ATO turn the spotlight on employees as contractors

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The Australian Taxation Office (ATO) has stated their intention to increase their audit focus on businesses that use contractors.

An incorrect employment classification of an employee / contractor could be a breach of both ATO and Workers Compensation legislation.

If ATO determine that your contractors are employees, you would have a shortfall in your Superannuation and PAYG payments and subsequently incur interest and penalties. In theory ATO can go back an unlimited period to collect the superannuation and PAYG for employees.

In past years there was confusion for business owners about the definition of a worker as the ATO definition was different to WorkCover Queensland’s definition.

Today the definitions have been aligned. WorkCover Queensland has adopted the same definition as the ATO who supply a simple online decision tool to identify ‘Employee or Contractor’.

You can check your circumstances by logging on to:

http://www.ato.gov.au/Calculators-and-tools/Employee-or-contractor/

You are asked to answer a series of questions

  • Is there an Agreement in place with the individual
  • Occupation of the individual
  • Does the individual have an ABN
  • Details of Subcontracting arrangements
  • Basis of payment for services
  • Responsibility for provision of equipment / tools
  • Who is responsible for Rectification of work?

At the end of the questionnaire a decision is provided based on answers given. You are able to enter personal details and a report can be produced for you to print /save. Retain a copy for your records and if audited, you have a documented basis on which you made your decision.

An important factor is the existence and content of a written agreement between you and the individual. You should consider obtaining legal advice in regard to any contractor’s agreement.

It is important to discuss all your labour arrangements with your CQIB insurance broker as contractor or labour-hire alters your exposures hence the need to tailor your insurance program to your specific needs.

 

Pre-existing injury disclosure…employers can ask

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Late last year the Queensland government made some significant changes to the Workers’ Compensation and Rehabilitation Act 2003. One particular change that employers should be aware of is that employers may now ask a prospective employee to disclose any pre-existing injury or medical condition that they believe or should suspect would be aggravated by the duties of the position applied for.

Further, the employer is entitled to access a prospective employee’s claims history. The request must be in writing and the prospective employer needs to provide the prospective employee with information about the nature of the duties involved in the job. They also need to advise the prospective employee that if they do not comply with the request, or supply false or misleading information, they will not be entitled to compensation or damages under the Workers’ Compensation and Rehabilitation Act 2003 for any event that aggravates the non-disclosed pre-existing injury.

The prospective employer may also apply to the Workers’ Compensation Regulator for a copy of the prospective worker’s claims history. The application needs to be in the prescribed form and requires the prospective employee’s consent. This information can only be used by the prospective employer for the purpose of considering that person’s application for employment.

Whilst these changes will definitely be beneficial to employers, employers need to be mindful that they still need to comply with discrimination laws and the Fair Work Act 2009 (Cth) when considering a prospective employee’s application for employment. If a prospective employee discloses a pre-existing injury and they can establish that the employer has discriminated against them based on their knowledge of that pre-existing injury the employer may be liable to pay compensation.

Employers will also need to take account of a possible increased exposure to negligence claims in circumstances where the employee has made disclosure of pre-existing injuries or conditions. If an employer has knowledge that the employee suffers from a pre-existing injury this may give rise to a special or higher duty of care to that employee than it would otherwise owe as a result of being furnished with that knowledge.

Before making any changes to their employment practices based on these changes it is recommended that expert advice be sought regarding the above matters.

 

A business minefield – Employees misusing social media!

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Business owners beware! Even if you or your businesses are not active in the social media space, your employees’ online actions can have a lasting real life impact.

In a well-known case from 2011, an employee of Linfox Australia Pty Ltd was dismissed for posting offensive and discriminatory comments about two of his managers on his Facebook profile page.

The Fair Work Commissioner recognised that the posted comments were ‘outrageous and distasteful’, but found that Linfox did not have grounds to dismiss the employee. At the time of the dismissal and the hearing, Linfox did not have a social media policy.

In the recent case of Malcolm Pearson v Linfox Australia Pty Ltd [2014], the Fair Work Commission held that it is not “harsh, unjust, or unreasonable” to expect an employee to comply with a social media policy that operates outside, as well as inside, the workplace. In this case, Linfox (presumably having learned from its previous experience) had implemented a social media policy and Mr Pearson’s refusal to sign this policy, amongst other shortcomings, constituted a valid reason for dismissal. The Commission dismissed the unfair dismissal case on the basis that the social media policy was a legitimate exercise by Linfox in protecting its reputation and security. The Commission recognised that the natural overlap between public and private life makes such an “invasive” policy necessary.

“It is difficult to see how a social media policy designed to protect an employer’s reputation and the security of the business could operate in an ‘at work’ context only…Gone is the time where an employee might claim posts on social media are intended to be for private consumption only.”

These decisions form part of an evolving body of case law that reflects the increasing prevalence of social media and a more sophisticated understanding of its implications in the workplace.

So what should employers do to protect their interests? Most experts agree that employers should:

  • Implement a comprehensive social media policy
  • Adequately train their employees in the policy and ensure they are aware of the employer’s expectations around social media in and out of the workplace, and
  • Regularly review the policy to maintain currency.

Employers should be mindful that courts and tribunals are increasingly willing to hold employees accountable for social media misuse. Hence, employers should not shy away from robust disciplinary actions when the circumstances are appropriate.

 

Household workers need cover too

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Do you have a regular gardener or cleaner at your home or holiday home? Or maybe you have a paid child-minder at your residence on your social nights out? Have you considered if you require Household Worker Insurance?

If you have paid help at your domestic residence, Household Worker Insurance is critical. A single work-related accident can leave you, the employer, liable for thousands of dollars in medical bills. Even worse, it could lead to a common law claim, which could involve a lump sum payment for loss of future earnings, pain and suffering, permanent impairment etc., which could amount to millions of dollars.

Don’t assume you have domestic worker protection under your home and contents policy.

Under the Household Worker Insurance policy offered by WorkCover Queensland, you are covered for the cost of compensating a household worker in your employ who sustains a work-related injury while working for you. These costs may include lost wages, travelling expenses, hospital, medical and rehabilitation expenses and other associated costs.

The policy is only $50 for a two-year term. For more details head to the WorkCover Queensland website or contact your insurance broker.

 

Insurance: The Broker’s Role…versus supermarkets and other direct vendors

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There is a significant push on selling insurance products through mainstream retailers. Their foray into insurance is a calculated move that relies heavily on the established reputation of these retailers to provide convenience and savings in commoditised household goods.

It’s a tactic popular with banks as they design products that will try to cater for all financial of their customers, and thereby, keep them ‘in house’.

So what’s the difference between insurance brokers and the direct sellers?

Both earn a commission from the placement of cover with the insurer. The product the client receives is only as good as the results when it’s needed at the time of a claim. The role of the insurance broker is to provide professional, advice-based service that represents the client’s best interests. The broker has a suite of product options available depending on clients’ circumstances, cover requirements and affordability.

The direct market relies on promoting a cheaper product as the bottom line. This is heavily supported by mass media advertising that keeps the subject matter in their campaigns light on detail and high on entertainment value – think of domesticated aliens, man folding underwear at counter, French girl struggling with Aussie accent, happy customers portrayed by actors etc. The product is deliberately made cheaper by using strict acceptance criteria and restricting policy coverage and benefits.

A recent study by Vero Insurance surveyed business owners as to why they prefer to deal with a broker. A common theme in the feedback was that a broker would see many claim scenarios and may be able to suggest the most appropriate cover based on previous experiences. This gave business owners more confidence rather than trying to understand the complexities themselves.

An important factor in any insurance buying decision should be how claims are settled. Brokers often recommend insurers based on their ability to provide excellent claims service. Insurance contracts and claim settlements can be complex and having professional guidance through the process is invaluable. Policy wordings often have limits, sub limits, conditions and exclusions that can potentially create situations where confusion reigns and the insurance industry is perceived as untrustworthy and deceitful.

The broker has the ability and responsibility to eliminate this confusion and provide the most suitable product for the clients’ needs.

If price is ever the single most important criterion in the insurance buying decision, then there can be benefits in using direct market insurers. However, always bear in mind that when price is optimised, the quality of cover usually suffers. Cheaper policies have strict acceptance criteria and the retailers’ call centre consultants have scripts to follow. The highly regimented and efficient transaction process is designed to deal with the large volume of phone calls. Closing the deal is likely to be the number one priority.

Fire doesn’t discriminate

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As the chills start settling in, we all need to be conscious of the winter fire season. Every year people die as a result of fires in the home. Statistics show the majority of house fires occur at night when people are asleep. Most are preventable.

In a fire, you may only have a few minutes from the sounding of the smoke alarm to when your life is seriously threatened by fire or smoke.  It makes sense to prepare for the worst by practicing an escape plan, making sure that everyone knows what the smoke alarm sounds like, and that everyone in the household knows what to do in an emergency

When you go to sleep, your sense of smell also goes to sleep. If there is a fire, toxic fumes may overcome you before you wake up. The piercing shriek of a smoke alarm can provide the seconds and minutes of valuable time you need to get out of the house during a fire. Think about…

  • Installing an adequate number of suitable smoke alarms and testing them regularly.
  • Having a written escape plan in case of a fire and practicing it.
  • Never leave cooking or any other open flame including candles or oil burners unattended.
  • Make sure keys to all locked doors are readily accessible in case you need to escape.
  • In the colder months, take extra care when using heaters, electric blankets or open fires.
  • Portable heaters should always be placed in a stable position, and a safe distance away from bedding, clothing, curtains and tablecloths.
  • Always keep lighters and matches away from children.
  • Regularly clean your clothes dryer. Clean the lint out from the filter in the dryer.
  • Oil, gas or wood heating units may require a yearly maintenance check.

All homes have different requirements so if you’re not sure, look into the free Safehome service, a program whereby you can invite local firefighters to assist with your fire and home safety needs. This initiative is free service provided by Queensland Fire & Rescue Service in the interest of developing a safer community. Contact 13 74 68 for more details or visit the website.

Your home and everything you treasure deserves proper protection. In addition to having safety practices in place, be sure to speak to your insurance broker who can provide you with the right insurance solution for home and contents, ensuring your peace of mind.

https://www.fire.qld.gov.au/communitysafety/freeprograms/safehome.asp

Travel Compensation Fund scrapped – Holiday plans at risk

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Nothing spoils a holiday more than being stranded following the financial collapse of a travel operator. Until recently, a traveller’s problems with a travel agent or transport operator going belly-up had some protection offered by the Travel Compensation Fund. This government legislated fund compensated travellers if the operator or agent collapsed and failed to account for money paid by you the traveller.

However, this particular safety net is no more. From 30 June 2014 the Travel Compensation Fund is closed. The fund has been replaced with a series of insurance options for the prospective traveller; one of these is ‘end provider insurance’.

Choosing the right cover is important.  A possible complication is that some insurance provider organisations may suggest that two insurance covers are now required – one to cover the usual travel risks and a second to cover insolvency of the travel agent or transport operator.

Not all insurers cover insolvency; in fact some of Australia’s best known travel insurer agencies do not offer this cover so a wise traveller will select a Comprehensive Travel policy that covers both risks.

Check also that your travel policy wording includes insolvency with a limit of at least $10,000 cover for a single traveller or $20,000 cover for a family for the costs that can be incurred in rebooking or cancelling your journey.

Another tip before selecting your transport operator is to check if their name appears on the Travel Insurer’s website which lists airlines that have a history of financial stress. If you purchase an airfare with one of these stressed airlines you are not covered in the event of the airline entering receivership. These lists are regularly updated to reflect the financial status of an airline, either adding or removing airline companies as situations change.

An example was Air Australia / Strategic Airlines which became insolvent in February 2012 when the airline halted all flights and went into administration.

Your insurance broker is best placed to make sure you have the right travel insurance policy and your best chance of having that happy holiday.

 

Letter of Authority or Letter of Appointment…which one for what purpose?

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As the dust settles on another financial year it is worth looking at some issues that continue to have an element of confusion for all concerned. One of these is the role of an insurance broker in relation to two widely used industry documents – the letter of appointment and the letter of authority.

The purpose of each is for a consumer to approach another broker to act on their behalf. One form, the letter of authority, is an instruction to make enquiries, while the other, the letter of appointment, is a transfer of business from one brokerage to another. These documents are often confused. Use the wrong one and clients may be under the impression that they are merely seeking an alternative quote, only to find they have transferred their portfolio of business to another broker.

The Letter of Authority is a document that may be used in the following examples: the consumer is looking to get an alternative quote via another broker; or if they would like a broker to make enquiries on their behalf, a situation that may occur during a difficult claim. Its purpose is that the instruction from the client is clear and transparent with all parties. This is important to protect privacy and avoid misrepresentation. The document must be signed by the business owner or appointed authority to do so. At this early stage of a possible new broker/client relationship, the broker is not allowed to receive commissions or fees for their services.

The Letter of Appointment is a document that has a clear intent for another brokerage to take over existing business. It would include claims maintenance and credit control. This document authorises the broker to accept commissions and fees for service within the standards set by AFSL licensing requirements.

Both documents have clear, separate intentions but can cause a great deal of confusion if not used correctly. Please contact your broker for guidance in selecting the appropriate document to suit your needs.

Third party manufacturers – Pitfalls for Australian suppliers

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Australian Consumer Law (ACL) provides a national framework for consumer protection in the supply of goods and services. Under the ACL, the definition of a “manufacturer” of goods is broader than just the enterprise that makes the goods – it is defined as including a person (includes a company or partnership) who:

  • extracts, grows, produces, processes or assembles goods
  • holds themselves out to the public as the manufacturer of goods
  • allows their name to be applied to goods
  • allows another person to hold them out to the public as a manufacturer
  • imports goods where the actual manufacturer does not have a place of business in Australia at the time of importation

In summary, a company can be liable for defects in goods even if it had no role in their manufacture.

Consumers who suffer loss or damage (includes injuries to persons and economic loss) because of safety defects in a manufacturer’s products can take the manufacturer to court or make a complaint to a consumer protection agency, which may take action on the consumer’s behalf. A product has a safety defect if its safety is not what the community is generally entitled to expect – this includes how and for what purposes the product has been marketed, its packaging, instructions or warnings about using the product, etc.

Suppliers who import goods should reduce their exposure to product liability action by using responsible and sensible business practices such as:

  • Know your manufacturer: the identity, location, reputation, etc and whether there have been problems with their product in the past.
  • Conduct regular reviews of product designs and production (this may mean regular visits to the manufacturer’s overseas factory).
  • Implement and review quality assurance procedures regularly.
  • Test products regularly to product specifications, ensuring they are always met, including batch testing.
  • Conduct appropriate marketing and keep control over how the goods are presented.
  • Provide clear and thorough user instructions.
  • Where necessary, conduct a quick voluntary recall of any products that are defective or unsafe.

If you have any questions about product liability exposures, please contact your insurance broker for advice.

 

Employers’ Rights – WorkCover claims questioned

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Employers are sometimes faced with a situation where they disagree with a decision of WorkCover to accept a claim for statutory benefits made by one of their employees who allege that they have been injured during the course of their employment. The employer may disagree with the acceptance of the claim for a variety of reasons, including a belief that the claim is fraudulent or that the injury did not actually occur at work.

Many employers do not appreciate that they have a right to challenge such a decision. If an employer is unhappy with a decision made by WorkCover on a claim they can seek to have the decision reviewed by the Workers’ Compensation Regulator. Conversely, an employee whose claim is rejected can also seek a review of the decision.

The Workers’ Compensation Regulator is a body independent from WorkCover Queensland and is required to impartially review decisions made by WorkCover.

There is no cost involved in having a decision reviewed by the regulator, other than, of course, if the employer chooses to engage legal representatives to assist them with the review application.

Once WorkCover has made a decision on the claim the employer is entitled to ask for written reasons for the decision within 20 days of being notified of the decision.

WorkCover has five business days to supply the employer with the written reasons for the decision. The employer then has 3 months from the date of that letter to apply for a review with the regulator. The employer is entitled to provide the regulator with additional evidence it wishes to rely on in support of the review application.

The regulator has 25 business days to hand down a review decision unless an extension has been agreed upon. The employer has a “right of appearance” on the regulator during the review process, which can either be done in person or over the phone. It is not necessary to have legal representation during the review process.

If either party is unhappy with the ultimate decision of the regulator they can appeal the decision to the Queensland Industrial Relations Commission. The regulator will normally appoint legal representation to defend their decision in the Industrial Relations Commission. Should the worker appeal the review decision the employer needs to apply to the Commission for the right to be heard on the appeal.