A recent decision in the Federal Circuit Court, where bus driver employees had been incorrectly classed as contractors, highlights the problem that many workers face when given an inaccurate status of employment.
Fair Work Ombudsman inspectors found that four bus driver employees of a small transport company were paid a flat rate of $22 per hour, despite working 12 hour shifts and on weekends. Three of the drivers were classified as contractors, rather than employees.
Company fined $89,250 for deliberately classifying bus driver employees incorrectly
Under the Passenger Vehicle Transportation Award 2010, the drivers were entitled to receive $38.94 per hour on weekends, and $48.68 per hour on public holidays.
Classifying the bus drivers as contractors and paying them a flat rate meant they missed out on casual loadings, overtime rates, weekend and holiday penalty rates, as well as night and early morning work.
The Federal Court found the four drivers were underpaid by $46,012 between 2012 and 2014. Even though the bus company had since paid the four workers back in full, the judge fined the company $89,250 for "deliberately" wrongly classifying the bus driver employees as independent contractors. (See Fair Work Ombudsman v Eagle Tours Pty Limited  FCCA 2099.)
Penalty a warning to other companies which classify workers incorrectly
The judge heard during the trial that other bus company owners had said it was normal to pay drivers a flat rate of $22 per hour when they were hired for jobs that came up.
In his decision to impose the fine, the judge stated the company should be penalised to discourage other businesses from believing that all bus drivers - or other workers for that matter - could be hired as contractors, regardless of the nature of their engagement.
Contractor versus employee: why you need to understand the difference
Providing clarity on whether you should be hired as an employee or contractor, the Fair Work Ombudsman states that the difference is based on many factors, with no single factor determining whether a worker is one or the other. (Please see Independent contractors and employees on the website of the Fair Work Ombudsman.)
Generally, a contractor is engaged for a specific task, has a high level of control over how the work is done, uses his or her own tools, and bears responsibility for quality of the job. They submit invoices for the work completed, pay their own tax, and look after their own superannuation.
This may suit many workers. However, contractors miss out on a range of employee benefits, including regular pay, superannuation, workers' compensation, standard hours, tax being automatically removed from their pay, use of company tools, supervision and a degree of work security.
In a court matter, the judge will look at the totality of the workplace relationship to determine the status of a person's employment.
Employers who classify their workers wrongly are breaking the law
Under the Fair Work Act 2009, it's illegal for an employer to misrepresent an employment relationship or to force an employee onto a contract, and there are hefty fines in place to deter this.
As a worker, it's important you understand your rights, particularly if an employer tries to sign you up as a contractor. If you do have any concerns about your employment status, it's wise to consult an expert in workplace law.
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.