Contingent Workforce Risks – When To Call A Lawyer

For many organisations, the catalyst for initiating a contingent workforce audit and implementing a strategy is in response to mitigating risk, most often after a breach has already occurred. But, when do you need to call a lawyer? How do you start analyzing your level of risk, and what do you do when you identify a problem? 
I talked to employment and industrial law expert, Nick Duggal, Parter at TressCox lawyers who discussed managing the risks of contingent labour, analysing the relationship with your contracted workers, and the advantages of going to a lawyer early on in your journey.
 
You can watch our chat, or read Nick’s main’s point below.

Contingent Workforce Risks

 
There is a great deal of risk in engaging contingent labour, especially on a large scale which unfortunately I don’t see fully recognised by some of the users out there.
 

Terms And Conditions

The first port of call in my perspective in properly quarantining and avoiding that risk is to have a solid set of terms and conditions with your suppliers.
The reality is that they’re getting a margin from the working relationship because they should be taking on a lot of risk, but you have to clearly confirm that in their terms and conditions.
 
Is it clear that they’re the employer? Is it clear that they have all of the burdens in relation to paying the right kinds of taxation? Are they wearing the responsibilities in terms of workers compensation, not only from an insurance point of view but also from a training point of view. It’s really useful to have all of those things really clearly set out in the standard terms and conditions.
 

When An Organisation Is Contracted Directly To Its Contractor/Contingent Workforce

 
You should have a solid set of terms and conditions with your contractors. Ideally these contractors will be operating their own contracting business, they’ll be a PTY LTD and therefore you can apportion to them a lot the same sorts of responsibilities you could apportion to a large scale contingent labour supplier, in terms of taxation, workers compensation and the like. So there’s not a huge amount of distinction between how you engage both types of contractors.
 

The Risk Of A Contingent PTY LTD Hire Working For One Employer

 
If an individual is engaged on a project basis, for a specified period of time,  there’s a good prospect that they’re generally be found at law to be a true contractor.
 
However, if someone is working exclusively for the same company, over an extended period of time, and there’s no discernible particular project that they’re working on, there can be an increase in risk that the law will deem them to be an employee of the end user, and that can lump the end user will all sorts of obligations in terms of employment entitlements, taxation entitlements , Workcover entitlements and the like.
 

What To Do If You Discover A Potential Risk

Look At The Facts Before Reacting

 
Number one is that I’d want to look at the terms and conditions. If they don’t support the user as well as they could, if the worker has been there a long time, then it’s important to not have a knee jerk reaction.
If you panic and immediately decide to terminate that relationship, that’s where all of these risks might crystallize. You might find yourself with an underpayment complaint. You might find that the worker has notified the ATO.
 

Talk About The Relationship

 

Take a look at that relationship, maybe have a discussion with the worker of the fact that the relationship has changed over time. Maybe it might be worthwhile entering into a new form of the relationship. It’s not unheard of that long term contractors can become legitimately employed by the end user.
 

If you’ve had the same contractor for five years, and you’ve worked on a number of projects. maybe it’s time to reevaluate relationship.

When You Need A Lawyer

Proactive Risk Mitigation

 
From my perspective, it’s much much more advantageous if an employer or organisation comes to me voluntarily and says “look, I’ve got this worker, nothing’s happened yet but they’ve been here for awhile. What do you think I should do?”. Then you can do it with some degree of comfort.
 

After The Fact

 
The worst, more disadvantaged time when employers come to me, is when they’ve already had a claim. They’re already being investigated by the ATO, the fair work ombudsman is already undertaking an audit in relation to the underpayment of employment entitlements. Then it becomes much much more challenged.
 
You’ve got less leverage to work with, you’ve got less time to work with, and you don’t have the opportunity to create a case around how you want to change the relationship.
 

Nick Duggal will be presenting a session on contingent workforce risk minimisation at #CWF15 in Sydney on 22-23 September. Register your ticket for the event here.