If You Are an Independent Contractor
Why Contractor and Employee Status Matters
In Australia, the legal rights and obligations that apply to employees and independent contractors are not the same.
Employees are generally entitled to a minimum wage, leave, superannuation, protection from unfair dismissal and other employment entitlements. Independent contractors generally provide their services through a commercial service relationship, where the rights and obligations of both parties arise largely from the contract for services.
However, the name given to a contract does not always determine the true nature of the relationship. Even where a contract states “independent contractor”, a dispute may still arise if the way the work is actually carried out more closely resembles an employment relationship.
Common factors that need to be examined include:
- who controls the time, place and manner of the work;
- whether the person may work for other clients;
- whether the person uses their own tools, equipment or business structure;
- whether the person bears business risk;
- whether charges are made by the hour, by pay cycle or by project;
- whether invoices are issued;
- whether the person may engage others to carry out the work on their behalf;
whether the actual relationship between the parties is ongoing and one of dependence.
Common Disputes in Contracting Relationships
Common issues in contracting relationships include payment disputes, early termination of the contract, unclear scope of services, ownership of intellectual property, confidentiality obligations, client resources, non-solicitation clauses, and whether the contractor should in fact be treated as an employee.
For a business, incorrectly engaging staff as contractors may give rise to risks relating to unpaid wages, superannuation, tax, penalties and other legal exposure. For a contractor, confirming their true legal status helps to determine whether they may claim employee entitlements, or whether they should instead recover payment through a contractual dispute.
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