Independent contracting relationships are increasingly common,
especially within industries such as:
medical and healthcare consulting;
transport and logistics; and
emerging "sharing economy" business such as
However, the distinguishing line between an employee and
independent contractor can be a fine one.
The parties to an independent contracting arrangement need to
ensure that the relationship is correctly classified. Incorrect
classification as a contractor can have unintended and potentially
serious consequences, including:
Breaches of the "sham contracting" provisions of the
Fair Work Act 2009 (Cth) (FW Act);
Access to the FW Act unfair dismissal regime;
Claims for unpaid entitlements; and
Taxation and superannuation implications for both the employer
The relevant authorities dealing with the distinction between an
employee and an independent contractor are fairly well established,
and were very recently articulated by Deputy President Binet in the
Fair Work Commission (FWC) decision of Petrie
v Grant Johnson Pty Ltd  FWC 6407.
This case involved an unfair dismissal application brought by Mr
Petrie, a roof tiler. The respondent, Grant Johnson Pty Ltd
(Johnson), raised a jurisdictional objection
claiming that Mr Petrie was engaged as an independent contractor
and therefore ineligible to be protected from unfair dismissal
under the FW Act.
In considering this issue, Deputy President Binet cited the FWC
full bench decision of French Accent v Michael Anthony Do
Rozario  FWAFB 8307, which summarised the general law
approach to deciding employee/contractor status as follows:
In determining whether a worker is an employee or an
independent contractor the ultimate question is, considering the
terms of the contract and the totality of the relationship, whether
the worker is conducting a business of their own or is a servant of
another in that other's business.
The nature of the work performed and the manner in which it is
performed must be considered.
The terms and terminology of the contract are important.
However, the parties cannot alter the true nature of their
relationship by putting a different label on it.
Consideration should then be given to the various indicia
(identified in Stevens v Brodribb Sawmilling Co Pty Ltd and other
authorities) as are relevant in the particular context.
In addressing the indicia, Deputy President Binet identified
that there are no rules as to the weight to be given to the various
indicia, being just a guide, with the ultimate question being
whether the worker is acting for another or on their own
In applying this principle and deciding that Mr Petrie was an
employee not an independent contractor, considering the relevant
indicia the Deputy President identified that:
Johnson controlled the time and manner of work performed, and
Mr Petrie worked exclusively for Johnson;
Johnson exercised control over the location and type of work
performed by Mr Petrie via the preparation of roof restoration
contracts for clients, which Mr Petrie completed. Any discretion Mr
Petrie might have had over the work was limited to minor variations
Mr Petrie had little to no control over his start times and
that his finishing times depended on the work he performed and the
Mr Petrie did not promote his services, nor did he have a
business website or any other advertising material.
Johnson also provided him with business cards and pamphlets
that he was expected to give to customers.
Mr Petrie did maintain his own vehicle, but was required to
display Johnson's logo on the van.
Johnson described Mr Petrie as its "worker" to its
In some cases, it can be difficult to determine if a worker is
an employee or an independent contractor, because it is often the
case that some of the relevant indicia may point towards an
employment relationship, while other indicia may point to an
independent contractor relationship.
To limit the risks of incorrect characterisation, the parties to
an independent contracting relationship should turn their minds to
creating certainty in the relationship from the outset.
This may include careful consideration of the above indicia when
drafting any independent contractor terms of engagement.
Given the difficulty, complexity and potential risks of
incorrect classification, the parties to an independent contracting
relationship should consider seeking legal advice when entering
into such arrangements, especially where an assessment of the above
indicia generates some uncertainty.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
This decision outlines the potential pitfalls of an employee making public comments on Facebook outside of work hours.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).