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Engaging Independent Contractors

DO YOU NEED AN INDEPENDENT CONTRACTOR AGREEMENT?

The engagement of an independent contractor can be a "minefield" for the ill advised. Generally, the whole purpose of engaging an independent contractor is to have them conduct a specific task or purpose rather than entering into an employment relationship with them. Unfortunately, there are numerous cases where an independent contractor has ultimately been deemed to be an employee. Consequently, the party who engaged the independent contractor is then liable to pay employment entitlements, all because the correct advice was not sought prior to the commencement of the relationship.

The importance for businesses to obtain appropriate advice before engaging the services of an independent contractor is highlighted by the decision of the Honourable Justice Mordy Bromberg in On Call Interpreters & Translators Agency Pty Ltd v Commissioner of Taxation. In this case, Justice Bromberg found that thousands of interpreters who were employees of a company had wrongly been treated as independent contractors, and the company was thus liable to pay out five years' worth of employer contributions to superannuation for each of the affected employees.

Accordingly, we believe it is extremely important that all businesses ensure that their commercial arrangements are formalised appropriately to reduce the risk of an independent contractor being deemed to be an employee. There are various ways in which this can be achieved, the first step being the preparation of an independent contractor agreement.

Are Independent Contractor Agreements regulated?

The independent contractor relationship is subject to various regulations, such as the Independent Contractor's Act 2006 (Cth) ('the IC Act'), where one of the parties to the relationship is a Constitutional Corporation.

The IC Act protects the status of Independent Contractors and encourages independent contracting as a wholly legitimate form of work. In this regard, we note that the IC Act, like other Commonwealth legislation, seeks to override State laws and we therefore suggest you contact us for further advice if your business is not a constitutional corporation.

Pursuant to the provisions of the IC Act, the 3 elements of an independent contractor agreement (being a contract for service and not an employment contract) are:

1. where an independent contractor is a party; and
2. which relates to the performance of work by the independent contractor; and
3. has the requisite constitutional connection, (being, amongst other things, at least one party is a constitutional corporation)

Are Independent Contractor Agreements risk free?

The IC Act has also created a Federal unfair contracts jurisdiction for Independent Contractors. This part of the IC Act allows a party to a services contract to apply to the Federal Court of Australia or Federal Magistrates Court on the grounds that the contract is unfair and/or harsh. In reviewing such an application, the Court may have regard to the relative strengths of the bargaining positions of the parties, whether there was any undue influence, pressure or unfair tactics, and whether the total remuneration is likely to be less than that of an employee performing similar work.

Accordingly, to avoid the various pitfalls in engaging independent contractors, we recommend you consider purchasing our independent contractor agreement and any subsequent advice that may follow. Further information on whether the independent contractor agreement will suit your needs is available by clicking on the link below.

Engaging Employees Engaging Independent Contractors

Senior Employee Employment Agreement Full Time Employment Agreement Part Time Employment Agreement Casual Employment Agreement Senior/Middle Management/Exec Employment Agreement Independent Contractors Agreement

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