Victoria’s contracts move would be a disaster

Food delivery riders are one of the most visible manifestations of the gig economy. Picture: Tim Pascoe
Food delivery riders are one of the most visible manifestations of the gig economy. Picture: Tim Pascoe

The nation has already been stunned at the incredible Victorian government blunders that led to the state’s COVID-19 virus getting out of control. But now that same government has issued a report that recommends actions that threaten sole trader contractors who are plumbers, electricians, barristers, computer programmers, those involved in the “gig economy”, and many other activities.

It aims to change the way work is carried out in the troubled state, transforming industries like housing, IT, road transport and home delivery .

The report called the “Inquiry into the Victorian On-Demand Workforce” targets the so-called “gig economy”, but its solution is designed to cover a wide range of other self-employed people by changing their relationship with their source of income. And so instead of undertaking a contract to perform a service for an enterprise or an individual, a plumber will become a short-term employee of that group or person.

California has already tried such a left-wing inspired stunt and, as you would expect, discovered it boosts unemployment and sends people wanting contract services like IT to other US states or to India.

And in Victoria, given the ravages of COVID-19 on small business, it would be a disaster.

Australia has a system of differentiating contracting and employment by using the so-called “common law”. This centuries-old set of precedents underpins Australian legislation nationwide. We have augmented it by clear rules set by the federal government which basically state that if a person makes arrangement to undertake a task for remuneration and that arrangement gives all the control over hours, times of work and locations etc to the receiving enterprise, then it’s an employment relationship. It’s covered by the employment rules.

If, on the other hand, the person performing the task has a choice as to whether to accept the work and, where appropriate, to be able choose when the work is done and how a task is carried out, then it is a contracting relationship.

Usually in contracting you can do work for others and often provide your own “tools”.

Accordingly, the Uber system of distribution was found to be contracting and not employment partly because of the freedom Uber drivers have to accept or reject work on offer.

The Victorian report recommends the Commonwealth abandon the common law test for self-employment and replace it with a new test called the “entrepreneurial test”. Exactly how this test would be worded is not spelt out but if it follows California the whole gambit of self-employment would be covered.

The report recommends that if the Commonwealth does not act then Victoria should act alone.

The Coalition in Canberra will, if course, laugh at the request—it is looking to boost small business. But it underlines the importance of the actions that the Coalition— with the base support of the ALP– is undertaking to speed up contract payments and end so-called “unfair contracts”.

Federally the ALP, under Anthony Albanese, is now genuinely looking to gain the support of smaller enterprises.

If Labor backed the Victorian proposal it would be a policy akin to “franking credits on steroids” (A disastrous franking credits policy was a key factor in the loss of the last election).

The Victorian government probably believes it has no hope of being re-elected so wants to take up causes from the extreme left. For example, almost certainly the “entrepreneurial test” would enable the CFMEU to take control of the home building industry, because the myriad of small independent contractors would become employees of multiple builders. The report does not analyse the wider ramifications of abandoning common law but instead concentrates on the gig economy and, usefully, has discovered a remarkable set of facts showing how it is used to benefit Australians.

The report conducted a national survey of 14,000 people that found that 7.1 per cent were currently doing gig work but of that 7.1 per cent just 2.7 per cent had gig work as their full-time income—ie just 0.19 per cent of the total Australian workforce use the gig economy for their full time income.

The report shows that workers use the various “gig” platforms and the choice of contracting available to work around other commitments to gain additional opportunities to generate income. It’s true there is no superannuation but if the gig economy is used as an income adjunct then holidays are available at any time by stopping the supplementary income. This is helping a large number of people and if the contractor plays hardball we have set up the small business ombudsman for appeals.

And if they are unhappy, contractors can also go somewhere else to gain the supplementary income. In other words, the report confirms that the gig economy is being used as a flexible addition to income. But to protect just 0.19 per cent of the work force who use it as their sole source of income the report sets us on a path to trash vast areas of the small business community.

It appears that the committee’s conclusions may have been set before it started researching and when the evidence showed that the proposed action was not justified it ignored the evidence. The union movement wants to increase its power to cover small business activities—particularly in housing. If it succeeds the cost of building houses will rise.