As well as regulating labour hire, Queensland’s new Labour Hire Licensing Act includes an anti-phoenix element. This is not Queensland’s first use of industry-exclusion to address phoenixing, a similar structure was used in the 2017 Building Industry Security of Payment legislation – but the ambit of the labour hire regime is far broader than many would anticipate.
Building Industry Fairness (Security of Payment) Act
As discussed in more detail here, the Building Industry Fairness (Security of Payment) Act 2017 implemented a range of measures aimed at protecting sub-contractors from the risk of non-payment.
The anti-phoenix element arises from exclusion from the building license regime if an office bearer of a company acted as a director or secretary of a construction company that entered into insolvency administration in the prior two years.
Labour Hire Licensing Act 2018
The Labour Hire Licensing Act 2018 which commenced on 16 April 2018 to introduce a regime for registration of labour hire participants likewise includes an anti-phoenix element. The requirement that all directors of a company must be ‘fit and proper persons’ is hardly unusual, but the criteria includes two that are particularly focused on insolvency, referencing prior directorship of a company that:
- entered into a formal insolvency administration.
- has failed to pay tax or superannuation due to its employees.
The changes are noteworthy because the LHLA has a reach that is far broader than would be anticipated from its name. The regime is not limited only to external labour hire arrangements, it appears that it extends to internal arrangements that are very common in corporate groups: the use of a designated payroll company. As a result it seems that a group employer in any industry – whether headquartered in Queensland or not – will need to register and comply with the regime in respect of any Queensland employees.
At a time when the Federal Government is implementing changes intended to reduce the stigma of business failure, it seems that the Queensland government is heading in the opposite direction – further expanding a ‘one-strike’ regime that will restrict those involved in a financial failure from acting as company directors.
No doubt the Federal Government’s Anti-Phoenix Taskforce is aware of the Queensland approach and will be watching the outcome with great interest. If the industry-exclusion model does appear to provide a more effective means to deal with the problem of phoenixing, there may be moves to implement it more broadly.