Contractor Or Employee?— High Court of Australia Reinforces The Importance Of Proper Description

Many employers consider altering the contractual arrangements for their workers so that the workers become independent contractors rather than employees. Such an arrangement can provide benefits and flexibility to both the company and the workers, but can also be used improperly to reduce employee rights below minimum standards. The Fair Work Act contains penalties for improper use of independent contracting (the “Sham Contracting” provisions—there are prohibitions on misrepresenting employment as an independent contracting arrangement, dismissing an employee in order to engage them as an independent contractor, and on making misleading statements to encourage employees to become contractors). The recent High Court decision in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd on 2 December 2015 is a stark reminder that all employers need to carefully consider the nature of the relationship with their workers, and to accurately describe that relationship, even where the workers may be engaged through a third party.

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