Independent Contractor V Employee Checklist

Below are a series of questions designed to prompt assessment of the relationship between Principals and Contractors, and the potential of that relationship being assessed at common law as an employment relationship. It is essential that organisations do not incorrectly identify employment relationships and commercial arrangements due to the obligations, risks and significant penalties that can apply both to inadvertent and deliberate incorrect arrangements being entered into. Due to the complexity of the law in this area, this checklist must only be used as a generic tool and must not be relied upon as advice as re the nature of the relationship. Where there is any doubt about the question posed, the answer provided or relationship in general, it is strongly recommended that the organisation seek specific advice prior to entering into any arrangement with the Principal/Contractor.

“Principal” means the company (the client) engaging the services of the Contractor.

“Contractor” means the independent contractor providing the services to the Principal.

Is there a formal written agreement in place?

Yes - consider compulsory questions with reference to agreement.

No - complete checklist based on facts our and recommendation is that a formal agreement be prepared if you are intending to engage as an independent contractor.

Have a read of the key obligations and complexities that determine the factors within this issue in the Contractors v Employees: Under the spotlight blog article.

If there are any answers in the No box, there is a risk that the relationship is likely to be one of employment. Advice should be sought if you wish to engage the person as an independent contractor.

Where factors are present but not included in formal agreement, our recommendations is that you seek to update accordingly.

If there are answers in the No box, specific advice should be sought prior to engaging the person as an independent contractor.

If it is deemed that the Contractor is an independent contractor, this document should be retained with the signed contract. Where there is ambiguity/uncertainty based on the contract, our recommendation is that the contract is reviewed and updated to be clear and specific.

Note: It is unlawful under the Independent Contractors Act 2006 and the Fair Work Act 2009 for a business to enter into a commercial arrangement with a contractor with the intention of avoiding an employment relationship, or to misrepresent an employment relationship as a contractor relationship. Additionally, it is also unlawful to dismiss an employee with the intention of re-engaging that person as an independent contractor. For the above reasons it is strongly recommended that where the parties to the relationship are uncertain as to the true nature of the relationship pursuant to the applicable laws, specific advice should be sought.

Disclaimer:
The information provided in this information sheet does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.