Employee or Contractor?

In a recent case, the Full Federal Court looked at independent contracting arrangements. The Full Federal Court unanimously found that two drivers each engaged for 35 years as independent contractors were in fact employees all along.

In considering the decision the court made an assessment of the totality of the working relationship:

  • The Applicants derived sole income working for the same business for many years
  • The Applicants were required to purchase a truck to retain work
  • The Applicants contracted with the Respondent through family partnerships
  • The trucks were owned by family partnerships
  • The Applicants were required to be available to work during set hours
  • The Respondents logo was displayed on the Applicants trucks for majority of relevant period
  • The Respondent`s branding was on the Applicants clothing
  • The Respondent controlled the Applicants hours of work, what they were to do, their remuneration, the annual leave that they could take, the paperwork they had to complete and other key rights and obligations.

Compensation and penalties are yet to be determined, but it is likely there will be at a minimum 35 years of annual and long service leave owed to each of the Applicants.

When considering whether a worker is a contractor or an employee the Australian Tax Office provides the following table:

EmployeeContractor
Ability to subcontract/delegate: the worker can’t subcontract/delegate the work – they can’t pay someone else to do the work.Ability to subcontract/delegate: the worker can subcontract/delegate the work – they can pay someone else to do the work.
Basis of payment – the worker is paid either: for the time worked a price per item or activity a commission.  Basis of payment: the worker is paid for a result achieved based on the quote they provided. A quote can be calculated using hourly rates or price per item to work out the total cost of the work.
Equipment, tools and other assets: your business provides all or most of the equipment, tools and other assets required to complete the work, or the worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.  Equipment, tools and other assets: the worker provides all or most of the equipment, tools and other assets required to complete the work the worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.  
Commercial risks: the worker takes no commercial risks. Your business is legally responsible for the work done by the worker and liable for the cost of rectifying any defect in the work.Commercial risks: the worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Control over the work: your business has the right to direct the way in which the worker does their work.Control over the work: the worker has freedom in the way the work is done, subject to the specific terms in any contract or agreement.
Independence: the worker is not operating independently of your business. They work within and are considered part of your business.Independence: the worker is operating their own business independently of your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.

Authorised by the Australian Government, Canberra. 

All businesses that engage independent contractors should regularly complete a contractor versus employee audit to assess their exposure to legal risk.

Jamsek v ZG Operations Australia Pty Ltd [2020] 

This article has been prepared for information purposes only and is not legal advice. For legal advice regarding your specific circumstances, please contact WR Law directly on (03) 5499 6131 or by email at admin@wrlaw.com.au

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