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LEGAL
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JEREMY BRIGDEN
FROM PRIEST LEGAL
Employment Arrangements: BEWARE THE ROOSTER
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istinction between Employee vs Contractor at Common Law Under the common law, ascribing the label of ‘contractor’ to the legal relationship does not make it so. In Re Transport Workers’ Union of Australia (1989) 34 IR 179 illustrated the point by proclaiming ‘[t]he parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck.’ Whilst parties may readily agree that the relationship will be one of principal and contractor, the law imposes its own definition of ‘employee’, and this trumps the ‘contract’ label. In other words, the Courts will look to the ‘real substance’ of the relationship in question. Two recent decisions of the High Court of Australia on the employee-contractor distinction are Hollis v Vabu Pty Ltd [2001] HCA 44 and Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19. The fundamental distinction between an employee and an independent contractor is: ‘… rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own.’ There are a series of factors, referred to as ‘indicia’, which generally help decide what a person is. These indicia include: • control – whether the worker has control over the way they perform a task; • integration – the nature of the services rendered by the worker and whether they are an integral part of the business activities carried on by principal or whether the worker operates on their own account; • provision of tools and equipment – whether the worker is required to supply/maintain tools or
equipment; • results – whether the worker is paid to achieve a result or paid for their time; • risk – whether worker is liable for any defective or remedial work by them; • delegation – whether the worker has the right to delegate the performance of the work; and • the contractual terms – the agreement between the parties as to the nature of the relationship. The consequences of mislabelling can result in additional liabilities for the principal/employer including superannuation guarantee obligations, workers’ comp, PAYG and additional payroll tax. It can also result in civil claims [being sued] for underpayment of minimum entitlements under the NES or any applicable ward, as well as unfair dismissal claims on the basis of a ‘deemed’ employment scenario. Further, dire implications can arise in circumstances where a contractor, being deemed an employee, is under-insured as a result of the mis-classification, and a principal/ employer can be held liable for losses which might have otherwise been fully insured. Casual v Permanent Employment As with the distinction between contractors and employees, another duck and rooster scenario is the distinction between casual and permanent employment. Again, it is not up to the parties to ‘label’ the relationship. It is a classification determined according to legal principles. The intention of the parties, save to the extent that it is contained within a written employment agreement, is largely irrelevant. In a controversial decision last year [WorkPac Pty Ltd v Rossato [2020] FCAFC 84] the Federal Court ruled that casual employees
undertaking ‘continuing and regular work’ could claim permanent employee entitlements. What was worse is that this decision did not allow employers to offset the casual loading that was paid, effectively allowing casual employees to ‘double dip’ on their entitlements. This decision had huge impacts for both employers and casual employees nation-wide. This month the High Court on 4 August 2021 in WorkPac Pty Ltd v Rossato [2021] HCA 23, hearing that case on appeal, has clarified that continuing and regular work alone is not enough to establish permanent employment, and that there are two factors are to be considered when establishing permanent employment. Firstly, there must be a firm, advance commitment to continuing and indefinite work; and, secondly, this commitment must be based on a binding, written employment contract. What can you do? 1. Get Advice. Employers simply need to get it right. If in doubt, get competent legal advice. Ensure that where the distinction is tenuous, remuneration paid to the contractor is at least as beneficial as their minimum employment entitlements under the NES or applicable award. 2. Have a contract. Invest in a competent written contract drawn up by a competent lawyer. 3. Have adequate insurance. Make sure your insurance cover is adequate for your business operations, and those engaged. 4. Know your rights. Employees should be aware of their entitlements. The National Employment Standards exist for a reason. If you think you’ve been underpaid and/or misclassified, you may have unpaid entitlements which you are at liberty to try and recover. GREATER PORT MACQUARIE
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