FWC cites factors to determine if worker is employee or independent contractor
The Fair Work Commission (FWC) recently dealt with a dismissal claim filed under section 395 of the Fair Work Act 2009. A bookkeeper argued she was unfairly dismissed from her role with an industrial manufacturing company.
The worker maintained that despite being classified as a contractor receiving $45 per hour, she worked under direct supervision of the chief financial officer who controlled her duties. She also raised concerns about the company's payroll management and compliance with relevant industrial instruments.
The employer argued that the worker had no right to make an unfair dismissal claim because she wasn't an employee - she had specifically requested to provide services through her business entity, JKJ Bookkeeping, after discussions about the initial $30 per hour employee rate.
For a dismissal claim to proceed under section 386 of the Fair Work Act 2009, the Commission first needed to determine if the worker was an employee. The Act defines dismissal specifically in employment contexts where "the person's employment with his or her employer has been terminated on the employer's initiative."
The Commission noted that these provisions are limited to employment relationships, not other working arrangements. Without a written agreement between the parties, they had to examine the nature of the engagement and conduct.
The Commission's approach was guided by recent High Court cases that transformed how employment status is determined - specifically Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd v Jamsek.
The decision cited this key shift in approach from recent High Court rulings:
"The High Court, via the combination of judgements in both Jamsek and Personnel Contracting, has largely rejected an approach whereby the relationship between parties across its life span is examined (including how the relationship operates in practice). The Court has stated that contractual terms and not performance, where those terms can be ascertained and where the contract is not a sham, will determine the true nature of the relationship."
The case highlighted how contractual terms, rather than day-to-day operations, now determine employment status. This marked a significant change from previous approaches that considered how relationships worked in practice.
This meant focusing on formal arrangements between parties rather than examining operational details of their working relationship.
The worker provided evidence about her initial discussions regarding an hourly employee position at $30, which she said was below the required Modern Award rate. She confirmed agreeing to a $45 hourly contractor rate after further discussions.
The managing director testified that the worker had requested to work through her business entity at the higher contractor rate.
While provided a workstation, she had to supply her own laptop and maintained freedom to service other clients.
The director stated she held professional indemnity insurance and managed her own tax arrangements, submitting invoices through her business entity.
After examining all evidence, the Commission stated:
"[The worker] was able to provide her services to multiple clients, she was paid an hourly rate on the provision of an invoice, she was required to administer her own PAYG taxation, and she maintained her own professional indemnity insurance. These factors combined suggest that the nature of the working relationship... was that of an independent contractor providing services for a client business."
The final determination held: "Having considered the nature of the engagement between the parties, I have determined that [the worker] was not an employee, rather she was an independent contractor providing services to [the employer]."
The Commission specifically addressed sham contracting concerns: "I am not persuaded that the matter currently before the Commission arises in circumstances where a business has sought to avoid providing the required benefits or obligations to an employee by engaging that individual through some other form of questionable contractor arrangement."
As the worker was found to be an independent contractor rather than an employee, she could not access unfair dismissal protections under the Act. The Commission dismissed her application accordingly.
