Independent Contractor Assessment

Commentary

Under the Closing Loopholes changes a definition of “employee” and “employer” for the first time has been inserted into the Fair Work Act. This new definition will applies from 26 August 2024.

Under this new definition, in order to determine whether a worker is an ‘employee’ (as opposed to an independent contractor) consideration must be given to:
•    the ‘real substance, practical reality and true nature of the relationship’; and
•    the whole relationship between the parties, including the terms of the contract and how the contract is performed in practice.

Critically, this means to determine whether a worker is an employee or an independent contractor, it will no longer be sufficient to simply look to the terms of the written contract. Instead what is required is an assessment of the totality of the relationship and other factors, including how the contract is actually being performed in practice.

Employers who utilise any independent contractors in their business should therefore consider reviewing their current arrangements to assess the likelihood that any contractors they engage may be considered ‘employees’ under the new definition from 26 August 2024.