Prior to 2022, the test of whether a person was considered to be an independent contractor or employee was based on applying a multi-factorial test (‘MFT’). The MFT looked at the substance of the relationship between the parties (how they operated with one another), over the actual form it was recorded (what the written contracted stated as the intentions).
In 2022, the High Court of Australia delivered two cases that reversed the long-held precedent of courts applying the MFT, and honed in more towards the intentions of the parties when they entered into the agreement, focussing more on the form of the agreement.
The government has sought to rectify the High Court’s interpretation, and have ensured that we return to a MFT approach through the introduction of the definition of “employment” in the soon to be in effect law, Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2023 (‘Closing Loopholes Act’). Therefore, we have come full circle, and have returned to the pre-High Court of Australia judgements in 2022, in applying the MFT, the usual matters will be considered:
- The control of how work is to be performed or provided
- Integration of services
- Method or mode of remuneration – is it for a specified outcome or for time and labour
- The ability to delegate or subcontract
- Tools, equipment and/or uniforms
- Risks, insurance, taxation and goodwill.
What this essentially means is that if you had an independent contractor agreement that was drafted and implemented in the past few years, that the existence of the agreement itself may not protect you from a claim, and that a person whom you thought was an independent contractor, could in fact be considered an employee. This obviously holds huge implications for potential claims underpayment, superannuation, payroll tax and etc.
For a review of your circumstance, please feel free to reach out for a discussion.
