Independent contractor or employee?

Commission reminds employers about clarifying contract terms and rights

BY Paulinet Tamaray 02 Sep 2023

The Fair Work Commission (FWC) recently dealt with an alleged worker’s claim that he was dismissed and the contract that stated he was an independent contractor was a “sham.”

Deon Elliot filed a general protections application involving dismissal, claiming that adverse action was taken against him by his alleged employer, NGS Crypto Pty Ltd. On the other hand, the employer argued that Elliot was a contractor under a service agreement with them.

The service agreement in question

Elliot provided the services agreement that had clauses that contained the following:

A clause that said ‘The Company wishes to engage an independent contractor to provide the services set out to the Company [paraphrased]’;
That he is to be paid by invoices rather than a salary, and must provide an ABN;
That he must carry out all insurances. This is not a cost incurred by the company;.
That he has the opportunity to delegate its role to employees and agents;
That ‘The relationship between the Company and the Contractor is that of a principal and independent contractor. Nothing in this agreement constitutes the relationship of partnership or employer and employee between the Company and the Contractor. It is the express intention of the parties that any such relationships are denied.’;

After presenting their agreement as evidence, he argued that “this was a sham contract and that he was under an employment arrangement with the [company].”

His arguments also included the following:

He was unable to control his working hours;
He never had the choice to present his own company name;
He did not have the option to work from home;
He was unable to delegate his work;
He had been provided all equipment by the alleged employer, such as office equipment, business cards, training materials and scripts, email address and email templates, and company polos;
He said his role was similar to an employee who had to get approval for sick leave and annual leave.

HRD previously reported about a sex worker who claimed unfair dismissal after she was fired from her regular shifts via text message. She claimed her employer kicked her out because she complained about the establishment’s health and safety policies.

She argued that she should be considered a casual employee and eligible for an unfair dismissal claim. On the other hand, the establishment argued that they provide booking, introduction, accommodation, and support services to independent contractor sex workers who then serve the customers as sole traders.

Was he an employee or not?

In its decision, the Commission emphasised the importance of having a written agreement in place between the parties, as this would be their reference in determining the relationship.

“Where a comprehensive written contract is in place, this will be the primary source of the parties’ legal rights and obligations, and it will be decisive in characterising the relationship. This will apply unless the contract is a sham, varied after it was made, or post agreement conduct, or context demonstrates that a term is legally ineffective,” it said.

After reviewing Elliot’s contract, the FWC said that he was “engaged on an independent contractor basis.”

“The legal rights and obligations in the agreement make it clear in multiple instances that [he] was engaged as a contractor,” the decision said.

“The agreement [even] provides an incentive for [him] to make commissions above his base and had the contractual right to hire his employees,” it added.

Thus, the Commission said that he not an employee, and “was therefore not dismissed,” it ruled.