What is the distinction between employees and contractors?

In this week’s edition of ‘It depends’, lawyer Elise Emmerson talks about the distinction between employees and contractors.

VIDEO TRANSCRIPT

Welcome to It Depends. Today I’ll be talking about the distinction between employees and contractors.

How has the distinction between employees and contractors been decided historically?

Historically, the courts applied the multifactorial approach in determining whether an individual was an employee or contractor, and this involves looking at all of the circumstances between the parties and deciding whether the individual was an employee or contractor. So, some of the factors considered in the multifactorial approach included the control exercised over the individual whether training was provided, equipment was provided, whether the individual could delegate their work and the label that the parties gave to their relationship. So, the most famous case is probably the case of Hollis and Vabu and this involved a bicycle courier who was involved in a pedestrian accident and the court had to determine whether the individual was an employee or contractor to be able to determine whether the courier company was vicariously liable for the accident.

How does the recent case law change this approach?

The High Court cases of ZG Operations and Jamsek and CFMMEU and personal contracting changed this approach by emphasising that where the parties have comprehensively committed the terms of their relationship to a contract and that contract isn’t in dispute, the determination as to whether an individual is an employee or contractor is looking at all the rights and obligations under the terms of the contract. So, this means that where there is a comprehensive contract in place which isn’t in dispute, it’s unnecessary to consider the wide range of factors that the multifactorial approach considered.

How can I effect these changes in my business?

The most important step that businesses can take to effect these changes is to make sure that there are comprehensive contracts in place with workers. And it’s important to remember that these cases are not suggesting that deeming clauses can be inserted into contracts deeming an individual to be an employee or contractor all of the terms of the contract will be considered. So, it’s important to get legal advice and make sure that all the terms of the contract are consistent with the party’s intention.

If you’d like to get advice regarding the distinction between employees or contractors, please contact a member of our team.