The Federal Magistrates Court this week found that an agreement between a construction company and one of its workers was actually an employment agreement, despite the company requiring the worker to provide invoices and an ABN in order to be paid.
The worker did not have his own company, had no insurance and did not contribute to superannuation. The hourly rate being paid to the worker was below the award rate.
Interestingly the court commented that there was a significant element of deterrence in the penalty applied because a)  sham contracting arrangements are often difficult to detect,  and b) there is likely to be reluctance on the part of employees to make a complaint for fear it may compromise future employment prospects.
The case acts as a warning to employers who try to get away with these sham arrangements, but also highlights that it is not always obvious whether a worker is a contractor or an employee. As yet the legislators have not clearly defined what the difference is and so employers need to rely on accepted guidelines from case law where there is uncertainty. This involves careful consideration in each situation and includes weighing up how the parties work together with questions such as:

  1. Who has effective control over the way the work is performed, the place of work and hours of work?
  2. Can the worker perform work for others or do they have the genuine right to do so?
  3. Does the worker have their own place of work or are they available to work in other locations?
  4. Does the worker use their own tools and equipment?
  5. Is the worker able to delegate or sub-contract the work to others?
  6. Can the worker be suspended or dismissed?
  7. Does the worker present to the world at large as an employee?
  8. How is the worker paid? (for example a weekly wage as opposed to invoice on completion of tasks)
  9. Is the worker paid a gross amount or is tax withheld before payment?
  10. Does the worker receive paid holiday and sick leave?

The important thing to remember is that it doesn’t really matter what name you give the arrangement; the courts will look to what is actually happening and call it what it really is. 

Guest post by Christine Broad, Solicitor, BlandsLaw.

Dominic Woolrych

Dominic is the CEO of LawPath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.