Labor’s new IR policy a jail threat to employers

Opposition Leader Bill Shorten announced a new Labor Party Policy this month under the title ‘Protecting Rights at Work’. The policy states that it is aimed at “unscrupulous employers who are willing to exploit workers”.

The policy includes major changes to the laws governing independent contractors and very harsh penalties for employers who underpay workers. Beyond vast increases in civil penalties, the proposed measures threaten employers with potentially lengthy periods behind bars. They include:

  • Increasing the penalties for employers who fail to pay workers correctly:
    • The maximum civil penalty would increase from $54,000 for a corporation to the higher of three times the amount of the underpayment or $1,080,000;
    • A penalty of up to two years imprisonment would apply in circumstances where an employer intentionally or recklessly underpaid an employee;
    • The Courts would have the power to disqualify directors of companies which underpay workers.
  • Increasing the penalties for sham contracting (i.e. treating a person as an independent contractor when the person is an employee):
    • The maximum civil penalty would increase from $54,000 for a corporation to $216,000;
    • A penalty of up to two years imprisonment would apply in circumstances where an employer intentionally or recklessly engaged in sham contracting;
    • The courts would have the power to disqualify directors of companies which engage in sham contracting.
  • Developing a definition of “independent contracting” to provide certainty to employers and workers, rather than relying on the common law to decide whether or not a person is an employee or an independent contractor.
  • Addressing ‘phoenix companies’ (i.e. new companies that emerge from the insolvency of other companies) by making directors personally liable for debts upon insolvency in relation to amounts owing for breaches of the Fair Work Act.
  • Increasing civil penalties to a maximum of $216,000 and introducing a new criminal offence, punishable by up to two years imprisonment, for employers who deliberately fail to meet their obligations under the Fair Work Act in respect of a temporary overseas worker.
  • Requiring employers to provide temporary overseas workers with a Temporary Overseas Worker Support Pack upon their commencement of employment. This pack will include information on employment entitlements and rights under Australian law, as well as contact details for relevant trade unions, migrant assistance organisations and workplace and occupational health and safety regulators. This information will be required to be provided in the worker’s native language. The maximum penalty for a corporation which fails to provide the Temporary Overseas Worker Support Pack upon their commencement of employment would be $54,000.

Ai Group has already commenced consultation with the Labor Party concerning this new policy statement, and we will clearly be expressing our opposition to the potential for harsh criminal penalties being imposed on our members. Underpayments often occur due to payroll errors or uncertainties regarding award coverage. Even though Labor’s policy is not aimed at these situations, the policy creates substantial risks for employers and managers.

We will also take issue with a number of the assumptions behind these proposals. For example, as outlined in our submission delivered last week at a public hearing of the Victorian Inquiry into Labour Hire and Insecure Work, the common law is far better equipped to assess the substance of particular relationships than any statutory definition of an ‘independent contractor’ could.

A one-size-fits-all definition would, rather, prevent the facts and circumstances of individual cases being fully considered – and would disrupt a very large number of existing contractual arrangements which are legitimate under common law, to the detriment of all parties to these contracts.

The vast majority of independent contractors have absolutely no desire to be employees. And tough sham contracting laws are already in place within the general protections in the Fair Work Act. These laws are operating effectively and do not need to be tightened – in fact, they were already tightened significantly when the Fair Work Act was introduced.

Do you have any concerns with the ‘Protecting Rights at Work’ package? Please share your thoughts or questions below. Ai Group will continue to keep members informed regarding our ongoing consultation with the Opposition on this and any other workplace relations policy developments.

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Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.


  1. Paul Martin

    A definition of ‘Independent contractor’ would be great if it could be achieved. Leaving it to common law only benefits lawyers !! At present government departments have different definitions of the same thing when trying to ascertain when payments are required. e.g. super, payroll tax, etc.
    The best definition would be to have both the employee and the employer just simply agree in writing that the relationship is one of ‘independent contractor’ and that would be that. No arguments.

    1. Stephen Smith (Post author)

      Thanks for your comments Paul.
      Your suggested definition would make things very easy for everyone Paul. I suspect though that unions and others would argue that it could lead to some employees being pressured to agree. There are about 1 million independent contractors in Australia, the vast majority of who do not want to be employees. Whatever definition is drafted (with the possible exception of yours), it is likely to disturb countless independent contracting arrangements that the parties are happy with. Regards, Stephen.


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