Queensland’s new labour hire licensing laws explained and analysed

Dec 2017

It’s official!  Labour hire workers are at greater risk of being injured at work than ordinary employees.1 Workers’ compensation premiums for labour hire employees are also higher than premiums for employees generally.2 Anecdotally at least, so are public liability premiums and deductibles for businesses who regularly use labour hire staff.

None of these issues will come as a surprise to casualty underwriters or corporate users of labour hire providers.

In response to these and other issues affecting the labour hire industry, the Queensland Parliament has enacted the Labour Hire Licensing Act 2017 (Qld) (Act), which will come into effect on 16 April 2018.  This newsletter examines the scope and reach of the new laws, possible effects on claims frequency and whether there are opportunities for casualty underwriters and corporate users of labour hire services to take advantage of the new legislation to more clearly evaluate the likelihood of injuries and claims.

Scope and reach

What is labour hire?

A person provides labour hire services if, in the course of carrying on a business, they supply a worker to another person to do work.3 The worker may be supplied directly to another person or through one or more agents or intermediaries.4

Who is a worker?

A worker is a person who enters into an arrangement with a labour hire provider, under which the provider:

  1. may supply the person to another person to do work; and
  2. the labour hire provider is obliged to pay the worker for the work.5

Who is caught? 

In the current employment climate, where workforce flexibility underpins most business models, these wide definitions are likely to regulate the following arrangements:

  1. traditional arms-length labour hire providers;
  2. ‘internal’ or ‘captive labour hire’, where a business structures its affairs so that workers are employed by one entity in the company group, but perform work for another entity; and
  3. secondments and loans of workers from one employer to another.

The legislation is not intended to apply to traditional principal and subcontractor arrangements,6 genuine volunteer work, work experience placements arranged through an educational institution or recruitment services resulting in permanent placement.  In the future, it is likely that regulations will be enacted to clarify the application of the Act and explicitly exclude certain types of arrangements.  

Licensing

Obtaining a license

In broad terms, the legislation requires providers of labour hire services to comply with a number of basic probity requirements to secure a license.7 These will be administered by a public service unit8  and include financial stability and solvency, an unblemished corporate and criminal history, and no obvious links to associates who are not fit and proper.

Licenses will be granted for a term of one year9 and may be subject to conditions such as the requirement to hold insurance, lodgement of a security and be open to inspection of premises at regular intervals.10 

Ongoing reporting

License holders will have ongoing bi-annual reporting requirements from the date their license is granted.  These reporting requirements will provide a wealth of information about labour hire service providers, including:11

  1. the number of workers deployed;
  2. the arrangements between the workers and the license holder;
  3. the location and type of work that has been performed;
  4. details of any disciplinary or enforcement action taken against the license holder; and
  5. the number of notifiable incidents and workers’ compensation applications involving the license holder.

Labour hire register

A free online labour hire register will be established and will include details of all of the license information mentioned above.12  The register will provide a considerable degree of transparency around the performance of license holders in relation to key aspects of the labour hire relationship, especially worker safety and incident and claims frequency.

Objectives – will they be achieved?

Parliamentary inquiry

The enactment of this legislation follows completion of a parliamentary inquiry into labour hire practices in Queensland.  As mentioned, one of the key findings of the inquiry was that labour hire workers are at much greater risk of injury occurring in the course of their work. The factors which contributed to these outcomes included:

  1. labour hire workers receiving limited training and supervision and potentially being deployed to perform work to which they were not ideally suited;
  2. an unwillingness of labour hire workers to raise workplace health and safety issues due to perceived job insecurity;
  3. the limited capacity of labour hire providers to exercise supervision and monitoring of their employees’ work activities; and
  4. lack of clarity around the division of responsibility for safe work systems, assessing work suitability and devising and implementing safe work systems between labour hire providers and the host employers who use them.

Claims experience

In our experience, labour hire related workplace injuries are a relatively common class of injury claim.  All of the issues identified by the parliamentary inquiry are, indeed, features of the claims that we manage.

Specifically, there can be a tendency amongst commercial labour hire providers to play a subsidiary role in relation to worker safety.  Often, seemingly little or no attention will be paid by the labour hire provider to worker selection, host employer work systems, site specific assessments and ongoing monitoring of performance.

Equally though, there is an obvious tension between the desire of the host employer to secure workers for particular roles and their willingness to permit the labour hire provider to fully scrutinise the adequacy of their work systems.  There can be very little incentive for the labour hire provider to do so, as it is being asked to judge and report on the adequacy of its own clients’ systems.  It may also not have the required knowledge or expertise to critically evaluate the adequacy of the host’s system so as to protect its workers.

Partial solution?

In that sense, the decision to cast the regulatory burden solely on the labour hire provider while not having complementary requirements for users of labour hire services to facilitate and actively participate in the implementation of safe systems makes it uncertain to what extent these laws will lead to improvements in worker safety in the sector.  At the least though, a licensing and injury reporting system will most likely quickly identify those labour hire providers who have or develop a poor track record with worker safety.

Host employers must also still comply with the existing work health and safety laws, which do cover the field in relation to worker safety.  It may be thought that this will, in combination with the Act, improve worker safety in an overall sense.

Implications for users of labour hire providers

As mentioned, the need for labour hire users to ensure that they are sourcing workers from licensed providers does bring with it the added burden of checking the credentials of their provider. However, mainstream commercial suppliers are likely to make this easy for their clients to achieve.

Those companies who may be significantly affected are businesses who have elected to establish their own ‘internal’ or ‘captive’ labour hire arrangements.  Undoubtedly, these new laws will add a much greater regulatory burden to continuing with such arrangements. The new reporting requirements, especially, will cast light onto any and all notifiable incidents involving the company group.  License fees13 and the requirement to comply with license conditions may also render these arrangements less attractive overall.

Opportunities for casualty underwriters

Perhaps the greatest benefit for casualty underwriters who place cover for users of labour hire providers, and the providers themselves, will be the ability to search the public online register for information.  

If an underwriter knows that a host employer uses labour hire services and who its provider is, they will be able to check the safety track record of the provider.  Whether the register will eventually identify the host involved in any particular incidents remains to be seen. 

As mentioned, those groups who elect to persist with the ‘internal’ or ‘captive’ labour hire structure should also now be searchable.

Other states

South Australia

South Australia has recently passed its own labour hire licensing legislation14 which is broadly the same as Queensland’s legislation; however South Australia’s system does not require annual license renewals, has higher penalties, and has a more rigorous assessment of the fitness of license applicants.  

While South Australia will also have a freely accessible register of licensees, the licensee’s notifiable incidents and workers’ compensation claims will not be published.  In the future, regulations may be introduced requiring the publication of this information.

The South Australian legislation currently awaits assent; however it is likely to come into effect on 1 March 2018.

Victoria

The Victorian Government is currently in the consultation phase of introducing labour hire licensing legislation following its own inquiry into the labour hire industry.15  As in Queensland and South Australia, the Victorian legislation is likely to require that license applicants demonstrate they are good corporate citizens, set up a public service unit for monitoring compliance with the licensing scheme, and maintain a register of licensees.  

....
1 Inquiry into the practices of the labour hire industry in Queensland, Report No. 25, Finance and Administration Committee dated June 2016, page 6. 
2 Inquiry into the practices of the labour hire industry in Queensland, Report No. 25, Finance and Administration Committee dated June 2016, page 32.
3 Labour Hire Licensing Act 2017 (Qld), s 7. 
4 Ibid s 7(c).
5 Ibid Section 8.
6  A person does not provide labour hire services if they engage subcontractors to carry out work under a contract for construction work within the meaning of section 10 of the Building and Construction Industry Payments Act 2004.  See Labour Hire Licensing Act 2017 (Qld), s(3)(b).
7 Labour Hire Licensing Act 2017 (Qld) ss 15 and 27.
8 Ibid s 13.
9  Ibid s 17.
10 Ibid s 29.
11 Ibid s 31.
12 Ibid s 103.
13 The government has said that license fees are likely to be $1,000 to $5,000 depending on the size of the business.
14 Labour Hire Licensing Bill 2017 (SA).
15 ‘Latest update: A labour hire licensing scheme for Victoria’ accessed at https://economicdevelopment.vic.gov.au/inquiry-into-the-labour-hire-industry.
This article may provide CPD/CLE/CIP points through your relevant industry organisation. 
Stephen White

Stephen White

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Partner
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+61 (0) 7 3000 8354
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Rebecca Wilson

Rebecca Wilson

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Solicitor
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+61 (0) 7 3000 8467
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