Engaging independent contractors
All documents issued prior to 1 July 2017 were issued by the former Department of Commerce. Documents listed here are the latest versions available, but may be subject to review. For more information on this document, please contact firstname.lastname@example.org.
Small business may need to engage an independent contractor to perform tasks on their behalves. There are about 986,000 persons working as independent contractors in Australia (ABS 2013). Engaging the right contractors and managing contractor safety are effective tools in preventing workplace injuries and incidents.
Your legal obligations
When small business owners (the principals or main contractors) engage independent contractors, they have duties of care to ensure safety and health of the contractors as outlined under section 19 of the Occupational Safety and Health Act 1984 (the OSH Act). Specifically, if the contractors are going to be exposed to hazards and risks associated with performing tasks on behalf of the business, the safe system of work for the contractors must be prescribed. Contractors form part of the system of work for which the principal is directly responsible. Therefore, the law stipulates that the duty owed by the principal to the contractors may not be different from that owed by an employer to employees (section 23D of the OSH Act).
Some businesses adopt the ‘hands off’ approach with contractors believing that they can remove themselves from liability for safety and health responsibilities in cases where contractors cause work-related injuries and incidents to themselves, their employees or to third parties. This may not be the case. The duty of care ensures safety and health responsibilities are shared by everyone at the workplace. Nevertheless, the extent of the responsibilities of the parties involved is dependent on their degree of control over the matters. The courts have been more favourable in cases where the principals demonstrated sound risk management practices with safe system of work. The principals cannot delegate workplace safety and health responsibilities to contractors through the ‘conditions of contract’.
Employees or contractors
The distinction between employees and contractors is one that has different interpretations in terms of workplace safety and health responsibilities. Contractors are people who operate their own business and are contracted to perform services under a ‘contract for service’ (a commercial contract). They are usually an agent, a person who is only told what to do by the principal; and not how to do it.
Employees are those who work for an employer and receive remuneration in wages or salary under a ‘contract of service’ (an employment contract). Employees take directions directly from their employer on how the work is to be performed. Some contractors may have employees, however, the contractors will be spending most of their time providing labour services directly to clients, rather than managing their staff (ABS 2013).
It is a common practice for business to hire contractors who offer the lowest price without evaluating their safety records or by assuming that they will also meet all legislative requirements. If the lowest price is the only consideration, the business may run the risk of selecting unsafe contractors for the job or the project. Instead of cost saving, engaging unsafe contractors is likely to cost the business more in the long run.
Choose a contractor with experience and the ability to complete the job safely
Previous work history and past safety records can be used to determine the differences between contractors regarding their safety value. The selection list should include good safety records in terms of their accident/ incident rates, insurance experience and workers’ compensation claim costs. Referee reports and clients testimonials can be good source of information to evaluate contractors’ previous work history.
Select contractors that have their own safety manual, safety plan and policy
The written safety plan and policy can be a starting point to observe the contractors’ commitment towards workplace safety. The safety plan should include various activities such as job safety analysis, risk assessment, hazard substance register and induction and training records.
Include safety costs in tenders or bid documents
When evaluating contractors through tenders or bid documents, the safety costs should be made visible in the documents to make meaningful comparisons. This will allow all contractors to compete fairly without bidders who do not make a provision for safety appearing to have lower costs. If the job or project involves high risk activities, the documents should mention specific hazards and risks that must be controlled and require bids to specify control methods.
Managing the safety of contractors
Key strategies in managing contractor safety include:
All contractors are engaged under some form of agreements ranging from a verbal agreement to a comprehensive document that details the conditions of contract. Regardless of which form the agreement takes, the business should specify clearly to the contractor all foreseen hazards, the parties’ obligations, liabilities and responsibilities to workplace safety. Documentation such as insurance coverage and liability limits are just a few of the areas that need to be addressed prior to the contractor commencing the work or project.
Aligning your contractors’ safety plan with your safety plan
Prior to commencing the work, hazard identification and risk assessment must be prepared on the job being awarded. The risk assessment process should be integrated in the contractor’s own safety plan. The contractor’s safety plan can be similar to or mimicking the safety management plan of your business. However, the separation of the two is important to ensure the contractor has gone through getting the safety process in place and personalising it into action.
Conduct contractors safety orientation and training
Prior to work proceeding, the business (the principal) should conduct safety orientation of the worksite or, if the worksite will be in different locations, in an environment that will replicate the worksite for the contractors and their employees. In the session, the contractors and their employees will be informed of the known hazards, introduced to site safety practices and rules, and familiarised with emergency action plan for the site. An attendance record of all persons attending the sessions should be maintained.
Contractors must provide only qualified and safety trained people to perform the work, fully trained in compliance with the national and state requirements. The business must ensure they have a process for knowing who is or who is not on site (contractor to sign in and out). A physical induction process must be used to introduce workers to the actual work area.
The degree of control of work activity will dictate your OSH liability if work-related injuries or incidents occurring
Contractors are responsible for their own safety and supervising their employees ensuring they work safely. However the business (the principal) has significant level of control of work activity and must establish the necessary degree of contact with the contractor specifically in areas of risks associated with the job or project. It is important to keep a check on how the work is going against the plan, agreed working methods (including safe work procedure), and the job specifications. The business should also monitor the contractors’ overall safety by conducting regular safety inspection to ensure the contractor is performing as agreed. Records of the inspections should be maintained.
Regular meeting should occur between the business and the contractor to discuss near misses, incidents and formulate remedial action. Immediate reporting of contractor accidents is required.
Conduct post contract evaluation
It is essential that a post-contract evaluation is carried out to assess policies, choice of contractor, control of the contract and the quality of the work performed so that necessary changes can be made next time to improve the processes.
Each contractor’s performance can be evaluated against the criteria set at the beginning of the contract. The information gathered from the evaluation process should be shared with the contractor. This serves as future reference and the information can be used as a ‘preferred contractor’. Most contractors are in business for the long term. Knowing this type of information is being collected and stored for future reference may be the best safety motivator.
Case example – duty of care of the principal towards a contractor and sub-contractor
This case involves a verbal contractual arrangement between a small business of contracting for roofing work, the roofing company and the crane hire company. The small business of contracting for roofing work (Business M – a pseudonym) was prosecuted under section 23D (2), 19(1) & 19(2) of the OSH Act 1984 and was ordered to pay a fine of $70,000 by the Magistrates Court of Western Australia. Under the charge, Business M failed to provide and maintain working environment to which any person employed or engaged by the contractor to carry out or assist in carrying out the work concerned was not exposed to the hazards, and by failing caused serious harm to such a person.
Business M was contracted to replace the roofing of the commercial premises. Business M (the principal contractor) does not have any employees and does not engage in any actual roofing work itself. It merely obtains contracts and then engages contractors to perform the physical work. In this incident, Business M verbally engaged a roofing company (a contractor) to perform the re-roofing and it further engaged a crane hire company (a sub-contractor) to provide a crane to land the new roofing, and lift down the removed roofing as part of the re-roofing work at the premises. On the day of the incident, two workers from the crane hire company were working on the site, one being a crane operator and the other a qualified and licensed dogger. The crane operator is a full-time employee of the crane hire company, while the dogger who was 19 years old at that time, was an independent contractor (a sub-contractor). There was no contract of any kind between the roofing company and the crane hire company.
Before commencing work, the roofing company employees viewed the premises, discussed and signed off on a job safety analysis (JSA) for the re-roofing work. The content of the JSA identified the hazards presented by the damaged and brittle skylights. The roofing company’s employees decided to address the identified hazards by walking straight ahead across the frontage roof to avoid the skylights. However, the roofing company did not discuss any safety issues with the crane company, the crane operator and the dogger, nor did the roofing company make them aware of its JSA.
The crane operator and the dogger commenced work at the site. In the process of removing the asbestos sheeting from the roof by using the crane to lower the sheet down from the roof, the dogger ascended to the frontage roof and guided the crane operator to land the new sheets to the ground. At one point, the roofing company’s employees warned the dogger to be aware of the rusty sheets and skylights on the frontage roof. While landing a new pack and attempting to remove the slings, the dogger had some difficulty doing so. As a consequence, the dogger stepped onto the far end of the skylights. The areas of the skylights collapsed bellow the dogger and he fell approximately 3.3 metres and struck his head and neck on the cement floor. The dogger suffered serious injuries as a result and subsequently underwent bifrontal cranioplasty.
On this incident, the court took decisions that Business M could have done more to provide a safe system of work for its contractors and sub-contractor. The court stated that it was practicable for Business M to require and confirm that the roofing company had a system of work in place that would adequately address the risk of a person falling through the skylights, such as installing of safety mesh net prior to any person commencing the re-roofing work and installing of temporary metal sheeting over the skylights. Business M must also ensure that the crane hire company was aware of the existence, height and condition of the skylights, and the risks and the consequence of falling through the skylights. The crane company had not provided the dogger with instructions on training in working at heights or ensured that the dogger had otherwise received such instruction or training. Any person who might be required to access the roof must be adequately trained in and informed of the risk of falling to the skylights.
The case displays that Business M (principal contractor) cannot rely on the expertise of the contractors or assume that all contractors will necessarily perform the work safety. In this incident, the issue of the safety of the subcontractor, the dogger, was not sufficiently considered. Each party in the incident relied on the other to ensure that the work would be carried out safely. However, Business M as the duty holder, has to put in place a system of monitoring the work to ensure safety and health of contractors, sub-contractors and everyone at the workplace.
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