Contractor or employee? – a question that remains a question in the industrial relation dispute


LL.B. (Macq.)
Solicitor, in Victoria





Before I proceed with this excerpt from Papathansiou case, it is interesting to note that notwithstanding the number of evidence presented by the respondent (HBS Group) in this case Commissioner Gregory found in favor of the applicant on a number of reasons which you will find below which I quote:

“[19] The Applicant submits the Tribunal must apply the definitive High Court majority decision in Hollis v Vabu 6 in determining this matter. It submits, this requires the Commission to consider the totality of the relationship between the parties. It also submits, based on the decision in Brodribb, that an indicia test is required to weigh up the relevant factors that should determine the nature of the relationship between the parties. It submits relevant indicia in the present matter include:

• the principal’s capacity to control the worker in relation to the time and manner in which the work is carried out;
• the capacity to delegate work;
• the capacity to refuse work;
• the manner in which the engagement commences, whether via quotation of fees and the tendering process, or via a      job offer;
• the matter of payment for the work and taxation;
• the principles provision of tools and items necessary to complete the work, including insurance and work premises;
• the relative power of the bargaining parties;
• the mutuality of obligation between the parties; and
• the extent to which the worker is incorporated into the organisation.


[20] It also referred to the Full Bench decision in the matter of Abdalla v Viewdaze Pty Ltd 7 (Abdalla) where the Full Bench held the relevant test is:

“...whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own.” 8

[21] It also referred to the decision in Roy Morgan Research Pty Ltd v Commissioner of Taxation, 9 which found that despite being engaged as independent contractors, market researchers were found to be employees due to indicia indicating, inter alia, the significant degree of control exercised over their work by the Company. The Applicant also referred to the decision in French Accent emphasising, in particular, the view of the Full Bench that parties cannot disguise the true nature of their relationship by putting a different label on it.

[22] Section 380 of the Fair Work Act defines “employee” to mean a “national system employee”. 10 Section 13 of the Act defines “national system employee” as an:
“...individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement.” 11

[23] Section 15 in turn provides that:
“(1) A reference in this Act to an employee with its ordinary meaning:
(a) includes a reference to a person who is usually such an employee” 12

[24] The effect of these provisions is that resolution of the issue for determination requires the application of common law principles to determine whether the Applicant was an employee or, instead, engaged by the Respondent as an independent contractor.

[25] As the parties submissions have indicated there are well established principles of common law that have been developed to determine whether an individual is an employee or an independent contractor. Both parties referred to the decision in Abdalla in which the Full Bench summarised the legal principles that apply. Those principles were subsequently refined by a Full Bench of Fair Work Australia in the French Accent matter that both parties again made reference to. In that decision the Full Bench highlighted some of the difficulties in seeking to retrospectively categorise relationships as either one of employer and employee or principal and independent contractor. The Full Bench stated, in particular, at paragraph 25 of the decision:

“The FW Act imposes obligations on employers in relation to their “employees” and confers benefits and rights on “employees” without defining when a worker is an employee as distinct from an independent contractor. The definition of “employee” leaves it to the general law to supply that distinction. The nature of the established general law approach to distinguishing between employees and independent contractors may be seen as contributing to the problem precisely because the nature of the general law test is such that it does not admit a clear answer in every case. Once one adopts the position, as the general law has done, that the distinction is rooted in the objective character of the work relationship two things follow. First, the infinite variety of human affairs means that work relationships present as a spectrum, some of which are clearly relationships of employment and others of which are clearly relationships of independent contract but some of which are less clear cut. Secondly, that character of a work relationship is what it is and cannot be changed simply because the parties agree to label it differently (unless, of course, the relationship is sufficiently ambiguous that a clear determination is not possible, the situation addressed by the Massey Proposition). That is a matter clearly recognised by the courts and tribunals.” 13

[26] The Full Bench then continued to deal at length with the approach to be applied in distinguishing between an employee and an independent contractor. Those conclusions are contained in paragraph 30 of the decision in the following terms:

“The general law approach to distinguishing between employees and independent contractors may be summarised as follows:

(1) In determining whether a worker is an employee or an independent contractor the ultimate question is whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own of which the work in question forms part? This question is concerned with the objective character of the relationship. It is answered by considering the terms of the contract and the totality of the relationship.

(2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant indicia and the relative weight to be assigned to various indicia and may often be relevant to the construction of ambiguous terms in the contract.

(3) The terms and terminology of the contract are always important. However, the parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract.

(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context. For ease of reference the following is a list of indicia identified in the authorities:

*Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.

Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of an independent contract. While control of this sort is a significant factor it is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where the work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weighs significantly in favour of the worker being an employee.

‘The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.’ ‘[B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.’

* Whether the worker performs work for others (or has a genuine and practical entitlement to do so).
The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, working for others (or the genuine and practical entitlement to do so) suggests an independent contract.
* Whether the worker has a separate place of work and or advertises his or her services to the world at large.
* Whether the worker provides and maintains significant tools or equipment.
Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.
* Whether the work can be delegated or subcontracted.
If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.
* Whether the putative employer has the right to suspend or dismiss the person engaged.
* Whether the putative employer presents the worker to the world at large as an emanation of the business.
Typically, this will arise because the worker is required to wear the livery of the putative employer.
* Whether income tax is deducted from remuneration paid to the worker.
* Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.
Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.

* Whether the worker is provided with paid holidays or sick leave.
* Whether the work involves a profession, trade or distinct calling on the part of the person engaged.
Such persons tend to be engaged as independent contractors rather than as employees.
* Whether the worker creates goodwill or saleable assets in the course of his or her work.
* Whether the worker spends a significant portion of his remuneration on business expenses.
It should be borne in mind that no list of indicia is to be regarded as comprehensive or exhaustive and the weight to be given to particular indicia will vary according to the circumstances. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.

(5) Where a consideration of the indicia (in the context of the nature of the work performed and the terms of the contract) points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. However, a consideration of the indicia is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The ultimate question remains as stated in (1) above. If, having approached the matter in that way, the relationship remains ambiguous, such that the ultimate question cannot be answered with satisfaction one way or the other, then the parties can remove that ambiguity a term that declares the relationship to have one character or the other.

(6) If the result is still uncertain then the determination should be guided by ‘matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability’ including the ‘notions’ referred to in paragraphs [41] and [42] of Hollis v Vabu.” 14

[27] A key question then in determining whether the Applicant is an employee or independent contractor is whether he can be considered to be “the servant” of the Respondent or whether he carried on a trade or business on his own behalf. A number of the indicia identified from relevant authorities and summarised by the Full Bench in the French Accent decision are clearly relevant in determining the issue in this matter. Accordingly, I now turn to consider the circumstances of the present matter in the context of those various indicia.


Read 641 times

About Author

Login to post comments