But I called them a Contractor… the High Court doesn’t care!

May 17, 2023

When determining whether a worker is an employee or independent contractor, the agreement between the parties is now the key factor, rather than their actual behaviour and conduct.

The Court will first look to whether there is a valid and comprehensive written agreement in place.

If there is a written agreement, the court will look at the rights and obligations of the employer and employee under the agreement to determine their relationship.

Where there is no written agreement, it will be the terms of the oral agreement which are considered. It may be that the court will need to assess the nature of the working relationship in broad terms to resolve a dispute over a particular term of the agreement, but it is now unlikely that the conduct of the parties will be able to be used to establish a term of the agreement, as had previously been the case.

In both instances the determining factors will be:

1. Control: An employee works under the direction and control of their employer, whereas an independent contractor has more control over how, where and when they perform their work.
2. Integration: An independent contractor operates their own enterprise, as opposed to being subordinate to the employer’s business. For example, a contractor might be permitted to work for other clients.
3. Equipment and tools: An employee typically uses equipment and tools provided by the employer, while an independent contractor usually provides their own equipment and tools.
4. Risk: An employee is not responsible for any financial or commercial risk associated with their work, whereas an independent contractor is.
5. Remuneration: An employee is paid on hours worked generally based on submitting a time sheet, whereas an independent contractor will generally invoice the client for the work they perform.
6. Superannuation: An employee is entitled to superannuation contributions from their employer, whereas an independent contractor is responsible for their own superannuation.
7. Taxation: An employee has income tax deducted by their employer, while an independent contractor is responsible for their own tax obligations.

The term used by the parties to describe their relationship is irrelevant.   That is, just because you call a staff member a contractor does not make it so.

If you are unsure if you or a worker of yours is an employee or an independent contractor, please contact a member of our business services team.