what must have been perceived to be a need to protect against action taken by a third party directed at employees of an independent contractor. In that case, the concern was limited to adverse action taken because the employees of the independent contractor were not or did not propose to become members of a union. What I think is telling about the current provisions, is that the concern about action taken by a principal against employees of an independent contractor has been significantly expanded. Not only is non-membership of a union covered, but each and every workplace right and each of the industrial activities protections, now operate in respect of persons employed (or engaged) by an independent contractor. That result is consistent with the observations made in the Explanatory Memorandum to the Bill which became the FW Act at [1336] as follows:
The consolidated protections in Part 3-1 are intended to rationalise, but not diminish existing protections. In some cases, providing general, more rationalised protections has expanded their scope.
123 There is a discernable rationale for the expansion of the protections afforded to employees of independent contractors from action taken by a principal who engages the contractor. It is well known that the trend to self-employment was accompanied by a growing practice by enterprises to contract out or outsource to contractors many of the functions which had formerly been performed internally by a part of an enterprise's direct workforce. As Owens and Riley point out, throughout the 1980's and 1990's the organisational model utilised by business underwent transformation. Many companies resolved to focus on their "core business" and to carve out or outsource non-core functions to separate enterprises that could provide services under contract: Owens R and Riley J, The Law of Work (Oxford University Press, 2007) p 145. The carving out or outsourcing of cleaning, security or maintenance services provide common examples. As a result, there has been a proliferation of employees of contractors working in the workplaces of enterprises involved in outsourcing.
124 In that context, enterprises that engage contractors have a heightened interest in the industrial rights, practices and arrangements made between the contractor and its employees. That is primarily because the employees of contractors commonly work in the same workplace as the direct employees of the principal or with employees of other contractors also engaged by the principal. Additionally, the labour costs of a contractor will often be of significant relevance to the ultimate price paid by the principal. In many situations, those costs may be directly passed on to the principal. As a result, the interests of a principal in the workplace relations arrangements of a contractor may extend to the selection of employees, their terms and conditions of employment and the nature and extent of their union activities. Any or all of those matters have a capacity not only to affect the price paid by the principal, but also the relations between the principal and those of its own employees employed in the same workplace as that in which the independent contractor's employees work.
125 The terms of the former s 298L(1)(c)(i) of the WR Act show that the mischief sought to be addressed by that provision, was directed against a principal requiring a contractor to have its employees join a union. Items 3 and 4 of s 342(1) go much further in guarding against the conduct of a principal which has an adverse effect on the workplace rights and industrial activities rights of employees of a contractor. It seems to me that this extended protection involves a recognition that contracting arrangements are a fertile area in which workplace rights and other protected activities are at risk of adverse action taken by a third party principal. It is likely that Items 3 and 4 were substantially directed at that mischief.
126 The only mischief that the State identifies to explain why adverse action by a principal against the employees of an independent contractor has been prohibited, if independent contractor is to be given its confined meaning, is the protection of the workplace rights of the owner/operator who is employed by his or her own company from adverse action by a principal. It is possible to conceive of a situation such as that. For instance where adverse action might be taken by a principal against the owner/operator employed by his or her own company because he or she has decided to join a union. However, the possibility of protection is so narrow and the occasion for its use likely to be so rare, that it is difficult to imagine that Items 3 and 4 were enacted for such an inconsequential purpose. It is far more likely that the very significant expansion of protection provided by Items 3 and 4 has been undertaken to guard against the unique power and interest in industrial matters, of principals who engage contractors. With that objective in mind, it is unlikely that "independent contractor" when used in Items 3 and 4 was intended to have a confined meaning.
127 The mischief to which I consider Items 3 and 4 are principally directed, helps also to explain why the draftsperson did not use the word "person" or "employer" instead of "independent contractor". To have done so would have extended the reach of the provisions beyond the particular arena targeted for regulation.
128 Once that door is stepped through, there is nothing to suggest that Parliament sought to constrain the application of Items 3 or 4 to small rather than large contractors. If Parliament had sought to constrain the scope of those protections to small businesses it could have done so expressly, as it has done in relation to unfair dismissal protections, where unique arrangements have been established for businesses employing fewer than 15 employees: see s 23 and Pt 3-2 of the FW Act. The manner in which the IC Act has limited its protective scope for corporatised independent contractors to small family run corporations is another example of what might have been done, if Parliament's intent was consonant with that for which the State contends.
129 I should add in relation to the IC Act, that the express restrictions found in s 11 are an obvious point of distinction from the provisions here under consideration and in that context, neither the Explanatory Memorandum nor the observations of Cowdroy J in ATS (Asia Pacific) Pty Ltd v Dun Oir Investments Pty Ltd [2012] FCA 1004 at [43] relied upon by the State, are of much assistance.
130 For all those reasons, I reject the State's contention that when used in Item 4 of s 342(1) of the FW Act, the phrase "independent contractor" is confined to mean an individual or corporate entity which is the functional equivalent of an employee. In my view, whilst the term includes such a person, it also includes a wide range of contractors who, independently of the person with whom they contract, provide services pursuant to a contract which includes the provision of labour but which may also include the provision of other services. That does not mean that the protective scope of s 340 extends to all such contractors and all of the persons employed or engaged by them in all circumstances. It is only where those persons have a workplace right which is adversely affected by a principal in the manner specified by the table in s 342, that the section is engaged. That requirement provides a requisite nexus with workplace relations which serves to confine the reach of the provision within the reasonable boundaries which must have been contemplated and does so without the need for a confined meaning to be attached to the phrase "independent contractor".
131 In coming to that view, I have also considered the various provisions of the FW Act which the State pointed to as suggesting an intended 'equivalence' between an employee and an independent contractor. I accept that some of those provisions do suggest an equivalence. However, all that the exercise serves to demonstrate is that like its predecessors, the FW Act uses the term "independent contractor" differently in different provisions and that the term takes it's meaning from the particular context in which it is found. That is apparent, for instance, from the provisions of ss 357-359 which use the term "independent contractor", but make it clear that the protection proffered is only available to an individual. It is also the case that a narrow conception of an independent contractor is contemplated in relation to provisions dealing with eligibility for union membership and related topics. The confined meaning intended for "independent contractor" in those provisions is a reflection of the predecessor provisions dealing with the composition of unions in the context of the industrial history to which I have referred.
132 As set out earlier, Eco is a demolition and recycling company that usually contracts to undertake demolition works and recycles the by-products of that work. Eco provides services under contract including labour services provided predominantly by its own employees but also on ocassion by contractors which it engages. In my view, where it is proposed that Eco contract with a principal under a contract for services (the meaning of which I will shortly outline), Eco is an "independent contractor" within the meaning of Item 4 of s 342(1).