Employee/independent contractor distinction

Work relationships in Australia take a variety of different forms. The most common is the employment relationship, under which an employer engages an employee to perform paid work. A contractor relationship arises when a principal contractor engages an independent contractor to carry out paid work.

The distinction between employment and contracting is significant because only employees have certain rights (and some obligations) under most employment and workplace relations legislation. For example, minimum employment standards, award/agreement coverage and unfair dismissal protection. However, some laws, such as anti-discrimination and occupational health and safety statutes, apply to both employees and independent contractors.

The common law “multi-factor” test is applied by courts and tribunals to determine whether a worker is an employee or an independent contractor for purposes of the applicable legislation (ie to decide whether a worker is eligible to bring an unfair dismissal claim).

The development of the gig economy has created ongoing litigation in the courts to establish whether gig worker relationships are employment or contracting in nature. The difficulty arises because gig workers provide services through digital platforms and this does not fit comfortably with the traditional analysis of characterising a relationship through the common law “multi-factor” test. It is likely that government will need to legislate to address this difficulty and to set down minimum work standards for the gig workforce.

See Employee/independent contractor distinction.