A recent case has demonstrated the caution that needs to be taken when engaging contractors and the need to ensure that a genuine contractor relationship exists.
The case of Butlin v ACA Home Improvements Pty Ltd & Ors,  involved a window installer who was made redundant but was told that he would be able to continue working as a contractor.
Following the redundancy, the employee made a successful adverse action claim against his employer on the basis that his role itself was not redundant, but rather that the employer wanted to change the nature of his engagement as a means to save money and to employ a cheaper alternative.
The employee, Mr Butlin had been engaged as a contractor initially, but was engaged as a permanent employee in the position of window and door installer after approximately 1 month. Approximately 9 months later, the employer claimed that there had been a downturn in the window/door installation part of its business, and that it could not continue to employ Mr Butlin on a full-time basis.
Despite this, the employer had employed another person to perform similar work during weekends, claiming that Mr Butlin had said advised that he would not work on weekends.
At a meeting, the director of the company, terminated Mr Butlin’s employment on the grounds of redundancy, but told him that it might be possible for him to continue working with the company as a contractor. Mr Butlin disputed the redundancy due to the employer having several jobs pending and there being no shortage of work.
Section 358 of the Fair Work Act 2009 makes it unlawful to terminate an individual’s employment in order to then reengage the same individual in the same job as a contractor. However, Mr Butlin alleged that his employer had attempted to reclassify the employment relationship as a contracting arrangement purely because it was cheaper to do so, rather than due to genuine operational requirements. The employee was able to evidence that remuneration rates for a contractor versus an employee had been discussed in detail.
In reaching its decision, the Federal Circuit Court considered the credibility of the evidence provided by each party and found that Mr Butlin’s evidence was much more credible than that provided by the employer to support the claims that there was a downturn in business.
The employer denied having offered to re-engage Mr Butlin as a contractor, and instead claimed that he had been made redundant because of a downturn in business and because he was reluctant to perform work other than window installation (the business also provided a range of other products and services). In contrast to this, the contractor who was engaged to replace Mr Butlin reported that his workload had increased and that he could not keep up with demand. As a result, it was found that
It was held that Mr Butlin’s termination amounted to adverse action for a prohibited reason, due to the employer having failed to prove that it was a genuine redundancy. While damages have not yet been awarded, the respondents will be liable for civil penalties.
For further assistance regarding adverse action, please contact a member of our HR advisory team via email at firstname.lastname@example.org or via telephone at 1300 720 004.