When does a contractor become an employee?
The Fair Work Commission (FWC) recently dealt with a dispute about whether a worker could bring a general protections claim under section 365 of the Fair Work Act 2009. The case hinged on whether the worker was an employee who could be dismissed, or a contractor whose agreement was terminated.
The worker, who provided teaching and assessment services to an Aboriginal Health and Medical Research Council (AH&MRC), argued that despite signing a contractor agreement, his working arrangement had evolved into employment following discussions about pay rates with management.
The FWC stated that under section 386 of the Fair Work Act, only employees can be dismissed, so the worker's employment status would determine if his claim could proceed.
On 2 September 2024, the worker signed an independent contractor agreement on AH&MRC letterhead, which included his ABN.
The agreement specified he would provide teaching, assessment, marking, administration and student education support services at an hourly rate of $73.04 including GST, submitting weekly invoices.
This arrangement emerged from the worker's own choice. As the decision noted: "This followed an express choice made by [the worker] to be offer his services to [the employer] as a contractor rather than an employee."
The worker maintained other business operations throughout this period, submitting invoices under his ABN for payment as the Advance Institute of Business. The contract continued until 1 October 2024, when AH&MRC terminated it.
A critical point arose regarding discussions with the acting head of training about increasing the worker's rate.
While the worker claimed this changed his status, the Commission accepted evidence that: "the discussion in question was not about changing the nature of the engagement between [the worker] and [the employer]. It was about increasing his hourly service fee to $83 per hour to align with the rate paid to others."
Shortly before the contract ended, the worker wrote to a colleague stating: "I am not an employee of [the employer], I am a contractor, the same as you." The Commission specifically noted that ABNs are "for use by businesses including sole traders – not for employees."
The FWC found no evidence of a sham arrangement, stating: "There is no evidence that the contractor agreement was a sham. It reflected the preference of [the worker] and the reality of the arrangement between the parties, who each conducted themselves in accordance with its terms."
While the worker argued his work was directed and hours set by the employer, the evidence showed hours were set by agreement according to the worker's availability. The Commission found any direction about work details did not indicate employment-level control.
Working remotely, the worker provided his own computer and internet connection without reimbursement. The Commission found that his use of employer-specific software was necessary given AH&MRC's status as a registered training organisation.
The decision acknowledged certain features that could apply to either working arrangement: "participating in an induction process, being expected to comply with [the employer] policies, and being paid superannuation for a contract which was mainly for the labour of [the worker]."
The Commission concluded definitively: "It is clear that [the worker] was not an employee of [the employer]. The relationship was genuinely one through which [the worker] worked as a contractor providing services to [the employer]."
This determination was based on multiple factors, including how the agreement "reflected the preference of [the worker] and the reality of the arrangement between the parties, who each conducted themselves in accordance with its terms."
The Commission ruled: "It follows that [the worker] was not dismissed and the jurisdictional objection is upheld."
Consequently, the worker's application under section 365 was dismissed as he lacked the employee status required to bring such a claim.
