CHAPTER 2
As a contractor, I am my own boss and I make my own choices. As an employee, I am always under someone's thumb ... There is more teamwork as a contractor
-- Moera, 38-year-old woolclasser, Queensland, Australia, 2000
WHAT IS NOT EMPLOYMENT? INDEPENDENT CONTRACTING!
To gain a deeper understanding of the legal reality of employment, it is necessary to understand what is not employment. For although the employment demon lurks deep within our societies, in truly free societies the demon can be purged. People can and do reject employment and opt instead for its opposite -- working with commercial contracts and becoming independent contractors.
Independent contracting is the contractual and relationship opposite of controlled employment. Independent contracting often goes by other names, such as free agent, freelancer, self-employed, and contractor. It is both a method of and an attitude to working that is spreading fast and, at the start of the 21st century, is recognised as having been adopted by up to one-third of the private-sector workforce in many developed countries.
Independent contracting is the relationship obverse of employment. With independent contracting, the contract deployed is the commercial contract. The parties to the contract have equal rights under common law to control its terms. In the eyes of the law, neither party has superior rights to the other, even if one party is richer or apparently more powerful than the other.
Independent contracting utilises the contract that protects the most basic human rights of each and every person. The commercial contract delivers the core legal structures designed to prevent or resolve the abuse of individuals when they are involved in economic relationships. The commercial contract provides fundamental protections to the weak, gullible or naive against the powerful and manipulative. It is not perfect and cannot stop all abuse, but it is one of the most important mechanisms available in civilised societies to redress abuse. Its only similarity to employment is that it is not some theoretical construct thrust upon people. The commercial contract is founded in the human relationships that actually exist in any given commercial transaction. It is the legal bedrock of economic activity.
Specifically, independent contracting involves the use of the commercial contract; a contract of equality existing between one person (whether an individual, company or trust) and another person. Independent contracting requires a contract in which parties agree that they exercise equal control over the terms of the contract and they therefore both control themselves. On the surface, the differences between the commercial contract and the employment contract may appear to be subtle, but they are, in fact, huge and their implications profound.
Both employment and independent contracting require (and are dependent on) very particular attitudes if they are to hold solid. Parties to an independent contract will have difficulty sustaining the integrity of the commercial contract if one party insists on wanting to exercise exclusive control. Likewise, if the employee in an employment contract objects to being "controlled" and wants equality, the relationship and the employment contract itself will come under stress. Relationships are the key to contracts. Relationships do not cause a contract to come into existence but, when a contract exists, a relationship always exists. A contract is, above all, formed on the basis of mental attitudes that determine relationships and which underscore the integrity of a contract. The mental attitude of an employer or an employee is not appropriate to independent contracting; indeed, it would cause an independent contract to collapse.
Independent contractors are typically people who desire to be in a business relationship. Neither party is dominant and both accept and expect that the nature of the contract necessitates a business-type relationship focused on mutually beneficial outcomes. Professionalism is the key mental attitude required of an independent contractor, whether a high-powered surgeon or a cleaner. Subservience, lack of responsibility, avoidance of accountability and a lack of interest in the outcome are not the attitudes of the independent contractor. Instead, the attitudes of the independent contractor are self-assuredness, acceptance of responsibility, preparedness for accountability and a focus on outcomes.
The massive differences between the employment contract and commercial contract underscore significant differences in behaviour and outcomes in businesses and economies. To understand this extraordinary arrangement called the commercial contract, it is best to look again at specific legal decisions in which the finding of employment or independent contracting was the judicial task at hand.
The judicial decisions examined in Chapter One focused on the indicators of employment and independent contracting. All those cases involved dissecting the differences between the commercial and employment contracts. In the case about to be discussed, however, the workers subject to the testing were found to be independent contractors, not employees. The very evidence the workers gave in this case illuminates some key points about the attitudes and behaviour that are the hallmarks of independent contractors and the commercial contract. These independent contractors truly did control their own work, but that did not preclude their clients from exercising control as well. The control process was one undertaken by people exercising mutual control to achieve mutual benefit.
THE QUEENSLAND FIGHT FOR INDEPENDENCE
The case involved an application under a highly unusual piece of legislation passed in the Australian State of Queensland which came into law on 1 July 1999. It is a piece of aggressive legislative activism that confronted and opposed the centuries of common-law development regarding commercial and employment contracts.
The legislative provision (called Section 275) (1) of the Queensland Industrial Relations Act sought to declare that common-law independent contractors could be turned into employees, even though their independent contractor status continued to exist and be accepted at common law. Section 275 was (and is) the equivalent of a parliament seeking to decree that an apple is an orange even though it accepts that the object is still an apple. One thing about common law is that, in lay terms, it is common sense. One odd thing about legislatures is that they are not legally constrained by common sense. Their only constraint is the alertness of the people to nonsense. So legislatures can (and do) declare things to be what they are not!
Section 275 falls into the nonsense category. So strange is the legislation that one court, when having to make a ruling on an application under section 275 that a company should be declared an employee, said
We were initially concerned that the relief was so wide that a corporate subcontractor ... might be caught. There is some conceptual difficulty in treating a corporation as an employee. However in the context of a legislative provision which deems relationships to be that which they are not, there can be no objection to bringing such a relationship into existence. (2)
In effect, the Parliament of Queensland has discarded centuries of common-law principles and human rights protections, and sought to force people into relationships of inequality (employment) against their will. As with most oppression initiated by any state throughout history, the public justification usually claims the moral high ground. In taking such aggressive legislative action, the Queensland Government claimed that it was protecting the weak and the oppressed. But this mask of moral purity was only a diversion.
It was not surprising, then, that the first test case of this destructive anti-independent contractor legislation should contain substantial human drama and colour. It was a seminal test case within the context of Australian folklore, history and political ideology, and in its own way cut to the heart of the great political debate about labour and capital. The case was played out in the dusty, rural outback town of Charleville, Queensland, where sheep shearers confronted union officials in a battle of hearts and minds over the authority of the collective versus the rights of the individual. It was a battle between those who sought to organise and control workers through state-imposed collective systems and those who sought freedom of individual thought and action as independent contractors. Yet this grand battle of ideas was played out in a most civilised, refined and almost innocuous manner in the local Charleville court room.
The case involved an application by the Australian Workers Union (AWU), once the largest of Australia's trade unions, to force a group of independent contractor shearers led by Barry and Moera Hammonds to be declared employees under section 275 of the Queensland Industrial Relations Act. The background and history to the case, the town of Charleville, and the importance of shearing to the labour movement need to be understood if one is to appreciate the importance of the Hammonds case.
More than one hundred years ago, the Australian union movement and its political wing, the Australian Labor Party (ALP), were born from the beer-and-blood violence of the workers' war of the 1890s. When Australia rode on the sheep's back, the economic boom depended on fleece being shorn from millions of sheep in rural Australia. The dusty, hard life of the Australian shearer typified the working-class struggle against the landed gentry who were the woolgrowers. This rugged, matey and sexist environment gave birth to the Australian union movement in the form of the Australian Workers Union; and the resultant images have long been ingrained in the psyche of an Australian nation eager to establish its identity. The Australian union movement and the Australian Labor Party came into existence in the shade of a large but now gnarled old tree in a Queensland country town which, like Charleville, depended on the pastoral industry and sheep. Within the Australian labour movement, the symbolism of shearing in Charleville is strong. It's a symbolism of workers versus bosses that underpins unionism internationally and deeply pervades the cultural approaches to labour regulation worldwide.
The historical and ideological underpinnings of these two great and powerful Australian institutions -- the union movement and the ALP -- were threatened, so the union believed, by shearers who refused to be employees. The anti-contractor provisions of the Queensland Industrial Relations Act were created specifically by these two institutions, which controlled the Queensland Parliament at the time.
In the 1990s, almost a hundred years after the AWU and Australian Labor Party were formed, Charleville and the surrounding districts were infiltrated by immigrant New Zealanders. Many of these were darker-skinned Maori, who brought new efficiencies to shearing, first with the use of wide combs for shearing and, following that, with the revolutionary ideas and attitudes of independent contracting. Barry and Moera Hammonds were at the forefront in both reform endeavours. In both instances, they faced fierce and often violent opposition from the White-Australia-inclined, Anglo-Saxon shearers who controlled the powerful AWU. In both instances, the full force of statute law was thrown against the newcomers. The Government of the State of Queensland, being a political creature born from the AWU, utilised its full force against individuals who dared to flout the rules it chose to impose on workers.
Many laws were imposed on shearers. Chief among these was the ban on shearing work on a Sunday, in place for nearly 70 years. Never one to be told what to do, Barry Hammonds, supported by his wife, Moera, stood against the State, and in his first encounter with it, Barry dared to shear on a Sunday. He did this in 1992 and for his "crime" he was tried and convicted and spent six days in the Charleville jail. As extraordinary as it seems, in an allegedly developed, democratic, civilised and free society, an individual could be jailed because he chose to work on a Sunday. The power of the union-controlled State had prevailed in that instance, but Barry had won a greater moral victory for the rights of individuals to work when they chose.
Barry's real crime, however, was to work in a shearing industry in crisis, because the price of wool had long since collapsed and the once-rich farmers of the district had become asset-rich but cash-destitute. No-one was making money and no-one could see a way out of the decades-long industry crisis.
For whatever reason, Barry and Moera were stubbornly determined to find better ways to work. They were at the forefront of the introduction of wide combs in the early 1990s and then introduced the first independent contractor systems into the Australian shearing industry. By the late 1990s, Barry and Moera had more than 300 individual contractor shearers working the rounds of the Queensland spreads, shearing sheep. By this stage "employment" had dwindled to a fraction of the Queensland shearing industry. The AWU's influence amongst shearers had disappeared, principally because shearers found that the AWU's rough and arrogant approach hindered their ability to perform and make money.
Barry and Moera and their teams of shearers and shed hands were also at the forefront of improving work practices that were the key to the survival of the wool industry. It was not the big things that made a difference, but hundreds of small items. The 1920s' shearing "award", still operating in the year 2000, stipulated the type of food that had to be served and the precise starting and finishing times of work. The required menu still reflected the "meat and vegies" tastes and habits of the 1920s. What people ate was stipulated by law. Shearing work was ruled by laws that declared when start and finish bells were to be rung. Barry and Moera breached the union laws, modernised and improved the shearers' diets, and introduced flexible work hours that reflected the preferences of the shearers.
The Hammonds introduced better grading or classing techniques for the wool, since it is in wool classing that the revolution is most marked. In 2000, wool prices varied according to the quality of the wool. Most baled wool leaving the farm gate averaged 20 microns in thickness and fetched $A3.50/kg for the woolgrower. By comparison, 19-micron baled wool could be worth $A7.00/kg and 16-micron (relatively rare) $100.00 plus /kg. Better "people systems" in the shed made possible more exacting baling and treatment of wool and therefore better financial returns.
At that time, the future of wool-growing depended largely on the higher prices that better-quality wool could command. This was and is the free contractors' focus. Moera Hammonds is an ace wool classer. A wool classer grades the wool according to its thickness. She came fourth at the prestigious International Golden Shears wool handling championships in New Zealand in 2000, the highest placing ever achieved by an Australian entrant. Her professionalism with wool classing is reflected in the training she gives new contractors, the standards she and her teams expect of themselves, and the business mentality of the contractors towards doing a quality job. The ability to class fine wool as the sheep is shorn is not only critical to the wool price that the farmers receive but, just as important, to their ability to identify high-quality breeding sheep and thus to improve the quality of their flocks.
Part of Barry's strength was (and is) his easygoing, laconic personality. He tells the story of the union hiring a mob of town thugs to beat him up at the back of the Charleville Hotel. With his back to the wall, he faced the mob, sizing up who he would take out before he was overpowered. The mob sized Barry up and decided a drink with Barry would be more productive than a beating. Unbeknown to the union, the union paid for the drinks out of the money given to the thugs!
But the waning of the AWU's influence was not due to Barry and Moera, who, in reality, were simply examples of a much larger shift in the culture of the Australian workforce. In the days of the newly emerging "e-economy", where the smart information technology experts operated as "free agents", it transpired that the cutting edge of the change in worker attitudes was not only in major cities but in country Queensland towns and in mature, "old" industries. The new, young breed of wool handlers, shearers and the like are educated, business-savvy, well-travelled and worldly wise. Business sophistication is not defined by where one works but by the attitudes of individuals. When it comes to these attitudes, the new shearer is the equal of the futures trader working at a desk in a high-rise glass tower. The AWU had become culturally time-warped, incapable of accommodating the new shearer. Worse still, from its point of view, it did not know it!
In the new shearing industry, most workers are staunchly independent contractors -- or want to be! The shearing award is ignored because of its millstone-like effect on shearers' incomes. Sure, cold beer is still drunk in large quantities to cope with the extreme heat -- frequently a harsh, bone-dry 40 degrees plus -- but the workers themselves do not tolerate drunken colleagues who destroy the productivity of the whole team. And in Barry and Moera's shearing teams, for example, workers are in their early 20s and many are women. This was a big turnaround for an industry which, until recently, was dominated by ageing men and a looming workforce shortage. Although men may continue to do most of the shearing, the days of rough handling and abusing the sheep being shorn are diminishing. A shearer harming a sheep is likely to receive a reprimand from any of the female wool classers, who are sensitive to the sheeps' well-being.
According to farmers, the outcome is a better wool clip and higher wool prices. And, for this, the farmers pay more. The contractors' remuneration consistently outstrips that of the antiquated award, which tends to "dumb down" both attitudes and pay.
The real point of interest, however, lies in the attitudes of both the shearing teams and the people for whom they work. Under the old system of employment, the farmers were seen as the bosses and the shearers as the workers. Relationships were of the "them and us" kind which are typical of employment. But independent contracting is the legal identification of different mental approaches to work and to the relationships between the parties. In the Hammonds' Section 275 court case, these attitudes were demonstrated in the statements made by all the people who gave evidence. It was in these new attitudes to work that the court found clear evidence of the existence of commercial contracts and thus independent contracting.
Comments from the wool growers, traditionally thought of as the bosses, provide a deep insight into the new attitudes. The statements are not statements of political ideology but rather of a practical approach to business needs. The statements are very much demonstrations of the nature of independent contracting and the commercial contract. (3)
Michael is in his mid-30s and owns and runs a family farm of some 240,000 acres with about 30,000 sheep. He also works as a shearer during the shearing season. He said:
The esteem in which shearers around town had been held was terrible poor prior to them [Barry and Moera] coming along ... They have taught people going into shearing that it is a career and a skill and given them self-esteem ... Younger people coming into the industry ... are now approaching it more as a career.
... the flexibility to shear on weekends is very important ... It is essential to be able to ensure that the sheep aren't kept in the holding pens over weekends.
... working over weekends goes both ways. If the shearing is tough, caused, for example, by having a high proportion of big wethers in the flock and you try to shear through into the weekend, the productivity of the team drops.
The TSA [Barry's and Moera's] teams tend to have a higher ratio of wool handlers to shearers. Since there is more time to spend on the fleece, the "fleece to pieces ratio" can be greatly increased and this can make a big difference to the return for the wool clip.
David is 38 and the owner/manager of a local produce and hardware store in town. In addition, he owns and manages a 14,000-acre property with about 2,500 sheep.
It used to be union controlled starting at 7am with a bell and when the bell rung to finish, the gear was dropped.
I pay TSA a bit more than I do the employees, but it is worth it for the quality of work they do and their reliability.
... when I had sheep with fly strike ... I could have lost 100-200 sheep if they were not all finished off quickly ... The TSA team will always do them more quickly to help save as many lives as possible.
Brad is the owner of a 14,000-acre family farm with 4,000 sheep.
It is now much more a matter of mutual agreement between the shearers and the farmer about wet sheep. The farmer doesn't want to shear wet sheep either because he has spent 12 months growing the wool and doesn't want to ruin it by shearing wet sheep. On the other hand, he doesn't want the sheep starving in the holding pen while the shearers keep voting them wet, which was the situation years ago.
Howard owns a 34,600-acre family farm with 17,000 sheep.
... the whole attitude of shearers we have seen over recent years with TSA which we believe has now permeated through the industry. The shearers are much younger, much more professional and out there to make a quid.
I believe a lot more goes into the training of wool classers and this shows through in the quality of the wool clip presented at the end of the shearing.
The TSA workers [contractors] are more attuned to what the market demands by way of wool presentation and this reflects in the price obtained for the wool.
The changes spoken of here by farmers were not possible under the old employee-dominated "workers award" regulation regime. The law dictated behaviour that simply entrenched class warfare and stopped practices developing in the farm shed which would have enabled people to move forward with their working lives. The level of control exercised by law through the award was extreme in its detail and pervaded almost every work activity. The new breed of contractor-shearer developed a business attitude akin to that of the wool grower. The new attitude reflects an understanding that the shearing teams are in the same business as the wool grower, namely, to make money out of processing wool. Every person has a different role and all have individual expertise and needs that have to be accommodated and bought together for mutual benefit. The central recognition is that all that matters is the price for wool that the farmers are able to receive now and in the future. This dictates how much the shearers can receive.
This businesslike approach to work is reflected in the words of the independent contractor shearers in the wide variety of attitudes they display to their work. These are people who are effectively running their own businesses. They make decisions for themselves within the practical framework of the need to co-operate with others to achieve an end result. They meet their personal needs by voluntarily working to achieve identifiable, specific outcomes in harmony with other people of like-minded focus.
Amber is a 24-year-old wool classer with a degree in agribusiness. She wholesales woollen products as an additional business unrelated to shed work.
I like being a contractor ... Barry does not mind if I take time off in the middle of a shed to go to lectures or to line up to enrol.
If we are forced to work because of the wet weather, it's not anyone's fault. Also, getting behind in the shearing would affect the farmer.
Robert is a 32-year-old presser. He collects the graded wool, places it in large wool presses and, when full, activates the press to form the large wool bales that are delivered to market.
... when I first started working with TSA, I thought supplying my own equipment was a rip-off, but now I realise that I get the quality I want out of having my own gear. Nine out of ten of every grinding paper supplied by the farmer has been wet, damaged, run out or just failed to be provided.
I like looking after my own equipment and I know where it is and what condition it is in.
I have never been forced to work on a weekend and I have said no before. This was about two years ago because my girlfriend wanted us to stay in town because her father was very sick.
Penalty rates are stupid ... I don't think any penalty rates would work. All the shops are open on Saturdays and Sundays anyway so why do the unions try to make us feel guilty when we do occasional work on a weekend?
I have heard a little bit about this AWU application. I don't want to be deemed an employee and bound by the award. It should be my choice. Other employees work weekends, not because of TSA but because it is sensible.
Jacqueline is a 25-year-old cook, and some say has the most important job on the team.
I get paid at a higher rate than working as an employee ... As a contractor, I am freer and I am governed by myself.
Justin is 23 years old, has a degree in Agribusiness and is a shearer.
It seems as though the AWU never does anything in the shearers' real interests. The AWU application would affect me because then I would not be able to work weekends or more than 8 hours per day ... We would not be able to start shearing earlier in the day which we often do to either finish earlier on a Friday or to avoid working in the very hot afternoons.
Gavin is a 47-year-old wool handler and presser.
I like working for TSA because I am my own boss and I make money by putting the bales out. It is up to me how much I earn.
Oscar is 21 and a penny-upper and shearer. A penny-upper organises the sheep in the holding pens before and after they are shorn.
Last week for example ... There were more rams in the group than they expected, so we worked on the Saturday and Sunday. Shearing rams usually breaks more combs and they are harder to hold.
On my weekends, I usually catch up on sleep and work at one of the local pubs.
If I have to work on the weekend, I don't mind missing this work because I get paid better for my work at the shearing shed [than at the pub].
Moera is 38 and a wool-classer.
I started in the shearing industry when I was 15 years old ... I actually started bull handling when I was 12 years old.
As a contractor ... I am my own boss and I can make my own choices. As an employee, I am always under someone's thumb.
I like the idea of my money going into my own bank account and me not having to sit around the contractor's house for half a day on Saturday and not being able to have my money.
There is more team work as a contractor.
Rhonda is a 32-year-old wool handler and classer.
The problem with this is that it [the award] slows the whole team down. I have seen this at most places that are subject to the award.
I remember last December [1999], a lot of sheep had fly-strike. If the sheep are not shorn relatively quickly, they could die from this.
Angela is a 25-year-old roustabout. Her tasks involve picking up the fleece once it is shorn, placing it on the classing table and sweeping up around the shearer.
I started working through TSA ... The pay is better with them and that is important ... I take time off whenever I want. I have taken off today [Monday] so that I can go to the dentist. As an employee, they would have punished me for taking a day off ...
Geoffrey is a 35-year-old shearer.
I like being a contractor as it gives me peace of mind.
I know that some farmers have specifically requested that I shear for them. I also get higher income as a contractor. I get $12-$13 extra per 100 sheep.
I prefer using my own equipment.
I take more holidays off as a contractor than when I was working as an employee and take off a couple of months each year. I usually go home to my farm ... and sleep. If I was working as an employee, my employer would want me to be more permanent.
I would like to see the workers have the choice of when to work and not be told by the unions what I can and can not do.
William is 24 years old and a shearer.
I've worked on shearing teams which are staunch in their observance of the award. They have the 3 minute bell which is a warning to all the shearers that the end of the run will happen in 3 minutes and they have to finish up their last sheep and can't start another one in that time. They also do not do any weekend work or extra hours during the week or any hours outside the exact allotted hours in the Award.
Those teams are okay and they get by doing their thing. However, that is too restricted for me. I would rather have the choice whether I wanted to work weekends. I believe it is up to the individual. I don't have any problems with the teams who don't want to work weekends and work strictly according to the award but it's just not for me. I believe that if I want to work weekends then that should be okay.
These are the attitudes that define independent contracting. Contractors look at the practical issues affecting their work and make decisions for themselves based on the needs to achieve results. This is not the mentality of wage-slave employment; contractors resist attempts to control them. In the Section 275 case, it was the union and the State of Queensland that were trying to force the workers into controlled employment relationships.
These attitudes, expressed both by the shearing workers and the people whose sheep they sheared, are the necessary, uncomplicated attitudes that underpin the legal status of independent contractors. Taken together, the attitudes show that no-one is controlling anyone. What controls the way of work is all parties' recognition and understanding of the practical things that have to be done to complete the job and achieve a commercial result. It was these attitudes that were the primary evidence in the Section 275 case.
Yet what does seem odd is that these independent contractors, working through the Hammonds, had their life's values challenged by the doyens of the old economy. The Australian Workers Union made application under Section 275 of the Queensland Industrial Relations Act to force the free contractors to be bonded employees, and attempted to require them to work under the shearing award on lower remuneration and under inferior conditions. And it was the State of Queensland that created the legislation that sought to deny these workers their right to achieve independence.
Ultimately, however, some commonsense did prevail. After an 18-month and highly expensive legal case which cost the independent contractors some hundreds of thousands of dollars, the Commission ruled against the AWU. The application to force these people into wage-slave employment was rejected. The courts perceived the established reality of independent contracting and did not rule against the contractors.
The case attracted widespread interest in Australia because of the fundamental challenges it posed to the functioning of commercial contracts and hence commercial activity. Many other industry associations sought to make representation to the Commission hearing to put on record the broad principles that were at stake. The Housing Industry Association (HIA) demonstrated how the case challenged fundamental principles that underpinned the very structure of the Australian economy. It said:
The regulation of employment contracts contrasts sharply with society's regulation of commercial relationships, where legal equality is the basis of contracts ...
The Commission should be slow to interfere in normal commercial contracts -- to apply industrial relations outcomes to commercial contracts is to intrude into an essentially foreign area, which will create great uncertainty for businesses and over time will damage the legal underpinning of commercial activity.
HIA submits that it would be contrary to the spirit of the IRC Act to dragoon unwilling contractors into employment.
The Commission should accept and uphold both contracting and employment as, in principle, two equally valid systems for organising work.
These are the principles at stake in the way societies look at, consider and seek to control how people will work. They are principles that have their roots in the rich soil of every person's everyday working experiences.
ENDNOTES
1. The Australian Workers Union of Employees AND Hammonds Pty Ltd and others. Queensland Industrial Relations Commission No B885 of 1999.
2. ALHMWU and Bark Australia Pty Ltd No B1064 of 2000. Queensland IRC.
3. Hammonds case Affidavits and Witness Statements.
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