Businesses to benefit from changes to workers’ compensation coverage for contractors

From 1 July 2013, the definition of a ‘worker’ for the purposes of the workers’ compensation legislation in Queensland will be narrowed. The new definition will mean that fewer independent contractors will be required to be covered under a principal’s workers’ compensation policy. The changes will particularly affect contractors in the construction and transport industries who are currently required to be covered under the principal’s policy.

Broad scope of current definition

The current definition of a ‘worker’ under the workers’ compensation legislation in Queensland is very broad and captures many contractors, such as owner drivers and tradespeople who run their own businesses. Although these contractors are often not considered employees for any other purpose (such as superannuation and leave entitlements), they are still considered to be a ‘worker’ for the purposes of workers’ compensation. The definition of a ‘worker’ under the current workers’ compensation legislation includes, among other things, an individual:

• who is paid for labour only, or substantially labour only; or
• who does not meet all of the following criteria:
  • is paid for a specific result;
  • has to supply all of the plant, equipment or tools of trade to do the work; and
  • is liable for rectifying defects in the work.

New definition

The new the definition of a ‘worker’ will be:

• a person who works under a contract; and
• in relation to the work, is an employee for the purpose of assessment for PAYG withholding under the Taxation Administration Act 1953 (Cth).

This means that business owners will only be required to include an individual contractor under their workers’ compensation policy if the contractor works under a contract and is an employee for PAYG taxation purposes.

This is positive news for businesses because the new definition is easier to understand and apply. No longer will business owners need to undertake a complex analysis of the remuneration structure and method of work between the parties to determine workers’ compensation coverage.

Examples of individual contractors who may no longer be covered under the principal’s workers’ compensation policy

WorkCover Queensland has issued a statement stating that examples of individual contractors who may no longer be covered under a principal’s workers’ compensation policy are those who:

• supply and operate their own plant, such as earthmoving equipment or trucks, as part of their contract;
• work mainly or substantially for labour only, quote for the job, provide their tools of trade or rectify defects at their own expense; or
• have a personal services business determination from the Australian Taxation Office.

What businesses should do in response to the new legislation

Businesses should review their arrangements with the each individual contractor to determine whether the contractor will continue to be required to be covered by its workers’ compensation policy. This will involve:

• analysing whether the contractor meets the new definition of a ‘worker’ under the workers’ compensation legislation; and
• reviewing the contractual arrangements between the parties.

We recommend that businesses contact our workplace relations and safety team to ensure that they obtain the benefit of this new legislation. For more information, contact Tobey Knight, Lawyer, on (07) 3231 2933 or Belinda Winter, Partner on (07) 3231 2498.