I’m an Independent Contractor, but I think I might be an Employee?

Job mobility remains at its highest rate in a decade, which means Queenslanders are continuing to change industries, companies and even occupations regularly. With this change, among other things, comes new contracts and agreements for work to be completed. Regardless of if you are being hired or doing the hiring, it is always a good idea to have an understanding of your working relationship, and look out for any areas which may be unfair on yourself or others.

We all know that different types of work come with different levels of pay, but are you aware that the nature of your work can also grant you different leave and superannuation entitlements? What sets you apart in the employment sector is being an employee or being an independent contractor. This creates a string of different entitlements, which we will cover in this article, including the repercussions for sham contracting, which is the intentional disguise of an employment relationship as that of an independent contractor.

What’s the difference between an Employee and Contractor?

In Queensland, most employees are covered by the Fair Work Act 2009 (“FWA”). For a business to be covered under this legislation, they must be recognised as a National System Employer (generally a company established in Australia). If you are an employee, you are able to claim leave entitlements, minimum pay rates and general employment entitlements such as superannuation. It is important to note that leave entitlements are only granted to non-casual employees. In short, the FWA creates a standard for these entitlements, rights and obligations for employers to follow.

An independent contractor is covered by the Independent Contractors Act 2006 (“ICA”). This creates remedies for contractors who may be faced with unfair terms in their contracts. Ordinarily, contracts of this nature are silent in relation to entitlements for leave, tax and superannuation. Therefore, by way of honest mistake (or malicious intent) employers may offer the wrong contract to new workers and subsequently avoid paying such entitlements. Typically, a contractor under the ICA has a higher level of freedom and control over the work they do, but also carries the risk for mistakes and injuries that may occur along the way.

The breakdown – Where do I fit?

After the recent High Court judgements,[1] the relationship between workers and employers can be analysed based on how the worker serves the business.  The Australian Taxation Office has noted a key difference between employees as representatives of the business and contractors performing work to further their own business. There are some common features to look out for when making this distinction, including: control, integration, method of remuneration, ability to subcontract, providing tools and equipment, risk and generation of goodwill.

Ultimately, a person who represents the business, is given the tools to do so and receives a weekly wage, is most likely an employee. However, these features are dependent on someone’s role and their relevant agreement; as is often the case, there is no clear-cut answer

[1] CFMMEU v Personnel Contracting [2022] HCA 1, ZG Operations v Jamsek [2022] HCA 2.

What is Sham Contracting?

While for some this may be an obvious call, there are often agreements which sit on the fence between employee and independent contractor. If an employer knew (or ought to have known) that an individual was likely to be considered an employee, but disguised them as an independent contractor, then sham contracting may apply. By engaging in sham contracting, companies can attempt to avoid years of employee entitlements and retain the profits. The penalties of which are severe, with a maximum of $18,780 for individuals and $93,900 for corporations. We note here, this penalty is per employee who is a victim of sham contracting.

How Can We Help?

Whether you are a worker questioning your entitlements, or a business looking to protect your lability, you can put trust in our team for an honest and quality review of your circumstances. If any topics raised in this article become relevant to you, or you have further questions about your employment relationship, feel free to reach out to our team for a consultation.