Collective Bargaining by Independent Contractors: Challenges from Labour

Law — (2007) 20 AJLL 1

Australian Journal of Labour Law

Shae McCrystal

Shae McCrystal*
Collective bargaining by small business actors, including independent contractors, is subject to the
anti-competitive conduct provisions in Pt IV of the TPA. The ACCC can authorise the pursuit of conduct
that would otherwise breach Pt IV, but the process is lengthy and involved. This article examines
suggested changes to the authorisation process that would institute ‘collective bargaining notices’ for
small business actors. The proposed changes were embodied in a Bill introduced into Federal
Parliament to amend the TPA in 2005 but which subsequently failed to be enacted. The article
discusses the content of the proposed changes and explores the ‘traps’ lying in the common law
(breach of contract, restraint of trade, economic torts) and in the TPA (secondary boycotts) that were
not adequately addressed by the proposed collective bargaining notice system. The article argues that
the common law and TPA challenges to collective bargaining by employees remain relevant for
independent contractor bargaining. In order to provide meaningful access to collective bargaining for
non employee actors, any changes to the TPA must address these alternate areas of potential liability.

In 1965 Harry Arthurs called for acknowledgement that employee actors are not the
only workers in need of the counterveiling power afforded by collective
bargaining.1 Arthurs recognised the position of dependence experienced by many
legally ‘independent’ workers arguing that ‘[c]ounterveiling power may be the last
bastion of small-scale, individual enterprise’.2

In Australia the need to provide counterveiling power for small business actors that
can be lawfully exercised has recently achieved political legitimacy. At a time when
changes in regulation of labour relations have moved away from recognising
inequality of bargaining power, regulatory policy in the small business sphere has
increasingly embraced interventionist legislation designed to protect small business
actors. A number of commentators have noted this incongruity. Riley, for example,
has pointed out the ‘“incoherence” in contemporary workplace law’: a commitment to
fair dealing is to be abandoned for many subordinated employees, but adopted and
enforced to protect the entrepreneurial small business worker.3

In keeping with the increased political legitimacy of protections for small business
actors, changes to the laws affecting collective bargaining by non-employed actors
have been proposed. Acting on the recommendations of the Dawson review of the
competition provisions of the Trade Practices Act 1974 (Cth) (TPA),4 in 2005 the
Federal Government introduced the Trade Practices Amendment (No 1) Bill (the
Amendment Bill) into Federal Parliament. The Bill sought to amend the TPA in order
to establish a streamlined process to enable small business actors to engage in
collective bargaining without breaching the anti-competitive conduct provisions of
Pt IV of the TPA. While the Bill passed the House of Representatives, concern
expressed by some government members in the Senate over a schedule to the Bill
amending the TPA process for merger authorisations led to the Bill being split in the
Senate. The mergers schedule was removed. While the amended Bill was passed by

1
the Senate, it was not subsequently passed by the House of Representatives in its
amended form.5

At the time of writing, the original Bill has lapsed and the amendments have not been
reintroduced into Federal Parliament. However, the changes remain on the Federal
Government’s agenda and may be reintroduced some time in 2007.6 This article will
examine the changes to the TPA that were proposed in the Bill in order to explore
whether the provisions would have offered a collective bargaining solution to
contractor workers. In particular, the article explores the extent of legal protection that
would have been provided by the proposed collective bargaining notice provisions.
Protection against liability under the proposal extended to certain parts of the TPA but
not to the common law doctrines of restraint of trade, breach of contract or the
economic torts. The experience of labour law demonstrates that collective bargaining
is often unlawful under the common law. The contractor collective bargaining notice
provisions that were contained in the Bill appeared to offer inadequate legal
protection against common law doctrines for some contractor workers, particularly
those legally independent workers whose economic dependence more closely
resembles employed workers. In this article I critically examine the failed proposal in
order to provide suggestions for the improvement of any future resurrection of the
amendments. A collective bargaining model for contractor workers that ignores the
lessons learned from labour law will not succeed in creating a viable bargaining
regime.
Overview: Collective Bargaining by Contractor Workers
The ability for contractor workers to engage in collective bargaining requires
contractors to be able to form collectives, and to act in association in order to bargain
collectively. With some notable state legislative exceptions, collective bargaining has
only been lawful when exercised by employed workers in the context of industrial
relations systems.7 Although the practice of collective bargaining by contractor
workers has been a feature of certain industries (notably the transport industry),8 it
has usually occurred in breach of Pt IV of the TPA, although only occasionally
attracting litigation.9 While acknowledging the existence of collective bargaining by
contractor workers that occurs in spite of the law, this article will explore the status of
such bargaining at law in order to tease out the potential liability of parties engaged in
this conduct.

Part IV of the TPA governs anti-competitive conduct, rendering collusion and

combination by competitors unlawful on the basis that it is ‘anti-competitive’ in effect.
Collective negotiations, bargaining or boycott behaviour by competitor contractors
will almost always constitute anti-competitive conduct under the terms of Pt IV,
rendering participants in such conduct liable to fines, injunctions or orders for
damages.
The operation of the anti-competitive conduct provisions of the TPA are extended to
non corporate actors by the National Competition Code (NCC) which consists of
identical legislation passed by each state and territory replicating the provisions of
Pt IV and applying them to non-corporate actors.10 Accordingly, the following
discussion applies equally to corporate and non-corporate actors, including
contractors who operate as non-corporate sole traders. The provisions do not extend to
the pursuit of employment terms and conditions. C (other than provisions relating to
secondary boycotts and resale price maintenance) to the extent that the provisions
relate to employment conditions.11

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To explain the operation of the TPA in the context of collective bargaining by
contractor workers I first show how such conduct is rendered unlawful by Pt IV and
then examine the authorisation process and notification process that were proposed in
the Amendment Bill for otherwise unlawful collective bargaining to occur. The
discussion will seek to ascertain the zone of protection from liability for collective
bargaining conduct that may be afforded under the TPA by the authorisation and
proposed notification processes.

TPA Pt IV — What will constitute anti-competitive behaviour?

Under Pt IV of the TPA, and in particular s 45(2), collective conduct by competitors
will be unlawful if it constitutes a collective boycott, price fixing or has the effect of
‘substantially lessening competition’. Collective boycotts and price fixing are
outlawed per se: any conduct of this kind is unlawful and deemed to be inherently
anti-competitive in effect. Contracts, arrangements or understandings that do not
constitute a collective boycott or price fixing will only be unlawful if it is shown that
they are actually anti-competitive in effect.

To illustrate the operation of these provisions in the context of collective bargaining

by contractor workers, it is useful to use a fictional case study. The following
discussion of potential liability under these provisions is necessarily simplified as an
illustration of the operation of s 45(2) in this context, and does not purport to engage
with the more complex nuances of the operation of the section in practice.

Company A operates a software development company and has consultancy contracts

with 20 computer programmers. Each programmer is a genuine independent
contractor. Company B purchases the software development business from
Company A. The programmers are all offered new consultancy contracts with
Company B. The programmers form a collective to negotiate with Company B over
the amount of their services fees and their work arrangements. Would this breach
s 45(2)?

First, the programmers in this scenario will potentially engage in a collective boycott
if, in a market where they are competitors, they enter into a contract, arrangement or
understanding for the purpose of preventing, restricting or limiting the supply of
services to a target.12 Where our hypothetical group of programmers, who would
otherwise be in competition with each other for service contracts with Company B,
form a collective and refuse as a group (a contract, arrangement or understanding) to
work for Company B without Company B agreeing to collective negotiations over the
cost of their services or their work arrangements, then that contract, arrangement or
understanding may constitute a collective boycott. To constitute a boycott the purpose
of the programmers in so acting must have been the prevention, restriction or supply
of services to Company B.13 Here, while the ultimate purpose of the conduct is to
improve work arrangements, the immediate purpose would be to restrict the supply of
contractor workers to Company B in order to pressure Company B to agree to their
collective demands. This may therefore breach s 45(2).

In addition to the potential difficulties with the prohibition on collective boycotts,

because the group of programmers are seeking to fix, control or maintain the price at

3
which they sell their services to Company B, this will probably breach the per se
prohibition on price fixing.14 Finally, if the conduct of the programmers does not
constitute price fixing or a collective boycott, then their conduct may be in breach of
the TPA if the contract, arrangement or understanding that they reach as between
themselves may, or actually does, substantially lessen competition in the relevant
market.15 Competition is defined under the TPA as competition in any market in
which a corporation that is, or would be, a party to the contract, arrangement or
understanding, supplies or is likely to supply or acquire, or would supply or acquire
but for the questionable provision, goods or services.16 In this respect the conduct of
the contractors could be conduct which lessens competition between them in the
market for their services, or conduct which lessens competition in the market in which
Company B operates, if Company B becomes a less competitive member in the
market in which it operates.17 Therefore the likelihood that the programmers may, or
have, reduced competition will depend on a range of factors including the size of the
relevant market or markets, the state of competition in the markets and the likely, or
actual, effect of any contract, arrangement or understanding.

The effect of the prohibitions under s 45(2) is to render most collective bargaining by
contractor workers unlawful as a breach of the TPA. However, recognising that all
conduct that would breach s 45(2) is not necessarily anti-competitive, or may in fact
be pro-competitive, the TPA contains an authorisation process to enable parties to
obtain exemptions from the application of s 45(2). In addition, the proposed
amendments to the TPA sought to insert a notification process allowing certain parties
to lodge a collective bargaining notice which, once in operation, would have had the
effect of authorising anti-competitive conduct. The proposed system of collective
bargaining notices would have had a significant impact on the capacity of contractor
workers to engage in collective bargaining.
Authorisations and notifications
The authorisation procedure enables parties to seek authorisation to undertake
collective bargaining, collective boycotts or price fixing without contravening
Pt IV.18 The authorisation process requires parties who wish to engage in collective
bargaining to apply to the Australian Competition and Consumer Commission
(ACCC) for authorisation of the proposed conduct. The authorisation process is a
lengthy exercise involving public consultation and detailed examination of the likely
effect of the conduct on the market and the net public benefit from the conduct.19
In situations where the transactional value of the proposed conduct is less than
$3 million, the proposed amendments sought to provide a notification process for
applicants who wished to engage in collective bargaining. Under the proposed
changes, s 45(2) would not apply to the conduct of a corporation which had registered
a ‘collective bargaining notice’ with the ACCC where that notice was in force. The
provision would apply equally to individuals through the NCC.20 A change from
authorisation to notification for bargaining involving smaller transactions has the
potential to significantly broaden the opportunities for collective bargaining by
contractors because notification requirements would be significantly simpler and
quicker than the authorisation process.21

Under the changes that were proposed in the Amendment Bill, a collective bargaining
notice could be registered with the ACCC where a relevant party (corporation — TPA;
person —NCC) proposed to make, had made, or proposed to give effect to, a contract
containing a provision that would otherwise breach s 45(2),22 and:

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 • (1)they had made, or proposed to make, a contract with one or more persons
about their supply or acquisition of services to, or from, another person (the
target); and
• (2)they reasonably expected that they would make one, or more, contracts
with the target about the supply or acquisition of services; and
• (3)where they reasonably expected to make only one contract with the target
— the price for the supply of services under that contract would not exceed
$3 million in any 12 month period; or where they reasonably expected to make
two or more contracts with the target — the sum of the prices for the supply of
services under those contracts, would not exceed $3 million dollars in any
12 month period.23

A registered collective bargaining notice would enter into force 14 days after
registration and would remain valid for three years, unless it were invalid for a
technical reason or unless the ACCC lodged an objection notice over the substance of
the bargaining notice.24

Under the Amendment Bill a bargaining notice would have been invalid on technical
grounds where it did not comply with the form prescribed by regulation,25 where the
applicant had previously had an application for authorisation of the relevant conduct
rejected,26 or where the notice had been lodged on behalf of the parties by a trade
union, an officer of a trade union or a person acting on the direction of a trade
union.27

Of particular interest is the proposal that would have automatically invalidated a

collective bargaining notice where it had been lodged on behalf of the parties by a
trade union, an officer of a trade union or a person acting on the direction of a trade
union. The proposed restriction would appear to have excluded trade unions acting as
agents for contractor workers in the preparation and negotiation of collective
agreements. The rationale for the inclusion of this restriction in the Amendment Bill is
unclear. The Dawson Report, which recommended the introduction of the collective
bargaining notice provisions, did not recommend the inclusion of the restriction and
no convincing justification has been offered by the Federal Government.28

The second reading speech suggested that the aim of the restriction would have been
to prevent the TPA being used for ‘the pursuit of employee entitlements’ and ensuring
that the proposed notification process only applied to ‘straightforward arrangements
involving single businesses and a single target’.29 However, it remains unclear how
refusing small businesses and contractor workers access to experienced negotiators in
the union movement would achieve either of these goals. The provision would not
have restricted the use of employer or industry associations as agents in collective
bargaining, only trade unions. Trade unions, however, are by no means the only group
capable of pursuing more complex arrangements. In addition, employee entitlements
are heavily regulated by the Workplace Relations Act 1996 (Cth) (WRA) and the
pursuit of such entitlements is already exempted from the application of Pt IV. This
explanation for the proposed restriction on the use of trade unions as agents is
therefore not convincing.

The proposed restriction was the subject of extensive debate in the House of
Representatives, focusing on the limitation on choice offered to small business,

5
especially given the singling out of trade unions, but not industry or employer
associations.30 The restriction appears to have been, in the words of one member of
parliament, ‘a Pavlovian response from the government’ to the word ‘union’.31 In
addition, the inclusion of such a provision in any future amendments may raise
difficulties with respect to the freedom of association provisions in the WRA. The
WRA protections for independent contractors were recently strengthened by the
WorkChoices amendments,32 and it remains unclear how such a restriction on the
freedom of association of contractor workers, if placed in the TPA, would interact
with the protections contained in the WRA.33

Further, while the restriction appears to have been included in the proposal in order to
keep trade unions from organising or assisting either in the preparation of a collective
bargaining notice or any collective bargaining itself, the exact scope or impact of the
restriction as it was expressed in the Amendment Bill is unclear. The restriction was
set out in proposed s 93AB(9), and contained two grounds for invalidation. The first
ground, where a notice was lodged on behalf of the parties by a trade union, (or an
officer of a trade union) would invalidate a notice that was lodged by a trade union on
behalf of an applicant. However, the proposed section also purported to invalidate a
notice lodged by a person acting ‘on the direction’ of a trade union, and it is the scope
of this invalidity that is unclear. When would a person be acting ‘on the direction’ of a
trade union, as opposed to consulting or seeking the assistance of trade union? The
proposed section appeared to suggest that if the decision to lodge a collective
bargaining notice was made independently of trade union involvement, then an
applicant would not be ‘acting on the direction’ of a trade union, regardless of how
much collaboration the person had sought from a trade union in the preparation of the
notice (even if the trade union had been responsible for negotiations and drafting), or
how much assistance they subsequently sought from a trade union after lodgment of
the notice.

The proposed changes would have also enabled the ACCC to issue ‘objection notices’
relating to the substance of a collective bargaining notice.34 The changes would have
enabled the ACCC to issue an objection notice which would have had the effect of
preventing a collective bargaining notice from coming into effect 35 where the
collective bargaining notice disclosed the per se offences of collective boycotts or
price fixing, and the ACCC was satisfied that the net public benefit from the proposed
conduct was, or could be, outweighed by the detriment that could have, or had,
resulted from the conduct.36 Where a collective bargaining notice had only disclosed
conduct that would, or would be likely to, substantially lessen competition, the ACCC,
in addition to the public benefit test, would have also had to be satisfied that the
conduct had reduced, or was likely to reduce, competition.37

The process that was proposed for the lodgment of collective bargaining notices
would be considerably simpler and more efficient than the existing authorisation
process. Unlike authorisation, the substantive net public benefit of the proposed
conduct would not need to be demonstrated by the parties concerned before approval
could be obtained, unless the ACCC issued an objection notice. If this occurred, the
parties would be required to demonstrate the net public benefit to be gained from the
proposed conduct through conferencing, a more straightforward process than the
requirement for public submissions that apply at present for authorisation
applications.38 In addition, it is unlikely that collectives of contractor workers would

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be singled out by the ACCC for ‘objection’ under the new system. An ACCC
discussion paper issued prior to the introduction of the Amendment Bill, and the
recommendations of the Dawson Report, indicate that where smaller value
transactions are involved there is a greater willingness to recognise the existence of
power imbalance due to size, market position and the small scale nature of the
business transacted by likely participants in collective bargaining.39 However, this
may not be true for contractor workers who seek the assistance of a trade union in
running a collective bargaining campaign. While it is by no means clear under the
proposed changes that the involvement of trade unions would render collective
bargaining notices invalid, their involvement could result in more scrupulous attention
from the ACCC, especially in the form of objection notices. The Federal Government
has made no secret of its anti-trade union agenda. Should this provision remain in any
future amendments to the TPA, it is possible that the ACCC might be requested to
look more closely at collective bargaining notices where there was trade union
involvement. This could have the effect of offsetting some of the benefits of any
simplification offered by any change to a notification system.40

If the proposal to implement collective bargaining notices is reintroduced in its

current form and becomes law, the impact is likely to be significant, opening up the
possibility of engaging in collective bargaining for contractor workers. While
contractor workers are currently able to apply for authorisation of such conduct, the
lengthy time-frames involved and the complexity of the provisions have acted as a
disincentive, which is particularly acute for those contractors economically reliant on
the sale of their labour.41

The authorisation determinations of the ACCC, as listed on the ACCC website,

suggest that contracting workers have been very unlikely to seek, or obtain,
authorisation to engage in collective bargaining except where they are members of a
professional association that has undertaken the authorisation application on their
behalf.42 For example, for 2005 the ACCC website lists only eight authorisation
determinations of applications to engage in collective bargaining. Of these
applications four related to the sale of produce by growers or farmers,43 one involved
a group of councils seeking authorisation to collectively purchase garbage disposal
services,44 two involved peak bodies seeking to negotiate prices on behalf of their
members45 and one involved a small business seeking to bargain collectively with its
contractors!46 The website listing of authorisation determinations for 2006 provides a
marginally more encouraging picture. Of nine collective bargaining authorisation
determinations, two dealt with applications from associations representing contractor
workers for approval to engage in collective bargaining.47

This cursory examination of authorisation determinations demonstrates that the

authorisation process has not been utilised by contracting workers, particularly those
economically reliant on the sale of their labour. Any change to a quicker, less
complicated, notification process would mean that contractors could lodge a
collective bargaining notice without the level of sophistication that has been
previously necessary and without a lengthy wait for approval. It is also likely that a
lack of understanding of Pt IV issues in the community generally has kept
authorisation applications low. If the change were combined with a community
education program, the use of exemptions from Pt IV by contractor workers could be
increased.

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The preceding discussion has shown that the proposal to include provisions in the
TPA for collective bargaining notices could, if implemented, increase the number of
contractor workers utilising collective bargaining in the future. However, unlike the
WRA which provides a limited statutory immunity for industrial action carried out by
employees in support of collective bargaining,48 the proposed collective bargaining
notices would only provide statutory immunity from the specific unlawful acts
contained within TPA s 45(2), namely, collective boycotts, price fixing, and contracts,
arrangements or understandings that substantially lessen competition. Collective
bargaining by contractor workers may be contrary to other laws, including other
provisions of the TPA and the common law. The proposal to allow collective
bargaining notices would offer no defence against actions brought in this respect.
I will now consider which other laws may have an impact on the ability of contractor
workers to engage in collective bargaining, with the aim of determining the ‘safety
zone’ in which they are relatively free to take collective action without potential
liability, and how they can ensure that the results of collective bargaining are legally
enforceable as between bargaining participants. In the event that the proposal to
introduce collective bargaining notices is reintroduced into Federal Parliament, any
such Bill should also take into account the application of these laws on contractor
collective bargaining.
Trade Practices Act Liability
Collective bargaining and secondary boycotts under the TPA
One potential area of difficulty for contractor workers engaged in collective
bargaining relates to the secondary boycott provisions in the TPA.49Authorisations to
engage in conduct that would otherwise be unlawful under s 45D and its associated
sections (45DA and 45DB) may be sought from the ACCC under s 88(7). However,
as with the authorisation process for s 45(2), the process is difficult and time
consuming, and the authorisation register itself suggests that few authorisation
applications are made under these provisions. Further, the proposal to introduce
collective bargaining notice provisions did not extend to conduct that would breach
s 45D and associated sections. This means that were the proposed changes to be
implemented, a separate authorisation application would still need to be brought for
conduct under these provisions, which could take months to determine.
In the absence of a specific authorisation of ‘secondary boycott’ behaviour, it is
possible for contractor collective bargaining to constitute a ‘secondary boycott’. The
most common application of the secondary boycott provisions has occurred in the
context of employee disputes, whereby the sections are designed to render sympathy
strike action taken by employees unlawful.50 However, the sections will be equally
applicable in the context of commercial disputes involving contractors who are not
afforded the limited statutory protections that are enacted for employed workers,
leaving them particularly vulnerable.

Section 45D(1) outlaws ‘secondary boycott’ conduct engaged in for the purpose of
causing substantial loss or damage. Under s 45D a person must not, in conduct with a
second person, engage in conduct that hinders or prevents a third person supplying or
acquiring goods or services from, or to, a fourth person, where that conduct is
engaged in for the purpose (or for purposes including that purpose)51 and would have,
or be likely to have, the effect of causing substantial loss or damage to the business of
the fourth person.52

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The application of this provision in the employment context is well understood. The
section prevents employees of an employer who supplies or acquires goods or
services to, or from, another person (the target), interfering with the supply or
acquisition of those goods or services ‘in sympathy’ with the employees of that target.
However, the section may also apply where contractors engage in collective
bargaining in circumstances where the contractors utilise bargaining tactics that
involve the application of pressure on third parties designed to interfere with the flow
of goods and services to the target of their collective bargaining.

For example, utilising the hypothetical case study involving the contractor computer
programmers, it is evident that two or more of the contractors could not combine to
hinder or prevent a third person from supplying or purchasing goods or services to, or
from, Company B, with the purpose of inflicting loss or damage on Company B.
Under an appropriate exemption, the contractors could utilise a primary boycott in the
sense that they can withhold their own services, but they cannot hinder or prevent a
third person from supplying or purchasing services from Company B for the purpose
of inflicting loss or damage on Company B. The scenario outlined is different from an
employee secondary boycott where both the parties engaged in the conduct and the
target of the conduct are removed from the actors in the relevant collective bargaining
negotiations. However, this difference does not mean that the contractors would avoid
breaching s 45D on the basis that their conduct is targeted directly at the party that
they are negotiating with. The defence to s 45D provided for employees, that the
target of the conduct is an employer of the persons engaged in the conduct, does not
apply in this case because the contractors are not employees. Thus, even though the
contractors are negotiating with Company B, they are not employees of Company B
and can, therefore, engage in a secondary boycott against Company B, if they hinder
or prevent third persons from supplying or acquiring goods or services to or from
Company B.

In addition to the prohibition on secondary boycotts undertaken for the purpose of

causing substantial loss or damage, the TPA also prohibits secondary boycotts
undertaken for the purpose of causing a substantial lessening of competition.53 This
provision operates in exactly the same manner as s 45D, so would be equally
applicable in the scenario outlined above. The provision requires that one of the
purposes for which the conduct is undertaken is to cause a substantial lessening of
competition in the market in which the ‘target’ supplies or acquires goods or services,
and that the conduct would have, or be likely to have, that effect. The problem for
contractor workers engaged in collective bargaining is the question of the purpose of
their conduct. The ultimate purpose would be to secure a collective outcome.
However, in securing that outcome, the contractors would be seeking to reduce
competition as between themselves, and with respect to the third person that is
hindered or prevented from supplying or acquiring goods or services, in order to assist
in achieving a negotiated outcome. The purpose does not have to be the sole purpose,
it can be one of the purposes for the conduct. Whether or not the conduct will have, or
be likely to have, the effect of lessening competition in the market in which the target
purchases or supplies goods or services will depend on the facts of each case,
specifically the size of the market, the proportion of the market represented by the
collective bargaining contractors and the overall effect on competition. Where the
contractors represent a small slice of the market for their services, and the conduct

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that hinders or prevents the supply of services to the target by a third party only
effects a small slice of the market, the conduct may not breach the section, because it
may not be likely to substantially reduce competition.

The potential application of ss 45D and 45DA to collective bargaining by contractors

raises difficult issues. The sections were not designed to catch primary boycotts by
contractor workers engaged in collective bargaining, but if the conduct involves
hindering or preventing third parties in the sale or purchase of goods or services to the
target of the bargaining, such conduct may breach the sections. The most significant
threat from the sections relates to interactions between the collective bargaining group
and contractors outside the group who provide services to the target of the bargaining.
The contractors engaged in collective bargaining would have to take care that they do
not ‘prevent or hinder’ other contractors from supplying services to the target as this
may breach s 45D or s 45DA. It would have to be shown that the purpose was to
inflict economic damage on the target, or to reduce competition in the market for their
services. This could be particularly pertinent in cases where the contractors engaged
in collective bargaining seek to recruit other contractors to join the collective
bargaining group. Any efforts made to recruit new members need to be carefully
considered in order to avoid a finding that a ‘recruitment’ of a new member
constitutes a ‘hindering’ of the supply of services for the purpose of inflicting loss or
damage, or lessening competition.54

Another boycott provision that could cause difficulties for contractors engaged in
collective bargaining is s 45DB which provides that a person must not, in concert with
another person, engage in conduct for the purpose, and having, or likely to have the
effect, of preventing or substantially hindering a third person from engaging in trade
or commerce involving the movement of goods between Australia and places outside
Australia.55 This section would cover a primary boycott, involving the refusal to
supply their own services, undertaken by contractors in the context of collective
bargaining negotiations, if the boycott prevented or hindered trade or commerce
involving the international movement of goods. This would limit the utility of
collective bargaining for contractors where a refusal to supply services in pursuit of a
collective outcome could have the effect of hindering the international movement of
goods. The provision would only apply to a limited number of contractors supplying
services in particular industries, like port or wharf services, but if the process of
collective bargaining by those contractors hindered the international movement of
goods, they would potentially breach s 45DB. For these contractors there would be
very little ability to actively engage in collective bargaining beyond simple
negotiations without any active refusal to provide services unless they received an
authorisation under s 88(7). This means that any proposed collective bargaining notice
system would be of little benefit to these workers unless it was extended to cover
conduct in breach of s 45DB.
Collective Bargaining — The Common Law
There are areas of the common law that may also impact upon the ability of
contractors to engage in collective bargaining and which would not be limited by the
terms of a collective bargaining notice under the changes that were proposed. In
particular, it is necessary to consider the impact of the law of contract, both on the
ability of contractors to engage in collective bargaining and with respect to the
capacity of contractors to enforce collective agreements. Further, contractors engaged
in collective bargaining face potential liability from the economic torts which affect

10
the bargaining tools that contractors have available to support their position in
collective negotiations. The common theme that emerges is the extent to which
contractors engaged in collective bargaining need to be wary of the legal pitfalls
historically affecting employee strike action and collective negotiations.
The doctrine of restraint of trade and collective
bargaining by contractor workers
The doctrine of restraint of trade is the common law forebear of Pt IV of the TPA. In
general terms the doctrine provides that unreasonable restraints on trade are
unenforceable as a matter of public policy because they are ‘injurious to the
community, either because of their effect on the individual traders who are subject to
the restraints or because of the effect of the restraints on the competitive
process’.56 Where contractor workers are otherwise exempt from the application of
Pt IV, due to an authorisation (or, if the proposed changes are eventually adopted, a
collective bargaining notice), they may face difficulties from the doctrine of restraint
of trade, which is not affected by the operation of Pt IV57and to which any exemption
would not apply. Problems with restraint of trade may come from the act of forming a
collective in and of itself; or from the application of the doctrine to the outcomes of
contractor collective action.
Contractor collectives: Inherently in restraint of trade?
Part 16 of the WRA expressly protects an independent contractor who can
demonstrate the requisite connection to a constitutional corporation,58 against
discrimination or victimisation on the basis of a decision to join or not to join an
industrial association.59 However, while Pt 16 protects against victimisation of
individuals on the basis of membership, nothing is said about the application of the
common law doctrine of restraint of trade to the formation of the collective itself. It
appears that the WRA may only prevail over any presumed illegality of trade unions
under the common law (see discussion to follow) where the associations legality has
been recognised by registration under the Act. This leaves unregistrable, and
unregistered, associations potentially liable to action for restraint of trade.
A problem for collectives of contractor workers pursuing collective bargaining under
an authorisation may be an antique component of the common law doctrine of
restraint of trade which suggests that combination for ‘trade union purposes’ is
inherently in restraint of trade. Collectives of contractor workers may not constitute
‘trade unions’ but their purposes could be considered to be similar to trade union
purposes and, therefore, this aspect of the common law poses some potential
difficulties.

The origins and development of the anti-collective component of the doctrine of

restraint of trade are unclear because the case law is bound up with early statutory
developments criminalising certain forms of combination.60 However, in the 1867
case of Hornby v Close,61 which involved a question over whether a trade union
could enforce its rules under relevant association legislation, it was held that the rules
of the association, including the purpose of ‘being a trade union’, were unenforceable
as being in restraint of trade. In a similar decision two years later, it was held that the
rules of a trade union were illegal as in restraint of trade because they provided for the
support of association members while on strike and these trade union purposes were
indicative of a restraint of trade.62 While these cases suggest that any collective with
trade unionist purposes may be inherently in restraint of trade, the further
development of the law was stifled by the passage of the Trade Union Act 1871 (UK)

11
which provided that ‘the purposes of any Trade Union shall not by reason merely that
they are in restraint of trade be deemed to be unlawful’.63

Do these early cases mean that collectives of contractor workers could be ‘inherently’
in restraint of trade? Both cases focus on the rules of the associations, which made
provision for the support of members while on strike, to provide evidence of ‘trade
union purposes’ in the context of a legislative registration scheme. As a result, the
cases may not easily be applied in the context of a collective of contractor workers
who don’t take ‘strike action’ and where there is no equivalent statutory scheme.
Further, the passage of legislation protecting trade union combinations from the
doctrine of restraint of trade has limited the opportunities for these cases to be
revisited in light of modern attitudes to collective action and the further development
of the doctrine of restraint of trade.64

There is legislation protecting trade unions against invalidity under the doctrine of
restraint of trade for ‘improper trade union purposes’ in all state jurisdictions in
Australia except Queensland. However, it remains unclear if this protection would
extend to collectives of contractor workers. In Victoria and Tasmania, the relevant
Trade Unions Acts cover combinations of workmen and employers but also cover
‘any combination, whether temporary or permanent … for imposing restrictive
conditions on the conduct of any trade or business’.65 It is possible that a
combination of contractor workers formed for the purpose of entering into a collective
bargaining agreement with a target could fall within this limb of the definition of trade
union and therefore be protected against the doctrine of restraint of trade in those
jurisdictions. New South Wales maintains the same provision as Victoria and
Tasmania in its trade union legislation,66 but additionally has enacted s 4(2) of the
Restraints of Trade Act 1976 (NSW) which provides that a restraint of trade is valid
to the extent that it is not contrary to public policy. This suggests that this would be
the main hurdle for contractor collectives in that jurisdiction. In Western Australia the
relevant legislation is the Conspiracy and Protection of Property Act 1900 (WA)
which protects ‘trade unions’ against restraint of trade actions but does not provide a
definition of a trade union, so it is unclear if contractor associations would fall within
the legislation.67 In South Australia, the relevant provisions are contained in the Fair
Work Act 1994 (SA) but they only apply to employee or employer associations and
do not cover contractor associations. There is no relevant Queensland legislation.68
In consequence, the position of contractor collectives under this anachronistic area of
the doctrine of restraint of trade is unclear. In Victoria, New South Wales and
Tasmania the legislative protection extended to collectives against restraint of trade
appears to encompass contractor collectives. However, elsewhere there is unlikely to
be any protection, and contractor collectives in these jurisdictions could potentially be
found to be ‘inherently in restraint of trade’, although, as argued earlier, the cases are
open to challenge on a number of grounds. It is possible that these early common law
decisions could be overruled or confined to their facts if they were argued in a modern
case. A further issue with the doctrine of restraint of trade is its application to the
content of agreements reached by contractors as a result of collective bargaining.
Contractor bargaining: Application of restraint of trade doctrine?
At common law, the doctrine of restraint of trade renders certain unreasonable
restraints on contracting parties void as a matter of public policy. A contract may be
avoided for restraint of trade where it mandates restrictions that unreasonably impair
the interests of one of the parties, or where it unreasonably affects the public interest.

12
For contractor workers engaged in collective bargaining this could affect the use of
any restraints in their arrangements that operate horizontally, between contractor
workers, or with the target of their action; or that take effect vertically in the market in
which their target operates.

An initial difficulty with respect to the doctrine of restraint of trade is in ascertaining

those restraints that fall within the scope of the doctrine. While it is clear that certain
restraints are subject to the doctrine, for example, post-employment restraints,69 and
equally clear that restraints contained in contracts for the sale and lease of land fall
outside the doctrine,70 there is a grey area between these two certainties. Recent High
Court decisions examining restraints on the use of a trading name, and the disclosure
of pre-patent design information, failed to provide a clear test for which restraints will
fall within the doctrine.71 Two tests suggested in the English case of Esso Petroleum
Co Ltd v Harper’s Garage (Stourport) Ltd72 for ascertaining the restraints that fall
within the doctrine (the ‘fettering existing freedom’ test and the ‘sterilisation of
capacity’ test) were rejected by the High Court in the cases Peters (WA) Ltd v
Petersville Ltd73and Maggbury Pty Ltd v Hafele Australia Pty Ltd.74 A third test,
suggested in Esso Petroleum, the ‘trading society’ test, which would exclude from the
doctrine of restraint of trade those restraints which ‘may be found to have passed into
the accepted and normal currency of commercial or contractual or conveyancing
relations’75was noted by the High Court in Peters but in
neither Peters nor Maggbury was it expressly affirmed or rejected.76
The failure of the High Court to explicitly reject the ‘trading society’ test may mean
that it is possible to argue that after over a century of acceptance of employee
collective bargaining and other union-related activities, such restraints have ‘passed
into the accepted and normal currency’ of commercial relations, and are therefore
valid, even when applied in the context of contractor bargaining. Nevertheless, the
failure of the High Court to definitively settle on any test means that any contractual
restraint on trade that does not fall within a recognised exception may, until the law is
clarified, be the subject of the doctrine of restraint of trade.
If the doctrine of restraint of trade does apply to a bargain struck amongst contractor
workers or between contractor workers and the target of their action, the contractor
workers would have to show that the restraint, in the circumstances of the parties, and
in the context of public policy, is not unreasonable. Here, the tension is to balance the
competing interests of upholding arms length bargaining and ensuring that the public
interest in maintaining ‘free trade and a productive community’ is served.77
While the reasonableness of any restraint is a question to be determined on the facts
of each case, contractor workers attempting to enforce restraints emerging out of a
collective bargaining process should be able to establish reasonableness. Corones
notes that the common law cases tend to sanction anti-competitive contracts as
reasonable in the circumstances, giving examples of contracts covering retail price
maintenance, exclusive dealing and market sharing.78 Further, the existence of an
authorisation (or if the proposed changes are implemented, a collective bargaining
notice), providing an exemption from aspects of Pt IV of the TPA may be significant
with respect to the public policy element of the common law doctrine. The majority
judgment of the High Court in Peters79 noted that while the common law doctrine of
restraint of trade and Pt IV of the TPA are separate, reference to the TPA may be had
in developing the common law, especially ‘where the question is whether the
restraint … is to be reconciled with the public interest’.80 Therefore it can be argued
that a contractual restraint developed in the context of a Pt IV exemption would not be

13
‘unreasonable’ as a matter of public policy, although the question as to whether the
restraint acts reasonably as between the parties would remain.

The doctrine of restraint of trade may operate as an obstacle to contractor workers

engaged in collective bargaining by rendering the collective itself unlawful as in
restraint of trade; or the outcomes of bargaining unenforceable as in restraint of trade.
However, the law in both these areas is open to challenge. Protection for collectives of
contractors could come from registration under the WRA (although this would
involve onerous consequences) or from legislative protection in New South Wales,
Victoria and Tasmania. Alternatively, contractor collectives in other jurisdictions
could distinguish Hornby v Close given its historical and factual context. With respect
to the content of agreements negotiated by contractor workers, the application of the
doctrine is unclear. However, where it applies, contractor collectives should be able to
establish that the existence of a TPA exemption suggests that the restraint is
reasonable in the context of public policy.
Breach of contract, economic duress and privity issues
In addition to the doctrine of restraint of trade, contractors face other challenges from
the common law. Contractors must take care not to act in breach of any existing
contracts or to engage in economic duress. Further, the doctrine of privity of contract
poses an obstacle to the enforcement of agreed outcomes.

The potential for breach of contract by contractor workers engaged in collective

bargaining will depend on whether one or more of the contractors has an existing
contract with the target of the action. Contractor workers may be genuinely
independent, involved in a series of short contracts with different engagers for set
time periods or tasks. These workers are less likely to have existing contracts with
targets or may be in a better position to wait until the expiration of any existing
contracts before proceeding to bargain over the terms of future arrangements. In
consequence these workers will not be as vulnerable to breach of contract issues.
Further, a collective refusal to deal with a particular target as a bargaining tactic for
the negotiation of future contracts (in the context of a Pt IV authorisation) would not
constitute economic duress provided that the refusal to deal did not involve any
‘illegitimate’ pressure, for example, threats to commit unlawful acts.81 However, the
issues of breach of contract and economic duress are more pressing for those
contractors working under longer term or indefinite contracts with an engager, in a
situation which more closely resembles employment, even though the common law
still recognises them as independent contractors.

If contractors interrupt the performance of an existing contract in order to strengthen

their bargaining position, this will usually constitute a breach of contract. Whether the
breach would entitle the target to terminate the contract will be a question of whether
or not the interruption to the contract constitutes a repudiation of contract by the
contractor concerned. Each individual case will depend on an assessment of whether
the conduct of the contractor constitutes a rejection of the basis of the contract, or is
substantially inconsistent with the obligations under the contract.82

Contractual repudiation may be difficult to establish in the context of a relatively brief

refusal to perform part or all of a contract. Particularly in the context of collective
bargaining, the contractor may be able to demonstrate that they have not rejected the
contract or behaved in a manner inconsistent with the contract; rather their conduct

14
may demonstrate that they are seeking a better outcome for a further contract and
fully intend to perform the existing contract. However, if a breach of contract in these
circumstances were analogised with the wages-work bargain under the contract of
employment, where any refusal to work by an employee in the context of strike action
justifies termination of the employment contract, contractual repudiation by
contractors could be established by any refusal to perform, however brief.83

The parallel with the contract of employment is particularly pertinent for contractor
workers engaged under contracts of indefinite duration. Courts have been prepared to
imply terms requiring ‘reasonable notice’ for contractual termination at will of
indefinite commercial contracts, reflecting a similar approach to that adopted at the
common law for employment contracts.84 A similar approach for contractual
repudiation would suggest that a failure of the contractor to be ready and willing to
work as directed could automatically give cause for termination of contract without
notice by the engager. A finding of breach of contract or repudiation by a contractor
worker could lead to the pursuit of damages by the engager, or could form the basis of
an action under the economic torts, as I will discuss later.

A further difficulty for contractors who have existing contracts with the target of their
collective bargaining is the doctrine of economic duress. Where a contractor threatens
to breach an existing contract in order to pressure the other party to the contract to
enter into a new contract, on terms more advantageous to the contractor, this may
constitute economic duress. The effect of such a finding would be to render any
subsequent contract voidable at the instance of the pressured party.

Economic duress involves the application of illegitimate pressure to a person in order

to induce a person to enter into a contract.85 Illegitimate pressure for the purposes of
economic duress includes unlawful threats, for example, a threat to breach an existing
contract unless the person renegotiates the terms or enters into a new contract.86 In
commercial contracts, the line between discussion, negotiation and an actual threat to
breach an existing contract is often difficult.87 However contractor workers engaged
in collective bargaining cannot afford to threaten the performance of any existing
contracts if they want to ensure that subsequent agreements are not vulnerable to
findings of economic duress. A threat to halt performance of an existing contract in
order to seek a material advantage in a subsequent contract is unambiguously
illegitimate under the doctrine of economic duress.

The consequence of the application of the doctrine of repudiation of contract and

economic duress to contractor workers engaged in collective bargaining is that these
workers are more likely to act unlawfully under the common law the more that they
work in circumstances resembling employment. Where contractor workers seek to
bargain collectively with a target they will be in a better position to apply pressure
lawfully if they do not have existing contracts. Here, there can be no actual breach of
contract and a simple refusal to deal will not constitute economic duress in the
absence of illegitimate pressure. Where one or more of the contractor workers has an
existing contract with the target they must take care not to use their existing contract
as a bargaining tool, ie, not to do anything akin to industrial action. Action involving a
refusal to perform any, or all, of an existing contract may amount to contractual
repudiation or economic duress, either of which causes of action may also give rise to
an action under the economic torts. Here, the contractors with the theoretically

15
stronger bargaining position (the capacity to inflict actual economic harm on the
target by withholding performance) are the ones least able to lawfully utilise that
position and more than likely the ones most in need of counterveiling power.
Once contractor workers reach agreement with a target, they will need to create a
contract recognising the agreement. In the absence of a statutory scheme for the
recognition of agreements, contractors will be forced to contend with the common law
doctrine of privity of contract when seeking to enforce any agreement that results
from collective bargaining. The difficulty lies in ensuring that the contractors can
enforce the agreement both between themselves and against the target in order to
ensure that collectively bargained outcomes are not undermined by deviation in
individual contracts. This problem is familiar in the context of labour law, where
privity and agency issues surround the enforceability of unregistered collective
agreements.88

In the case of agreements reached between contracting workers and targets, there may
be issues of agency, if the agreement is negotiated and concluded by a professional
association. In such a case, the association would be the party to the contract, and the
party able to sue or be sued under the contract, unless the contract was negotiated to
include all relevant contractors, or was negotiated by the association as an agent of the
contractors. Further, the contract could not purport to cover any future dealings with
as yet unnamed contractors as a professional association cannot act as an agent for
future principals.

In order to ensure that an agreement reached at the conclusion of collective bargaining

is enforceable by all of the bargaining parties, the contract or contracts entered into at
the cessation of the negotiations needs to be limited in application. The contract or
contracts will need to be between the actual contracting workers and the purchaser of
their services, or if a professional association is involved, the contractors will need to
ensure that the association contracts as an agent on behalf of the relevant contractors.
The contract cannot be expressed to cover other, as yet unnamed, future contractors,
although the parties can make an agreement restricting the way that they will act in
future dealings.

Where an agreement is reached, contractors will need to determine if they are going to
enter into one contract under which they are all parties (ensuring that they avoid being
labelled as ‘partners’ in each others’ businesses) or have separate contracts with the
purchaser. Where each contractor has a separate contract, they will not be able to
enforce the terms of their agreement as against each other if the separate contracts
deviate from the agreed outcome. The most sensible alternative may be to negotiate
an agreement to which the purchaser and the contracting workers are all parties, that
sets out the terms of the collectively negotiated outcome, and then pursue individual
contracts for the specific circumstances of each contractor. This would enable each
contractor to sue on the main contract where any of the individual agreements are in
breach of the collective agreement.
Economic torts
The economic torts are designed to prevent potential economic loss through injunctive
relief, or compensate for economic loss, where it results from the conduct of persons
acting unlawfully in combination. The economic torts have been successfully utilised
against strike action by employees and collective action by contractor workers may
also result in the commission of a tort.

16
In common with employee strike action, the impact of the economic torts for
contractors engaged in collective bargaining is twofold. First, where collective action
appears to constitute the commission of a tort, grounds may exist for an interlocutory
injunction, the breach of which may lead to fines or contempt orders. Second, a
tortious action pursued to judgment may lead to a substantial damages order.
However, the likelihood of contractors engaged in collective bargaining committing
an economic tort will depend on how closely the contractors resemble employed
workers. The majority of the economic torts require an independently unlawful act.
For employed workers, the unlawful act is usually furnished by a breach of contract
occasioned by strike action. Therefore the economic torts become more significant for
contractors in circumstances where they are more likely to breach an existing contract
or commit economic duress as these actions will furnish the requisite unlawful act for
the commission of the tort. The economic torts are of less significance where
contractors are more genuinely independent and are at less risk of committing those
unlawful acts.

The economic torts that are of most significance for contractor workers engaged in
collective bargaining are: the tort of interference with contractual relations, the tort of
conspiracy by unlawful means, the tort of intimidation and the newly emerging tort of
interference with trade or business by unlawful means. The risk to contractor workers
in each case may depend on whether or not the course of collective bargaining
involves any independently unlawful acts and so will vary with each situation.
The tort of interference with contractual relations provides that it will be a tort to
knowingly and intentionally interfere with the contractual relations of a plaintiff
where it would cause damage to that plaintiff.89 For example, if a trade union calls a
strike, it is knowingly and intentionally interfering in the target employer’s
employment contracts, because the employees are induced to breach their
employment contracts through strike action. This tort could be relevant in the case of
contractor collective bargaining if a professional association or group of contractors
knowingly and intentionally induce other contractors to breach existing contracts held
with the target, or if the association or contractors knowingly and intentionally
interfere with other contracts held by the target.

The tort also applies in an indirect form if a person commits or threatens to commit
some act which is unlawful in itself (ie, breaking a contract of employment or
trespassing on property), and which has the effect of interfering in the performance of
a contract between the target of the action undertaken and another person. This tort is
the antecedent form of liability of the TPA secondary boycott provisions. The
requirement for an independently unlawful act that induces contractual interference
will reduce the relevance of this tort if the collective bargaining does not involve any
breaches of contract. However, it is unclear if an exemption under the TPA would
prevent a breach of TPA s 45(2) from providing the necessary unlawful act to activate
the tort. Would an authorisation operate to prevent the commission of an unlawful act
under s 45(2) or does it merely protect against liability for anti-competitive acts
committed in breach of the section? The relevant provision is s 88(1)(c) which
provides that s 45(2) ‘does not prevent’ the conduct described in the subsection from
occurring, or render any contract unenforceable, if the relevant party has obtained an
authorisation which is in force.90

17
The provision operates by excluding the application of s 45(2), not by providing
protection against litigation. This clearly suggests that while an authorisation is in
force, s 45(2) does not render the relevant conduct unlawful and, therefore, the
conduct will not constitute an unlawful act for the purposes of economic torts. If this
interpretation, which accords with the literal text of the section and the purpose of the
provision, is incorrect, then any conduct that would otherwise breach s 45(2) may
constitute an unlawful act for the purposes of the economic torts. This would seriously
undermine the utility of authorisations (and, if the changes are implemented,
collective bargaining notices). However, given the text of the provisions it is an
unlikely interpretation, so will not be considered further.

The torts of conspiracy are also relevant in the context of collective bargaining by
contractor workers. While simple conspiracy has been sidelined in the industrial
context through beneficial interpretation, the tort of unlawful means conspiracy
remains relevant.91 The tort of unlawful means conspiracy applies where two or more
people acting in combination deliberately inflict loss on an identified plaintiff,
through an independently unlawful act, and the action was directed against that
plaintiff.92 It is no defence to this tort if the reason for the unlawful act is a
‘legitimate’ one because the commission of an unlawful act renders questions of
motive irrelevant.93 The tort may be relevant to collective bargaining by contractors
where any of the contractors acting together break an existing contract as a part of the
collective bargaining process or engage in any other independently unlawful act, like
trespass or breach of the TPA, which deliberately inflicts loss on the plaintiff.
The tort of intimidation occurs when a person, or group of persons, coerce another
person, by a threat to commit an unlawful act, to act in a manner that adversely affects
their own, or another's, economic interests. Here, the focus of the tort is on the act of
coercion (intimidation) rather than the adverse consequences of the threat.94 In the
employment context, a threat to breach a contract has been held to constitute an
unlawful act for the purposes of the tort.95 With respect to collective bargaining by
contractor workers, a threat to breach an existing contract in order to coerce the target
of the action to either enter into a collective agreement, or to refrain from contracting
with someone outside the bargaining group, could constitute the tort of intimidation.
Again, the requirement for an independently unlawful act means that the relevance of
the tort decreases in proportion to the independence of the contractors.

The final tort in this context is the tort of interference with trade or business by
unlawful means. The tort has not yet been authoritatively established or accepted as a
part of Australian law, but has been applied in the English courts.96 The tort enables a
plaintiff to pursue a tortfeasor where they have experienced economic loss, if the loss
was the result of unlawful means undertaken by the tortfeasor. Whether or not the
unlawful means have to be directed at the actual person that is harmed by the conduct,
and the scope of the unlawful means necessary for commission of the tort, have not
been fully developed. If the potential target of the conduct does not have to be
identified, the scope of the tort would increase significantly to encompass any third
parties consequentially harmed by unlawful acts. However, the High Court decision
in Northern Territory of Australia v Mengel97 confirmed that for commission of the
economic torts to occur, the conduct involved must have been directed specifically at
the person who was harmed by the conduct, suggesting that if the tort is accepted in
Australia, this limitation will also apply.98 The tort has been raised as a cause of
action in litigation pursued by Gunns Ltd against 20 environmental activists in the

18
Supreme Court of Victoria, which may provide an opportunity for clarifying the
application and scope of the tort in Australia.99

The consequences of this tort in the context of collective bargaining by contractors

will depend upon whether it is accepted in Australia and the form that it takes. The
High Court decision in Mengel held that any tortious conduct must be intentionally
directed at the plaintiff. If this element remains an element of the tort were it to be
accepted into Australian law, this will significantly reduce the impact of the tort in
terms of third party liability. The exact scope of the unlawful means necessary for the
commission of the tort also remains unclear, so the question of the possible effect of
the tort cannot yet be adequately addressed.100
Free contractor collective bargaining?
The preceding discussion has demonstrated that the system of collective bargaining
notices that was proposed in the Amendment Bill would only be effective to protect
collective bargaining by contractor workers against liability under TPA s 45(2). This
would leave any such action vulnerable under a number of other potential heads of
liability. However, there is a crucial difference between s 45(2) liability and the other
causes of action under discussion. Forming a collective to bargain over the sale of
contractor labour will almost always breach s 45(2), particularly where it involves a
collective refusal to deal with a purchaser, or demands over the price of service
contracts. Therefore, protection against s 45(2) is a prerequisite for contractors to
engage in meaningful and lawful collective bargaining. However, excepting the
possibility that collectives of contractor workers may be inherently in restraint of
trade, the impact of the other heads of liability under discussion is not as immediate.
Liability here depends on the form that collective bargaining takes and the actions of
the contractors in pursuit of an agreement. The commission of an unlawful act is not
inevitable.

The threat posed by the doctrine of restraint of trade to the lawfulness of the collective
itself is a threat to all contractor collectives irrespective of their activities. However,
as the preceding discussion has shown, the common law is undeveloped and
predicated on the basis of the rules of associations containing ‘trade union purposes’
(assistance to striking workers). These cases may be easily overruled or distinguished
in future cases. Further, legislation in some jurisdictions offers protection to
contractor collectives against the application of the doctrine of restraint of trade.
Consequently, this threat may be more illusory than real. However, the potential
effect of the doctrine remains until it is overruled or federal legislative protection is
enacted.

With respect to the remaining causes of action, the discussion of secondary boycotts,
contract law and the economic torts has demonstrated that, provided that collective
bargaining by contractors remains passive, there is relatively little risk of acting
unlawfully. However, the ability to remain passive will depend in each case on the
degree of independence held by the contractors concerned. Genuine independent
contractors will be less likely to have long-term contracts with the target of their
action, leaving them less open to breach of contract, economic duress and the
economic torts. Those contractors in positions of greater dependence are more likely
to run the risk of committing an unlawful act under these doctrines.

19
Unsurprisingly, the more that collective bargaining by contractors resembles strike
action, the more likely it is that the action may be unlawful under laws that have
historically affected employee strike action. In parallel, the more contractor workers
resemble employed workers, the greater the risk that their action will equate with
strike action. However, if the doctrine of restraint trade can be overcome, the simple
ability to combine and bargain as a group is a significant step to a more level playing
field for contractors. The ability to exert passive pressure through a collective refusal
to deal may provide the extra strength that the right to strike provides for employees.
Where contractor collective bargaining involves more active, strike-like components,
involving unlawful acts, contractors risk possible liability under the areas of law
outlined above.
Conclusion
The suggested expansion of access to collective bargaining by contractors under a
system of collective bargaining notices operates in contrast to a reduction of the role
of collective bargaining for employees as a result of the Work Choices Amendments
to the WRA. This reflects a phenomenon whereby competition law regulators are
increasingly adopting concepts familiar to labour law, while labour law regulation
moves towards an increased focus on competition.
A system of collective bargaining notices for anti-competitive conduct by collectives
involving small transaction values would represent a significant step forward in
recognising that the need for counterveiling power in work relationships is not
confined to employment. However, in restricting the proposed protection from
liability to conduct contravening TPA s 45(2) the proposed changes would not have
assisted those contractor workers that experience the most significant power
imbalances.

Assuming that the restraint of trade issues can be resolved, genuine independent
contractors would be able to form collectives and exercise a collective refusal to deal
in pursuit of better terms and conditions with relatively little concern that their actions
would leave them liable in other areas of law. However, contractor workers tied to
one engager through indefinite or long-term contracts, or economically dependent on
one or two engagers for their livelihood are not in the same position. For these
workers, their existing contracts form obstacles to effective collective bargaining.
They cannot ‘refuse to deal’ with their existing engager as this would form the basis
of a number of causes of action under the common law. Even with protection from
s 45(2) it is unclear exactly what these contractors can do in terms of the application
of meaningful pressure on their engager while they retain an existing contractual
relationship.

Dependent contractor workers need further protection from common law liability in
the form of breach of contract, economic duress and economic tort actions if the
proposed collective bargaining notice regime is to provide them with the ability to
engage meaningfully in collective bargaining. Further, any collective bargaining
notice system should extend to protection against secondary boycott liability given the
risk of primary contractor boycotts contravening TPA s 45D. As the proposed TPA
amendments currently stand, only truly independent contractors will be afforded this
capacity.

If the amendments to the TPA are eventually passed in the form that was contained in
the Amendment Bill, they will have the effect of instituting a two tier system for

20
 independent contractor access to the ability to meaningfully engage in collective
bargaining. Here meaningful engagement presupposes the capacity to withdraw
labour as a measure of counterveiling power. Genuine independent contractors
utilising the collective bargaining notice system will be in the best position. Provided
that care is exercised with respect to the secondary boycott regime, and there are no
breaches of existing contracts, a collective refusal to deal will be lawful. For less
independent contractors the withdrawal of labour for the pursuit of collective
outcomes is potentially actionable under a number of different causes of action. To
ensure that less independent contractors are able to access countervailing power in
collective bargaining the proposed collective bargaining notices must encompass
protection against the common law.

21
Globalization and Health
Debate
Assessing the impact of the Australia-United States Free Trade
Agreement on Australian and global medicines policy
Thomas Faunce*1,2, Evan Doran1,3, David Henry1,4, Peter Drahos1,
Andrew Searles1,3, Brita Pekarsky1,5 and Warwick Neville1

Abstract
On 1 January 2005, a controversial trade agreement entered into force between Australia and the
United States. Though heralded by the parties as facilitating the removal of barriers to free trade
(in ways not achievable in multilateral fora), it also contained many trade-restricting intellectual
property provisions and others uniquely related to altering pharmaceutical regulation and public
health policy in Australia. The latter appear to have particularly focused on the world-respected
process of federal government reimbursement after expert cost-effectiveness evaluation, popularly
known as the Pharmaceutical Benefits Scheme ('PBS'). It remains uncertain what sort of impacts –
if any – the Australia-United States Free Trade Agreement ('AUSFTA') will have on PBS processes
such as reference pricing and their important role in facilitating equitable and affordable access to
essential medicines.
This is now the field of inquiry for a major three year Australian Research Council ('ARC')-funded
study bringing together a team of senior researchers in regulatory theory from the Australian
National University and pharmacoeconomics from the University of Newcastle. The project
proposes to monitor, assess and analyse the real and potential impacts of the AUSFTA in this area,
providing Australian policy-makers with continuing expertise and options.
To the extent that the AUSFTA medicines provisions may represent an important precedent in a
global strategy by industry on cost-effectiveness evaluation of pharmaceuticals, the study will also
be of great interest to policy makers in other jurisdictions.

Introduction May 2004, by the Australian Trade Minister and the

The final text of the Australia-United States Free Trade United States Trade Representative. On 17 November
Agreement ('AUSFTA') was signed in Washington on 18 2004, the parties exchanged notes accepting their respec-
Globalization and Health 2005, 1:15
tive implementing processes and the agreement entered
into force on 1 January 2005. The AUSFTA contained
numerous provisions either directly or indirectly related
to medicines regulation in Australia, particularly Annex
2C of Chapter Two, Chapter Seventeen on intellectual
property and Chapter Twenty One on dispute resolution.
It remains uncertain whether the AUSFTA will have either
a detrimental or beneficial impact on access to medicines
and the promotion and maintenance of good health in
Australia. There does, however, appear to have been a sub-
stantial difference in opinion between the Parties over
procedural changes that would result in Australian medi-
cines regulation.
Throughout the negotiations, the Australian Govern-
ment's position was either that the government cost-effec-
tiveness reimbursement system, the Pharmaceutical
Benefits Scheme ('PBS'), would not be included in the
AUSFTA, or that if it was, it was an item of public health
policy whose core components would be protected[1].
After signature, the Australian government maintained
that the fundamental architecture of the PBS remained
unchanged. It acknowledged commitments to make
improvements to the transparency and timeliness of PBS
processes. It also affirmed its reasonable expectations that,
as a result of the AUSFTA, Australian citizens would bene-
fit from faster access to new prescription medicines, that
the price of medicines on the PBS would not increase and
that the text of the AUSFTA made no changes to the cost-
effectiveness methods used to set PBS reimbursement lev-
els[2].
On the other hand, the Deputy US Trade Representative
stated to the US Congress:
The U.S.-Australia FTA is the first to include non-tariff market
access provisions to address issues in the pharmaceutical sector.
Recognizing the sensitivity of this issue, we drew on studies pre-
pared by the Australian government to propose changes that
would improve transparency and the regulatory procedures for
listing new drugs in Australia. Under the FTA, the United
States and Australia agreed to common principles on facilitat-
ing high quality health care and continued improvements in
public health, including through government support for
research and development in the pharmaceutical industry. We
also agreed to establish a Medicines Working Group to discuss
emerging health policy issues. Australia committed to specific
steps to improve the transparency, accountability and prompt-
ness of the listing process, including establishment of an inde-
pendent review of listing decisions[3].
Representatives of the multinational brand-name phar-
maceutical industry, including its regional organisation
Medicines Australia, claimed that there was no basis to
http://www.globalizationandhealth.com/content/1/1/15
claims that the US wanted the PBS dismantled[4]. They
argued that the regulatory changes required by these areas
of the AUSFTA would (a) help redress an alleged current
undervaluing of pharmaceutical 'innovation' in Austral-
ian pricing arrangements and (b) stimulate locally-based
research and development, as well as the local, mostly
generic, pharmaceutical industry[5]. They asserted the
negotiated modifications would make Australia's regula-
tory system more oriented to the global market pressures
on industry, more responsible in its approach to intellec-
tual property rights and so more attractive to private
investment, resulting in a net welfare benefit[6].
Others, however, have pointed to US legislation requiring
that nation's negotiators to seek in the AUSFTA provisions
facilitating the "elimination of government measures such
as price controls and reference pricing which deny full
market access for United States [pharmaceutical] prod-
ucts"[7]. The Australian Senate Select Committee on the
AUSFTA concluded:
While no single one of the specific commitments will create
immediate and measurable price rises for the PBS, the new
measures may well over time alter the bargaining power
between the PBS and pharmaceutical companies. This may
have long term ramifications that are not in the interest of Aus-
tralian consumers[8].
Concern has been expressed about AUSFTA provisions
with the potential to encourage higher medicines prices in
Australia. These include provisions in chapter 17 (Intellec-
tual Property) that expand the obligations of the Trade
Related Intellectual Property Rights ('TRIPS') agreement
by prohibiting parallel importation, restricting compul-
sory licensing to "national emergencies of extreme
urgency," prohibiting generic manufacturers exporting to
a patent-expired market when a domestic patent exists
and increasing data exclusivity protections[9].
A significant additional worry for these commentators
was article 17.10.4. For the first time in Australia, this
linked generic regulatory market approval on quality and
safety grounds with the patent status of the relevant brand
name product[10]. This Hatch-Waxman-type provision
was felt to risk brand name manufacturers "evergreening"
soon-to-expire pharmaceutical patents, as had occurred
after comparable regulations were introduced in jurisdic-
tions such as the US and Canada[11]. The academic, com-
munity and parliamentary concern in Australia was so
great on this issue, that it resulted in the Australian gov-
ernment passing "anti-evergreening" amendments to its
AUSFTA implementing legislation. These imposed a $A10
million penalty for a bad faith challenge by a brand name
manufacturer of a generic notification certificate under
the new s26B of the Therapeutic Goods Act 1989 (Cth).
Globalization and Health 2005, 1:15
They also allowed cost recovery in such circumstances by
the Australian government[12].
Provisions in Annex 2C(1) emphasising the need for
increased government recognition of pharmaceutical
"innovation" and "research and development" were like-
wise viewed by such critics as having the potential to
encourage brand name industry lobbying. This could
potentially weaken, in the long term, the capacity of Aus-
tralia's Pharmaceutical Benefits Advisory Committee
('PBAC') to reject, on clinical and cost effectiveness
grounds, new medicines from inclusion in the govern-
ment's PBS positive reimbursement list, or to reference
their reimbursement price against older products with
equivalent efficacy but much reduced price[13].
In this paper, we present a rationale and outline a draft
plan for a three-year study, funded by the Australian
Research Council ('ARC'), which will examine the impact
of the AUSFTA on a range of regulatory, public health and
industrial interests involved with access to medicines in
Australia. An important initial point to make is that we
consider the AUSFTA is best researched as a component of
an ongoing process of interaction with Australia's medi-
cines policy by the global pharmaceutical industry. This
trade agreement should be viewed, in other words, either
as a catalyst that may enhance the speed of regulatory
change, or a tangible manifestation of industry lobbying
principles that, till now, may have been more implicit. It
would be misleading, in any event, to investigate the AUS-
FTA's potential impacts on Australian medicines policy in
isolation of demonstrable long-term corporate strategies.
Some central issues our study will examine include to
what extent the AUSFTA requires, facilitates, or is likely to
result in, changes to Australia's generic pharmaceutical
industry, as well as its PBS cost-effectiveness system of
pharmaceutical regulation. We also aim to consider rele-
vant net welfare gain or loss; whether the Australian com-
munity will get the same value-for-dollar spent on
medicines, either through Commonwealth government
reimbursement, hospital or patient purchase.
We propose to investigate these questions empirically
(and provide a sound structure for the gradual acquisition
of suitable data). This will be done first by identifying,
with the assistance of qualitative interviews, actual or
likely AUSFTA-associated changes to the structure and
process of Australia's PBAC, as well as the marketing proc-
esses, development and sector competitiveness of generic
pharmaceutical manufacturers in Australia. This aspect of
the study will also review the legitimacy of such actual or
proposed alterations by examining the history of Aus-
tralia's PBS as a social justice measure designed to ensure
universal access to essential medicines. We will also
http://www.globalizationandhealth.com/content/1/1/15
review such proposed changes for coherence with basic
norms of bioethics, domestic law and international
human rights. We shall then attempt to determine their
actual or potential impact on a range of indicators includ-
ing drug prices expenditure and affordability, drug availa-
bility and equity of access.
We hope that publishing an outline of our proposed study
will further encourage policy discussion, facilitate collab-
orations and provide a template for governments of other
countries planning to enter such agreements. Although
much of the detail of the AUSFTA is specific to Australia,
there are important elements likely to be relevant to future
trade agreements involving the US or other countries that
have a major vested interest in the production, export and
rent generation associated with patented medicines. These
include whether the strengthening of pharmaceutical
intellectual property protection and weakening of medi-
cines clinical and cost-effectiveness evaluation and/or ref-
erence pricing, necessarily involves a weakening of a
nation's social and economic fabric, or the capacity of its
population to age well and age productively.
Background: Australia's PBS in the Context of
the AUSFTA
Australia's pharmaceutical sector is dominated by the
operation of the federally funded PBS, which, after a proc-
ess of clinical and cost-effectiveness evaluation contribut-
ing recommendations to price negotiation, provides
reimbursement (currently approximately 75%) for
around 80% of the prescription medicines used in Aus-
tralia[15]. The PBS does not restrict market access, but
facilitates maximisation of sales volume for listed prod-
ucts. In developing relevant price indices, our study will
also take into account AUSFTA impacts on prices for hos-
pital-used medicines (which can be calculated from the
PBS reimbursement price less the minimum safety net
value) and predict expenditure on medicines costed under
the co-payment level.
Central to our analysis of the impact of the AUSFTA on
medicines in Australia, however, will be an evaluation of
its effect on the PBS. Australia's PBS was established as a
free formulary of essential drugs after the Second World
War by the Curtin-Chifley federal administrations[16]. It
was a social justice measure designed to ensure that all
Australian citizens gained access to affordable, essential
medicines. Legislation to create the PBS had to survive two
High Court challenges and required a successful Constitu-
tional referendum[17]. Successive Commonwealth gov-
ernments used and built upon the 1940s enactments,
before a conservative party enacted the National Health Act
1953 (Cth) ('National Health Act')[18]. This is an
extremely important point, that will be focused on by
ARC research scholar Warwick Neville. The PBS is one of
Globalization and Health 2005, 1:15 http://www.globalizationandhealth.com/content/1/1/15

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