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(which does not assist in achieving greater
certainty for the worker).
A more recent attempt has indicated
that what is now important to be looked
at is the ‘totality of the relationship’
(whatever that may mean). What has
also been said is that the parties should
look at what is the ‘real substance’ of the
relationship in question.
Yet another expression which has
gained some support is that the
distinction between the employee and
the independent contractor is ‘rooted
fundamentally in the difference between
a person who serves his employer in the
employer’s business and a person who
carries on a trade or business of his own’.
Such expressions do not necessarily aid in
providing a clear answer.
AN ASSESSMENT OF ALL INDICATORS
What is universally acknowledged
is that there is a considerable number
of criteria which have evolved to assist
in the interpretation of a relationship
but none of which can ever be said to
be determinative. The object of the
exercise, according to one court, is to
paint a picture from the accumulation of
detail. However, another said it is not to
be regarded as a mechanical exercise
of simply considering each of these
factors as a checklist to see whether they
represent one classification or another,
as the factors may vary in the weight or
importance to be given in any situation.
No matter which overall test or
question is used, it is still necessary to
consider all the individual circumstances
and indicators. This has been described
as a multi-factorial approach.
In one recent case Justice Bromberg of
the Federal Court had to consider whether
2,500 interpreters and translators were
employees or independent contractors of
the On Call Agency.
He found it troubling that there was an
absence of a simple and clear definition
which explained the distinction. He noted
that it was a matter of an evaluation of the
overall effect of the detail, which is not
necessarily the same as the sum total of
the individual details.
Every few years a judge attempts to
summarise previous tests and come up
with a definitive answer.
Bromberg’s test was:
- Is the person performing the work an
entrepreneur who owns and operates
a business?
- In performing the work is that person
working in and for that person’s
business as a representative of that
business and not of the business
receiving the work?
In another recent case, the Federal
Court was asked to decide whether Ace
Insurance agents were independent
contractors. Each agent was paid
commission on the premiums they
collected, each used his own vehicle, did
not have income tax deducted from their
earnings and issued tax invoices to the
insurer for the services each provided.
Conversely, the tax invoices were
generated by the insurer and issued to
itself, the agents accrued no goodwill
in their own business, they were unable
to work for any other insurer, sold only
the insurer’s policies to the insurer’s
customers and were trained by the
insurer in the system of business devised
and maintained by the insurer.
Perhaps not surprisingly, they
were found to be employees and were
owed annual leave and long service
leave entitlements.
In the On Call Agency case, Bromberg
made reference to approximately 22
criteria in two different sections to help
make his decision. Those criteria ranged
from: who provides the equipment, the
tools and the car; what logo is on the
shirt or uniform, or on the business card;
who hands out the work; does the person
have to do the work themself or can it be
subcontracted; do they get paid for their
time or only on result; who pays PAYG and
workers’ compensation insurance; what
advertising does the person do and who
gets the profit from the work.
I add two more general questions which
may give guidance:
1. What is the strength of the
independent contractor’s trading?
If the contractor is no more than
a company in paper and name, the
engagement is more likely to be regarded
as that of employer/employee. It will
go against a subcontractor claim if
the contractor does not have separate
company accounting; OHS and HR
policies; Schedule of Rates; other
employees, or subcontractors engaged
in the business or if the contractor does
not undertake any other work for other
principals.
Clearly, a well-established company
engaging casual, part-time employees
or other subcontractors, advertising
and promoting itself in the area and
undertaking other work with established
accounting, invoicing and other incurrent
operational systems is preferable.
2. Who has ultimate control?
Reference has been made above to
the traditional test of ‘control’ (who
determines not only what has to be done
but how it is to be done). This remains a
significant influence even if only one of
many. In modern analysis, this may relate
to matters of performance, compliance
and discipline.
At present, many historical criteria
pointing one way or the other are under
legal review. For example, the ability to
delegate work tends to suggest against an
employment relationship but some cases
note that the mere right to delegate, in
the absence of a likelihood or actuality of
delegation, may be of little consequence.
Further, the fact that the contractor can
work for others and not exclusively for
one person again usually tends against an
employment relationship. Put in another
way however, the absence of some
provision requiring exclusive service can
also be a feature of casual employment.
In the On Call Agency case, Bromberg
went so far as to question the strength
of the indicator as to whether the person
was paid for the work done (traditionally
regarded as pointing to a contractor)
rather than on a time basis indicating an
employee. He noted there were many
examples of employees being paid on a
‘piece rate’, such as seasonal fruit pickers.
If you feel all of the above appears
conflicting, contradictory or just too hard
you are not alone. The ongoing debate is
the reason even judges complain about
the lack of a simple and clear test which
would show the difference between an
employee and an independent contractor.
In any case you are involved in, look at
all the circumstances, weigh them all up
and know that no one feature gives the
answer.
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Gadens
www.gadens.com