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Jeremy Brigden - Legal Light
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LEGAL Light t JEREMY BRIGDEN
FROM PRIEST LEGAL
Employment Arrangements: BEWARE THE ROOSTER
Distinction 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 defi nition 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-classifi cation, 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 classifi cation 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 clarifi ed 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 fi rm, advance commitment to continuing and indefi nite 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 benefi cial 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 misclassifi ed, you may have unpaid entitlements which you are at liberty to try and recover.
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Did you know only 48% of working-age (15-64) people with disability are employed, compared with 80% without disability. This means there is a huge number of potential employees being excluded from the current labour market. We think we can do better than this on the Mid North Coast and we are setting the local business community a challenge to diversify their workplace and employ a person with disability today. Join some of our region’s leading businesses and become a part of Key Employment’s 100 club – a community initiative designed to increase employment and inclusion of people with disabilities on the Mid North Coast. Kicking off on 1st September 2021 we are aiming for 100 businesses to commit to hiring a person with disability to help us create a more inclusive community. We know that a truly diverse workforce drives growth, innovation, brand awareness and ultimately profitability. It also makes good business sense; research shows that workers with disability have fewer workplace injuries, better attendance records and show greater loyalty and productivity than other workers. We urge all local businesses to focus on ability and help us create a more diverse and socially inclusive community. Employ a Key Employment client today and become a part of the #achieve anything movement. To sign up to the challenge or for more information contact Lisa Reed on (02) 6691 9999 or email jobs@
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