The difference between contractors and employees

Deciphering the difference between an employee and contractor can often be difficult. This was recently demonstrated in Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 whereby it was determined by the Fair Work Commission that Mr Franco was in fact an employee of Deliveroo and ordered to be reinstated.

The purpose of this article aims provide some basic indicators which can be used to determine which of the two apply.

To decipher the difference, the adoption of a multi-factor test is taken by the courts. This test looks at the whole relationship rather than just what is stated in the employment contract. Accordingly, as per Diego Franco v Deliveroo Australia Pty Ltd;

'The correct characterisation of the employment relationship will emerge to form a complete picture. Although, the picture is impressionistic and not precise, the conclusion must be drawn from the overall picture which has been obtained.'

Below are some common factors that the FWC takes into consideration when determining whether a person is an employee or independent contractor:

  1. Control - does the person have a high level of control in how the work is performed?
  2. Hours of work - does the person decide what hours they work?
  3. Ability to work for competitors - is the person able to work for competitors?
  4. Provision of equipment - does the person use their own tools and equipment?
  5. Taxation - does the person pay their own tax and GST?
  6. Method of payment - does the person have an ABN and submit invoices for the work that they complete?

If the answers to the above questions are yes, it is more than likely that the person will be considered a contractor.

The Commission may also look at what the parties 'mutual intention' was. In this context, as stated in Ebrahim Hoosen v ISI Managed Services Pty Ltd [2021] FWC 3032 'intention' is assessed objectively, and as per Ermogenous v Greek Orthodox Community of SA In [2002] HCA 8, describes 'what it is that would objectively be conveyed by what was said or done, having regard to the circumstances and is not a search for the uncommunicated subjective motives or intentions of the parties.'

Further, it should be noted that independent contractors are afforded limited workplace rights, including the right to engage in certain industrial activities. Consequently, for further information on whether a person is considered an employee or independent contractor contact E&IR Consulting -

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