Employee or contractor? FWC looks at sales manager role in unfair dismissal claim

The Fair Work Commission (FWC) recently dealt with a case involving a dispute over whether a worker was an employee or an independent contractor.

This decision highlights the ongoing challenges in distinguishing between these two types of working relationships in the modern labour market.

The case centred on a worker who had been engaged by a media company for over three years. After being informed that her services were no longer required, she filed a general protections application with the FWC.

The crux of the matter lay in determining whether she was indeed an employee who could make such a claim, or an independent contractor without access to unfair dismissal protections.

Employee or contractor?

The dispute arose when the worker was informed on 18 March 2024 that her services were no longer required, with the termination taking effect on 22 March 2024. She subsequently filed a general protections application in the Fair Work Commission on 12 April 2024.

The application was filed against three respondents: the media company, its Chief Executive Officer, and its Head of Partnerships. The employers objected to the continuation of the application, arguing that the worker was not an employee but rather an independent contractor.

The FWC's decision hinged on the interpretation of the written contract between the parties. Following recent High Court precedent, the Commission focused solely on the rights and obligations set out in the contract, rather than examining how the relationship played out in practice.

Details of the working arrangement

The worker had initially applied for a full-time sales manager position in October 2020 but was unsuccessful. Later, she was invited to consider an independent contractor arrangement, which led to the signing of a written Services Agreement on 2 March 2021, with its terms commencing on 3 March 2021.

The contract in question was a comprehensive "Services Agreement" that referred to the worker as "the Supplier" and outlined specific services to be provided. These included generating revenue, maintaining client relationships, and representing the company at various events.

Importantly, the agreement contained several clauses typical of contractor arrangements, such as the ability to subcontract work (with the employer's consent), responsibility for insurances, and payment via invoices including GST.

The Commission considered several factors in reaching its conclusion:

1. Control: While the employer could specify times and places for work, there were no set hours or days stipulated in the contract.
2. Integration: The worker was not found to be working "in" the employer's business, but rather providing a specific service to it.
3. Payment structure: The worker was paid a fixed monthly rate of $4,924.24 (excluding GST) plus a 10% uncapped commission on revenue booked exclusively by her.
4. Intention of the parties: The contract explicitly stated that it did not constitute an employment relationship.

The FWC emphasised the importance of the written contract, stating:

"Consideration of the relationship between the parties as a whole leads to the conclusion that it is comprehensively regulated by the written contract in evidence before me. No subsequent conduct of the parties would suggest the contract's terms have been varied in substance or that it is a sham or otherwise ineffective."

This approach aligns with recent High Court decisions that have placed greater weight on the terms of written agreements when determining employment status.

The worker had previously operated as an independent contractor in 2014, using an Australian Business Number (ABN). She maintained a website for her business and had referred to contractual clients on this site.

The employer's Head of Partnerships provided evidence that at the time of the worker's engagement, the company had three independent contractors operating, all of whom had their contracts terminated as part of a company restructure.

The worker gave evidence that she worked 38 hours a week, five days a week and sometimes on weekends. This differed from her initial expectation that the work would require about three days a week.

This case serves as a reminder of the complexity surrounding employment relationships in Australia. It highlights the importance of carefully drafted contracts that clearly define the nature of the working relationship.

The FWC's decision also underscores the challenges faced by workers engaged as contractors in accessing certain workplace protections.

As the Commission noted:

"On the basis of the above considerations, I am satisfied that the correct description of [the worker's] relationship with [the employer] is that of independent contractor and that she was not an employee and therefore not dismissed within the meaning of the FW Act."

This meant that the worker's application was dismissed due to lack of jurisdiction, as she was not considered an "employee" under the Fair Work Act.

"It follows that [the worker's] application is without jurisdiction and that it must be dismissed."

The case emphasises the need for both employers and workers to carefully consider the terms of their engagement and the potential implications for workplace rights and obligations.