How to Spot Employees, Independent Contractors, Roosters, Ducks and Elephants

John Wilson
Legal Director

Accredited Specialist in
Employment and Industrial Law

On 15 July 2011, proceedings covering the important distinction between employees and independent contractors ended with the discontinuance of an appeal by the employer.

The case was brought by a business, On Call, against the Commis-sioner of Taxation, seeking to challenge an assessment that On Call was liable to make superan-nuation contributions for more than 2,500 workers over a period of 5 years from 1 July 2002 to 30 June 2007.

The amount owing under the assessment was not quantified, but it can be assumed to be a substantial sum. The case demonstrates the importance for any business in correctly identifying whether the workers performing in the business are employees or else independent contractors.

It reaffirms the importance of the totality of the circumstances, and looking “beyond and beneath the documents”. This approach was described by an English Judge as “the elephant test” – an animal too difficult to define but easy to recognise when you see it; and an Australian Judge has said that the parties cannot create a working relationship “which has every feature of a rooster, but call it a duck.”

Successfully structuring a work relationship as independent contracting rather than employment may provide important benefits including avoiding the costs of complying with statutory requirements for pay and conditions, workers compensation levies, payroll tax, and superannuation contributions. Importantly, vicarious liability will result if the workers are classified in law as employees.

Read the rest of this article in our Employment newsletter.