An employer who hires a contractor needs to consider whether the individual who actually does the work is likely to be a "worker" for WorkCover insurance purposes. This is not always clear cut and can be complicated by factors such as the structure of the entity who contracts with the employer.
This article looks at circumstances when an injured contractor will be considered a worker of the employer, with a focus on the WorkSafe Victoria Guidelines titled "Contractors and workers guideline" (the Guidelines).1 These Guidelines examine when a contractor engaged to carry out work is to be considered a "worker" for WorkCover insurance purposes.
*Note at the time of writing this article they were last updated as of 29 July 2022.
2. STATUTORY DEFINITION OF 'WORKER'
A "worker" is defined under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) (WIRCA) as an individual:2
- (i) performs work for an employer; or
- (ii) agrees with an employer to perform work- at the employer's direction, instruction or request, whether under a contract of employment (whether express, implied, oral or in writing) or otherwise; or
(b) who is deemed to be a worker under this Act;
The Guidelines look at how WorkSafeVic approach applying this in practice subject to the exclusions detailed below.
3. OVERVIEW OF THE GUIDELINES
The term "contractor" as outlined by WorkSafe in the Guidelines covers a wide variety of individuals who may operate as sole traders or through companies, partnerships, or trusts.
3.1 The two steps
The Guidelines outline two main steps that can assist in determining if the individual will be viewed as a worker or not. The relevant steps which need to be considered depend on the type of entity who contracts with the employer:
- Step one, is relevant where the contracting entity is a sole trader and related to a finding of a worker as a common law employee; and
- Step two, must be considered in all cases and relates to whether an individual will be deemed a "worker"
The Guidelines are subject to exceptions, and do not apply if the employer obtained the services of an individual through a labour hire (or on-hire) firm and pays that firm for the work undertaken in their business. Furthermore, the Guidelines do not apply to:
- owner drivers;
- door-to-door sellers;
- timber contractors;
- taxi drivers;
- share farmers;
- outworkers; or
- sporting contestants.
4. STEP ONE - IS THE INDIVIDUAL A COMMON LAW WORKER?
Step one looks at when an injured person argues that they are a "worker" at common law in accordance with the definition contained in the applicable Victorian workers compensation legislation3. Under the Guidelines, WorkSafeVic will need to consider step where the contractor hired to do the work is a sole trader
4.2 Approach of WorkSafeVic and the Courts.
The Guidelines list a series of factors that WorkSafeVic looks at in making its judgment. They are very similar to the indicia the courts have traditionally applied when applying the noted provisions in Victorian Workcover legislation when determining whether a contract of service existed between the injured person and another party.4 This has been done by looking at the substance of the relationship and weighing up various indicia.5
4.3 Factors that WorkSafeVic consider under the Guidelines step one:
WorkSafeVic looks at whether the person who does the work for the alleged employer fits all or most of the below descriptions:
(a) Direction and control - the person performs the work under the alleged employer's direction and control on an ongoing basis.
The nature, extent, and use of control - including the manner in which it is available to be used and actually exercised - has historically been an important factor pointing to the presence of an employment relationship.6
(b) Standard of set hours - the person generally works standard or set hours under the alleged employer's direction.
Relevant case law has also looked at matters such as whether or not the person engaged can set their own hours of work.7
(c) Delegate - the person cannot subcontract/delegate the contract work or pay someone else to do the work.
(d) Amount Payable - the amounts payable by the alleged employer for the work are for the time worked, a price per item or activity, or a commission rather than for a result achieved based on the quote provided.
The Victorian Supreme Court has also looked at whether or not income tax was deducted and holiday pay or long service leave or superannuation was being paid as important factors.8
(e) Equipment and assets - the alleged employer provide all or most of the equipment, tools and other assets required to complete the contract work, or they provide an allowance to, or reimburse the sole trader.
The imposition of risk/ indemnity from liability has also been considered relevant to determining the nature of the relationship9, with the party who is responsible/liable for the work being indicative of being liable for the relevant injury.
(f) Independence - the sole trader is not operating independently of the alleged employer's business but works within and is considered part of their business.
The Victorian Supreme Court of Appeal has also looked at the degree of integration into the business of the principal when examining matters of independence.10
WorkSafeVic have notes that if all, or most, of the above factors apply to the working agreement or contract, then it is likely that that they will consider the sole trader to be a "worker" of the respondent/employer. That said, WorkSafeVic have noted that none of these factors are definitive, and that they will consider the whole of the relationship between the parties.
4.4 High Court signals shift in approach?
It is worth noting that two recent High Court cases11 have re-examined the multi-indicia approach of lower courts when looking at the nature of an employee relationship where a properly formed contract free of vitiating factors exists and emphasised the primacy of contractual orthodoxy.
For example, the majority of the High Court in the Personnel Contracting Case12 held that where a properly formulated contract exists in the absence of vitiating factors, "there is no occasion to seek to determine the character of the parties' relationship by a wide-ranging review of the entire history of the parties' dealings"13. Further stating that such a review is "neither necessary nor appropriate because the task of the court is to enforce the parties' rights and obligations, not to form a view as to what a fair adjustment of the parties' rights might require."14
4.5 Next steps.
If, after answering the above, the sole trader is not considered to be a "worker" under the scheme, step two requires examination - as an individual may still be classified as a "deemed" worker.
5. STEP TWO - DEEMED WORKER OR NOT?
In order to determine whether an injured contractor will be deemed a worker, we need to look at whether they satisfy certain conditions, as detailed in step two of the Guidelines, including the relevant period(s) when the work was conducted (the Relevant Period(s)).
5.2 Identifying the Relevant Period(s)
The Relevant Period(s) is intended to be of a 12-month duration and is defined in cl 9(6) of the WIRCA. The definition and calculation of the Relevant Period(s) are also discussed in detail in step two, Part A of the Guidelines.
In circumstances where there are competing Relevant Period(s) or if the worker is covered by more than one relevant period, "the period that gives the worker the greatest benefit will be used."15
5.3 Applying Conditions in Part B of the Guidelines
Once we know what the Relevant Periods are, we need to check whether all of the following conditions apply to the contract for a relevant period -
(a) Doing work in or for the employer's business
The sole trader, company, trust or partnership is doing work in or for the alleged employer's business.
(b) At least 80% of overall work
The individual will personally be performing at least 80% of the overall contract work.16
(c) Amount Payable for supply of labour
The amounts payable by the employer to the sole trader, company, trust or partnership will be mainly for the supply of labour (rather than the supply of equipment or materials).
(d) At least 80% of overall gross income earned by worker
Those amounts payable by the alleged employer will be at least 80% of the overall gross income earned by the sole trader, company, trust or partnership from all sources, for services of the same kind.17
If, all of these four conditions apply, then WorkSafe is likely to consider the individual to be a "worker" for the Relevant Period, that is unless the exception in part C applies.
5.4 Part C: Exception - independent business
Therefore, even if the four conditions in step two of the Guidelines apply for the Relevant Period(s), the individual will not be a worker for that period if WorkSafe decides that the contractor is carrying on an independent business or trade while providing services to the alleged employer.
This is because Cl 9 of the WIRCA does not apply in respect of the contract if WorkSafe determines that in providing the services to the principal the contractor is carrying on an independent trade or business.18
Whether a contractor is carrying on an independent business requires consideration of whether the contractor is carrying on a business which can be said to be truly independent of the alleged employer's business.
Note that, whoever seeks to rely on this exclusion, carries the onus of establishing the operation of an independent trade or business.19
6. CLOSING REMARKS
The circumstances of when a contractor is or is not a "worker" can be a complicated exercise and one which needs to be approached on a case-by-case basis. It is worth contacting WorkSafe and/or a lawyer to assist in this assessment if you are dealing with uncertain, complex and/or unique factual circumstances.
2 s 3 of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) (WIRCA). See also See s 5(1) of the Accident Compensation Act 1985 (Vic) (ACA).
3 See s 5(1) of the ACA and s 3 of the WIRCA.
4 See e.g., Eastern Van Services Pty Ltd v VWA Et Anor  VSCA 154; and Elazac Pty Ltd v Shirreff  VSCA 405.
5 Dean Churilov, Personal Injury Compensation in Victoria (Wolters Kluwer, 3rd ed, 2021) 24.
6 Eastern Van Services Pty Ltd v VWA Et Anor  VSCA 154,  (the Eastern Van Case).
7 Elazac Pty Ltd v Shirreff VSCA 405, [30-31] (the Elazac Case).
8 See e.g. the Elazac Case.
9 See e.g. the Eastern Van Case.
10 See e.g. the Eastern Van Case.
11 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting  HCA 1; and ZG Operations Australia v Jamsek  HCA 2.
12 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting  HCA 1.
13 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting  HCA 1, .
14 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting  HCA 1, .
15 Workplace Injury Rehabilitation and Compensation Bill 2013 'Explanatory Memorandum', http://classic.austlii.edu.au/au/legis/vic/bill_em/wiracb2013494/wiracb2013494.html.
16 See Cls 9 (1)(a) - 9 (1)(c) of the WIRCA.
17 See Cl 9 (1)(d) of the WIRCA.
18 See Cl 9 (2) of the WIRCA.
19 BSA Ltd v VWA et Ors  VSCA 265, .
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.