Employee or Independent Contractor: Two Recent High Court Cases Provide Further Guidance

What is the Difference Between Independent Contractor and an Employee?

You may think distinguishing an employee from an independent contractor is simple; however, a worker who holds an ABN and produces invoices each week does not necessarily mean the worker is an independent contractor.

There is no one rule to answer this the question, although there are a number of factors that need to be considered.

Two recent High Court cases looked at determining employee vs independent contractor relationships and held:

1. the label of a worker as an ‘employee’ or ‘independent contractor’ is not definitive in determining the relationship;
2. where an employer and worker have clearly and comprehensively set out the terms of their relationship in writing, whether or not the worker is an employee or independent contractor will be considered through that lens; and
3. a wide-ranging review of the parties’ post contract conduct is often unnecessary and inappropriate and should only be made use of where the contractual terms between the parties are unclear on their face or have resulted form a sham arrangement or another breach of law.

I use subbies on my projects regularly.  What does this mean for me?

If your business engages contractors, you should do a comprehensive audit of your contractor arrangements to ensure the relationship is set out in writing, and that it correctly reflects the relationship between the parties which is that of employer and independent contractor.

If your business uses labour hire companies for its workforce, you should ensure the labour hire company has correctly classified the workers it is contracting out to you and that it is not a ‘sham contract’.

To learn more about the differences between employees and independent contractors, click here.