In the recent case of Salim v AFA Sheetmetal Components Pty Ltd  FWC 1834 before the Fair Work Commission (FWC), it was found that an unskilled labourer was in reality a casual employee rather than an independent contractor, despite the fact that he had an ABN, issued invoices and was free to work for others.
What was the case about?
Mr Salim brought a general protections claim in the FWC alleging that he was employed as a casual employee and his dismissal had been in breach of the general protections provisions of the Fair Work Act.
A preliminary issue for the FWC to determine was whether he was an employee or (as the company he had been working for claimed), an independent contractor.
There was no written contract in place between the parties which meant the FWC had to look at the conduct of the parties to establish what the true nature of the relationship was.
What did the FWC find?
The FWC found that:
- Mr Salim was offered work on an “as needs” basis. There was no guarantee of work on any particular day. This practice could be consistent with either engagement on a casual basis or as an independent contractor.
- Mr Salim was paid $35 per hour worked, rather than by reference to producing a particular result. This suggested an employment rather than a contractor relationship. Although being paid in cash potentially breached other employment laws, this did not mean that he was not an employee.
- Mr Salim had (on one occasion) produced an invoice for work performed (which would suggest a contractor relationship), however this only occurred on one occasion and the invoice was produced at the direction of the company, it therefore added little weight to the argument he was a contractor.
- Mr Salim was not prevented from working for others. This practice could be consistent with either engagement on a casual basis or as an independent contractor.
- Mr Salim was not required to provide a warranty for his work or rectify any shortfalls in his own time. This factor was suggestive of an employment relationship.
- Mr Salim was not required to wear a uniform that might associate him with the company’s business. This factor was suggestive of a contractor relationship.
- Mr Salim was treated differently to the respondent’s employees, in that he was not provided with a uniform or PPE, did not receive pay slips and was not subject to the same payment procedures it applied to employees. These factors supported the view that Mr Salim was a contractor.
- Aside from referring to having an ABN when the parties first met and Mr Salim having a book containing invoice templates, there was no evidence consistent with Mr Salim operating his own business, such as marketing activities (for example, business cards or online activity) and relevant insurance.
- Mr Salim’s lack of skills pointed strongly towards him having been engaged as a casual labourer, true independent contractors generally being those who have a specific skill or specialism.
In light of all of the above the FWC determined that Mr Salim could not be regarded as a true independent contractor running his own business, but rather he was actually a casual employee working within the employer’s business. He was therefore eligible to bring a general protections claim in respect of his dismissal.
It is not clear whether the FWC would have made the same finding if Mr Salim had entered into a written contract whereby he had agreed to be engaged as an independent contractor. However, if the contract had been carefully crafted to include factors which pointed to a contractor rather than employee relationship, then the result may well have been different. Businesses are therefore well advised to review the ways they engage contractors and ensure they have appropriate contractual documentation in place.
Need further help?
If you need further assistance in understanding your obligations to contractors, determining whether a particular worker is an employee or contractor or in putting appropriate contracts in place, please contact EI Legal.