Unfair dismissal; employees vs contractors


This is how the Fair Work Commissionm’s unfair dismissal benchbook deals with the distinction between employees and independent contractors.

“What is the difference between an employee and an independent contractor?

In an employment relationship, labour (being a combination of time, skill and effort) is traded for remuneration.13 There is a provider, a purchaser, an exchange and a contract containing terms and conditions that regulate the exchange.14

The ‘label’ the parties have expressly given to their legal relationship is an important consideration.15 However ‘[t]he 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’.16

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: that is, the parties cannot deem the relationship between themselves to be something it is not.17

Courts will look to the ‘real substance of the relationship in question.’18

There have been many detailed discussions by courts and tribunals about the distinction between an employee and an independent contractor, including what issues should be considered and the way the issues should be decided.

In Hollis v Vabu Pty Ltd19 it was held that ‘the distinction between an employee and an independent contractor is rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’.20″