FWA on independent contractors
FWA on Independent Contractors
Commissioner Gooley indicated in the recent Fair Work Commission decision of Tomer Rabba v PeleGuy Pty Ltd T/A PeleGuy (U2012/11902) on 10 January 2013 that this is another in a long list of cases which evidence “the ill-defined dividing line between employment and independent contract.” The decision confirms that the Fair Work Commission is taking a very cautious view of independent contracting arrangements.
By way of background, the Company sells products to petrol stations and convenience stores. Between September 2008 and 29 July 2012 the Company engaged the Worker to sell its products to its customers. There was no written contract of engagement.
Indicia of Contractor or Employee
The questions that the Fair Work Commission considered in deciding whether the Worker was an independent contractor or an employee were:
1.Was the Worker conducting a business of his own?
2. The nature of the work performed and the manner in which it is performed.
3. The terms of the contract
4. The indicia of an employment relationship:
4.1 Whether the Company exercises, or has the right to exercise control over the manner in which the Worker’s work is performed, place of work, hours of work and the like.
4.2 Whether the Worker works for others (or has a genuine and practical entitlement to do so).
4.3 Does the Worker have a separate place of work and/or advertises his or her services to the world at large.
4.4 Whether the Worker provides or maintains significant tools or equipment?
4.5. Whether the work can be delegated or subcontracted.
4.6 Did Company have the right to suspend or dismiss the person engaged?
4.7 Did the Company present the Worker to the world at large as an emanation of the business?
4.8 Was income tax deducted from remuneration paid to the Worker?
4.9 Was the Worker paid a periodic wage or salary or by reference to completion of tasks?
4.10 Was the Worker provided with paid holidays or sick leave?
4.11 Did the work performed by the Worker involve a profession, trade or distinct calling on the part of the person engaged?
4.12 Whether the Worker created goodwill or saleable assets in the course of his or her work.
4.13 Whether the Worker spends a significant proportion of his remuneration on business expenses.
Summary of the evidence
The features that supported the contentions of the Worker that he was an employee were:
● He worked exclusively for the Company;
● He was not able engage others to perform his work;
● He was subject to supervision by the Company;
● Selling goods was an inherent part of the business of the Company;
● He did not create any good will or saleable asset.
The features that supported the contentions of the Company that the Worker was an independent contractor were:
● The Worker submitted invoices to the Company;
● The Worker paid the fuel costs;
● The Worker was not subject to PAYG taxation;
● The Worker was paid by result by way of a commission on sales made;
● The Worker was not paid annual leave, sick leave or any other entitlement normally associated with employment;
● The Worker determined his own hours;
● The Worker commenced working after termination doing the same work under his own ABN.
Commissioner Gooley found that the Worker was an integral part of the Company’s business and in performing his role as a sales person, he was subject to control by the Company. The Company allocated work to the Worker and supervised the work. While the Worker could determine the sales method, what time of day he visited customers as well as the frequency he visited them over and above the minimum number of visits determined by the Company, the Worker was not conducting his own business when he performed work for the Company.
Impact of Decision and Lessons
Now that a decision has been made concluding that the Worker is an employee, this may lead to the Company having to make payments to the Worker. Such monetary obligations include payments in accordance with the Award like minimum pay rates, overtime, loadings and penalties, together with compliance with the National Employment Standards. i.e. annual leave, payment for public holidays not worked, provision of sick leave, notice of termination. Superannuation obligations and tax consequences will also be relevant. In addition, there may be penalties issued by the Fair Work Commission for breach of the sham contracting provisions of the legislation. Penalties could be up to $33,000 per offence for corporations and $6,600 per offence for individuals.
We recommend that you obtain our advice in relation to ongoing contractor arrangements that you have in place or in relation to any proposed arrangements you would like to commence. The primary theme from this case is that an independent contractor must be conducting his/her own business when they perform work for the principal.