In a recent discussion piece entitled: Regulate Recruitment: Why? How? questions were posed about why and how the emerging recruitment profession and employment services industry could be regulated.  That discussion prompted a number of inquiries about the extent to which the industry is already regulated and about the regulatory options that may be available.

In a sense, every act of regulation is a response to some perceived conflict.  The content of the regulation reflects a kind of world view of that conflict and promotes a discernible set of interests by proscribing (or prescribing) a set of behaviours. Consider, for example, the objects provision, s.5, of Queensland’s Private Employment Agents’ Act 2005:

 “The purpose of this part is to provide for a code of conduct as the main way of regulating the conduct of private employment agents in their relationships with persons looking for work or for workers.”

The Code, which is contained in regulations, goes on to proscribe certain conduct, such as charging work seekers a fee for finding jobs; and to prescribe certain conduct, such as requiring employment agents to ensure that a work seeker’s right to maximize the work seeker’s potential for career development is preserved.

In many cases the content of a code will reflect the identity of the party who initiates it and upon the identity of any party who controls or contributes to the regulatory agenda.  A code initiated by an industry association might address a very different set of concerns from a code initiated by the ACTU or by the ACCC.  This was illustrated when the Recruitment & Consulting Services Industry Code (the” RCSA Code”) was first put forward for authorization in 2002.

The RCSA Code was an industry association initiated code that sought to address industry issues and provide a framework for regulating conduct by and between association members. The AMWU, as an interested party, sought to modify the content of the code by having included, amongst other things, a specific provision requiring members to provide on-hire workers with no less than the pay and conditions received by workers performing work of equal value directly employed by the host employer. It was an attempt to impose an industrial agenda upon an industry arrangement.  Whatever the merits of the Union’s submission may have been, it was the Association’s code that was put up for authorization; not the Union’s and the public benefit test could only be applied on the basis of what had been put forward.

The ACCC suggested that it might have been a different matter if it had been asked to endorse rather than merely authorize the RCSA Code.  Endorsement was a procedure available at that time by which the ACCC could indicate that a particular code represented “best practice” within an industry.  The closest current procedure would be prescription of a voluntary industry code under s. 51AE of the Competition & Consumer Act 2010.

The RCSA Code was duly authorized in 2003. It was renewed in 2009 and falls due for renewal once more in early 2014.  In the meantime, the debate about industry regulation has continued unabated.  The renewal process is thus likely to stimulate further discussion about why and how the industry could or should be regulated.

In order to engage in that discussion, employment services agencies in Australia and interested stakeholders should be aware of at least eight types of regulation that may be relevant.  Three of those types fall into the category of self regulation. The remaining five types represent forms of statutory regulation.

Type 1 Regulation – Voluntary self-regulation – Industry association members only

Many employment services agencies (and individual employment services professionals) belong to industry associations of one type or another that have codes to govern the professional and ethical conduct of their members.  Some of these are authorized by the ACCC and some are not.  Where the industry association code might contain a cartel provision, an exclusionary provision; or where it might substantially lessen competition or impact on competition in other ways it is advisable to have the Code authorized by the competition regulator or to notify terms that might impact on competition where that may be done.

Although this form of regulation is described as “voluntary”, the only voluntary part about it is that an employment service agency or professional can choose whether to belong to the association or not. Once membership is obtained (and sometimes from the time of application for membership) an express or implied contract will bind the person to the code and it may be enforced against that person.

An additional means of indirect enforcement exists to the extent that a court applying the unconscionable conduct provisions of the Australian Consumer Law may take into account the provisions of various industry codes. Occasionally, industry clients and governments will leverage the provisions of an association code by incorporating their provisions (but not their membership requirements) in their purchasing and tendering arrangements.  They then become enforceable as a matter of contract between client and supplier.

There is experience of such codes operating in the employment services industry over many years, both in Australia and overseas. They have generally operated in the competition and consumer field; though there is an example of a recruitment industry privacy code having been proposed under the code provisions of the Privacy Act 1988; but later withdrawn before determination. There may be some renaissance of these under the industry code provisions of the Privacy Act once the amendments proposed by the Privacy Amendment (Enhancing Privacy Protection) Act 2012 take effect in March 2014.

Type 2 Regulation –Voluntary (prescribed) industry codes

There are none of these in Australia at present.  However, in the future they may provide an effective means of industry regulation – especially if those states and territories that have retained employment agent legislation (ACT, NSW,  Qld, SA and WA) repealed their legislation or provided an opt out mechanism in favour of a voluntary (prescribed ) industry code operating federally.

This type of regulation differs from Type 1 (Voluntary self regulation limited to industry association members) in that it reaches beyond the membership of any single industry association and applies, potentially, to all industry participants according to code binding mechanisms set out in the code or regulations. However, they might not be easily obtained.

The ACCC has not yet prescribed a voluntary code; and has suggested that it would only do so in the following circumstances:

  • the code would remedy an identified market failure or promote a social policy objective;
  • the code would be the most effective means for remedying that market failure or promoting that policy objective;
  • the benefits of the code to the community as a whole would outweigh any costs;
  • there are significant and irremediable deficiencies in any existing self-regulatory regime—for example, the code scheme has inadequate industry coverage or the code itself fails to address industry problems;
  • a systemic enforcement issue exists because there is a history of breaches of any voluntary industry codes;
  • a range of self-regulatory options and ‘light-handed’ quasi regulatory options have been examined and demonstrated to be ineffective;
  • there is a need for national application as state and territory fair trading authorities in Australia also have the options of making codes mandatory in their own jurisdiction.

Furthermore, the government will only consider prescribing a code of conduct under the Competition & Consumer Act if it is not already underpinned in other federal legislation.

At present, there is no federal legislation underpinning employment services industry legislation and there is perhaps a reasonable argument that a number of the conditions outlined above would prove to be satisfied if the coverage and effectiveness of existing industry association codes were to be examined on an industry wide basis.

As with Type 1 regulatory codes, it would be expected that such codes would operate in the competition and consumer field. Investigation and enforcement procedures for applicable industry codes are contained in IVB of the Competition and Consumer Act. However expansion into the privacy field ought now be contemplated as a possibility as the OAIC will be able to request a code developer to develop a code for a specific industry. Corresponding investigation and enforcement provisions exist under the Privacy Act.

Type 3 Regulation – Mandatory Industry Codes

It is unlikely, at the present time, that a mandatory industry code would be established for the employment services.  That is because there is state and territory legislation operating in Qld, NSW, ACT, SA and WA which wholly or partially regulates the industry in those jurisdictions. Nevertheless, some measure of indirect regulation applies to employment services firms structured as franchises, which are thus subject to the Franchise Industry Code.

At state and territory, something approaching a mandatory industry code could be established in those jurisdictions, such as S.A., which have established small business commissions with powers to mandate industry codes.  The principal difficulty which they would face, however, would be their jurisdictional limits would restrict coverage intend to produce local inconsistencies in what seems to be recognized as a national market.

In the privacy field, the changes taking effect in March 2014 would allow a privacy code of conduct to be mandated for an industry.

Type 4 Regulation – Legislative Regulation Specific to Employment Agents

At one time it was common for governments to require employment agents to be licensed as part of a scheme of industry wide regulation.

Example: New Zealand at one time had a Servants Registry Office Act 1908 (later named the Employment Agents Act 1908 (NZ) and since repealed).

In recent years, many governments either repealed or relaxed their rules. However, licensing rules do remain in some jurisdictions (e.g. SA, WA, ACT); whilst, in others, remnants of earlier regulatory schemes have been preserved in the form of statutory or regulatory codes of conduct (e.g. Qld and ACT) or have passed into Fair Trading Legislation (e.g. NSW), where they have remained despite the harmonization brought about by the passing of Australian Consumer Law and the repeal of much state fair trading legislation.

Type 5 Regulation – Regulation under licensing schemes for other professions undertaking activities similar to those undertaken by employment agents

In some jurisdictions, it has been suggested that, although specific employment agent licensing has been repealed, employment agents continue to be regulated under other licensing regimes.

Example:  In  NSW  it  was  suggested, at one time, that  employment  agents  were  required  to  hold  licences  under  the Commercial Agents and Private Inquiry Agents Act 2004 (NSW). The suggestion received strong government support until industry objections led to employment services agencies being expressly excluded by amendments to the Commercial Agents and Private Inquiry Agents Regulation 2006 (NSW).

The suggestion that employment agents continue to be regulated under licensing regimes that were developed for other classes of agents is based upon definitions in those licensing regimes that look as though they might apply to employment agents.

Example: N.T. has a Commercial and Private Agents Licensing Act 2000. A “private agent” is defined to include an inquiry agent. “Inquiry agent” includes:

…a person who, for monetary or other consideration, performs the function of obtaining or providing information as to the personal character or actions of any person, or as to the business or occupation of any person on behalf of any other person.

That, of course, is precisely what employment agents do when they conduct candidate screening, reference checks, or validate candidate provided information on behalf of their clients. Unlike the position in NSW, there is no regulatory exemption for employment agents in the N.T.  In those jurisdictions where this type of regulation might apply, it is best to contact the Local State or Territory regulatory authority and ask whether specific business activities bring an employment services agency within the scope of their licensing scheme.  In most cases they should say that it does not.

Type 6 Regulation – Multi-disciplinary regulation

Some employment agencies may also carry on other businesses – either directly or through related entities – that are subject to regulation.

Example: An agency or group might provide immigration advice. Migration agents are subject to separate regulation. Here it is the business of migration agent that is subject to the regulation rather than the business of employment agent.

Type 7 Regulation – Vicarious regulation

Although on-hire (labour-hire) is often excluded from the reach of the rules regarding employment agency regulation, there are some exceptions; and, occasionally, it has been suggested that temping agencies are regulated and licensed under schemes that regulate the industry sectors into which they on-hire staff.

Example: In Qld it was suggested by government, at one time, that employment agencies on-hiring workers into the building sector were required to hold building licences.

Type 8 Regulation – Wide cover regulation

Some laws such as privacy laws, discrimination laws and consumer protection laws have a wide coverage that includes employment agencies as well as other businesses.  There may even be some employment agency specific provisions.

Example: Some anti-discrimination and Equal Opportunity Acts have provisions that expressly apply to the work the employment agencies do.  Other Acts such as the Privacy Act might have a profound impact on the work that employment agencies do and, in a manner of speaking, could be said to regulate employment agencies to that extent.

Employment services agencies and recruitment professionals operate within a broad regulatory environment, where corporations legislation, work health & safety legislation, revenue legislation, competition and consumer legislation, anti-spam legislation, industrial relations legislation, and “clean slate” or offenders rehabilitation laws all affect what employment services agencies and professionals do and how they go about it.

Despite the fact that there is a wide array of regulatory options, many of them already deployed, what is missing, and what seems to be contributing to the ongoing calls for industry regulation, is a coherent scheme of regulation with federal coverage that approaches anything like the regulation of the longer established professions. Whether it is really needed for the employment services industry at this time is a difficult question.  Whether it is desirable might depend upon the degree of flexibility which it leaves to enable business practices to develop, standards to be set and business models to adjust to a rapidly evolving and changing market.