| The new workers’ compensation laws (from November 2005) prohibit certain employers from requiring individuals to incorporate (set up their own company) as a condition of getting a contract for work.
Prior to this, in many cases, workers continued to work exclusively or substantially for the company that previously employed them, while performing the work as a sole director of their own company. This left these workers, who were fundamentally employees, without any workers’ compensation cover.
The term ‘avoidance arrangement’ applies only in the following circumstances:
1. The arrangement was entered into on or after 14 November 2005.
2. The work is done under an arrangement designed to enable an employer to benefit from a worker’s services without liabilities and duties as the worker’s employer under the Workers’ Compensation and Injury Management Act 1981; specifically if:
(a) before the arrangement was made, the worker was the employer’s worker(under the Act) and provided substantially similar services; or
(b) before the arrangement was made, the employer intimated they would not engage the worker under contractual arrangements that would make the worker the employer’s worker under the Act.
3. While the arrangement is in effect, the worker does work principally for the employer on behalf of a company of which the worker is an employee or director.
4. The work is directly a part or process in the trade or business of the other employer.
Employers who allow a worker to do work for them under such ‘avoidance arrangements’ may be fined a maximum of $5,000.
If a worker is injured while working for an employer under an avoidance arrangement, the employer will be liable to pay workers' compensation entitlements in accordance with the Act and meet return to work obligations.
It is an offence for an employer (or the employer’s insurer) to receive any money or indemnity from the worker (or the worker's company) in respect of any compensation liability the employer has to pay compensation. Penalty: $2,000.
Examples of avoidance arrangements
1. Worker previously employed - AG Engineering enters into a new contract with a welder who was previously employed under a contract of service by the company to weld steel roofing frames.
Under the new arrangement, the welder provides substantially similar services as she did when working for AG Engineering, but provides those services on behalf of a separate company as a director or employee, working principally for AG Engineering. The work done is also directly part of the business of AG Engineering - that is, metal fabrication.
If an injury occurs, AG Engineering will be liable to pay the welder compensation and meet return to work obligations, if required.
2. Worker not previously employed - Morrissey Cleaners calls for tenders from incorporated companies to provide cleaning services to its clients. Morrissey Cleaners intimates that it is not responsible for workers’ compensation under the contractual arrangement for any company winning the tender for the contract.
An applicant, Mr Brookes, forms a company named PB Pty Ltd, registers himself as the director and PB Pty Ltd wins the contract. While the contract is in effect, Mr Brookes does work principally for Morrissey Cleaners – work that is directly a part of the business of Morrissey Cleaners - that is, industrial cleaning.
If an injury occurs, Morrissey Cleaners will be liable to pay Mr Brookes' compensation and meet return to work obligations, if required. |