Non-employees such as Independent Contractor
An independent contract is one whom contracts their labour to a business and would typically use their own equipment for a specified purpose, but they remain separate to the principal and are not strictly part of the business. This type of contract is a not a contract for service but a contract for the provision of a service.
As an independent contractor the individual has no recourse to legal remedies surrounding termination of employment. They do have some rights to ‘general protections” provisions in the FW Act.
It is critical therefore that the lines between an employee and a contractor are very distinct. It is generally given that the relationship between a contractor and a principal is intended to come to an end at the completion of a task. The contract would not have any provisions for annual leave, personal leave or compassionate leave or other statutory entitlements that an employer/employee relationship would include.
Considerations of whether the contractor is in fact an employee or not would include:
Tips for managing Independent Contractors
A contract with an Independent Contractor can end in a number of ways:
- because each party has fulfilled the obligations as per the contract
- by agreement of both parties
- by the operation of certain laws
- by breach of the contract by one party, which then alters the other party’s obligations as per the contract
- by “frustration” of the contract due to unforeseen circumstances. This occurs when through no fault of either party the contract becomes incapable of being performed satisfactorily
If there is a breach of contract, the affected party can choose either to treat the contract as still existing and hold the other party to their commitments as per the contract or treat the contract as being terminated. The affected party can then seek the following remedies from a court.
- Damages – this is likely to be the expected losses that the affected party would incur. The party affected must seek to minimise these costs by finding an alternative contractor or the contractor trying to secure another contract as quickly as possible
- Injunction – stops a party from committing an act or carrying out a particular course of conduct
- Specific performance – obtaining an order requiring a contractual party to perform its obligations as per the contract
- Declaration – is a proclamation from a court for the purposes of resolving a conflict. This option is discretionary
Workplace Rights Protections for Independent Contractors
These provisions as determined under FW Act prohibit a principal from taking ‘adverse action’ against an independent contractor on the basis of such rights. In addition the principal must not take adverse action:
A ‘workplace right’ is defined in S 342 as:
With regards to ‘adverse action’ and the action taken by a principal against an independent contractor:
With regard to ‘adverse action’ and the action taken by a principal against a prospective independent contractor:
‘Adverse action’ also includes threatening to take any of the above actions or organising such an action.
Labour Hire Workers
This category of workers covers those that are supplied through a labour hire agency to work for a client company, generally for short periods of time. The labour hire company may hire these workers either as casuals or as independent contractors operating under a contract. The benefit for a business in this situation is that they are not the employer of the work and therefore are not obligated for the usual range of employee benefits.
When terminating a labour hire worker it is important to understand the legal relationship, for if the worker is hired as an independent contractor, the contract can be terminated either at the fixed term date or at the completion of the project or task. If the worker is a casual who works for the labour hire firm they are the party to terminate the arrangement or dismiss the labour hire employee.
Typically volunteers are not employees. The reason for this is that in order for there to be an employer / employee relationship some form of ‘consideration’ is required such as wages or a salary before an employment contract will be taken to have been formed.
As volunteers are not deemed to be employees they do not have the usual statutory rights that employees being terminated do, however, they do have a the right to a safe place of work as H&S legislation covers all people in the workplace and this includes volunteers.
Each employment relationship carries different obligations and different rights for the employee. It is critical that you know and understand these differences and hire the correct type of worker for your needs.