As you probably already know, properly categorising workers as either employees or independent contractors is an important issue.

A recent decision of the Administrative Appeals Tribunal, Associated Translators & Linguists Pty Ltd v Federal Commissioner of Taxation, showed how this distinction can affect a businesses liability to pay workers’ superannuation guarantee charges.

The case showed that when deciding whether workers are employees or contractors, the courts will look at a number of factors (we have called these ‘control factors’ in the Employment Law Practical Handbook’s chapter on Independent Contractors).

They will look at the structure of your organisation and how the worker fits into that structure. In other words, they will pay close attention to whether the work the worker performs constitutes the service of your business, or whether you use the worker’s work as an ‘input’ in order to provide your usual service.

In Associated Translators & Linguists Pty Ltd v Federal Commissioner of Taxation, the work relationship in question was quite ambiguous. There were a number of factors that suggested the relationship was one of an independent contractor. For example:

• the employment contract referred to the worker as an ‘independent contractor’;
• the worker was able to carry on the business of a translator on their own account; and
• the worker was providing a skilled service.

Nevertheless, the tribunal classified these workers as employees. In coming to this decision, the tribunal took into account the fact that the work performed by the workers constituted the entire service of the business and that the business could not be carried on in a reasonably efficient way without the workers.

In addition, the company:

• imposed strict reporting obligations on the workers;
• restricted their right to delegate work; and
• paid the workers for hours worked (as opposed to paying for a result).

As a result, the tribunal found the company was liable to pay the superannuation guarantee charges of its workers.

So when you are classifying the workers in your business, make sure that you have examined the totality of the relationship and are aware of your rights and responsibilities toward them.

For more information about independent contractors, check out the Independent Contractors chapter in your Employment Law Practical Handbook.

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Regards,

Charles Power
Editor-in-Chief
Employment Law Practical Handbook