Employee vs. Contractor

If you work regular days, hours and the same place, don’t work for anybody else, and your workplace provides all that you need to do your job, you are probably an employee.

We have had several cases where people have approached us for advice about their employment situation, where they are retained on the basis of being an independent contractor.

If you are a contractor, you are responsible for creating and submitting invoices to your workplace.  You need to pay your own tax, and if you earn over $75,000, you will need to pay GST regularly, and submit BAS payments.  You will not be paid any annual or sick leave, but your workplace will need to pay the current rate of superannuation of 9.5%.  It is up to you whether you negotiate your contractor salary at a rate that includes or excludes GST.

If you should be an employee, because of the regularity of your employment and the fact that you don’t work for anyone else, but you are treated as a contractor, you may have a claim against your workplace for sham contracting.

The Fair Work Act 2009 outlaws sham contracting.  Sections 357-359 cover sham contracting, and provide for civil penalties if employers treat people as independent contractors when in fact they should be employees, and vice versa.  A breach of these provisions could lead to a fine of up to 60 penalty units, equivalent to $10,000.

Recent cases

In late 2018, the Fair Work Commission delivered a case against Foodora, finding it had unfairly dismissed the applicant, Joshua Klooger[1].

Prior to making that decision, Fair Work had to determine whether the applicant was an employee or a contractor.  In order to claim unfair dismissal, you have to be an employee.  The Commission found that the Foodora delivery driver was an employee as:

– Foodora had considerable capacity to control the manner in which the delivery rider performed work,

– Foodora fixed the place of work and the start and finish times of each engagement or shift;

-he was not carrying on a trade or business of his own;

-he was working in the Foodora business, as part of that business;

-his work was integrated into Foodora’s business and not an independent operation; and

-he was engaged in work as a delivery rider/driver for Foodora as an employee.

Fair Work went on to determine that there was no valid reason for the dismissal of the applicant, relating to his capacity or conduct.  The true substantive reason for the dismissal of the applicant was not sound, defensible or well-founded at [122].  That reason was that his conduct involved making a complaint to Foodora about his and others’ workplace rights and entitlements at [113].

Foodora ceased operations in Australia in 2018.

In June 2019 Fair Work decided that Uber workers had no legal claim to workplace entitlements as employees, rather deciding that the nature of their retention and work more reflected a contractor arrangement.

The key factor in its decision was the fact that Uber did not require drivers to perform work at particular days and times.

In both cases, the level of capacity and control of the worker was a decisive factor.

[1] Klooger v Foodora Australia Pty Ltd (U2018/2625)