Australia: Contractor or deemed worker?

Employers may still be liable for individuals who hold themselves out to be contractors, but are in fact 'deemed workers' (Schedule 1, Clause 2 of the Workplace Injury Management Act 1998)("Schedule 1").

There is a common misconception that just because someone has an ABN and is paid via their ABN, it automatically means that person is a contractor. Determining the true nature of the relationship between an employer and a hired person needs to be examined in its entirety.

Relevant Law

Clause 2 of Schedule 1 of the 1998 provides:

"Where a contract:

(a) To perform any work exceeding $10 in value (not being work incidental to a trade or business regularly carried on by the contractor in the contractor's own name, or under a business or firm name), or

is made with the contractor, who neither sublets the contract nor employs any worker, the contractor is, for the purposes of this Act, taken to be a worker employed by the person who made the contract with the contractor".

Common law test

The common law test for a 'deemed worker' is found in Scerri v Cahill & anor (1995) 14 NSWCCR 389 ("Scerri"), where the Court of Appeal held that a person who relies on the deeming provisions of Schedule 1 must prove:

  1. He or she was a party to a contract with the respondent to perform work;
  2. The work exceeds $10.00 in value;
  3. The work is not incidental to a trade or business regularly carried on by the applicant in his own name or under a business or firm name; and
  4. The applicant has neither sublet the contract nor employed workers.

The issue of whether a person engaged to carry out work for a company, was a subcontractor or a 'deemed worker', was recently examined in Manildra Flour Mills Pty Ltd v Almer [2017] NSWWCCPD 21.


  • Peter Almer ('Almer') worked under an ABN as a sole director and shareholder of PTE Enterprises.
  • He performed work as a truck driver for Manildra Flour Mills ('MFM') delivering flour to bakeries.
  • He injured his right shoulder and neck at work in 2014 and injured his right ankle in 2015.
  • He made a claim for weekly compensation and medical expenses from February 2015.
  • Almer did not argue he was a 'worker' within the meaning of section 4 of the 1998 Act, i.e. he did not submit his relationship with MFM was one of employer and employee.
  • It was agreed MFM contracted with either Almer or PTE Enterprises.
  • MFM denied liability on the basis Almer was a 'contractor hired under the entity PTE Enterprises' of which he was the sole director and was not a 'deemed worker'.

The matter proceeded to arbitration before Arbitrator Egan who looked at the issue of whether Almer was a deemed worker under Schedule 1. Arbitrator Egan considered:

  • Whether Almer was carrying on a trade or business under his own ABN;
  • The method of payments made as Almer was being paid via a joint bank account in his own name and that of a 'trustee company' for PTE Enterprises;
  • Whether there was a contract between MFM and Almer as an individual or with the company, PTE Enterprises.

Arbitrator's decision

The arbitrator found, that despite Almer operating under his own ABN, invoicing for work and being paid via his company's bank account, he was still a 'deemed worker' under Schedule 1. He said as Almer specifically performed the delivery work, was paid more than $10 in value, worked exclusively for MFM, did not advertise his services elsewhere and did not sublet the contract to any other employees, he satisfied the test in Scerri.

Presidential decision

On appeal, MFM submitted:

  • The first limb in the Scerri test did not apply as the arbitrator erred in finding MFM contracted with an individual as opposed to the company he worked for.
  • The 'deemed worker' provision could not apply as the individual who performed the work was not a party to the contract.

Deputy President Snell accepted the submissions made by MFM. He concluded the real issue for determination was whether MFM contracted with, PTE Enterprises or Almer himself, not as an agent of PTE Enterprises.

Deputy President Snell made the following findings:

  • The fact that MFM always dealt with Almer is consistent with the possibility that either the contract was with Almer or with PTE Enterprises, as Almer was a servant or agent of the company.
  • Whoever MFM contracted with, the contract was one for services. It was not alleged to be a contract of service, involving an employment relationship.
  • In a contract for services, the independent contractor can delegate the work. This would be the case regardless of whether MFM contracted with Almer or PTE Enterprises.
  • Construction of the contract (which was oral), to determine the identity of the parties, involves consideration of the words and conduct used, to determine what these would be reasonably understood to convey, rather than the actual beliefs and intentions of those involved.
  • The arbitrator misconstrued the nature of a contract for services and this affected his decision that Almer was a deemed worker.

He overturned the arbitrator's decision that a hired individual, although operating through a company ABN, was a 'deemed worker' for the purposes of receiving worker's compensation benefits. Deputy President Snell remitted the matter for re-determination by another arbitrator.

Lessons learned?

  • Employers need to be clear about who they engage or contract with to perform the work. i.e with a company or an individual person representing the company.
  • Employers should conduct a careful analysis of their contracts of engagement versus their actual working arrangements - it is the words or conduct used in the construction of the contract, rather than the actual beliefs and intentions of the parties, that determine the relationship between a company and those who perform the work.

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