What happens when a contractor claims they're really an employee?
The Fair Work Commission recently dealt with a dispute where a worker filed an application under Section 365 of the Fair Work Act 2009, challenging their independent contractor status after their contract ended.
The case centred on whether the worker's actual working conditions aligned with their written contractor agreement. The worker pointed to several aspects of their role that they believed indicated an employment relationship rather than a contractor arrangement.
The matter required examination of the contract terms and actual working practices to determine if the worker had standing to pursue an unfair dismissal claim, as Section 386 of the Fair Work Act 2009 specifies that only employees can be dismissed.
In September 2023, both parties signed what was termed an independent contractor agreement for corporate massage services. The contract specified a minimum hourly fee of $50, which later increased to $55, with payment to be made within 14 days of invoice submission.
The agreement outlined that the massage service company would present client appointments, and the worker could express interest in these assignments.
The contract expressly stated that the worker could engage in other activities and had the right to assign or subcontract services.
This arrangement continued until October 2024, when a dispute arose, leading to the contract's termination.
The worker argued against their contractor classification, stating in evidence that they "did not have control over [their] schedule of work but was required to service clients at particular times." This reflects the exact wording from paragraph 3 of the Fair Work Commission's decision.
They also challenged the practical application of certain contract provisions, arguing that "everything had to go through [the manager]."
The worker provided examples where, rather than allowing subcontracting, the company directly engaged other massage therapists the worker had recommended.
The worker also raised concerns about their lack of control over payment rates and the requirement to maintain high service standards.
The manager countered these claims with evidence about the working relationship. As stated in paragraph 4 of the decision, "[the manager] said that [the worker] was always free to assign or subcontract [their] work but had never chosen to do so."
Evidence presented to the Fair Work Commission showed that in the six months before the contract ended, the worker had provided services on only 20 occasions, a fact that went undisputed.
The manager confirmed that while the worker could propose their own fees, the company retained the right to accept or decline these proposals.
The manager also testified that contractors were consistently informed they could assign or subcontract work, provided any substitute workers carried appropriate insurance.
The FWC found that "[the worker] did have control over [their] schedule because [they were] free to accept or reject jobs as [they] saw fit. [The worker] was also able to assign or subcontract [their] work, but [they] never sought to do so."
The decision also noted: "The contractor agreement was not a sham. The parties conducted themselves in accordance with its terms. [The worker] provided services to [the employer] from time to time and invoiced [the employer] for those services. The contract reflected reality."
Thus, the Commission concluded that the worker was not an employee of [the employer. "Therefore, not dismissed." It added that the worker lacked standing to bring an unfair dismissal claim under the Fair Work Act 2009, resulting in the dismissal of their application.
