- Recent Federal Court decisions highlight uncertainty as to whether an individual is an employee or an independent contractor.
- The ’multi factor test’ rarely yields clear results, and this distinction can be particularly unclear when assessing non-traditional work arrangements.
- With the growing trend towards non-traditional working relationships and the ’sharing economy’, the distinction between employees and independent contractors will increasingly come under scrutiny.
For years, courts have been called upon to assess whether an individual worker is, at law, truly an employee or an independent contractor. The characterisation is relevant for tax, superannuation, and underpayment claims, and claims made under the Fair Work Act 2009 (Cth) (FW Act), such as unfair dismissal, adverse action claims or allegations under the ‘sham contracting’ provisions.
In this context, the courts have colourfully observed that ‘the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody call it a duck.’ (Re Porter (1989) 34 IR 179, 184). However, with the shift away from traditional working arrangements, there is often legitimate uncertainty about whether an individual is an independent contractor or an employee.
Traditional working arrangements are being challenged by disruptive services providers like Uber, Airbnb, Airtasker and Service Central. This new ‘sharing economy’ or ‘collaborative consumption’ model is also transforming how businesses – here and around the globe – want to engage with labour and service providers, with flexibility a key element to these business models. While these working arrangements have benefits for both businesses and individuals, principally through the flexibility they can offer, they do not sit comfortably with Australia’s strong employment protections, nor with the ‘employee / independent contractor’ paradigm.
Two decisions of the Full Federal Court illustrate the difficulty faced by many enterprises in correctly characterising an individual as an employee or an independent contractor. It is a distinction that will increasingly be tested, and come under scrutiny, with new and evolving work arrangements.