In a case involving ACE Insurance Limited, the Full Federal Court has re-affirmed that just because parties enter into an agreement under which they expressly agree that the relationship is not one of employer and employee, the Courts can still intervene to confer employee status with related benefits and entitlements.

The facts

ACE hired 5 insurance sales agents as independent contractors. After the termination of their various engagements, the agents successfully claimed they were actually employees. Kaching! ACE was ordered to pay over $500,000 in accrued annual and long service leave entitlements. This was notwithstanding that the agents had signed contracts stating that they were independent contractors.

Why?

The Court asked whether the agents were employed (and had therefore entered into contracts of services, (requiring personal service by the agents themselves), or, whether ACE had engaged the agents as contractors pursuant to contracts for services (which do not necessarily require personal service by the agents themselves). Confused? Read on.

ACE argued that each agent was paid commission on the premiums they collected, used their own vehicle, did not have income tax deducted from their earnings, issued tax invoices to ACE for their services, and at least two of them had the ability to contract through a corporation.

However, the Court noted that the contracts were made with the individual agents only and the agents were required to personally perform the services, the tax invoices were actually generated by ACE and issued to itself, the agents accrued no goodwill in their own businesses, they were in practical terms unable to work for another insurer, they sold only ACE's policies to its customers, and were trained by ACE in a system of business devised and maintained by ACE. Importantly, the Court found that the agents "had no real independence of action or true independence of organisation". In other words, they were under ACE's practical control.

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