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Thursday, 29 July 2010 |
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Employees v independent contractors
Wednesday, 23 July 2003
A recent decision of the Full Bench of the Australian Industrial Relations Commission (AIRC) in Abdalla, Abraham v Viewdaze Pty Ltd t/as Malta Travel, has re-iterated the principles to be applied when determining whether a worker is an employee or an independent contractor. The decision endorses the approach that a determination of a worker's status is made by having regard to a variety of factors - in other words, by considering the totality of the relationship.
Introduction
The Full Bench of the Commission recently considered an unfair dismissal application in which the respondent argued that the Commission lacked jurisdiction to hear the matter because the applicant was an independent contractor, not an employee.
The Full Bench determined that the various factors in this case pointed more strongly towards the conclusion that the applicant, who performed work as a travel consultant, was an independent contractor. On consideration of the indicia cited by the authorities, the Full Bench decided that the case was unclear. The Full Bench concluded that the applicant was an independent contractor, due primarily to the respondent's lack of control over the performance of the work, the applicant's discretion as to work hours and the fact that the applicant kept most of the commissions he made in his work.
Distinguishing employees from independent contractors
In reaching its decision, the Full Bench examined the authorities, including the significant decision of the High Court in Hollis v Vabu Pty Ltd, and summarised the various factors which should be considered in determining whether a worker is an employee or an independent contractor, as follows:
- Whether the contract between the parties is a contract of service or a contract for the provision of services.
- The nature of the work performed and the manner in which it is performed.
- The terms and terminology of the contract. However, importantly the Full Bench stressed that parties to a contract cannot alter the true nature of their relationship by simply putting a different label on it.
- The various 'indicia' identified by the authorities including, among other things:
- an organisation's degree of control or right to exercise control, over the manner in which work is performed, the place of work, and hours of work etc
- whether the worker performs, or has an entitlement to perform, work for others
- whether the worker has a separate workplace and advertises his or her services
- whether the worker provides and maintains significant tools or equipment
- whether the work can be delegated or subcontracted
- whether an organisation has a right to suspend or dismiss the worker
- whether the worker is presented to the public as a representative of the business
- whether income tax is deducted from remuneration paid to the worker, and
- whether the worker is provided with paid holidays or sick leave.
The Full Bench noted that the list of indicia outlined in its decision is not exhaustive.
- Where the result is uncertain, a determination should be guided primarily by whether it can be said that the worker is running his or her own business or enterprise with independence in the conduct of his or her operations as distinct from operating as a representative of another business with little or no independence.
- If the result is still uncertain, then the determination should be guided by whether the organisation is, or is perceived to be, vicariously liable for the acts of the worker.
Implications for employers
- This decision serves to remind employers and organisations about the principles used to distinguish an employee from an independent contractor. It is important for employers and organisations to continuously monitor their arrangements with workers to ensure that their specific intentions regarding the legal status of their relationship with workers is being reflected at a practical level.
Whether a worker is an employee or independent contractor will affect various potential liabilities under awards and agreements, as well as tax and superannuation laws. Moreover, genuine independent contractors are not eligible to pursue unfair dismissal proceedings.
This article was supplied by law firm Freehills.
Peta Bissell (peta.bissell@freehills.com)
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