Independent contractor or employee + Closing the Loopholes

Employment Law: 06 August 2024

Author: Stephen Curtain - Our People

The Closing the Loopholes legislation includes principles to apply when determining the ordinary meaning of an 'employer' and 'employee' and requiring an assessment of the real substance, practical reality and true nature of the working relationship by considering the 'totality' of the relationship.

The High Court had determined in two cases in 2022, Jamsek and Personnel Contracting, that in deciding whether a relationship was an employment one or an independent contracting relationship, the terms of the contract should be given priority over the way in which the contract was performed (the multi-factorial test). However, the new legislation changes the emphasis back to the multi-factorial test.

However, workers whose income exceeds a high income threshold (yet to be determined) can choose to opt out by giving notice to this effect to the “employer.”

An example of the application of the multi-factorial test, but not a test of the new definitions, was applied in the recent case of Aspire 2 Life Pty Ltd v Jessica Tidmarsh in the Full Federal Court. The Court found that, in determining whether a relationship is an employment relationship or an independent contracting one, courts will not be governed by how the parties categorize their relationship but will continue to consider the multi-factorial tests to determine how the relationship worked in practice.

Tidmarsh, a personal care worker made a General Protections application on the basis that she had been dismissed, which was defended by Aspire 2 Life on the basis that she was not an employee but an independent contractor. The parties had called their relationship an independent contracting relationship and the contract suggested it was. Tidmarsh operated through an ABN and was responsible for her own tax, superannuation and workers’ compensation and other insurances, and undertook other obligations normally undertaken by an employer in practice.

However, the court found that other elements of the relationship, including the fact that Aspire 2 Life negotiated the services to be provided and the fees for those services with the client, was responsible for the ongoing management of the clients and had the right to make policies and procedures for Tidmarsh to adhere to, pointed to an employment relationship indicating that Tidmarsh was integrated into Aspire 2 Life’s business.

The court concluded that the right to control the nature of the services to be provided to clients of Aspire 2 Life, when those services were provided and the way in which the personal care work was to be undertaken by Tidmarsh was determined by Aspire 2 Life and consistent with its ongoing responsibility to manage the services provided to its clients.