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Are independent contractors protected from unfair dismissal?

24/11/2020

Traditionally, independent contractors are not protected from unfair dismissal because they are not employees. However, in some cases, the parties have mischaracterised the relationship as a contractor relationship when it is actually an employment relationship. In these cases, because the worker is actually an employee, they may be protected from unfair dismissal.

 

What is an independent contractor?

In essence, an independent contractor is a person that owns and operates their own business. They might do so as a sole trader with an ABN or via a company. They are ordinarily free to determine the price they charge for their services and free to determine the manner in which the services are provided.

It is not uncommon in some industries for workers to be told that they will be engaged as a contractor, and will need to obtain an ABN and invoice for their work, even though the worker does not actually own and operate their own business. In this scenario, a sham contracting relationship has likely been established and the worker is likely to be an employee.

Even if the parties have agreed to create a contractor relationship, this is not determinative. While the label that the parties have given the relationship may be important, the parties cannot deem the relationship to be something that it is not. Therefore, the court or tribunal will look to the real substance of the relationship to determine whether it is a contractor relationship or an employment relationship, regardless of the label that the parties have assigned to it.

When looking at the substance of the relationship, the court or tribunal will look at a number of factors, including how the work is controlled and performed, whether the person can delegate the performance of their work, whether the person works solely for the one company, whether the person advertises their services elsewhere, whether the person is given a business card or is required to wear a uniform and how the person is paid for their work.

Unfair dismissal eligibility

In the context of an unfair dismissal claim, it is the Fair Work Commission that will conduct this analysis, usually as part of a jurisdictional hearing. Evidence about the relationship will usually be given by both parties and legal submissions will be made.

If the Fair Work Commission determines that the person is an employee, and has otherwise satisfied the eligibility criteria to make an unfair dismissal application, then the person will be protected from unfair dismissal, even if they have been referred to by their employer as an independent contractor. The Fair Work Commission will then conduct a further hearing to determine whether the dismissal was unfair.

Should I make an application as an independent contractor?

Before making any unfair dismissal application it is always important to obtain sound legal advice as to whether you have been genuinely engaged as an independent contractor or whether a sham contracting relationship has been established. It is important to act quickly, as you only have 21 days from the date of any dismissal to file an application.

 

Disclaimer: This article should not be construed as legal advice and is not intended as such. If readers wish to obtain advice about anything contained in this article, they should speak with a lawyer and discuss their individual circumstances.