Legal principles Contractors Versus Employee

Legal principles Contractors Versus Employee

The courts start from a position of determining whether a common law employment relationship exists, as opposed to a principal/independent contractor relationship. In a common law employment relationship there is a ‘contract of service’. A ‘contract of service’ is based on a ‘mutuality of obligation’; that is, the employer makes an offer of work with accompanying remuneration and the employee accepts the terms of the offer by performing the work.
This contract can be either implied or expressed orally or in written form.

Factors that have been considered by the courts in determining whether a worker is an employee include:

  1. control and direction
  2. contract and practical relationship;
  3. contracts to achieve a ‘given result’;
  4. independent business;
  5. power to delegate;
  6. risk;
  7. provision of tools and equipment; and
  8. other indicators.

In considering these factors, it should be noted that numerous court decisions have held that the totality of the relationship between the parties must be taken into account before deciding whether a worker is an employee or an independent contractor; that is, a determination cannot be made on the basis of a limited, or selective, number of factors (see for example: Stevens v Brodribb Sawmilling Co Pty Ltd [1986] 160 CLR 16, Abdalla v Viewdaze [2003] AIRC 504, Commissioner of State Revenue (WA) v Mortgage Force Australia Pty Ltd [2009] WASCA 24, Commissioner of State Taxation (SA) v Roy Morgan Research Centre Pty Ltd [2004] SASC 288, Sweeney v Boylan Nominees Pty Ltd [2006] HCA19) and B & L Linings Pty Ltd &anor v Chief Commissioner of State Revenue (No 2) [2006] NSWADTAP 32).

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