November 28, 2017
Professionals | QLD
SERVICE ENTITY ARRANGEMENTS MAY BE CAUGHT BY NEW QUEENSLAND LABOUR HIRE LICENSING LAWS
The Queensland Government has recently passed legislation that establishes a new licensing scheme for providers of labour hire services.
While the licensing scheme purports to target traditional labour hire service providers, closer examination reveals that (whether it is intended or not) intragroup service entity arrangements are also at risk of being caught by the new regime.
Businesses with a connection to Queensland that either provide or utilise labour hire services, or who have implemented intragroup service entity arrangements, should review their arrangements to get ready for the new laws.
WHAT ARE THE NEW QUEENSLAND LABOUR HIRE LAWS?
The Queensland Government recently passed the Labour Hire Licensing Act 2017 (Qld) (Act) which implements a new mandatory licensing scheme for all providers of labour hire services operating in Queensland.
The Act creates obligations for:
- (labour hire service providers) – requiring they become licensed labour hire service providers and demonstrate they remain “fit and proper” to be providers of labour hire providers; and
- (users of labour hire services) – requiring they only engage workers from licensed labour hire service providers.
There are strong penalties for users of and providers of labour hire services that do not comply with their obligations under the Act.
The new licensing scheme takes effect from 16 April 2018, with a 60 day transitional period, meaning that “labour hire service provides” have until 15 June 2018 to get their licensing applications in and processed. If not, those providers (and users) will be in breach of the Act and at risk of fines and other penalties.
WHO IS A PROVIDER OF LABOUR HIRE SERVICES?
The Act imposes a broad definition of a “provider” of “labour hire services”, extending the definition to cover any person, that in carrying on a business, supplies to another person a worker to do work.
This definition applies regardless of:
- whether the worker is an employee of the provider;
- whether there is a contract between the provider and the worker, or the provider and the person to whom the worker is supplied;
- whether the provider supplies the worker directly or indirectly through agents and intermediaries;
- whether the work done by the worker is under the control of the provider, the person the work is done for or a third party.
Given the broad definition of a provider of labour hire services, it concerns us that intragroup service entity style arrangements will also be captured under the Act.
WHAT IS A SERVICE ENTITY ARRANGEMENT AND HOW MIGHT THE NEW LABOUR HIRE LAWS APPLY?
A service entity arrangement typically has the following hallmarks:
- person (A) carries on a business or professional practice;
- person (B) carries on a business of providing services, which may include staff hire, administrative support etc.;
- there is generally a level of common ownership between A and B;
- A engages B to provide services, which may include the supply of staff to provide clerical and administrative support services to A;
- A pays B a fee, generally linked to costs incurred by B to provide the staff to support A.
Depending on the terms of a service arrangement, the service entity may be a “provider” of “labour hire services” and regulated under the Act. Specifically, we consider this will likely be the case where the service arrangement specifies the provision of workers to the business, rather than a service based outcome.
However, care should be taken not to adopt a position that service arrangements that require the service entity to produce serviced based outcomes will not be captured because the service entity may still be providing workers to a business, despite the control of the workers remaining with the service entity.
WHAT ARE THE PENALTIES FOR FAILURE TO COMPLY WITH THE NEW LABOUR HIRE LAWS?
The penalties for failure to comply with the obligations under the Act are significant and include:
- operating a labour hire services business without a license or entering into a labour hire services arrangement with an unlicensed supplier:
- individual - $130,439 or 3 months imprisonment;
- corporation - $378,450;
- advertising you are able to conduct a labour hire service business without a licence - $25,230.
With significant penalties for non-compliance, the time to act is now to complete a review of business structures and models and service agreements to determine whether a business is affected by the new licensing scheme.
HOW CAN MCINNES WILSON LAWYERS HELP?
McInnes Wilson Lawyers can assist providers and users of labour hire services comply with their obligations under the new licensing scheme, including:
- assisting with applications for a labour hire service licence;
- reviewing your business structure and model to determine whether your intragroup service entity arrangements may fall within the scope of the licensing scheme;
- reviewing your service agreements with non-related parties to determine whether your arrangement will be affected by the Act;
- drafting service agreements that include assurances that the provider of labour hire services meets the licensing requirements.