This article discusses whether a body corporate by-law engaging contractors is needed and how committees should manage contractor compliance and risk.
Question: Should our body corporate have an “Engagement of Service Contractors” ByLaw to standardise the way we engage contracts?
We are updating our strata title By-Laws.
Can we include reference to the manner in which service contractors are retained by the BC? For instance, we would like to include a ByLaw specifying that service contractors must provide copies of WorkCover Currency Certificates and Public Liability insurances.
We would also wish our ByLaws to state that the BC must not retain any worker – Sole Trader or otherwise – who could possibly fall into the category of “employee” as opposed to “contractor”.
We have a relatively new Committee Resolution to this effect, but no actual ByLaw.
One source has suggested that it’s not necessary because it is an obvious legal requirement. Or is it? Others feel we don’t have adequate clarity in this regard and therefore could be vulnerable to future committees inadvertently plunging us into “employer” status.
Consequently, does an “Engagement of Service Contractors” ByLaw, cover these issues appropriately?
Answer: You might want to ask who that bylaw is governing and why it needs to be introduced.
All body corporates should always do what they can to make sure that contractors attending their site are fully insured, licensed and registered as required. If you don’t, you are placing your property at risk as uninsured or unqualified tradespeople are more likely to cause an accident or incident and costs for rectification of this could fall back onto the body corporate.
The easiest way to manage this is to ensure that body corporate works are booked through your body corporate managers. Most companies today have compliance systems in place that ensure they only engage suitable contractors. They may charge you a fee for this. Some companies include motions on their agendas noting that they will only book qualified and insured trades. You can ask your body corporate manager how they handle these matters.
The question here is whether you can have or need to have a by-law to enforce such a requirement. It’s fairly common to have clauses around this inserted into by-laws about how owners conduct renovations and renovations by-laws should be more common than they are, but the question seems to ask whether a more generic by-law can be instilled. I can’t think of a reason why not, but you might want to ask who it is governing that by-law and why it needs to be introduced. If it is to direct individual owners, then I can see the purpose – as per the above, a broader renovations by-law may be suitable. If it is for the Committee, then you might want to ask why that is required – the Committee have a duty of care to owners and should only be engaging suitable tradespeople as a default. What would you do if the committee breached the by-law and engaged contractors in contravention of its terms? A breach of by-law notice doesn’t seem an adequate method of resolution. As such, the by-law may act as a guide and possible barrier but it won’t necessarily future proof your scheme.
For the question around contractor vs employee, it seems fairly unlikely that the committee could be in a position where it could engage an employee, given that such a status would, at the least, require approval at a general meeting as any contract would almost certainly require approval at that level.
For reference, the ATO defines the difference between the two as being:
An employee works in your business and is part of your business. A contractor is running their own business.
Their website has a detailed list of the distinctions: Australian Government: Difference between employees and contractors
In most circumstances, the body corporate is simply engaging contractors – that is people who run their own business and provide a service to the body corporate. Some caretakers or facility managers may occupy a different position, although most operate under the umbrella of a company. If you came across a situation where you were unsure it is best to seek legal advice to confirm your understanding.
This post appears in Strata News #534.