An Employee or Independent Contractor

What is the nature of the relationship between Guinevere and Magic Computers? Is Guinevere an employee or independent contractor?

Rule

There are two fundamental distinctions between the employee and independent contractor. The employee has a contract of service. [1] The employer has control over the employee and work is unable to be delegated to another person. [2] Further, the employer is vicariously liable for the actions of the employee. [3]

The independent contractor has a contract for service. [4] The worker performs an agreed task for an agreed price. The employer usually has no control over the work hours or the way in which the work is carried out and work may be subcontracted to others. [5] An employer is not vicariously liable for the actions an independent contractor. [6]

The common law has developed various tests to determine whether a worker is an employee or an independent contractor.

The traditional test utilised by the courts was the ‘control test’. Zuijs v Wirth Bros [7] established that, the right to exercise control, rather than the exercise of the actual control is considered a very significant factor and is a strong indication of an employee/employer relationship.

The ‘integration test’, classifies workers based upon their degree of integration into the business. A worker who wears a uniform can be an indication that they are an employee. However, the control test and the integration test though extremely significant are not preferred as standalone tests. [8]

The multiple indicia test [9] was established in Stevens v Broadribb Sawmilling Co Pty Ltd [10] and was later confirmed in Hollis v Vabu Pty Limited [11] as the preferred test within Australia. [12]

The High Court stated: ‘Control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.’ [13]

The test requires all circumstances surrounding the employment to be considered to indentify the type of working relationship. Not one factor is determinative, and ‘any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant.’ [14]

Indicia which may be considered:

The provision and maintenance of equipment and tools –

When supplied by worker > independent contractor. [15]

Integration –

The worker has been integrated into the business. E.g. Wearing uniforms, signage on vehicles > employee relationship. [16]

Tax arrangements –

Worker arranges own taxation > independent contractor. [17]

Entitlements and allowances –

Leave, superannuation, workers compensation provided for > employee relationship.

Nature of the task –

Tradespersons and professionals are two groups likely to be conducting their own business > independent contractor. [18]

Duration of service –

Worker engaged to perform a specified task > independent contractor. [19]

Worker employed for an indefinite period > employee relationship. [20]

Mode of remuneration –

Remuneration in the form of wages > employee relationship. [21]

Remuneration in the form of a lump sum, price per volume, or results > independent contractor. [22]

Who controls the place and hours of work –

Worker sets own place and hours of work > independent contractor. [23]

Delegation of work –

The ability to delegate jobs to others > independent contractor. [24]

Control –

Control over conduct, the way in which tasks must be carried out and the number of tasks > employee relationship. [25]

Control over reporting e.g worker encouraged to report weekly and attend meetings but no obligation to do so > independent contractor. [26]

These multiple indicia are weighed up to determine the nature of the employment relationship.

Application

In applying the multiple indicia test to the situation given, the following is indicative of an employee/employer relationship:

Merlin does not have the relevant expertise to exercise direct control over the way in which HR duties are carried out however, has exercised control over which duties are to be carried out. Similar to the case of Zuljs v Wirth Bros Pty Ltd. [27]

No indication of the ability to delegate duties to others.

Work is to be carried out at Merlins Lismore office where equipment is provided; however work could be done from home when it is better suited.

Guinevere was to provide weekly reports of her activities.

The following is indicative of an independent contractor relationship:

The mode of remuneration was a set amount of $2,200 with no entitlements to any overtime, sick and holiday pay. Further, tax was to be arranged by Guinevere. This is strongly indicative of an independent contractor relationship.

Guinevere is responsible for a set amount of tasks (non ongoing) and work is results based.

Considering the nature of the task, Merlin has a past history with Guinevere as a HR consultant and has specifically hired her as a professional. As Merlin has used her services in the past which was not ongoing this is indicative of a contract for service. The suggestion of future long term employment is irrelevant.

Although no discussion prior to commencement of work have occurred in relation about the freedom to work for others, Guinevere was been engaged in consultancy work for a competitor company. Although this work is in the different field of OH&S it is highly indicative of an independent contractor relationship. [28]

There is no suggestion from the facts in relation to integration into the business, and no mention of uniforms. However this is less important when there is no interaction with the public as is in this situation. [29]

By applying the multi factor test we can see that there are factors of both the employee/employer relationship and the independent contractor relationship. It is a matter of weighing up these factors.

Conclusion

I conclude that the nature of the relationship between Guinevere and Magic Computers is one of an independent contractor relationship. The reason for this is the mode of remuneration and the taxation arrangements, and the fact that Guinevere was hired to complete a set amount of tasks without any real integration into the company. I believe that these factors outweigh the minor existence of control which is shown by the instructions and weekly reporting.

Question 2

1,000 words with no more than 1,250 words

In light of the issues discussed in Topics 1–5 of your study materials, discuss whether

or not you agree with the opinions stated in the following paragraph.

Employment law, that is, the set of common laws that regulate the relationship between an employer and an employee, failed to provide adequate protection to employers or employees in this relationship. Therefore, Parliaments around Australia began to enact statutory laws, culminating in the Labour Federal Government passing the Fair Work Act 2009 (Cth), to effectively replace the common law and regulate the employment relationship.

discuss

Present of point of view using description and interpretations (why and how) while examining all aspects of an issues/topic. Present pros and cons supported by evidence.

Intro

What was the law prior to statutory intervention

Did it provide protection?

Why this was insufficient

What was the new stat law?

Did it effectively replace the common law?

Did it effectively regulate?

Positives

Negatives

Conclusion

Bibliography

Articles/books/reports

Australian Guide to Legal Citation (2nd ed, 2002).

Butterworths Concise Australian Legal Dictionary (3rd ed, 2004).

CCH, Understanding Work Choices: A practical guide to he new workplace relations system (CCH 2nd Ed, 2006).

Creighton, B, Stewart , B, Labour Law (The Federation Press 4th ed, 2004).

Lewis, P, Thornhill, A, Saunders, M, Employment Relations – Understanding the employment relationship (Pretice Hall, 1st Ed, 2003).

Macdonald, R, Clark-Dickson, D, Clear and Precise – Writing skills for today’s lawyer (2nd ed, 2005)

Owens, R, Reiley, J, Murray, J, The Law of Work (Oxford University Press 2nd Ed, 2011).

Sappideen, C, O’Grady, P, Warburton, G, Macken’s Law of Employment (Thompson Reuters, 6th ed, 2008).

Case Law

Commissioner of Pay-Roll Tax (Vic) v Mary kay Cosmetics Pty Ltd (1982) 82 ATC 4444.

Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

Humberstone v Northern Timber Mills (1949) 79 CLR 389.

Narich Pty Ltd v Commissioner of Pay-Roll Tax (NSW) (1984) 58 ALJR 30.

Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179.

SJP Chicken Processor v Workcover (No 3) [2006] SAWLRP 7.

Stevens v Broadribb Sawmilling Co Pty Ltd (1986) 160 CLR 16.

Zuljs v Wirth Bros Pty Ltd (1955) 83 CLR 561.

Zuljs v Wirth Bros Pty Ltd (1955) 83 CLR 561.