Employment Law

Am I an independent contractor? Working out your employment status

Published in: December 2016

The status of employees can take a number of forms, and depending on the type of employment relationship, the rights and obligations will differ, and in the case of contractors, can do so quite significantly. This piece will provide an introduction to the characteristics that make up an independent contractor.

What are the characteristics of an independent contractor?

In trying to ascertain whether or not an employee is a contractor, a useful gauge is to look at the relationship between the employer and employee with some of the following factors which may be indicative of a contractor:

·         whether a written or oral agreement exists;

·         the level of direct supervision in relation to the work undertaken;

·         evidence of a separate business.

Generally speaking, employees are deemed to be an agent of the principal employer and will be paid for the provision of labour, and as a consequence, employees will usually be engaged under a contract of service. In contrast, contractors are usually independent actors with employers having vicarious liability for the actions of a contractor, and as a consequence, contracts will usually be engaged under a contract for services.

The general rule of thumb for contractors is that such employees are usually asked to perform a particular assignment, or to produce a particular result, with payment tied with the completion of the assignment, or achieving the desired result.

The relevant factors when determining if a person is an independent contractor

When trying to establish whether a person is either a contractor or employee, the following general considerations may be used in determining the person’s employment status:

·         if the functions, or part of the functions can be delegated or subcontracted;

·         the person providing the instructions related to the work;

·         the nature of the instructions related to the work; and

·         the freedom of action in the performance of the work.

Additional indicators may also be used in determining if a person is a contractor can include questions such as whether the person owns or maintains the tools or equipment needed to undertake the work, and whether there is an opportunity for profit, or on the other hand, a risk of loss, and finally, whether an invoice is provided to the other party upon the completion of the relevant work.

The laws governing independent contractors

The laws covering contractors can be found in the Independent Contractors Act 2006 (Cth) (the Act) and the principal objects of the Act are:

·         to protect the freedom of independent contractors to enter into service contracts; and

·         to recognise independent contracting as a legitimate form of work arrangement that is primarily commercial; and

·         to prevent interference with the terms of genuine independent contracting arrangements.

Independent contractor awards and benefits

Contractors will be afforded benefits of the award system which will be dependent on whether the person is covered by a relevant award, and by the type of industry the contractor is engaged with. 

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