LawTalk Blog

In employment law what is an independent contractor?

employment law employee or contractor

A few years before the Fair Work Act 2009 (Cth) came into effect, Federal legislation was passed to regulate an increasing category of workers - independent contractors.

Over the past few years, independent contractors have been in the spotlight with the potential for exploitation and unfair contracts. This has resulted in the introduction of the Independent Contractors Act 2006 (Cth) ("IC Act"). This has been subsequently supplemented further by the sham contracting provisions in the Fair Work Act 2009(Cth).

The IC Act also regulates genuinely independent contracting relationships and recognises that, when such a relationship is entered into appropriately, it can be a legitimate relationship between two parties.

The IC Act is a Commonwealth Act whereby a person can seek a review of their contract for services (opposed to a contract specifying the services you must provide, which denotes an employment relationship) on the grounds that the contract is harsh or unfair. The application for review must be filed in the Federal Magistrates Court of the Federal Court of Australia within twelve months of the date upon which the contract ends.

The IC Act is fairly limited in scope as to what it can take into account. A contract may be determined as being harsh or unfair by taking into account the terms when the contract was made and other relevant matters in existence at the time the contract was made.

The IC Act defines "unfairness grounds" to include whether a contract is:

  • unfair;
  • harsh or unconscionable;
  • unjust;
  • against public interest;
  • designed to avoid obligations pursuant to the Fair Work Act 2009 or a state or territory law; and
  • providing remuneration that is less than if the person had been an employee.

In the Court's assessment of whether the contract is harsh or unfair the Court will consider:

  • the bargaining position of each party;
  • if undue influence or pressure or unfair tactics were used against a party to the contract;
  • whether the total amount of remuneration is likely to be less than an employee who would perform the same work; and
  • any other matter the Court sees as relevant.

It is important to note that there is very limited case law on how the IC Act will determine unfairness or harshness. Given the limited case law on the IC Act, the case law on the former provisions in the Workplace Relations Act 1996 are useful.

Examples of undue influence or unfair tactics include:

  • misleading or deceptive representations;
  • promises which are not honoured;
  • misrepresentations as to the nature of the contract, for example stating that training was to be provided when this wasn't the case.

In considering the definition of "unfair" and "harsh" Munro J stated in Re Transport Workers Union of Australian (1993) 50 IR 171 at 214:

"It is both well established and widely recognised that industrial tribunals have avoided rigidity in defining terms such as 'unfair' and 'harsh'. Those words are not terms of art. They should be understood by a common sense approach as words in common usage with no special technical meaning."

In Keldote Pty Ltd and Ors v Riteway Transport Pty Ltd (2009) 185 IR 155  it was held that a clause requiring long haul truck drivers to bear the costs of expensive upgrades but were precluded from being able to renegotiate their rates was unfair.

The provisions of the IC Act, in our view, are yet to be fully realised. In our experience we would ordinarily utilise the provisions of the Fair Work Act (Cth).

If you believe you may be working under an unfair independent contract, it's important that you seek experienced employment law advice.  

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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