Australia: Clarifying whether a worker is a contractor or an employee

Recent decisions of the Federal Court and Fair Work Australia have clarified the test that is applied to determine whether a worker is an employee or a contractor. These decisions have found that persons who had, for some time, been engaged as independent contractors were employees. Coupled with the increasing vigilance of regulators to stamp out the practice of sham contracting, these developments have put companies on notice that their independent contracting arrangements may be the subject of scrutiny.

It is essential, therefore, for companies to review their work arrangements with independent contractors and seriously consider converting independent contracting arrangements to employment arrangements in doubtful or marginal cases and, of course, in cases where the work relationship is clearly an employment relationship.