Employment has become a hot button issue globally over the past few years and Australia is no exception. Any readers who have paid even cursory attention to the news, may have heard at some stage of the increasing use of independent contractors in the workforce. In fact the Australian Bureau of Statistics has estimated that one in 10 workers are independent contractors and with an increasing reliance on independent contractors, it is important that a distinction is made between an employee and an independent contractor – because the status of a worker has numerous legal ramifications in the workplace.
Independent contractors and legislation
Most employees will fall under the auspices of the Fair Work Act (the Act) and other associated legislation that governs workplace issues; such as minimum entitlements and unfair dismissal for example, but what about the independent contractor? Workers whose employment relationship is based around contracts for services are generally less regulated when compared to an employee, therefore, the ability of an independent contractor to freely move is less restricted.
Although, issues regarding minimum conditions and dismissal aren’t widely applicable towards an independent contractor under the Act, this does not mean that there are no laws which apply to independent contractors. In fact under the Act, sham contracting provisions are applicable to independent contractors, as well as other legislative instruments such as the Independent Contractors Act, which deals with unfair contracts, the Sex Discrimination Act, which deals with sexual harassment in the workplace, as well as other various legislative instruments regulating occupational health and safety, are just some of the laws which have a direct effect on independent contractors.
How is the status of an independent contractor determined?
The matter of Stevens v Brodribb Sawmilling Co Pty Ltd laid the groundwork in establishing the test for determining the working relationship of a contractor and an employer and the test is multi-pronged. First, the whole of the relationship is to be considered and secondly, the level of control which is exercised between the parties is also an essential element.
In Stevens v Brodribb, Mason J observed:
“… the existence of control, whilst, significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question… Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision of holidays, the deduction of income tax and the delegation of work by the putative employer… control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.”
Further illumination was provided when determining the nature of the working relationship in Hollis v Vabu, which was a matter involving an unidentified bicycle courier sporting a jacket with the words ‘Crisis Couriers’ – a company owned and operated by Vabu. The courier struck Hollis while performing his or her duties causing injury to the plaintiff. Vabu argued because the contracts signed by the riders were for contracts for services, meant that the couriers were independent contractors, therefore, he was not liable for the injuries suffered by Hollis.
Although the riders of ‘Crisis Couriers’ supplied their own bikes and paid for any expenses associated with their bikes out of their own pockets, the High Court found that the courier who struck Hollis was indeed an employee, and that Vabu was liable due to the fact that:
- no special skills or qualifications were required to do the job;
- there was no prospect of freelancing;
- there was stringent rules concerning attendance and assignment regarding the roster;
- the couriers could not refuse work;
- the couriers had uniforms and had to conform to a dress code;
- there was no scope to bargain for rates, and there were identifiable rules relating to annual leave and requests for leave.
In a joint judgment, the High Court said:
“… the relationship between the parties, for the purposes of this litigation, is not to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed by Vabu go to establishing the totality of the relationship between the parties; it is this which is to be considered.”
The tests established from Stevens v Brodribb and Hollis v Vabu suggests that when determining the nature of the working relationship, is heavily reliant on the overall circumstances of the situation as well as control. Additionally, it should also be emphasised that the substance of the contract also plays an important role in establishing whether or not a worker is an employee or independent contractor.
Issues of employment can be complicated and if anyone has any concerns regarding their employment status, should seek the services of a lawyer who will be able to assist in your matter.
