From Lexology, Emily Haar, Aneisha Bishop and Demi Harford discuss a recent case in Australia in which a worker was determined to be an employee depsite signing two contracts describing the relationship an an independent contractor relationship. Emily, Aneisha, and Demi write:
A Full Bench of the Fair Work Commission (FWC) has recently been required to consider whether a worker, who had signed two contracts describing her as an independent contractor, was in fact an employee.[1] Although the terms of the contracts contained a number of factors that suggested the worker was an independent contractor, a detailed review of the contractual rights and obligations suggested that the worker was serving in, and was integrated into, the business.
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Key Takeaways
Determining whether a working arrangement is that of an employment relationship or contracting arrangement can often be a complex exercise.
Although the contract between the two parties contained aspects that fit the description of an independent contracting arrangement, with regard to the worker having her own ABN, providing her own equipment and maintaining her own tax, super and insurance, this case demonstrates that this alone is not always enough.
Even under the strict test established in recent years that the focus is on the contract, rather than any subsequent conduct of the parties, an analysis of the contract can still reveal that there is an employment relationship despite the worker being labelled as a “contractor.”
It remains the case that the identity of the “contractor” (whether they contract as an individual sole trader or through a proprietary limited company), and the ability to delegate or sub-contract, remain the most important factors to consider when assessing the status of a working relationship.
Employers should note changes commencing on 26 August 2024 that will effectively reverse the decision in Personnel Contracting and require consideration of both the contract and the practical reality of the relationship when determining who is an employee. However, this test will only apply to claims made under the FW Act, such that the Personnel Contracting explanation of the test will still apply to non-FW Act claims (e.g., those relating to superannuation contributions or entitlements determined under State legislation, such as workers compensation). Please see our related articles here and here which discuss these FW Act changes further.
Read the full story at Contractor vs Employee: The label is not determinative – Lexology