Case Study: Fair Work Commission Ruling on Director is an Independent Contractor

A recent Fair Work Commission ruling has been made on a company’s director being deemed an independent contractor in the absence of a signed written contract.

In 2021, the sole director of a Sydney ice cream company (first company) sold the business to another company (second company). Prior to the sale, the parties had agreed verbally that the sole director would be employed by the second company on a part-time basis to continue to brand and develop products. A condition of the sale of business was that the parties each deliver an employment agreement. The second company provided an employment agreement to the director of the first company. However, the director never returned a signed copy. The second company emailed the director of the first company requesting her employee details. She responded by suggesting that she would be a consultant rather than an employee.

After the completion of the sale, the director of the first company continued working as chief executive officer for the second company and invoiced the second company for consultancy services.

In early 2022, the second company emailed the director of the first company informing her that her consultancy is cancelled. The director filed a general protections claim involving dismissal with the Fair Work Commission.

The Commission found that although the parties agreed that the sole director would become an employee, they never made an agreement. There was no written contract between the director and the second company in relation to the work being performed. The director of the first company failed to explain what happened to the employment contract. Her issuing invoices to the second company is a characteristic of independent contracting.

Although two landmark decisions last year, Personnel Contracting and Jamsek specified the parties’ relationship can be determined by terms of a written contract, conduct is still relevant in oral contracts. The Commission noted that “where the contract is oral, or partly oral and partly in writing, subsequent conduct may be admissible in specific circumstances for specific purposes – to objectively determine the point at which the contract was formed, the contractual terms that were agreed or whether the contract has been varied or discharged”.

If you have questions in relation to employment or independent contracting, please contact our Workplace Relations and Legal Team on (02) 6175 5900.