Recently a case was heard before the Fair Work Commission (FWC) where a worker claimed unfair dismissal from their employer. The employer objected to the claim on the grounds that they understood the worker to be an independent contractor and not an employee (and therefore the worker was not eligible to submit an unfair dismissal claim). On examination of the relationship between the two parties, the FWC ruled in favour of the worker, who was deemed to in fact be an employee. This was the case even in the absence of a written employment or contractor agreement.
In this case the worker performed tiling and grouting services on behalf of the company. The company had reached a verbal agreement with the worker to provide these services and, did not develop any formal written agreements or documentation about the services being provided. It was for this reason that that the employer thought they were eligible to dismiss the worker without due process as obliged towards an employee – as they believed in the absence of a formal employment contract the worker was understood to have been engaged as an independent contractor.
To assess this case, the FWC considered factors related to the nature of the relationship between the parties. Primarily they looked at who had autonomy in the relationship. They determined that it was the company who directed when and where the work was performed and who had control over the specifics in the way that the work was performed.
In a genuine contracting arrangement, the company will express a requirement for work and services to be performed, but will provide less direction and specification about exactly and when this is done. One contributing factor in reaching the decision that this was employment included that the company had refused the worker’s request to not attend work, and provided detailed instructions (rather than negotiations) about when and where they were to attend work.
There have been multiple cases brought to the FWC previously about contracting versus employment relationships. It is imperative that businesses make an appropriate decision around this to avoid potential claims being made against them, and to avoid additional wage costs if any claim is substantiated.
Beyond autonomy, other factors to consider include the following:
- Where the worker ultimately works from (on-site at your business, or separately and with flexibility)
- Who provides the key equipment required to perform the work (for example if technical equipment such as a computer is this supplied by the business, or does the worker provide their own equipment; in a construction context, consider who chooses, orders and manages the supplies needed to perform the work?)
- How is the worker remunerated and taxed? Are they receiving regular wages periodically for being on-site, or are the paid according to the completion of discrete tasks?
- Is superannuation being paid? Are entitlements being paid?
This case points to the importance of being clear at the beginning of a work relationship about what the expectations are for both parties, reaching an agreement, and proceeding to document this explicitly in writing via either a Contractor or Employment Agreement.
Membership with HR Advice Online provides you with access to determine whether a relationship is employment or contractual, including a checklist and template contracts for your use when the result is employment. For further information please contact us at [email protected] or 1300 720 004.
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