Understanding Business Laws: Case Studies On Employee And Independent Contractor Distinctions (essay).

Case Study: Amanda's Status with Monks Pty Ltd

1. Monks Pty. Ltd., a television production company, chooses Amanda to act in a new serial being produced. Before she commences work she signs a contract that says she will fill a central role in the serial and must be prepared to work at all times but that there is no guarantee of any continued work and that she is free to accept work from other production companies.The contract also requires her to make herself available to the media as directed by Monks.

Amanda works 50-60 hours a week (including evening and weekend call backs to re-shoot scenes) and after four weeks Monks Pty Ltd. pay her $10,000 without making any deduction for tax.  The next day she receives a nasty gash on her arm on set when the director throws a prop at her in an angry tantrum, requiring her to be off work for the following week.   In haste, the director alters the story line and completely writes Amanda's character out of the serial.

Suggest, with reference to cases, whether Amanda is (or at least was) an employee or an independent contractor?   (Amanda believes employee status would entitle her to pay for the time she is recovering from her injury & for her effective dismissal but you are not required to advise her on these matters)

And

2. Ken and Bob are drivers for Ore Ltd. Ken has been employed by the company for 20 years, while Bob, though better qualified than Ken, has worked as his assistant for the last 18 months.  

Ore Ltd has recently included Ken but not Bob on a list of employees to be made redundant due to an economic downturn.  Ken was surprised as he expected the customary ‘last on / first off’ (last employed / first made redundant) rule to be applied as it has been by the company and indeed across the mining industry more generally in previous downturns.  

Ken was also surprised to see that there was no mention of the rule in his contract, which said only that the employer may determine redundancies by reference to the level of employee qualification.  Can Ken argue that the ‘last on / first off’ rule forms part of his contract and that he should therefore not be made redundant before Bob? (8 MARKS) (You are not required to advise Ken more generally in relation to his possible redundancy)

(Source of questions: Van Der Waarden, Employment Law 1st ed)

This paper discusses a few case studies through which we will understand the business laws better. We will learn the common issues and laws distinguishing between an employee and an independent contractor and what advantages and disadvantages they both have in the corporate world. This is a basic understanding for everyone in the corporate world.

With regards to the concerned circumstances the problem that has been recognized is to affirm if Amanda is an employee or an independent contractor with regards to the company named, Monk Pty Ltd.

In the Stevens vs. Broadribb Sawmilling CO Pty 1896 case, the court clubbed the control test along with the business integrity test to cultivate a fresh test to affirm the job of the employee. It was believed that this would help maintain the integrity of the business. The test is called the Multifactor test. Corresponding to the requirements in reference to the test, no particular aspect is enough to affirm the employment status.  This test was approved in Australia as per the case given below:

The Hollis vs. Vabu Pty Ltd (t/as crisis couriers) case in 2001, 27 CLR 21, shows us that the court had ruled that an employee or an independent contractor is not dependent of what label has been assigned to them. The totality of the equation was testined by the court to affirm the status of the same.

The rule stated below by Twomey (2012), has been used by the employees to affirm if an individual is an employee or an independent contractor:

Command on work – Job of an employee is usually governed by the employer, which means the employees are ordered about when, how and what work to do; but the employer lacks this degree of command on an independent contractor. Maintaining the autonomy, the independent contractor has the right to take his own decisions and work on his own pace. They mostly have flexible working hours and complete the work on their own accord.

Payments – An employee usually is given a steady income regardless of the time duration between each payment. It can be in weekly, monthly or annual gaps depending on the contract between the employer and employee. The independent contractor on the other hand gets paid after the completion of work or obeying any other condition stated in their contract which gets decided by the employer and independent contractor before beginning the work.

Factors Distinguishing Between Employee and Independent Contractor

Risk- The employee is not a part of any risk in reference to the business. So even though the employee might get affected by the various losses a company might face like decrease of salary or even getting redundant, they don’t have to bear any direct consequences like losing their own funds. The independent contractor however, is directly responsible for all losses since the business is his own and the loss is far greater.

Subcontracting- An employee cannot impose his duties on other people but an independent contractor can. An employee can ask other employees to share his workload to help him or even do the job or cover up for him while he is away. An independent contractor cannot do that since he has taken the work under his own label and not under the umbrella of some company.

Circumscribed services- An employee is obligated to work under his employer exclusively unlike an independent contractor, who can work for a lot of people at one time. An employee is bound to dedicate fixed hours of a week to his employer and not provide services to anyone else. The hiring is exclusive and so are the services. The same is not true for independent contractors since they aren’t bound by any compulsion and can choose to work with or under as many people as they like depending on their capability (Kavanagh & McRae, 2017).

Uniforms- Employees might have to wear a uniform that reveals the identity of the employee or the company. Though it is not compulsory for every employee to have to wear a uniform, it depends on the company policies and the employers. The independent contractor is under no such obligation. Since they are not tied to any specific company, the policies do not apply to the either. However, just because an individual is not in a uniform, it does not mean one is an independent contractor (Sappideen, O'Grady & Riley, 2016).

Income tax- The employee’s income tax is eliminated from his salary and paid to the Australian Taxation Office by his employer whereas the independent contractor has to pay the ATO (Australian Taxation Office) separately. The employee gets a deducted amount as a salary but the entire amount is theirs. The same does not apply for independent contractors. Though independent contractors get the entire amount, they have to pay a part of that cash flow separately to the government as income tax unlike employees (Walsh, 2015)..

Command on Work

Superannuation- The employer has to contribute a superannuation amount to the employee which is currently 9.5% of their salary unlike the independent contractor who have to make their own contributions.

Leaves- An employee is entitled to various kinds of leaves as per the law, like compensated leaved, ill health leaves, annual leaves. There are certain designated leaves assigned by the government for the employees. That, along with other leaves that the employee gets to claim for personal reasons. The independent contractor does not enjoy these privileges, he does not get leaves and on the rare occasions he does, it is not reimbursed (Kaplan & Botes, 2015).

In ACE Insurance Ltd vs. Trifunovski in 2013, FCAFC 3, the court had ordered that even though the accused had hired the complainant as an independent contractor, the complainant was in reality an assignee and the accused company is bound to compensate and pay for the leave allowances.

We know that Amanda had been hired by Monks Pty Ltd. to play a central role in a serial, for which she had to be available for work at all times as and when was required by the company, she was contract bound to not refuse. They had not given her any assurance for work and she was also permitted to work for any other production house. She also had to be accessible to the media when required. She was working extra owing to demands of her project but there was no fixed working hours unlike those for employees. Also it was confirmed that there were no future projects of Monks Pty Ltd. with Amanda like it would have been the case with an employee. When she was paid 4 weeks later, no tax money was reduced. So, owing to her to her non taxed reduced payment, unfixed work hours and no future projects or work with the company, making Amanda an independent worker.

Conclusion:

It can be concluded that Amanda is an independent contractor, not an employee and is not in a place to ask for reimbursement for any damages. Since we already know that independent contractors are entirely responsible for losses.

The above problem taught us the proper distinctions between independent contractors and employees with the laws stating the same with their liberties and restrictions within the corporate world. Now let’s see how the last in first off command can affect employees in a company:

Payments

The problem is to affirm if Ken can argue the Last in first off command was a factor of his job contract. Let us look into the give circumstance.

Verbosity is a possibility if employers obey the commandments of the general law that puts the employers under an obligation to never make any employee repetitive illicitly. The employers should also refer to the various state industrial laws.

The arrangements given in the job contract need to be referred to as well by employers to decide on the verbosities; it is mandatory that they take into account the industry’s applicatory procedures, tactics and conventions (Bagenstos, 2013).

The verbosity needs a lot of careful thinking as a lot of factors come into consideration. Since the rule is for everyone, it needs to be taken into account that the rule needs to be based on equality and non-discrimination, such that it does not give anyone the upper hand at any point.  The fundamental principles in reference to selecting a rule for verbosity are: aptness, lawfulness and non-prejudiced (Perritt, 2016).

The conditions in reference to the ‘last on-first off’ requirements had been talked about in the Australian Iron & Steel vs. Banovic case in 1989, 168 CLR 165.  It was concluded that the said rule was sexist and hence not applicatory.

In the above circumstance, we have been told that Ore ltd. has notified verbosities for its employees in the lights of market turns dropping. Although Bob had contributed to the company for over twenty years and Ken had just been around for 18 months, Ken was more qualified. The contract of Ken specifically mentioned that redundancy would carried out on the basis of qualifications and nothing else. Bob had contributed a lot more to Ore Ltd. but as per the contract, since qualification took the upper hand, it made Ken more eligible to remain in the company.

Conclusion:

Since selecting people on the basis qualifications was a criteria but last on/first off wasn’t, there is not grounds based on which Bob should remain. The contract favours Ken, so Ken should not be a verbosity.

References

ACE Insurance Limited v Trifunovski [2013] FCAFC 3

Australian Iron & Steel Pty Ltd v Banovic (1989) 168 CLR 165

Bagenstos, S. R. (2013). Employment Law and Social Equality. Mich. L. Rev., 112, 225.

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226

Hollis v Vabu Pty Ltd (t/as Crisis Couriers) (2001) 207 CLR 21

Kaplan, J., & Botes, J. (2015). It's leave, Jim, but not as we know it: employment law. Without Prejudice, 15(6), 37-39.

Kavanagh, M., & McRae, E. (2017). Employment law: Protecting vulnerable workers amendment to fair work act. Governance Directions, 69(4), 241.

Perritt Jr, H. H. (2016). Employment law update. Wolters Kluwer Law & Business.

Russell, R. (2017). Concentrate Questions and Answers Employment Law: Law Q&a Revision and Study Guide. Oxford University Press.

Sappideen, C., O'Grady, P., & Riley, J. (2016). Macken's Law of Employment.

Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1

Twomey, David. Labor and Employment Law: Text & Cases. Cengage Learning, 2012.

Walsh, D. J. (2015). Employment law for human resource practice. Nelson Education.