BlandsLaw - Blog posts from contractor vs employee
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Australia & the ‘Gig Economy’

In recent years, the popularity of online service apps such as Uber, Diliveroo and Foodora has skyrocketed and Australia has embraced the ‘gig economy’ with open arms. This new movement refers to environments where businesses or individuals contract with free agent workers (usually through an app-based platform) for short-term engagements. As a result, an increased number of workers are trading off the stability which traditional employment provides for flexibility and autonomy whereas others are simply keen to earn a little extra cash on the side.

However, workers can experience inconsistent hours of work, patchy cash flow and lack of entitlements such as paid sick leave, holidays, notice of termination and so on. Additionally, workers are expected to provide their own physical assets and are required to pay any maintenance costs out of their own pockets. There is also the question of who is responsible if something goes wrong. Issues have arisen regarding the legal implications of these kinds of arrangements including whether these workers are truly independent contractors or in

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Recognising a ‘sham’ contract

A sham contract refers to an agreement in which an employer attempts to disguise an employment relationship as an independent contractor arrangement. This is done with the intention ofavoiding paying employee entitlements such as superannuation, workers compensation, leave, and certain taxes. Doing this not only significantly reduces costs, but also eliminates an employer’s vicarious liability for the wrongdoing of itsemployees.

However, employers should think twice before presuming they have found a loophole in the system;these arrangements are punishable under the sham contracting provisions of the Fair Work Act 2009, and companies can face a hefty fine of up to $54,000 in the event of a breach. In addition, employers may also be liable for underpayment claims, payroll tax, superannuation payments and be exposed to unfair dismissal claims.

In a recent case heard by FWC[1], it was determined that a worker had access to unfair dismissal after it was found he wasmisrepresented as an independent contractor when in reality he was an employee.The FWC stated that the employer

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The Federal Circuit Court has imposed a record $238,920 penalty on a company providing an airport shuttle service from Newcastle to Sydney airport, for underpaying its drivers. 

Interestingly, the Fair Work investigation arose not from an employee complaint, but as part of a national compliance campaign focussed on sham contracting. The penalty imposed was made up partly of breaches relating to misrepresentation of employees as contractors, and partly for failing to meet award requirements.

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Employee or Independent Contractor? It's Not the Title That Counts

The recent case of Kuat Chee v Renown Business Solutions Pty Ltd [2012] FWA 5137 (9 July 2012)  addressed the difficult topic of when a contractor is truly a contractor, and when they are properly classified as an employee.

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