Case examines whether contract terms matched actual working relationship in practice
The Fair Work Commission (FWC) recently dealt with a case involving a membership director who claimed she was dismissed in contravention of workplace laws.
The case centred on whether the worker was an employee entitled to dismissal protections or an independent contractor whose services were simply terminated.
The worker argued that despite contractual arrangements labelling her as an independent contractor, the practical reality of her working relationship meant she was actually an employee who had been dismissed.
She maintained that how the work was performed in practice created an employment relationship regardless of written contract terms.
The employer disputed these claims, arguing that the worker was engaged as an independent contractor from the outset and remained in that capacity throughout the relationship.
The employer contended that the worker could not have been "dismissed" because she was never an employee.
Background to contractor dismissal dispute
The worker commenced working for the membership organisation in July 2023 as membership director. The organisation facilitated bi-monthly meetings of corporate executive officers who were members.
The worker's role was to sign up new members and follow up with existing members to ensure satisfaction with the programme.
At engagement, the worker was sole director and shareholder of a company established in the mid-1990s with an Australian Business Number and goods and services tax registration.
The worker was familiar with independent contractor relationships, having provided services to others as a contractor through that company for several years.
On 22 July 2023, the CEO emailed the worker proposing she be engaged as a contractor and paid an hourly rate plus commission for each member signed up.
The parties entered into a written contract dated 25 August 2023 providing that the membership director was to have control over work performed, including hours and location, and supply her own equipment.
Employer response to contractor arrangement
The contract specified work was to be paid on an hourly rate with commission bonuses for new members. The membership director was engaged on a contract basis and wholly responsible for income tax on fees received.
The employer did not accept liability to pay superannuation, and the membership director was responsible for insurances including professional indemnity, public liability and workers' compensation.
The agreement was expressed as not constituting a relationship of "employer and employee, principal and agent or partnership." The worker submitted that the written contract was not appropriate to her role but accepted that she had signed it and understood she was being engaged as an independent contractor.
The worker generally worked from home and attended meetings when required. She used her own desktop computer and mobile phone, paid for computer servicing and generally paid her own travel costs.
The worker maintained her own workers' compensation insurance and worked for another company as a contractor in an unrelated industry, which the employer knew about and did not prohibit.
Investigation into contractor relationship reality
The worker's working hours were not fixed and she could arrange them to suit other commitments. She had regular Monday meetings with the CEO to discuss work.
Evidence showed variation in work performed, with the number of people she would meet ranging from 1 to 9 each week, often 3 to 5 people.
The worker could determine the order in which leads would be contacted and, within limits, when those people were contacted. She invoiced the employer for work performed, initially monthly and later weekly, with invoices issued by the worker's company including goods and services tax.
It was not disputed that the worker represented herself to contacts as part of the employer's business.
The CEO accepted it was important she was seen as part of the organisation rather than a broker, as this impacted potential members' willingness to sign up. The worker was provided with template documents including initial emails, but had latitude in follow-up conversations.
Framework for contractor employee disputes
The FWC applied section 15AA of the Fair Work Act, which requires determining employee status by ascertaining "the real substance, practical reality and true nature of the relationship" considering the totality of the relationship including contract terms and how the contract is performed in practice.
The FWC found aspects suggesting integration into the employer's business: "The [worker] was presented to third parties as an emanation of the [employer]... The work of the [worker] was integral to the [employer's] operation." However, the FWC noted insufficient evidence that she regularly performed day-to-day work as part of a group of fellow workers.
Regarding control, the FWC found: "any legal right of control conferred by the contract was very limited and there was insufficient evidence to conclude that the [employer] exercised significant control as to how the [worker] actually performed her work."
FWC's ruling on contractor dispute
The FWC concluded: "The post-contractual conduct of invoicing for the work that was carried out through the [worker's] existing corporate entity and receiving payment, including GST, into the account of that entity, was entirely consistent with the notion that the parties were conducting themselves on the basis of a relationship of principal and independent contractor."
The FWC found the relationship did not change fundamentally over time and dismissed the application, ruling the worker was an independent contractor, not an employee entitled to dismissal protections.
The decision highlighted the importance of examining both contractual terms and practical working arrangements when determining employment status.
