FAIR WORK DECISION: Worker was an employee, not a contractor

FAIR WORK DECISION: Worker was an employee, not a contractor

By Rebecca Hyde, Workplace Compliance Advisor at ClinLegal in Adelaide. Rebecca holds a Bachelor of Laws and Legal Practice (Hons) and a Bachelor of Behavioural Science (Psychology).

Georgios Adalopoulos lodged a claim with Fair Work against CMC International Pty Ltd. He had been performing work for CMC when he had an altercation with a director of the company. Mr Adalopoulos was not given any subsequent work by CMC. He claimed that he had been an employee of CMC and had been unfairly dismissed by his employer. CMC rejected this, asserting that Mr Adalopoulos was an independent contractor and therefore couldn’t make an unfair dismissal claim against them.

Why the Uncertainty?

A contractor is a business providing work for another business. He/she bears full responsibility for his/her reputation and financial risk because payment for work is determined by satisfactorily completing work for the employer of another business. In contrast, an employee works directly for an employer, hence the reputation and financial risk of the business remains with that employer.

Mr Adalopoulos was initially hired as a contractor and had his own Australian Business Number (ABN). However he did not have a registered business name or brand, and did not appear to perform the usual functions of a business, such as invoicing his work or paying his own tax or superannuation. He did not supply the tools of trade required to do the job and filled in employer approved timesheets. Furthermore, Mr Adalopoulos was seen on occasion to be wearing CMC company t-shirts. While CMC did not approve of this action, it provides evidence that Mr Adalopoulos was not conscious of profiting personally from any goodwill created by his work.

Based on these facts, Mr Adalopoulos appeared to be an employee of CMC, rather than a contractor. As a result, Mr Adalopoulos’ unfair dismissal claim was heard by the Fair Work Commission. While the unfair dismissal claim was unsuccessful, the Commissioner stated that based on the finding that Mr Adalopoulos was in fact an employee, CMC are still required to pay outstanding employee entitlements owed to Mr Adalopoulos.

What do you want from your staff?

Employers have a responsibility to define their needs prior to hiring someone for work and to ensure that whatever work relationship they agree to remains true throughout the life of the relationship. To minimize the risk in your practice, ensure that you are aware of some of the differences between a contractor and employee relationship so that you can spot when this distinction may not be clear. Below is a summary of some of the key differences that were highlighted by the Commissioner to help determine whether the worker was a contractor or employee:

Indicators that the worker is a Contractor

  • A contractor usually has a specialised skill/and or profession and is employed to perform specific tasks on an infinite freelance basis or contracted period of time;
  • They have their own Australian Business Number (ABN), and generally have a Registered Business Name, pay their own Tax, GST and Superannuation, and spend their own remuneration on personal business expenses;
  • They engage in basic business transactions such as invoicing, personal insurance coverage and maintenance of financial and business records;
  • They also usually provide their own tools and equipments to do the work, advertise their own brand name and promote business to the general public;
  • They tend to dictate the manner in which work is completed, what hours will be worked, and can delegate their work to sub-contractors who are not employees of the employer;
  • They are paid upon completion of agreed tasks, rather than a salary for hours worked;
  • Contractors have independent authority and are responsible for their own work incomes.

Indicators that the worker is an Employee

  • An employee is recruited to do a job on a position description outlining duties and stated lines of authority and/or reporting responsibilities. He/she is generally appointed for a probationary three month period and is given performance appraisals and salary reviews as decided by the principal/s of the company;
  • If and when appropriate, or as standard practices within the company, the employee wears a uniform, signs a time sheet, reports to a manager and is expected to work as a team member and help other work mates in addition to his/her duties;
  • An employer is not registered for an ABN and does not forward an invoice for monies earned;
  • The employer is responsible to adhere to laws governing minimum rates of pay, holiday and paid leave, tax, and superannuation rules and regulations;
  • Employees are on an Employer’s Payroll, dependent on and responsible to the employer.

The facts of this case are from the decision of Georgios Adalopoulos v CMC International Pty Ltd [2014] FWC 3467 and Georgios Adalopoulos v CMC International Pty Ltd [2014] FWC 5862

For further information or advice, contact us at info@clinlegal.com.au or visit www.clinlegal.com.au and access our Contract of Employment Templates and Guide: How to Minimise Risk – Contractor or loyee?

This Article is produced by ClinLegal. It is intended to provide general information and guidance in summary form on workplace compliance issues, current at the time of publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.

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