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Employee or Independent Contractor?

The dangers of getting it wrong…

In a recent case before the Federal Court, a company that provided translation and interpreting services was required to prove that many hundreds of interpreters on its books were independent contractors and not employees.

The company operated by a system of allocation whereby it would receive a request from a client and then match the job with an interpreter, who was free to reject or accept the work but could not negotiate the rate of payment.

While the interpreters generally considered themselves as independent contractors, a problem arose when the Australian Taxation Office came after the company for failing to pay prescribed superannuation contributions for the benefit of their “employees”.

The Court looked at a range of factors but noted there was no single conclusive factor in determining a worker’s employment status. The totality of the relationship between the parties had to be examined and not just the contractual description.

The Court found that the interpreters were in fact employees on the basis that their remuneration was non-negotiable and they did not use business names, poach clients, have goodwill attached to a business, or advertise their services.

This particular case highlights the dangers of incorrectly characterising the employment status of workers and the potentially serious financial ramifications of getting it wrong.

It is well known that some employers disguise or misrepresent an employment relationship as an independent contracting arrangement in order to avoid paying workers minimum rates of pay, leave entitlements or superannuation. This is known as “sham” contracting and is illegal under the Fair Work Act 2009.

To resolve any ambiguity about your employment status or the employment status of your employees, we recommend you seek legal advice from an experienced solicitor – Phone Elspeth Pope on (02) 4324 7699.

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