Independent contractors are usually self-employed and accordingly are their own boss – providing their own tools, deciding which jobs to take on, being paid to achieve a result and bearing the risk of non-payment.
Employees on the other hand are paid to work certain hours for an agreed wage, and are usually entitled to paid leave.
A common distinction between contractors and employees is the documentation used to engage the worker – an employee will usually be provided with an employment agreement for ongoing services; an independent contractor will usually enter into a contract specifying the nature of the work to be carried out during a particular period. The difference is sometimes small and it can be difficult to ascertain whether a person is a contractor or employee.
Whilst a difficult distinction, contractor versus employee is an important one for businesses to make.
A recent Federal Court case has held that signing contracts indicating an independent contractor relationship is not sufficient to shirk responsibility if the real nature of the relationship is that of employer/employee.
The case involved a number of insurance sales representatives who signed contracts to provide independent contractor services. The sales representatives however were trained by the insurance company, supervised and directed by the insurance company, and worked closely with the insurance company. The Court held that the insurance company’s ability to control the sales representatives placed them into the category of employee rather than contractor. The decision resulted in more than $500,000 in accrued annual and long service leave being paid to the insurance representatives by the company.
To avoid a costly claim for back pay or other entitlements such as superannuation or long service leave, contact the employment law team at Everingham Solomons where Helping You is Our Business.
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