The signed contract clearly states that the person you hired is an independent contractor, so that makes them an independent contractor…right? Ahh…if only it were that simple.
Establishing whether the legal relationship created under contract is that of employer/employee or principal/contractor isn’t always straightforward, and if you get it wrong it could end up costing you a lot of money.
Simply including a clause in the contract labelling a person as a contractor will not be sufficient to create that type of arrangement. If a dispute arises, a court will look beyond this label and examine the terms of the contract and the relationship as a whole.
An employer who deliberately or recklessly misrepresents an employee as an independent contractor will find themselves in hot water with the Fair Work Commission.
Additionally, a contract of employment can entitle an employee to numerous rights including:
- Minimum wage and modern awards
- Working conditions
- Leave entitlements
- Occupational health and safety protections
- Workers Compensation
- Superannuation contributions
- Withholding of income tax
- Protections against unfair dismissal
- Reimbursement for work-related expenses; and
- Union membership and industrial action
Failing to meet employer obligations exposes individuals and companies to a wide range of liabilities under civil and criminal law. This can all be avoided by getting the right legal advice before hiring.