Fair Work Commission’s Decision Prompts Businesses to Check Their Arrangements

Fair Work Commission’s Decision Prompts Businesses to Check Their Arrangements

The Fair Work Commission’s recent decision of Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 highlights the importance of classifying workers correctly.  In that case, it was found a Deliveroo rider was an employee under the Fair Work Act 2009 (Cth) rather than an independent contractor. While there were several factors indicative of an independent contractor relationship, the Commission ultimately held that Mr Franco was, in fact, an employee.

Accordingly, businesses that engage independent contractors should review their arrangements carefully. While no single factor will define a relationship as one of employment or independent contracting, the Courts may determine a person is a genuine independent contractor taking into consideration:

  1. the contractor maintains a high level of flexibility as to how the work is to be performed;
  2. the contractor has the capacity to set their own hours;
  3. the contractor negotiates their own fees;
  4. the contractor is required to account for their own taxation, insurance cover and tools and equipment;
  5. the contractor is required to invoice from all work performed;
  6. the contactor has no leave entitlements or employment incentives from the business.

 

Implications

If a worker is incorrectly classified as an independent contractor when the true nature of the relationship is that of an employee, an employer could be liable to pay the full range of employment benefits owed to an employee.  For example, they may be ordered to comply with modern award entitlements, overtime, accrued leave entitlements, payroll tax and superannuation, etc. The Company may also need to consider workers’ compensation obligations and recognise unfair dismissal and general protections claims rights. These actions may be brought against the business by the worker or, alternatively, a relevant authority such as the Fair Work Ombudsman.

The employer may also be subject to penalties for sham contracting.  This arrangement arises when an employer knowingly or recklessly disguises an employment relationship as an independent contractor arrangement to avoid responsibility for paying legal entitlements to employees.

Importantly, these penalties may be imposed even where there are some factors indicating the worker was treated like an independent contractor (for example, the worker may have been required to have an ABN and submit invoices like a genuine independent contractor would). Penalties for sham contracting can be imposed by the courts. The maximum penalty is $13,320 for individuals and $66,600 for corporations, per contravention.

 

Contact our team at HR Business Assist on 1300 138 551 for information about our Employee vs. Contractor Guide.

To read the full Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 case click – here.

Disclaimer:  This article is factually accurate at the time of publication. However, we recommend that you seek specific advice to ensure that you act upon applicable and up-to-date information.

 

HR Business Assist | P 1300 138 551 | E info@hrbusinessassist.com.au

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