Owner Drivers and Forestry Contractors Regulations 2017
Authorised by the Chief Parliamentary Counsel
Authorised Version
i
Owner Drivers and Forestry Contractors
Regulations 2017
S.R. No. 101/2017
TABLE OF PROVISIONS
Regulation Page
1 Objective 1
2 Authorising provisions 1
3 Commencement 1
4 Revocation 2
5 Definition 2
6 Persons of a specified class prescribed not to be contractors 2
7 Prescribed code of practice 2
Schedule 1—Code of practice for owner drivers and forestry
contractors 3
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Endnotes 39
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Authorised Version
1
STATUTORY RULES 2017
S.R. No. 101/2017
Owner Drivers and Forestry Contractors Act 2005
Owner Drivers and Forestry Contractors
Regulations 2017
The Governor in Council makes the following Regulations:
Dated: 10 October 2017
Responsible Minister:
NATALIE HUTCHINS
Minister for Industrial Relations
ANDREW ROBINSON
Clerk of the Executive Council
1 Objective
The objective of these Regulations is—
(a) to prescribe persons of a specified class not
to be contractors for the purposes of the
Owner Drivers and Forestry Contractors
Act 2005 and these Regulations; and
(b) to prescribe a code of practice in relation to
the engagement of contractors who are
owner drivers or forestry contractors.
2 Authorising provisions
These Regulations are made under sections 27
and 66 of the Owner Drivers and Forestry
Contractors Act 2005.
3 Commencement
These Regulations come into operation on
21 October 2017.
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4 Revocation
The Owner Drivers and Forestry Contractors
Regulations 2006 1 are revoked.
5 Definition
In these Regulations—
the Act means the Owner Drivers and Forestry
Contractors Act 2005.
6 Persons of a specified class prescribed not to be
contractors
The following specified classes of person are
prescribed not to be contractors—
(a) a natural person carrying on a business
(whether solely, in partnership or otherwise)
of transporting goods, other than forest
products, in 4 or more vehicles supplied
by the business and operated by the person
(whether solely or with the use of additional
or relief operators);
(b) a body corporate carrying on a business
of transporting goods, other than forest
products, in 4 or more vehicles supplied by
the body corporate or an officer of the body
corporate and operated by an officer of the
body corporate (whether solely or with the
use of additional or relief operators).
7 Prescribed code of practice
For the purposes of Part 3 of the Act, Schedule 1
is prescribed as the code of practice.
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Schedule 1—Code of practice for owner
drivers and forestry contractors
Part 1—Introductory
1 Objectives
The objectives of this Code are—
(a) to provide for certain mandatory
requirements concerning the engagement
of contractors; and
(b) to provide guidance to hirers and contractors
on—
(i) conduct which is likely or unlikely to
be unconscionable conduct within the
meaning of sections 31 and 32 of the
Act, including by providing examples
of conduct that in the absence of any
special circumstances is likely to be,
or not to be, unconscionable conduct
within the relevant industry context;
and
(ii) contract terms which are likely
or unlikely to constitute unjust
contract terms within the meaning of
section 44(2) of the Act, including by
providing examples of contract terms
that in the absence of any special
circumstances, are likely to be, or not
to be, unjust contract terms within the
relevant industry context; and
(c) to ensure a competitive and fair operating
environment by promoting the following
principles to guide business relations
between hirers and contractors—
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(i) parties to a contract should be able
to operate their respective businesses
without unfair business practices being
used against them;
(ii) contractors are entitled to be paid the
agreed rate for their services;
(iii) hirers are entitled to have work
performed to a satisfactory standard;
(iv) parties to a contract should clearly
communicate their expectations and
requirements and any plans that may
affect the other party's interests;
(v) hirers should offer and pay contractors
remuneration that, considering the
contract as a whole, the services to be
performed and the general market for
those services, enables the contractor
to meet efficient operating expenses,
receive a fair return for the contractor's
own labour and a return on an
investment.
2 Interpretation
(1) In this Code—
contract means a regulated contract within the
meaning of section 3 of the Act;
the Act means the Owner Drivers and Forestry
Contractors Act 2005.
(2) If the term contractor is used in this Code in a
context that applies only to a natural person, the
term refers—
(a) in the case of a contractor who is a natural
person—to that person; and
(b) in the case of a contractor who is a
partnership—to any of the partners; and
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(c) in the case of a contractor who is a
company—to an officer of the company.
Note
All terms used in this Code have the same meaning as
provided by the Act unless the context requires otherwise.
Contractor is defined in section 3 of the Act to mean an
owner driver, a haulage contractor or a harvesting
contractor.
See in particular the following definitions in the Act—
the definition of hirer in section 3, the definition of owner
driver in section 4, the definition of haulage contractor in
section 5 and the definition of harvesting contractor in
section 6.
The definition of contractor is affected by the Owner
Drivers and Forestry Contractors Regulations 2017.
Those Regulations limit the definition of contractor to
businesses that supply up to a maximum of 3 vehicles.
3 Application
(1) This Code applies to hirers and owner drivers,
harvesting contractors and haulage contractors.
(2) If a provision of this Code is preceded by the
following heading—
Mandatory Requirement
the provision must be complied with by the person
to which it applies.
Note
Section 30 of the Act provides that a person to whom a code
of practice applies must comply with the code of practice to
the extent that it imposes duties or obligations on the person
or prohibits the person from engaging in certain conduct.
(3) Part 5 contains provisions which include examples
that relate to forestry contractors. Examples set
out in any Part of this Code may be used as
guidance in respect of the Act for hirers and all
kinds of contractors, be they owner drivers,
harvesting contractors or haulage contractors.
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Part 2—Conduct during negotiations
4 Unconscionable conduct during negotiations
This Code does not prevent hirers or contractors
from acting vigorously in their own commercial
interests. However, each party should deal with
the other party or parties fairly and in good faith
when negotiating a new contract or a variation to
a contract.
Guidance
In the absence of any special circumstances, if
a hirer or a contractor engages in the conduct
described below, that conduct is likely to be
unconscionable conduct within the meaning of
sections 31 and 32 of the Act.
(1) A party, by themselves or through an
agent—
(a) does not provide a reasonable
opportunity to discuss an offer, or
makes offers on a "take it or leave
it" basis suggesting a party must
accept an offer and refuses to consider
any alternative offer; or
Note
A party may use a template contract in a manner that
provides reasonable opportunity for discussion of the
contract and consideration of alterations to it.
(b) does not genuinely consider offers
made to them; or
(c) does not provide a reasonable
opportunity for another party to
properly examine and consider
offers, or to obtain legal, financial
or other advice, including in the
party's preferred language; or
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(d) disguises the terms of a contract
using fine print, unnecessarily
difficult language or deceptive
lay-out or headings; or
(e) summarises the meaning of a
document to another party but
omits to mention important terms
in a way that is misleading; or
(f) fails to correct another party's
misunderstanding, where the
hirer or contractor knew or
reasonably ought to have known
that the other party was under a
serious misapprehension about
the terms of the agreement or any
other relevant matter.
(2) A party builds up reasonable commercial
expectations in another party for the renewal
of an agreement and then exploits those
expectations to extract a harsh or one-sided
deal from the other party.
(3) A party attempts to pressure another party
into accepting an offer by acting in breach
of contract, or otherwise acting unlawfully,
or by threatening to do so.
Example 4.1
Wal was given a contract to look over. The clause about
goods in transit insurance was complex and hard to read.
Wal asked the company's manager whether it meant he
had to take out a new policy. The manager said he was
pretty sure the insurance arrangements hadn't changed but
he wasn't really certain. Wal signed the contract and sent
it with a letter saying he was told the insurance was the
same as before, but asking that the company tell him if this
wasn't right. The company didn't reply. A dispute arose
later about some expensive goods damaged in an accident,
and the company argued that Wal was obliged under the
contract to take out the insurance. The company's failure to
correct Wal's misunderstanding in circumstances where it
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was brought to its attention and not corrected is likely to
constitute unconscionable conduct under section 31 of the
Act, and Wal could notify a dispute to the Small Business
Commissioner.
Example 4.2
Ajani was looking for work. He responded to an
advertisement seeking couriers. He was given a long and
complicated contract. Ajani has trouble with English and
said he needed to have a friend with good English read the
documents. The manager said if Ajani wanted the job he
would have to sign on the spot and pay $1000 to cover the
"set up costs". Ajani was anxious to find work and the
manager was persuasive, so he signed and paid. He later
realised the contract paid well below the going rate and
it was impossible to make a living from the rates paid.
The company refused to refund the $1000. The company's
conduct is likely to constitute unconscionable conduct under
section 31 of the Act, and Ajani could notify a dispute to the
Small Business Commissioner.
Example 4.3
Bill works for a company that provides waterfront services
using both contractors and its own employee drivers.
Bill is planning to retire and is negotiating to sell his truck
to the company. Bill persuades the other contractors to
refuse to work unless Bill's demands are met. Bill and
the other contractors' conduct may be in breach of their
contracts and is also likely to be unconscionable conduct
within the meaning of section 32 of the Act. The company
could notify a dispute to the Small Business Commissioner
and could also seek an urgent injunction in the Tribunal.
Additional guidance
Set out below are circumstances where parties
need to take special care that they do not act
unconscionably.
(1) If a hirer is aware that a contractor lacks
business experience or has difficulty with
business language—
it is likely to result in unconscionable
conduct within the meaning of section 31
of the Act in the circumstances that the
hirer refuses to allow the contractor a
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reasonable opportunity to obtain an
understanding of the contract so as to be
able to protect the contractor's interests
appropriately.
Example 4.4
A company is seeking new contracts with its
drivers. Even though the company knows Darren
has problems with reading complex documents, the
company insists the offer is only open for 24 hours.
Darren feels pressured to sign even though he doesn't
understand the contract and hasn't had a chance to get
his accountant to read it for him. This conduct is
likely to constitute unconscionable conduct under
section 31 of the Act, and Darren could notify a
dispute to the Small Business Commissioner.
(2) If a party is in an unusually strong
negotiating position in relation to another
party because of a monopoly or otherwise
limited market for the supply of the
services—
the imposition of unduly harsh or one-sided
contracts in these circumstances is likely
to be unconscionable conduct within the
meaning of either section 31 or 32 of the
Act.
Example 4.5
Uri and Jack have an expensive specialised vehicle
that can carry oversized farm machinery from sea
ports to dealers. A machinery importer is the only
business in Victoria with a need for this kind of
vehicle. There are 2 possible scenarios in this
situation of a limited market that may result in
unconscionable conduct—
(a) knowing that Uri and Jack have no other
potential customers for their vehicle, the
company tries to force a significant rate
reduction that makes the business
unprofitable; or
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(b) knowing that the company is reliant on their
vehicle to perform its contracts with customers,
Uri and Jack threaten to refuse to accept work
over the busiest period of the year unless the
company pays a significant rate increase.
The conduct described above is not an exhaustive
description of conduct during negotiations that
may be unconscionable conduct within the
meaning of either section 31 or 32 of the Act.
5 Best practice in negotiations
Best practice
To ensure that contract negotiations are conducted
fairly and that both parties fully understand their
agreement, the parties should—
(a) provide each other with the following—
(i) a reasonable opportunity to meet and
discuss the terms and conditions;
(ii) a reasonable opportunity to put
alternative offers that suit their own
business needs;
(iii) sufficient time to properly examine
and consider offers and to consult with
business partners or fellow directors;
(iv) a reasonable opportunity to seek
legal, financial or other advice and
appropriate assistance to understand
documents; and
(b) properly consider any offers made by the
other party.
If a hirer has any concerns about a contractor's
understanding of a contract, the hirer may
request the contractor to provide written
confirmation that the contractor has received
advice from an appropriately qualified person.
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Parties should be clear, open and certain about
the circumstances in which their contract will
be renewed or not renewed.
Contractors and hirers are also entitled under
sections 25 and 26 of the Act to appoint agents
to conduct contract negotiations on their behalf.
In summary, sections 25 and 26 of the Act—
(a) entitle contractors and hirers to appoint
negotiating agents to negotiate contracts
on their behalf; and
(b) require other parties to recognise negotiating
agents where properly appointed; and
(c) enable parties to require that negotiations be
conducted through those agents.
6 Parties must not claim to exclude the Act or other
laws or the Code
(1) Section 65(1) of the Act provides that a provision
of a contract is void to the extent that it is contrary
to the Act or this Code.
Mandatory Requirement
(2) A party to a contract must not make any claim
to another party that the other party's rights or
entitlements under the Act or any other law or
this Code are excluded, unless the Act or other
law or this Code permits that exclusion.
Example 6
A freight forwarder has included a clause in its contract
stating that the contractor waives the requirement under
section 23 of the Act that a hirer cannot deduct money for
insurance unless a copy of the relevant policy has been
given to the contractor. The contract also provides the
contractor is not permitted to notify a dispute to the Small
Business Commissioner. These clauses are invalid and
unenforceable.
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7 Disclosure of information
Fair business dealing requires parties to exchange
information about their changed plans and
dealings that may have an impact on the other
party's business. This exchange of information
should be ongoing throughout the relationship,
and not just at the time a contract is entered into
or renewed. Sections 31(2)(h) and 32(2)(h) of
the Act provide that a factor to be considered in
determining whether a hirer or a contractor has
acted unconscionably is if that party unreasonably
fails to disclose to another party proposed conduct
that might affect the other party's interests, or does
not disclose any risks that that party should have
foreseen would not be apparent to the other.
Guidance
If a hirer or contractor is planning or has
experienced changes to the way they conduct
their business that may significantly affect the
business of another party, they should inform the
other party of those planned changes or changes
as soon as reasonably practicable. A failure to do
so is likely to constitute unconscionable conduct
for the purposes of sections 31 and 32 of the Act.
However, a party is not obliged to disclose any
incomplete proposal or negotiation, or any trade
secret or commercial-in-confidence matter.
Example 7.1
Alf's hirer is a small freight forwarder who has 2 major
clients. One of those clients has just appointed a receiver,
and it appears likely that the hirer might only get paid
20 cents in the dollar on debts it is owed. The hirer already
owes Alf for more than 30 days work. The hirer should
inform Alf immediately of the development and discuss
how they will deal with the situation. Either party could
seek the assistance of the Small Business Commissioner.
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Example 7.2
Kolya worked for a freight company that did most of its
work for a chain of homeware stores. After discussing
his plans with his hirer, Kolya invested in a new B Double
and entered a 5-year finance contract. Kolya wasn't told that
the contract between the hirer and the chain of homeware
stores was up for renewal. The contract wasn't renewed,
Kolya lost the work and was stuck with the new vehicle
and payments. The company should have told Kolya
that the contract with the customer was not yet secured,
particularly knowing that he was buying a new vehicle in
reliance on secure work. Kolya could notify a dispute to
the Small Business Commissioner.
8 Dispute resolution 2
(1) Part 5 of the Act provides a process for the
resolution of disputes between hirers and
contractors, including mediation by the
Small Business Commissioner. If this does
not successfully resolve the dispute, the
party who notified the dispute may refer the
matter to the Tribunal for determination.
(2) However, except in urgent circumstances,
parties should first seek to resolve any dispute
between themselves before using the disputes
process provided under the Act. Work should
continue as normal while the parties attempt to
resolve the dispute.
Best Practice
If a dispute arises, the aggrieved party should
do the following—
(a) notify the other party of their concerns
when the issue arises;
(b) advise the other party what they would
like to happen to resolve the dispute;
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(c) provide a reasonable time period for
resolution;
(d) accept any invitation to meet with the other
party to attempt to resolve the dispute;
(e) act professionally and courteously at all
times;
(f) continue to perform or offer services as
normal while the dispute is being dealt with;
(g) ensure services are being performed in a safe
manner;
(h) follow any process agreed between the
parties for the resolution of disputes.
If an unforeseen event occurs beyond the parties'
control (such as a road closure) the parties should
work together to find a way of dealing with the
situation that is fair and equitable.
9 Misleading advertising
Mandatory Requirement
(1) A hirer seeking to engage a contractor must
not make any representation to the contractor,
including through advertisements or in
interviews—
(a) that the hirer knows to be false, or
which the hirer is reckless as to whether
it is correct; or
(b) that is misleading or deceptive or likely
to mislead or deceive.
(2) For the purposes of this clause, representations
that are likely to mislead or deceive include the
following—
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(a) a representation that a contractor can earn a
certain amount if it is not reasonably possible
for a diligent contractor to earn that amount;
Example 9.1
John sees an advertisement in the local paper that
says drivers will "earn in excess of $1500 per week".
John starts work, but then finds out from the other
drivers that their average gross income for the last
year has been less than $900, and that no-one has
ever managed to earn more than $1200 a week.
John could notify a dispute to the Small Business
Commissioner over this breach of the Code.
(b) a hirer guarantees a contractor an
enforceable minimum level of income
or number of hours of work for a certain
period of time, but—
(i) does not make it clear that the
minimum is only for that period; or
(ii) in circumstances that the engagement
is to continue beyond that period, does
not provide any information to the
prospective contractor about expected
earnings after the period expires;
Example 9.2
A courier company recruits new drivers with
advertisements stating "guaranteed minimum
38 hours a week". However, after Herman started
with the company, and after he painted his vehicle
in the hirer's livery, he was given a contract that said
the minimum hours only applied for 3 months then it
was "up to the driver to bring in the work". After the
3 months, Herman's hours drop back to less than
20 a week. Herman could notify a dispute to the
Small Business Commissioner over the hirer's breach
of the Code.
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(c) a hirer provides estimates of earnings to
a contractor but fails to indicate whether
the figure is a gross figure (that is, that
the contractor will incur overhead costs
in earning that amount) or a net figure
(the figure after expenses are taken out).
Example 9.3
A pizza restaurant advertised for a delivery driver.
The advertisement states "guaranteed $100 per night".
The pizza restaurant should make it clear whether this
is a gross (before expenses) figure, for example, by
saying "$100 per night (less expenses)" or a guarantee
of earnings after expenses are taken out.
10 New vehicles or motorised equipment
(1) Hirers occasionally require existing contractors
to upgrade their vehicles or motorised equipment.
This can involve substantially higher overhead
costs and a much greater level of capital
investment. Unfairness is likely to result in these
circumstances if the terms of the contract are not
reviewed to make sure they remain reasonable
and appropriate.
Mandatory Requirement
(2) If a hirer requests or requires a contractor to
supply a vehicle or motorised equipment that is
different to the vehicle or motorised equipment
supplied by the contractor under a contract
with the hirer, or if the contractor identifies a
legitimate need to upgrade the vehicle or
motorised equipment, the hirer must enter into
negotiations with the contractor for variations
to the contract for that purpose, and in doing so
have regard to the following—
(a) any increase or decrease in the
contractor's costs associated with the
purchase and operation of the requested
vehicle or motorised equipment;
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(b) the appropriate level of commercial
security, having regard to the nature of the
vehicle or motorised equipment provided
and the amount of the investment;
(c) the need for the contractor to have
reasonable security over the contractor's
business assets (for example, a contract of
appropriate duration, a minimum number
of hours or income, or both);
(d) the impact upon efficiency and productivity
as a result of the upgraded vehicle or
motorised equipment.
(3) If, after these negotiations, the hirer agrees that
a different vehicle or motorised equipment may
be supplied by the contractor, the hirer must set
out in writing the terms and conditions being
offered for the services using the different vehicle
or motorised equipment, and must do so before
the contractor purchases or otherwise commits to
supplying the vehicle or motorised equipment.
(4) If the hirer requires particular specifications for
the different vehicle or motorised equipment, the
specifications must be provided in writing to the
contractor.
11 General principles for setting and reviewing rates
A hirer should offer and pay to a contractor a
rate of remuneration that is commensurate with
the rates typically paid within the industry for
similar services, and which meets an efficient
contractor's business costs and provides a return
to the contractor that recognises the contractor's
capital investment.
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Guidance
Hirers should offer and pay contractors
remuneration that, considering the contract as
a whole, the services to be performed, and the
general market for the services, provides for
each of the elements of remuneration described
below.
Considering the contract as a whole, contractors
should receive at least an amount which, after
accounting for operating costs, is an amount that
is not likely to be less than the amount that the
contractor would typically receive for performing
those services as an employee.
A significant departure from these principles
means that the relevant contract term is likely
to constitute an unfair contract term for the
purposes of section 44(1)(g) of the Act.
The elements of remuneration are comprised of
the following—
(1) An amount that represents the recovery
of the fixed and variable costs incurred
in performing the services required.
A hirer is not required to calculate the actual
individual overhead costs of a particular
contractor, but must consider the typical and
efficient overhead costs of a contractor with
the required type of vehicle or equipment. 3
Example 11
A freight forwarder has a fleet of 20 contractors
with B Doubles, and all contracts are up for review.
In deciding what rate to offer, the hirer uses a cost
model that is based on the typical or average
operating costs of a B Double based on a 3-year old
vehicle under finance, that requires 8 mechanical
services a year. Some of the contractors have
individual finance payments that are higher or
lower than the benchmark used to prepare the rate
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model, depending on the amount that they have each
borrowed. Some will have older vehicles (that require
more services) or newer vehicles (that require fewer
services). The use by the hirer of this benchmark
model meets the requirements of this clause.
(2) An amount that represents a fair return
for the contractor's labour.
For an owner driver, this is a fair amount for
the owner driver's labour in driving, loading
and unloading the vehicle and associated
activities such as administration. A fair
return for the owner driver's own labour
should be reflected in the contract between
the parties.
(3) An amount that represents a return on the
contractor's investment.
Contractors are businesses and therefore
aim to make a return on their business
investment, that is, a profit. Contractors
may supply significant assets and carry
significant commercial risk, and can
reasonably expect to receive an amount
over and above their efficient operating
costs and their own labour as a reward for
that risk and investment. The amount that is
a reasonable return on investment will vary
widely in all the circumstances, and may
vary over time as market conditions change.
Factors that influence what is a reasonable
return on investment can include the
following—
(a) the amount of the capital investment in
the vehicle or equipment;
(b) the level of commercial risk assumed
by the contractor;
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(c) the security and certainty of the
arrangements;
(d) whether the vehicle or equipment
provided by the contractor can readily
be used to provide services to other
persons;
(e) whether the vehicle or equipment is
also used for personal use;
(f) the efficiency and productivity of the
contractor;
(g) the market for the services.
12 Additional matters to be considered in setting rates
In addition to the matters set out in clause 11,
hirers should also take the following matters
into consideration when negotiating rates of
remuneration with contractors.
(1) The whole of the activities to be
performed by the contractor for the
purposes of the contract.
Guidance
Contracts, considered as a whole, should
take into account the cost to the contractor
of engaging in all the activities which are
reasonably necessary to perform the services.
A failure to take reasonable account in a
contract of all the work that is necessarily
performed in providing the services means
that the relevant term or terms of the contract
are likely to constitute unjust contract terms
for the purposes of section 44(1)(g) of the
Act.
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Example 12.1
Mark delivers cars for a chain of car dealerships,
exchanging new and traded-in vehicles between the
dealerships all over the State. Most journeys he
makes involve transferring just one car at a time.
He is paid a rate based on the number of cars carried
and the number of kilometres, but only for the
kilometres he travels when his vehicle is loaded.
The rates paid do not make any allowance for the
unloaded journey to collect the vehicle from the
dealership, or for returning to his base. This means
that after taking account of the running cost of the
vehicle, Mark is earning less than $10 an hour for
all the work required to perform the requested
services. The relevant terms of the contract are likely
to constitute unjust contract terms within the meaning
of section 44(1)(g) of the Act, and Mark could notify
a dispute to the Small Business Commissioner.
Example 12.2
A courier company has calculated that on average,
it takes a certain number of minutes for its couriers
to collect or deliver goods. The company pays on
a fixed run rate based on the suburbs between
deliveries, and builds into that rate an amount for
the contractor's labour for that average time spent
in collecting or delivering the goods. Sometimes an
individual courier may have to wait for a longer or a
shorter period, but on average, over time, they receive
compensation for the time worked. The relevant
terms of the contract are unlikely to constitute unjust
contract terms within the meaning of section 44(1)(g)
of the Act.
(2) Where the customer pays additional rates
or levies.
It is common for arrangements between
hirers and their customers to provide that
the hirer receives additional payments
or higher rates in certain circumstances.
With the rising cost of fuel, customer fuel
levies are common. Some hirers have acted
unscrupulously by not giving the contractor
any benefit of such a loading or increase,
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even though it is the contractor and not
the hirer who has actually had to bear the
increased cost caused by a rise in fuel prices.
Guidance
If the hirer has the benefit of arrangements
with customers providing additional
payments or higher rates from the customers
in the case that—
(a) the cost of fuel rises or falls (a fuel
levy); or
(b) the contractor spends excess time—
(i) loading and unloading, or waiting
to be loaded or unloaded; or
(ii) waiting for customers to make
goods available for collection—
and the contract between the hirer and the
contractor does not provide proportional
payments or benefits to the contractor in
the same circumstances, then the relevant
contract term is likely to constitute an
unjust contract term for the purposes of
section 44(1)(g) of the Act.
Example 12.3
Nina runs a 2-tonne van. In 5 years, her hirer has
only increased the rates paid to its contractors by
$1 an hour. At the beginning, Nina earned $900 a
week on average, of which about $270 was spent on
fuel. Because of the significant increase in the cost
of fuel over the last 5 years, Nina is now spending
over $450 a week on fuel, and the total return for
her labour and investment is now well below $10 an
hour. The company refuses to negotiate a new rate,
saying the market is too competitive. However, the
company's contracts with its customers allow it to
charge an increased price whenever the cost of fuel
increases by more than 5 cents a litre. The company
simply pockets this customer price increase as it is
the contractors who pay for the fuel. This conduct
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is likely to be unconscionable conduct within the
meaning of section 31 of the Act, and Nina could
notify a dispute to the Small Business Commissioner.
(3) Where the contractor provides services to
the hirer on an exclusive basis.
Contractors are businesses, not employees.
They are not obliged to work solely for one
hirer unless this is agreed between them.
However, hirers often require contractors to
make themselves available to accept work on
a full-time basis, and not to work for anyone
else. Often the contractor is required to paint
their vehicle in the hirer's or customer's
livery, meaning that regardless of the terms
of the contract, the vehicle is not able to be
used to perform work for other customers.
Guidance
Where the contractor—
(a) is not permitted to perform services
for any other person using the vehicle
supplied under the contract; or
(b) has their vehicle painted in the hirer's
or the hirer's customer's livery—
then, unless there is evidence to the contrary,
the hirer should pay the contractor
remuneration on the basis that the contractor
will receive no other income towards the
fixed overhead costs of the contractor's
business.
A failure to do so means the relevant
contract term is likely to constitute an
unjust contract term for the purposes of
section 44(1)(g) of the Act.
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(4) The need for a regular and systematic
review of fixed and variable overhead
costs.
Section 31(2)(k) of the Act provides that
a matter to be considered in determining
whether a hirer's conduct is unconscionable
is whether or not the contract allows for
the payment of any increases in fixed and
variable overhead costs on a regular and
systematic basis. This means that a contract
which locks up a contractor's rates for long
periods of time without regard to increases
in overheads (particularly fuel prices) will
be susceptible to a claim of unconscionable
conduct.
Guidance
Set out below is one practice that, while not
being mandatory, constitutes a review of
rates for increases in overhead costs in
respect of owner drivers on a "regular and
systematic basis", and is therefore unlikely
to constitute unconscionable conduct within
the meaning of section 31(2)(k) of the Act—
(a) the component of a contractor's
remuneration that relates to the cost of
fuel is determined by direct reference
to the actual cost of the fuel required to
perform the services and is adjusted on
at least a monthly basis; and
(b) the determination of any increases
or decreases in the cost of fuel is by
reference to a legitimate and accurate
fuel price monitoring source; and
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(c) the rates paid to the contractor are
reviewed regularly and systematically
in respect of operating costs other than
fuel.
While this clause sets out an arrangement
that is unlikely to be unconscionable,
other arrangements may be commercially
appropriate and legitimate in all the
circumstances and comply with the
requirements of section 31(2)(k) of the Act.
Example 12.4
Mick carries road base to road construction sites.
His hirer is tendering for a new road building project
and asks the contractors to agree to a fixed rate per
load for the 3 months of the project. The price that is
negotiated takes into account the fact that the cost of
fuel may increase during that time. This conduct is
unlikely to be unconscionable conduct within the
meaning of section 31(2)(k) of the Act.
Note
Part 5 of this Code sets out certain practices
that constitute a review of rates for increases in
overhead costs in respect of forestry contractors
on a "regular and systematic basis".
13 Reduction in remuneration for carrying smaller
loads
(1) Contracts generally provide for rates which are
based upon the running costs of the type of
vehicle provided, for example, a 2-tonne van.
Where the contract between the parties permits,
the contractor may agree to accept offers from the
hirer for loads that could be carried in a smaller
vehicle for a reduced rate of remuneration.
Contractors may consider such occasional loads
to be in their own interests, for example where
the alternative is running the vehicle unloaded.
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(2) However, where the hirer regularly directs the
contractor to undertake work for such reduced
rates, the end result may be that the contractor is
unable to cover the higher operating costs of the
larger vehicle.
Guidance
In general, hirers should pay contractors at the rate
agreed between them for the particular vehicle
supplied by the contractor, regardless of whether
the goods being transported could have been
transported in a vehicle with a lesser carrying
capacity.
Hirers should not—
(a) direct contractors to undertake deliveries
with a smaller load to be paid at a reduced
rate; or
(b) make special arrangements with customers
for reduced rates (for example, supplying a
2-tonne van at the lower 1-tonne van rate),
and direct the contractor to perform
deliveries for that customer at the reduced
rate.
Any regular direction that the contractor accept a
reduced rate that results in the contractor being
unable to meet the operating costs of the larger
vehicle is likely to constitute unconscionable
conduct within the meaning of section 31 of the
Act.
14 Payment of invoices
Contractors frequently have limited working
capital. This means it is not reasonable to expect
them to carry operating costs for excessive
periods. The period allowed for payment of
invoices should provide for regular payments
sufficient in the circumstances for the contractor
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to maintain a reasonable cash-flow to operate
their business.
Guidance
In the absence of any unusual circumstances
(or as otherwise required by law) a contract term
that allows a hirer to pay an owner driver more
than 30 days after presentation of properly
completed invoices is likely to constitute an unjust
contract term for the purposes of section 44(1)(g)
of the Act.
Further, it is likely to constitute unconscionable
conduct within the meaning of section 31 of
the Act if the hirer has engaged in a pattern of
conduct of regularly being late in paying the
contractor's invoices, paying only part of the
amount owed or failing to pay at all.
Example 14
Bob works as a long distance driver. His contract provides
for payment 90 days after invoice, when the industry
standard is generally 7, 14 or 30 days, depending on the
industry sector. Even then, his hirer regularly pays Bob late.
The company says "you'll get paid if and when we get paid".
The conduct of deliberate erratic payments is likely to
constitute unconscionable conduct within the meaning of
section 31 of the Act, and the contract term allowing for
90 days payment is likely to constitute an unjust contract
term for the purposes of section 44(1)(g) of the Act.
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Part 3—Deductions and statements
15 Deductions from remuneration
(1) Section 24 of the Act places certain restrictions
on hirers requiring contractors to pay any amount,
or from making deductions from money payable
to contractors, in respect of services or equipment
provided to contractors by hirers or any other
person. Under section 24, any amount deducted
must be—
(a) specified in the contract; and
(b) a direct and proper reflection of the actual
cost of the services or equipment in respect
of which the costs are charged.
(2) Section 24 of the Act also requires the hirer to
give the contractor an opportunity to obtain the
services or equipment from another supplier.
(3) Section 23 of the Act also requires a hirer
seeking to make deductions for insurance
to have an insurance policy in force and to
have provided a copy of the policy to the
contractor.
(4) Under section 65 of the Act, any term of a
contract that is contrary to, or inconsistent
with, anything in the Act, the regulations
or this Code is void to the extent that it is
contrary or inconsistent. There are also strict
requirements under the Corporations Act
concerning who is allowed to offer insurance
policies.
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Mandatory requirement
(5) If a hirer makes deductions from a contractor's
invoiced fees for services, or the use of
equipment, provided by the hirer or any other
person, the hirer must provide a written statement
to the contractor setting out the nature of the
equipment used or services provided and the
amount deducted for the equipment or service.
Example 15
Russell works for a taxi truck company. The company
starts to deduct an "insurance fee" of 5% of turnover from
all its contractors. Russell already has his own insurance
coverage that is much cheaper, but the company says he
must also participate in its "self-insured" scheme. The hirer
is in breach of sections 23 and 24 of the Act. Russell and his
colleagues could notify a dispute to the Small Business
Commissioner.
16 Deductions for the use of the hirer's equipment and
technology
A range of new technology, such as vehicle
monitoring technology, GPS devices and
electronic invoicing equipment or other
communications and monitoring equipment is
now available. This technology may provide a
benefit to the contractor or the hirer, or to both
parties, in terms of improved efficiency, safety,
client loyalty or productivity.
Guidance
If the hirer charges the contractor for the use of
equipment supplied by the hirer in circumstances
where the contractor does not obtain any benefit
or advantage to their own business from the use
of the equipment, then the relevant contract term
is likely to constitute an unjust contract term for
the purposes of section 44(1)(g) of the Act.
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However, it would not constitute an unjust
contract term if the rates paid to the contractor
made provision for the cost of any such charge
made by the hirer.
Example 16
A construction company negotiates with its owner drivers
to install new vehicle monitoring technology to obtain
government permission to operate more heavily loaded
vehicles on certain roads. The equipment costs $1500 to
install with a weekly monitoring fee of $30. The company
has calculated that the additional load capacity would
allow the contractors to earn an extra $200 a week. As the
contractor obtains a significant financial benefit from using
the equipment, it is unlikely to be an unjust contract term
if the contract allows the hirer to deduct the costs from the
contractor's payments, provided the contractor agrees and
the deduction is no more than the actual cost of the service
and equipment provided.
17 Penalties
Mandatory Requirement
A hirer must not require a contractor, or include
a term in a contract requiring a contractor, to
make any payment which is in the nature of a
penalty. A penalty is a payment that must be made
by a party for an amount in excess of the amount
necessary to remedy the actual loss or damage
suffered as a result of the conduct.
Example 17
Fang Shan's contract states that she must pay $100 to the
company if she is more than 10 minutes late in a delivery.
The inclusion of this contract term is in breach of this Code,
and Fang Shan could notify a dispute to the Small Business
Commissioner.
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Part 4—Allocation of work, working
arrangements and absences
18 Allocation of work
Some arrangements in the transport industry pay
remuneration to contractors for deliveries actually
performed, rather than for the hours where the
contractor is available to work. This means that
the fair allocation of work by the hirer is
important for all parties.
Guidance
If a hirer offers work to contractors in an unjust
manner, this is likely to constitute unconscionable
conduct within the meaning of section 31 of the
Act. Such conduct may also be in breach of
section 61 of the Act if carried out for a reason
prohibited by that section.4
Best Practice
Having regard to their legitimate business needs,
hirers should use their best endeavours to—
(a) plan their fleet to match their workloads; and
(b) allocate work fairly between their
contractors.
Contractors should operate in an efficient and
productive manner, and use their best endeavours
to assist hirers to meet customer requirements.
Parties should work together to pursue improved
management practices that avoid as far as possible
unproductive time and unloaded travel, and which
provide for the most efficient and productive
utilisation of the contractor's and the hirer's
vehicles, plant and equipment.
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19 Working arrangements
Some contractors work very long hours, do not
have adequate rest and recovery between shifts,
and do not have adequate family and recreation
time. While many contractors seek or accept
long hours for financial or other reasons, there
is significant evidence to show that working
patterns with excessive hours are unsafe, have
long-term health implications for contractors
and have a negative effect on family life.
Best Practice
When parties are negotiating a contract, they
should give proper consideration to achieving safe
work practices and a reasonable work and life
balance. Particular attention should be given to—
(a) ensuring their contracts comply with all
applicable laws and regulations on driving
hours and fatigue management; and
(b) the maximum number of hours a day in
which services are to be provided; and
(c) the number of days each week, month or
year in which services are to be provided;
and
(d) structuring the hours in which services are
to be provided to allow time for physical
recovery, rest and recreation, community
participation and family time; and
(e) what flexible arrangements can be put
in place that may assist contractors to
have a better work and life balance.
Such arrangements might include allowing
for consultation over preferred rosters,
arrangements to make it easier to find
and use replacement drivers or flexible
start and finishing times and locations.
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20 Absences due to illness or family responsibility
(1) Contractors are businesses, not employees.
As such, provided the standards of the contract
are met, it is a matter for the contractor to choose
the person who actually performs the services.
This could be the owner of the contractor's
business or an employee or subcontractor.
(2) A hirer may impose reasonable requirements
on the use of alternative drivers based on the
qualifications, training or character of a
proposed driver.
Mandatory Requirement
(3) A hirer must not terminate a contract only
because of the absence of the contractor due
to temporary illness or incapacity, family
responsibilities or a similar reason, without
first allowing a reasonable period of time for
the contractor to provide a suitable replacement
driver.
(4) In considering what period of time is reasonable
for the contractor to provide a replacement driver,
regard must be had to the nature of the work and
the relevant terms of any contract between the
parties.
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Part 5—Additional provisions for
forestry contractors and hirers
21 Unconscionable conduct during negotiations
In its application to forestry contractors, subclause
(2) of the additional guidance notes in clause 4 is
to be read as including the following example—
Example 4.6
There is only one forestry manager engaging harvesting
contractors in a particular region of Victoria, and it is
not practicable for the contractors to travel to other
regions or to work for anyone else. If the forest
management company was to use its strong market
position to extract an unduly harsh and one-sided deal
from harvesting contractors (having regard to all relevant
factors including international market conditions) this is
likely to constitute unconscionable conduct under section 31
of the Act. Conversely, if the harvesting contractors were
to join together and threaten to boycott the hirer unless
the hirer agreed to a harsh or one-sided deal in the
harvesting contractors' favour, this is likely to constitute
unconscionable conduct by the contractors under section 32
of the Act. The affected party could notify a dispute to the
Small Business Commissioner.
22 Best practice in negotiations
(1) This clause applies in relation to contract
negotiations between a hirer and a forestry
contractor.
(2) In addition to the matters set out in clause 5, the
parties to the proposed contract should, prior to
finalising the terms of the contract, jointly view—
(a) the locations or indicative locations for the
performance of the contract; and
(b) relevant harvesting and haulage management
plans.
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23 Disclosure of information
In its application to forestry contractors, the
guidance notes in clause 7 are to be read as
including the following example—
Example 7.3
Nathan is negotiating with a forest management company
to perform harvesting work and rates to be paid. His hirer
is aware that the coupe being considered has some terrain
outside that defined in the agreement that could make the
harvesting more complex and possibly damage equipment,
with extra costs and risks and delays. There is no way for
Nathan to do his own checks unless the company facilitates
this. The hirer should tell Nathan about the unusual terrain
and invite him to inspect the site to allow for further
negotiations.
24 Best practice in dispute resolution
In relation to the matters set out in clause 8 as
best practice in dispute resolution, an example
of an unforseen event beyond the parties'
control in the context of the forestry industry
is an environmental protest or blockade.
25 Misleading advertising
For the purposes of clause 9, an example of a
representation by a hirer that is likely to mislead
or deceive a forestry contractor is an inaccurate
guarantee or representation regarding the volume
of forest products available to the forestry
contractor.
26 General principles for setting and reviewing rates
(1) In its application to forestry contractors, subclause
(1) of the guidance notes in clause 11 is to be read
as including the following example—
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Example 11.2
Based on a forest manager's experience, the forest manager
has calculated benchmark cost rates per hour for a bulldozer
and a skidder. These benchmarks are based on the cost to
an experienced and efficient harvesting contractor who is
using reasonably modern and well-maintained equipment.
The forest manager can use this benchmark, and need not
calculate the particular individual costs of a contractor who
is using older, less efficient equipment.
(2) In its application to forestry contractors, subclause
(2) of the guidance notes in clause 11 is to be read
as including the following—
For a haulage contractor, this is a fair
amount for the haulage contractor's labour
in driving, loading and unloading the
vehicle and associated activities such as
administration.
For a harvesting contractor, this is a fair
amount for the harvesting contractor's labour
in managing their harvesting business.
27 Review of rates on a regular and systematic basis
Section 31(2)(k) of the Act provides that a matter
to be considered in determining whether a hirer's
conduct is unconscionable is whether or not the
contract allows for the payment of any increases
in fixed and variable overhead costs on a regular
and systematic basis. This means that a contract
which locks up a forestry contractor's rates for
long periods of time without regard to increases
in overheads (particularly fuel prices) will be
susceptible to a claim of unconscionable conduct.
Guidance
Set out below are certain practices that, while not
being mandatory, constitute a review of rates for
increases in overhead costs in respect of forestry
contractors on a "regular and systematic basis",
and which are therefore unlikely to constitute
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unconscionable conduct within the meaning of
section 31(2)(k) of the Act.
The component of a forestry contractor's
remuneration that relates to the cost of fuel is
determined by direct reference to the actual cost
of the fuel required to perform the services and
is adjusted—
(a) at least every 6 months; or
(b) if there is an increase in the price of fuel of
10% (or a lesser percentage amount) since
the last rate adjustment; or
(c) if there is an increase in the cost of fuel
of such an amount that it causes an increase
of more than 1% (or a lesser percentage
amount) of the forestry contractor's operating
costs since the last rate adjustment.
In addition—
(a) the determination of any increases or
decreases in the cost of fuel is by reference
to a legitimate and accurate fuel price
monitoring source; and
(b) the rates paid to the forestry contractor are
reviewed regularly and systematically in
respect of operating costs other than fuel.
While this clause sets out practices that are
unlikely to be unconscionable, other arrangements
may be commercially appropriate and legitimate
in all the circumstances and comply with the
requirements of section 31(2)(k) of the Act.
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Example 27
Ron is a harvesting contractor and has the benefit of a
5-year contract with a guaranteed volume and a turnover
of $350 000 a year. His hirer is in turn subject to a 5-year
contract with a timber processor, and has the benefit of
a 6-monthly fuel review clause. Ron's rates are similarly
reviewed for fuel increases under his contract every
6 months, and an additional lump sum is paid as
compensation for the average increases over the previous
6-month period. Given Ron's level of contract security
and turnover, and the commercial arrangements between
the hirer and the processor, a 6-month review is unlikely
to be unconscionable conduct within the meaning of
section 31(2)(k) of the Act.
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Endnotes
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Endnotes
1 Reg. 4: S.R. No. 153/2006 as extended in operation by S.R. No. 124/2016.
2 Sch. 1 cl. 8: Guidance on dispute resolution for owner drivers or contractors
can be obtained at www.vsbc.vic.gov.au.
3 Sch. 1 cl. 11: Guidance on the typical overhead costs for contractors can be
obtained from the Rates and Costs Schedules published under section 15
of the Act, which are available at www.business.vic.gov.au.
4 Sch. 1 cl. 18: Reasons set out in section 61 of the Act include: if the
contractor has exercised a power or right under the Act, informed a
person of a breach of the Act or Code, participated in joint negotiations,
raised an issue concerning health and safety or sought to renegotiate a
contract.
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