The varied nature of work in a labour hire company often gives rise to the question of whether a worker is an employee of the labour hire company or whether they are an independent contractor who is in business for themselves. I’m afraid there is no hard-and-fast answer to this question. Whether a worker is an employee or an independent contractor will very much depend on the individual circumstances surrounding the engagement. Nevertheless, the following considerations shed some light on the situation.
The totality of the relationship consideration
In determining whether someone is an employee or an independent contractor, the landmark case of Hollis v Vabu (2001) 207 CLR 21 held that the totality of the relationship is to be considered.
In considering the totality of the relationship, numerous factors are relevant. In particular:
- the mode of remuneration;
- the provision and maintenance of equipment;
- the provision of various entitlements (e.g. leave, superannuation, professional indemnity, public liability, worker’s compensation);
- the deduction of income tax;
- the right to delegate work;
- the ability of the employee to generate good will for the business;
- the employer’s rights of suspension and termination; and
- the professional trade or calling of the worker are all relevant considerations, to name a few.
When making an appraisal of whether an individual is an employee or an independent contractor, the relevant degree of control that the labour hire employer can exert over the worker is of paramount importance. When we speak of control, we are not talking about the active exertion of control over the daily activities of the worker, but rather the ultimate right to control both substantial and incidental matters. As a labour hire employer, you can hardly be expected to control the day-to-day activities of your workers. At best it would be almost impossible and at worst it would be highly inappropriate. I can only imagine the faces of your host clients as you stroll onto their business premises, uninvited, to check on your staff. Nevertheless, if the ultimate say so rests with you and not the worker, chances are the person is your employee and not an independent contractor.
Substance over form
I know what you’re thinking. If the written agreement with my worker says that they are an independent contractor, surely that is the end of it? I’m afraid that is not the case. Time and time again labour hire employers have gotten themselves into trouble because they rely on written documents to this effect, or what the law calls “form”. Ultimately, parties to a contract who expressly state that they are or are not in an employer-employee relationship, cannot simply rely on the agreement if it does not reflect the reality of the situation.
Whether a worker is a casual employee or an independent contractor will ultimately determine the rights that you must afford the worker and the obligations that you bear in relation to the same. If you are unsure about the status of your current workers, contact our team of highly trained employment lawyers.