There is no statutory definition of an independent contractor. The courts have developed a complex “multi-factor” test for determining a worker’s legal status, including the way work is performed, how it is paid for, whether the worker is free to work for anyone, the provision of tools of trade and the worker’s reporting obligations.
The Productivity Commission’s Draft Report on Australia’s Workplace Relations Framework released in September 2015 considered the current test for determining whether a worker is an employee or independent contractor.
Being engaged as an independent contractor often provides mutual benefits to the company and the worker. This is largely because it affords the parties greater autonomy in terms of how they regulate working conditions. Orthodox forms of employment contracts don’t usually offer the same level of autonomy or flexibility.
One of the hot trends in employee engagement is offering employees flexibility in how and where they perform their work. However, the lack of an employment relationship when work is being performed by one person for another can lead to problems. What it usually means is that the worker does not have the benefit of the protection of minimum conditions of employment contained within the National Employment Standards and Awards. This becomes a bigger problem when there is a mismatch in the bargaining power between the parties, and the worker ends up being engaged as an independent contractor to enable the employer/principal to avoid providing the worker with the minimum conditions of employment.
The Fair Work Act 2009 contains sham contracting provisions which are intended to stop genuine employees being engaged (either by consent, coercion or misrepresentation) as independent contractors. However, the lack of a statutory definition of independent contractor, coupled with the vagaries of how to apply the multi-factor test, means the application of the sham contracting laws is a difficulty and legalistic exercise.
As proposed by the Productivity Commission, it may well be time for a clear statutory definition of independent contractor to be established – or for the courts to develop a new common law definition. Ultimately it will benefit both companies and workers to know where their relationship stands and how to keep it on the right track.
Source: www.afr.com