Fair work laws; employee or contractor

This extract from an unfair dismissal decision of the Fair Work Commission contains a summary of the current legal principles which determine whether a person is an employee or independent contractor.

“Approach to determining whether a person is an employee or an independent contractor

[73] The principles to be applied in distinguishing between employees and independent contractors were recently summarised in the decision of a Full Bench of the Commission in Hempel v Northern Territory Air Services Pty Ltd 16 (Hempel) as follows:

“The principles applicable to the determination of whether a person is an employee or an independent contractor have been well established in various court decisions, of which the High Court decisions in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 and Hollis v Vabu (2001) 207 CLR 21 are of principal significance. The elements of the multi-factorial test which is articulated in those authorities were usefully summarised in the Full Bench decision in Jiang Shen Cai trading as French Accent v Rozario [2011] FWAFB 8307 and need not be recited here. It is sufficient to characterise the task in applying the multi-factorial test as “a matter of obtaining the overall picture from the accumulation of detail”, which requires an “assessment and evaluation of evidence for the purpose of identification and isolating factors or indicia which are capable of pointing in one direction or the other, and then weighing or balancing those factors in accordance with established principles, none of which is conclusive, in order to reach a conclusion”. 17

[74] The multi-factorial test was recently considered by the High Court in CFMMEU v Personnel Contracting Pty Ltd 18 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek19 (Jamsek). In those decisions, the High Court considered the relevance and applicability of the multi-factorial test in circumstances where an employer and a putative employee have comprehensively committed the terms of their relationship to a written contract and the validity of the contract is not challenged. The plurality in Personnel Contracting held that:

“Where the parties have comprehensively committed the terms of their relationship to a written contract the validity of which is not in dispute, the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract. Where no party seeks to challenge the efficacy of the contract as the charter of the parties’ rights and duties, on the basis that it is either a sham or otherwise ineffective under the general law or statute, there is no occasion to seek to determine the character of the parties’ relationship by a wide ranging review of the entire history of the parties’ dealings. Such a review is neither necessary nor appropriate because the task of the court is to enforce the parties’ rights and obligations, not to form a view as to what a fair adjustment of the parties’ rights might require.” 20

[75] However, as the Full Bench in Hempel observed, it remains the case that where the parties have not committed the terms of the relationship into a written contract comprehensively, or where the validity of the contract is challenged as a sham or otherwise ineffective, the multi-factorial test is relevant to the characterisation of the relationship to determining whether it was employment or an independent contract. This is apparent in the dicta of the plurality in Personnel Contracting where it was stated that:

“The foregoing should not be taken to suggest that it is not appropriate, in the characterisation of a relationship as one of employment or of principal and independent contractor, to consider ‘the totality of the relationship between the parties’ by reference to the various indicia of employment that have been identified in the authorities. 21

[76] To ascertain the proper characterisation of the relationship, the different factors that may be applied in a multi-factorial test were comprehensively summarised in the decision of a Full Bench of the Commission in Jian Shen Cai trading as French Accent v Michael Anthony Do Rozario 22 as follows:

“(1) In determining whether a worker is an employee or an independent contractor the ultimate question is whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own of which the work in question forms part? This question is concerned with the objective character of the relationship. It is answered by considering the terms of the contract and the totality of the relationship.

(2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant indicia and the relative weight to be assigned to various indicia and may often be relevant to the construction of ambiguous terms in the contract.

(3) The terms and terminology of the contract are always important. However, the parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract24.

(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context. For ease of reference the following is a list of indicia identified in the authorities:

  • Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.

Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of an independent contract. While control of this sort is a significant factor it is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where the work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weighs significantly in favour of the worker being an employee.

“The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.” “[B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.”

  • Whether the worker performs work for others (or has a genuine and practical entitlement to do so).

The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, working for others (or the genuine and practical entitlement to do so) suggests an independent contract.

  • Whether the worker has a separate place of work and or advertises his or her services to the world at large.
  • Whether the worker provides and maintains significant tools or equipment.

Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.

  • Whether the work can be delegated or subcontracted.

If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.

  • Whether the putative employer has the right to suspend or dismiss the person engaged.
  • Whether the putative employer presents the worker to the world at large as an emanation of the business.

Typically, this will arise because the worker is required to wear the livery of the putative employer.

  • Whether income tax is deducted from remuneration paid to the worker.
  • Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.

Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.

  • Whether the worker is provided with paid holidays or sick leave.
  • Whether the work involves a profession, trade or distinct calling on the part of the person engaged.

Such persons tend to be engaged as independent contractors rather than as employees.

  • Whether the worker creates goodwill or saleable assets in the course of his or her work.
  • Whether the worker spends a significant portion of his remuneration on business expenses.

It should be borne in mind that no list of indicia is to be regarded as comprehensive or exhaustive and the weight to be given to particular indicia will vary according to the circumstances. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.

(5) Where a consideration of the indicia (in the context of the nature of the work performed and the terms of the contract) points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. However, a consideration of the indicia is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The ultimate question remains as stated in (1) above. If, having approached the matter in that way, the relationship remains ambiguous, such that the ultimate question cannot be answered with satisfaction one way or the other, then the parties can remove that ambiguity a term that declares the relationship to have one character or the other 46.

(6) If the result is still uncertain then the determination should be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu (citations omitted)”

[77] In Abdallah v Viewdaze Pty Ltd 23, a Full Bench of the Commission found that the starting point for determining whether a relationship is one of employment or independent contract, is an analysis of its totality including the nature of the work performed, the manner in which it is performed and the terms and terminology of the contract. While it is necessary to consider what have variously been referred to as principles, criteria, tests or indicia of the relationship in question, not all indicia will be relevant, and it is necessary to weigh or balance them, with some to be given more weight than others based on the nature of the work and the manner in which it is to be performed. The Full Bench in Abdallah also said that the list is not exhaustive and that features of a relationship that do not appear in the list may be relevant to the determination of the ultimate question.

[78] If, after weighing these indicia, the result is still uncertain, the Full Bench was of the view that the determination should be guided by the notions referred to in the judgment of the majority in Hollis v Vabu including the statement that the distinction between an employer and an independent contractor “is rooted fundamentally” in the difference between a person who serves his or her employer in the employer’s business with little or no independence in the conduct of operations as distinct from a person who carries on his or her own trade or business.

[79] The Following table taken from the Fair Work Commission’s Unfair Dismissal Benchbook, usefully summarises and sets out indicia of employment and contractor relationships derived from the Full Bench decision in Abdallah v Viewdaze Pty Ltd and updated in Jian Shen Cai trading as French Accent v Do Rozario.

Indicative of contracting relationship Indicative of employment
Worker controls how work is performed. Employer exercises, or has the right to exercise, control over the manner in which work is performed, the location and the hours of work etc.
Worker performs work for others or is genuinely entitled to do so. Employee works solely for the employer.*
Worker has a separate place of work and or advertises his or her services to the world at large. Employer advertises the goods or services of its business.
Worker provides and maintains significant tools or equipment. Employer provides and maintains significant tools or equipment.
Worker can delegate or sub-contract any work to other persons to complete. Employer can determine what work can be delegated or sub-contracted out and to whom.
Contract may be terminated for breach. Employer has the right to suspend or dismiss the worker.
Worker wears their own uniform or other clothing of their choice. Worker has own business cards. Employer provides a uniform or business cards.
Worker responsible for own tax affairs. Employer deducts income tax from remuneration paid.
Worker provides invoices after the completion of tasks. Employee is paid by periodic wage or salary.
Worker does not receive paid holidays or sick leave. Employer provides paid holidays or sick leave to employees.
The work involves a profession, trade or distinct calling on the part of the worker. The work does not involve a profession, trade or distinct calling on the part of the employee.
The worker creates goodwill or saleable assets for their own business. The work of the employee creates goodwill or saleable assets for the employer’s business.
The worker spends a significant portion of their remuneration on business expenses. The employee does not spend a significant portion of their pay on business expenses.

*Generally referring to full-time employment – some employees may choose to work additional jobs.

The table above is not exhaustive and whether a worker is an employee or contractor may be determined by a factor other than those listed above.

[80] A significant aspect of applying the multi-factorial approach is the principle that the description applied to a relationship by one or other of the parties, is not determinative of the actual relationship, and that the totality of the relationship must be considered. The fact that the Church/Clinic describes the Applicant as a contractor, does not make it so. Neither do Mr Futter’s assertions that the Church is “an out there organisation” remove it from the operation of well-established principles as to how a relationship involving the performance of work, will be viewed at law. As Justice Gray famously put this proposition: “The parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck.” 24 I turn now to consider the application of the indicia of employment and contractor relationships to the present case.

Application of indicia in the present case

[81] There was no written contract between the Applicant and the Church/Clinic, and it is common ground that whether the Applicant was an employee or an independent contractor, the contract was oral. It is therefore necessary to analyse the totality of the relationship pursuant to which the Applicant performed her work, based on the evidence in relation to the nature of the work, the way it was performed and the terms and terminology of the contract. It is also necessary to identify the indicia which are relevant to the relationship and to weigh and balance them, to reach a conclusion about whether it was an employment relationship or relationship of contractor and principal.

[82] The evidence establishes that Applicant had no control over how her work was performed. The Applicant’s uncontested evidence, supported by the email tendered by her as Annexure A to her affidavit makes it clear that the Applicant was working rostered shifts of a set duration. The Applicant did not pursue or generate her own client base and clients the Applicant contacted were allocated to her by other “staff”. The Applicant was free to communicate with clients in a way that she determined but was required to follow detailed instructions in relation to how she conducted consultations and was provided with guidelines to be used “like a script”. The Applicant was also required to follow detailed instructions for recording consultations and providing information to a despatch area so that products could be sent to clients.

[83] Shift lengths, including meal breaks were prescribed by the Church/Clinic. The Applicant was paid according to the length of her shifts and was expected to undertake a certain number of consultations or follow-ups during the shift. Even if the Applicant had been paid by reference to the number of consultations or follow-ups she performed during a shift, this is not inconsistent with an employment relationship. There is no indication that the Applicant had any control over how the work was performed or that she could elect to change the script or undertake fewer or more consultations or follow-ups during her shift than the prescribed and allocated number.

[84] Rather than working independently, it is clear from the process instructions that the Applicant was working with a group or team of other persons undertaking the same work and that consultations were booked for them by “staff” engaged for that purpose and allocated consistently between the Applicant and others performing the same role with a view to equity and sustainability as between those persons undertaking consultations. These matters are also indicative of employment, whereby the Applicant worked as part of a team, organised and managed by the Church/Clinic. The fact that the Applicant’s hours of work and the days on which she worked may have fluctuated, is also not inconsistent with employment and any fluctuations were minor. There is no evidence as to where the Applicant was located to perform her work, however I assume that she worked from the premises of the Church/
Clinic, albeit this is not determinative in light of the other incidents of control over the manner and times at which the work was performed.

[85] I am also of the view that the purported requirement that the Applicant be a member of the Church and comply with its belief systems, is further evidence of control. These matters indicate that the Church/Clinic exercised control over the manner in which the Applicant performed her work and there is no evidence the Applicant had any control in respect of these matters.

[86] I accept that the Applicant undertook a short period of work for another entity – theportal.life – during the period she performed work for the Church/Clinic. However, the evidence establishes that there is a relationship between theportal.life and the Church/Clinic. Ms Burge’s evidence was that the owner/operator of theportal.life is known to Mr Futter and that they jointly arranged for the Applicant to undergo training that would have enabled her to work for that entity. However, the Applicant’s uncontested evidence was that she undertook that training to assist her with the work she was performing for the Church/Clinic. The Applicant also gave evidence, which was not contested, that theportal.life used products that were made by the Church/Clinic and that when she worked for theportal.life it was to further her knowledge relevant to the work she was performing for the Church/Clinic. Further, it was apparent from the evidence of Mr Futter and Ms Burge, that they had the ability to place persons who could no longer work for the Church/Clinic due to having received the COVID – 19 vaccination, with theportal.life.

[87] I accept that there was no evidence of any barrier being placed on the Applicant performing work for other entities including affiliates of the Church, and that she was trained to do so. It is also the case that the Applicant worked on a less than full-time basis for the Church/Clinic, and may have had available time to work for another entity which was not affiliated with the Church/Clinic. However, given the degree of control exercised over the manner and the times at which the Applicant performed work for the Church/Clinic, the fact that she may have been able and entitled to work for other entities, is not inconsistent with the Applicant having been an employee rather than an independent contractor. This is also indicative of an employment relationship.

[88] The Church/Clinic advertises the goods and services it provides. There is no evidence that the Applicant had a separate place of work, or that she advertised her services to the world at large. There is also no evidence that the Applicant provided any tools or equipment necessary to perform the work, much less significant tools or equipment. The Applicant used the intranet of the Church/Clinic to undertake her work and was allocated work by staff of the Church/Clinic. The evidence of the Applicant and Ms Mountford establishes that the products were made by the Church and Ms Burge confirmed this in her evidence. There is no evidence that the Applicant had the right to delegate or subcontract her work to others. To the contrary, the beliefs of Mr Futter and Ms Burge, and by extension the Church and the Clinic, are such that it would be highly improbable that the Applicant could have delegated or subcontracted her work. The Church/Clinic terminated the contract for breach and operated on the basis of a belief that there was a right to so terminate. All these indicia point to an employment relationship rather than a relationship between contractor and principal.

[89] The Applicant was neither provided with nor required to wear a uniform and did not wear her own uniform. This is not a relevant consideration and does not point in either direction. In relation to responsibility for taxation affairs, the following observations may be made. The Church/Clinic did not deduct income tax from the remuneration paid to the Applicant. There was no written contract between the parties stipulating that responsibility for conducting taxation affairs lay with the Applicant. The evidence of Mr Futter, taken at its highest, is that the Applicant knew that she was a contractor. Essentially, Mr Futter’s views on this point are based on his understanding of what Ms Burge told the Applicant when she was engaged to undertake work. Ms Burge gave no direct evidence about the oral arrangement she entered into with the Applicant. The Applicant accepted that the fact that she was a contractor responsible for her own taxation was spoken about at the time she was engaged, but that in her view this situation changed.

[90] The evidence in relation to the Applicant’s responsibility for her tax affairs, taken at its highest, is indicative only of the intention on the part of the Church/Clinic to engage her as a contractor. That evidence does not establish that this is what occurred. The fact that a person is informed that he or she is engaged as a contractor with responsibility for his or her own taxation arrangements, is not, of itself, sufficient to make it so, and the totality of the relationship must be considered where one or other of the parties disputes its true nature. The Applicant did not receive paid holidays or sick leave, other than an ex gratia payment that was made to her by Ms Burge when she was absent from work due to a requirement to have surgery. While this is an indication of the Applicant being an independent contractor it is equally an indication of casual employment. Alternatively, it may be that the Church/Clinic did not provide the Applicant with NES entitlements. This is an indicator that is also not determinative of the true nature of the Applicant’s relationship with the Church/Clinic.

[91] The Applicant did not provide invoices after the completion of tasks and was paid periodically based on time worked which may have included a notional number of consultations she was required to undertake in each working period. This is more closely aligned to the Applicant being paid by periodic wage or salary than it is of the Applicant being paid to complete tasks upon the provision of invoices. The Applicant’s work for the Church/Clinic did not involve a profession, trade or distinct calling. Other than some previous experience derived from working at an establishment that provided similar products and services and being trained by the owner of such an establishment, there is no evidence that the Applicant brought any particular qualification to the arrangement with the Church/Clinic. The detailed instructions and script the Applicant was required to follow to undertake her work are also an indicator in this respect. The Applicant created no goodwill or saleable assets for her own business and any such results benefited only the Church/Clinic. There is no evidence that the Applicant spent any of here remuneration on business expenses associated with any business or undertaking that she was running.

[92] All these indicia point directly to the Applicant being in an employment relationship rather than in a relationship as a contractor with a principal.

Conclusion in relation to whether the Applicant was an employee or an independent contractor

[93] When all of the indicia relevant to determining whether the Applicant was an employee or an independent contract are considered, they weigh overwhelmingly in favour of a finding that the Applicant was an employee of the Church or the Clinic. A finding that the Applicant was carrying on her own business is counter-intuitive and would be contrary to the established principles by which the question of whether a person is an employee or an independent contractor are determined.

[94] Accordingly, I find that the Applicant was in an employment relationship and I turn now to consider which of the two putative employers – the Church or the Clinic – was the other party to that relationship.”

Chait v Church Of Ubuntu (2022) FWC 2947 delivered 7 November 2022 per Asbury DP