High Court decision clarifies difference between Employee and Contractors
The high court has passed the judgement on two important decisions that are concerning the independent contractor.
- A valid written agreement between the contractor and the employer is now required.
- Rights and obligations will be set out in the agreement defining what type of relationship exists between the Contractor and the business.
As per the judgement, the relationship between the contractor and the business will depend on the terms and conditions mentioned in the contractual agreement. The employers engaging contractors should ensure that the agreement they put in place does reflect the relationship between the parties and it satisfies themselves that the relationship can truly be characterised as one of the employer and contractor. These decisions do have some relief to the businesses, and this does avoid claims like contracts are unlawful or the allegation of sham contracting etc.
Independent Contractor (IC)
Independent contractors are those workers who provide services to the business as non-employee. The employers are not legal employees of the business. They are an individual with specific skills that are hired to perform a specific task on a contractual basis. Most often, these contractors have their process, tools, methods to finish the work, they also negotiate their fees and work arrangements and, they work for more than one client. These contractors sometimes are called independent contractors, sub-contractor, or Subbies. However, they have their workplace rights and protection and have different responsibilities on insurance, taxation, and superannuation.
The contractual agreement is a document defining the business relationship between the firm and a contractor. These agreements are complex, but it does save both parties from legal, material, and other job-related headaches. The agreement establishes clear expectations between both parties and avoids employment misclassification. This agreement is different from the employment contract. It includes specifications of the workers’ services or projects, deadlines and desired outcomes. The agreement enables the business to be hired as a contractor. If key aspects of the relationship are not regulated by the agreement, this could allow a contractor to challenge the contract and a court to examine the conduct of the parties.
Few take on agreements:
- The Terms and conditions in the contractual agreement should be comprehensively set out in a written agreement between both the parties. Businesses/employers engaging independent contractors should state a clear difference between a contractor and an employee.
- While entering into the agreement, the businesses should review and update the documents relating to the hiring of contractors like advertisements and descriptions of proposed services.
- Need to ensure the legal rights, duties and obligations created by both the parties the agreement should be consistent with the contractor relationship.
- The agreement should determine who the contractor would work for, how much he would be paid, and that the contractor would only be paid for the labouring work.
- Employers need to ensure that a genuine contractor is entering the business, their relationships should be clearly defined in the agreement.
- Most of the contractual agreements do state the duration however employers need to periodically review and update the independent contractor agreements to ensure that all relevant terms are included in the written contracts.