We have already discussed at length the obvious impacts on
employment in a recession. But what happens to people who are not
Unlike employees, independent contractors do not have the right
to raise a personal grievance – they are limited to what
is stated in their contract. However, when an independent
contractor believes they have been hard done by, the ability to
challenge their status and argue that they are an employee is often
an attractive option.
Independent contractors have a right to challenge their status
to argue that they are actually an employee. The consequence being
that, if successful, they are then afforded the rights of an
employee, including the ability to sue for unfair dismissals and
Holidays Act 2003 entitlements.
It is quite common for a contractor to later argue that they are
in fact an employee. To do this they rely either on the fact that
the contractor relationship was a sham (ie it did not represent the
true nature of the relationship at the outset) or the subsequent
conduct of the parties has changed the relationship from that of a
contractor to an employee.
In assessing whether a worker is an employee or a contractor,
the following are relevant:
The degree of control that the business has over the worker (or
the level of independence that the worker has).
Whether the worker operated as an integral part of the
The economic reality of whether the worker is in business of
her or his own account. For example, are they paid on the basis of
an invoice? Do they take responsibility for their own tax issues?
Do they contract through a company? Are they paid more on the basis
of their status? Do they have the ability to contract with
Most contractor relationships start with a written agreement
which confirms the contractor status of the relationship. The
contract will usually record that it is the intention of the
parties that the relationship not be that of employer and
employee. This is not determinative but will be considered along
with the manner in which the parties have dealt with each other
during the relationship.
This does not mean that the Employment Relations Authority or
Employment Court does not respect the intention of the parties, or
their freedom to contract in whatever manner they wish. In fact,
the Employment Court has recently ruled in favour of a finding
against an employment relationship in Tse v Cieffe (NZ)
Limited WC4/09  NZEmpC 23. In this decision the Court
recognised that in some circumstances there will be elements of the
parties' conduct which might point to an employment
relationship. These must be weighed against the intention of the
parties as stated in the contract and the balance of their conduct
which was consistent with the contractor relationship. In that
instance the Court was confident that the status should remain one
of contractor, even though some aspects of the conduct were also
consistent with an employee/employer relationship.
This case reinforces the importance of clear agreements between
contracting parties at the outset. More importantly it confirms
that irrespective of the written terms of an agreement, the way in
which the relationship is managed on a day to day basis can be
If the relationship cannot be managed in a manner consistent
with contractor status then consideration should be given to
whether or not an appropriate employment agreement should be
entered into. Whatever relationship is ultimately settled on, it
needs to be monitored on an ongoing basis to ensure that the way it
is managed remains consistent with the intention of the
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
This WHS decision clarified the interpretation of s 19 of the Work Health and Safety Act 2011 (NSW).
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