“The parties cannot create something which has every feature of a rooster but call it a duck and insist that everyone else recognise it as a duck.”
That was the observation made by the Federal Court of Australia in relation to the test that is applied to determine whether a worker is an employee or a contractor.
Whilst the contract may describe the relationship between the parties, it is not determinative. The courts will look at the totality of the relationship and employ what has been hailed the “duck test”.
Head of Australian law firm Lander & Rogers' workplace relations and safety group, Andrew Farr, warns employers to ensure their contracts properly reflect the nature of the relationship with a worker.
"An independent contractor who looks like an employee or is treated like an employee, may well be an employee. Making this mistake can be very expensive to businesses," said Farr.
"In sectors where there is traditionally a lot of fluidity between employee and independent contractor status, such as sports and event administration, it is especially important to review existing contractor arrangements and ensure any new arrangements are analysed and evaluated with the duck test in mind."
In addition to legal costs, a finding that your independent contractor is in fact an employee can leave businesses liable for employee entitlements including annual leave, long service leave, superannuation, workers compensation and payroll tax.
Worse still, from a reputational perspective, a penalty under the Fair Work Act may also apply.