Determining Lewis's Employment Status: Employee Or Contractor? Essay On Company's Breach Of Fair Work Act. (70 Characters)

Lewis is a truck driver.  He was recently injured at the depot he attends Monday to Friday to pick up goods for delivery. XYZ Pty Ltd runs the depot.  Lewis has been delivering goods for it since 2001, after answering an advertisement it placed for drivers.  His hours vary according to the delivery tasks assigned but most days he starts at 8am and finishes by 4pm.  

Lewis, who drives an XYZ truck, invoices it for his hours of work and is paid a flat hourly rate less deductions relating to his use of the truck (insurance, vehicle registration etc).  Lewis wears no uniform but abides by depot rules on smoking, drug use, maintaining radio contact with the depot when delivering goods etc.

He has never been paid sick leave but he takes 4 weeks unpaid annual leave each year. Lewis  considers himself an independent contractor (sometime after starting the job, he was told that if he wanted to continue to do deliveries for XYZ he must sign a form acknowledging that the work he did for XYZ was done in this capacity) but a friend of his who is studying BSL202 Workplace Law suggests he may actually be entitled to workers compensation as an employee.  Is Lewis an employee or a contractor?  Why or why not?

Assuming, for the purposes of the question, that Lewis is actually an employee, did XYZ breach the Fair Work Act in requiring him to acknowledge that he was a contractor? (30 marks) (Source of question: Van Der Waarden, Employment Law 2^nd ed)

Determining Whether Lewis is an Employee or a Contractor

Whether or not, Lewis can be deemed as an employee of the company?

An independent contractor and employee are two people who are employed by the employer for carrying on the work of the company, but there is a difference between the two. The employer and employee relationship is governed through documents like an employment contract or through the use of a contract of service is drawn between the two; and through this governing document, the control is attained by the employer over the employee. The work of an employee cannot be delegated by the employee; though, the same can be done by the independent contractor (Murray, 2016). Along with this, this relationship is also regulated through the agency law, due to which, for the actions or the work of the employee, the employer can be held in vicarious manner. With an independent contractor, a contract of service can be entered into and the contract is done with a pre-decided prices. The hours of working and the delegation of contractor’s work cannot be regulated by the employer. Along with this, the employer cannot be held vicariously accountable for the acts of the contractor (Giliker, 2010).

There have been a range of tests which help in determining the status of an individual being an employee or being an independent contractor. One of the tests which are used in order to conclude upon the status of an individual being an employee or an independent contractor can be done through the use of control test, which was presented in Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73. In the quoted case, the court held that the right to control of one person over the other person is to be taken into consideration to conclude upon the status instead of the actual control over the person. And this dictates or is deemed as the strong indicator for acknowledging the status of the person (Australasian Legal Information Institute, 2017a).

Apart from the control test, the integration test can also be used in order to differentiate between the employee and the contractor. Under this test, the degree of integration of the person in question has to be evaluated in the business of the employer. For instance, if a person is obligated to wear the uniform provided by the employer, it indicates the presence of employee-employer relationship. And this issue was held in the matter of Humberstone v Northern Timber Mills (1949) 79 CLR 389 (Swarb, 2016). In reality, both the integration and the general tests are not used as standalone tests for determination of the status of a person (Marshall, 2006).

The Multiple Indicia Test and Other Tests for Determination of the Status of an Individual

The multiple indicia test is a famous test and the most preferable test when it comes to deterring the status of an individual as being an employee or contractor. And this test was initially given in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1, which was later on affirmed in Hollis v Vabu Pty Limited (2001) 207 CLR 21. And the multiple indicia test has been widely used across the globe since then. The High Court also stated the raison d'être for providing this test. As per the court, the control over a person could not be taken as the only factor for these purposes and this necessitated that the entire relationship present between the employer and the person had to be determined to conclude upon the present status (Find Law, 2017).

The multiple indicia test takes into consideration all the possible situations which encompass the employment of an individual for making a decision with regards to the status of the individual. Under this test, a single list cannot suffice the criteria based on which the relationship of employer-employee has to be determined and there is a need for evaluation of a range of things (Turner, 2013). The common factors also have to be considered under this particular test. For instance, if the car of the individual depicts the sign or symbol of the employer, the individual is categorized as an employee. In case the taxes have to be paid personally by the person, the person would be a contractor.

The way of paying the remuneration to the employee also helps in differentiating between the two. In case an individual gets paid in terms of lump sum basis or based on price for each unit, the status of the individual would be that of an independent contractor. If the employers have power over the workplace or the hours for which the individual has at work, the relationship is that of an employee. The entitlements of an individual, along with the allowances also determine the status. When a person is granted worker compensation, superannuation, or leaves, the status is clearly of an employee (Marshall, 2006).

The kind of work which is given to the person also has to be evaluated. Usually, the professionals or persons of trade are deemed as the independent contractors, unless specially retained by the company as an employee, instead of their professional qualification. For instance, a lawyer is hired to help in a particular project, would be deemed as an independent contractor. Once the person has been hired for an indefinite time frame, such individual has to be treated as the company’s employee (CCH, 2010). All these factors, when clubbed together, help in determining the actual status of the person. And along with the multiple indicia test, the control test and the integration test can be taken help of to determine the status of an individual (Marshall, 2006).

Was the Company in Breach of Fair Work Act?

To decide if Lewis is the employee of the company or an independent contractor, the multiple indicia test proves to be helpful, whereby all of the relevant factors have to be evaluated to determine his status. The payment is made to Lewis on hourly basis and the truck usage is deducted from it. This clearly highlights that on this condition, Lewis is the employee of the company as the costs of truck, which is the material in this case, is being paid by the employer. The time of the delivery has been fixed, even when the hours are not. Working on deadlines shows that he is an independent contractor. Further, the uniform is not worn by Lewis, which again shows him to be the independent contractor. But abiding by the deport rules gives him the status of an employee. The payment of unpaid annual leaves again makes him the employee of the company. So, the multiple indicia test clearly shows that Lewis is the employee and an employer-employee relationship is present in this case.

If the control test is applied in this case, it is clear that the employer has control over Lewis in terms of leaves, and truck, which gives Lewis the status of an employee. Lastly, applying the integration test, Lewis is properly and deeply integrated in the work of the business of the company which makes him its employee.

Conclusion

The discussion carried above clearly shows that Lewis is indeed the employee of the company on the basis of control, integration and multiple indicia test.

In case Lewis is deemed as an employee, were any of the provisions of the Fair Work Act contravened when he was asked by the company to acknowledge him as a contractor?

The power to investigate the sham contracting arrangements has been granted to the Fair Work Inspectors, along with the investigation of prohibited conduct with regards to the opt-in arrangements. Sham contracting arrangements are such where an attempt is made by the employer to misrepresent the employer-employee relationship as being that of a contracting arrangement. This is done so as to evade the responsibilities associated with the employee entitlements (Fair Work, 2017a).

The employer has been prohibited from wrongly representing such a relationship, and instead, indulging in sham contracting, through the Fair Work Act, 2009 (Cth) (Fair Work, 2017b). Part 3-1 under Division 6 of this act provides these prohibitions (Australasian Legal Information Institute, 2017b). Under section 357, the employer is prohibited from wrongly representing the employment as being an independent contracting arrangement. Under section 358, the prohibitions have been placed on the dismissal of the employee, in case a refusal has been made for engaging as independent contractor. Under section 359, the prohibition has been placed on the employer from making a false statement for misrepresenting the employment relationship (Federal Register of Legislation, 2017).

It has already been established that Lewis is the employee and there is no need to make any assumption in this regard. By asking him to sign a form which deemed him as the independent contractor, the company breached the provisions of the governing act. Particularly, sections 357 and 359 where breached in this case. Hence, the company would be held liable for the contravention of the Fair Work Act.

Conclusion

On the basis of these facts, it can be concluded that as Lewis is as an employee, the provisions of the Fair Work Act were contravened when he was asked by the company to acknowledge him as a contractor.

References

Australasian Legal Information Institute. (2017a). Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 (15 December 1955). Retrieved from: https://www.austlii.edu.au/au/cases/cth/high_ct/93clr561.html

Australasian Legal Information Institute. (2017b). Fair Work Act 2009. Retrieved from: https://www.austlii.edu.au/au/legis/cth/num_act/fwa2009114/

CCH. (2010). Australian Master Human Resources Guide 2010 (8^th ed.). Sydney: CCH Australia Limited.

Fair Work. (2017a). Independent contractors. Retrieved from: https://www.fairwork.gov.au/find-help-for/independent-contractors

Fair Work. (2017b). Contractors and employees – what’s the difference?. Retrieved from: https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/contractors-and-employees-whats-the-difference

Federal Register of Legislation. (2017). Fair Work Act 2009. Retrieved from: https://www.legislation.gov.au/Details/C2017C00144

Find Law. (2017). What is an independent contractor and how does an independent contractor differ from an employee?. Retrieved from: https://www.findlaw.com.au/articles/4515/what-is-an-independent-contractor-and-how-does-an-.aspx

Giliker, P. (2010). Vicarious Liability in Tort: A Comparative Perspective. Cambridge: Cambridge University Press.

Marshall, B. (2006). Working it out- Employee or independent contractor?. The National Legal Eagle, 12(2): 14-19.

Murray, J. (2016). Difference between Independent Contractor and Employee. Retrieved from: https://www.thebalance.com/independent-contractor-or-employee-what-s-the-difference-397912

Swarb. (2016). Humberstone v Northern Timber Mills; 16 Nov 1949. Retrieved from: https://swarb.co.uk/humberstone-v-northern-timber-mills-16-nov-1949/

Turner, C. (2013). Key Facts: Employment Law (3^rd ed.). New York: Routledge.