The Gig Economy is fast growing. It seeks to alter the traditional commercial relationship between employer and employee. It is based on workers performing flexible, contractor or freelance jobs which often involve connecting with a company’s customers through an online platform or software application.
The Gig Economy can benefit workers, business and customers alike by making work more adaptable to the needs of the moment and demand for flexible lifestyles. At the same time; however, the Gig Economy can have downsides due to the erosion of traditional employment relationships between the workers and the companies themselves.
In the Gig Economy the lines between the employer and employee on the one hand, and perceived employer and independent contractor on the other, are blurred and can be difficult to ascertain. For instance, many workers in the Gig Economy think they are an employee of the company. They are performing tasks for a brand or company so they must be employed by them, right?
The tech platform providers in the Gig Economy often beg to differ. Many don’t consider it a traditional employee/employer relationship. From their perspective the workers are not “hired” as employees but are merely granted permission to use their software application to perform tasks for their own separate and independent business.
In Australia, the law is not clear cut on this issue. There have been instances where gig workers have been found to be employees and other instances where gig workers have found to be independent contractors.
When an employee is not an Employee
Determining whether a worker is an employee or a contractor must be ascertained on a case by case basis.
Not sure whether your worker is an employee or a contractor? Applying this test can help.
If your answer is “yes” to one or more of these questions, your worker is more likely to be an employee:
Is the worker paid by the hour rather than paid for their results? For instance, are they paid based on the number of pizzas delivered or are they paid by the hour? A person paid by the hour is more employee-like.
Does the company control the worker’s work and to what extent? Who determines start and finish times, is training provided, do they have to meet company guidelines? The more company control over the worker’s tasks, the more it becomes an employee/employer relationship.
Does the worker wear a uniform or drive a vehicle with the company logo? Even inadvertently promoting the company brand may be seen as more employee-like.
Does the company provide the worker with materials and equipment? Who provides the vehicle involved? Who provides the software, mobile phone and even the customers so that work can be performed? Worker’s that have to provide their own materials and equipment are often seen to be more contractor-like.
Does the company pay for mistakes made by the worker? If the worker botches a job and drops your pizza on your front lawn, are they personally liable? A Contractor will normally pay financially for their mistakes.
But that is not of itself definitive. Worker compensation laws may also deem the worker to be an employee for the purposes of workplace compensation in certain circumstances.
There are three possibilities:
1. The facts establish that the person is an employee, not an independent contractor and there is therefore an employer/employee relationship.
2. The facts do not establish an employer/employee relationship, but worker compensation laws deem there to be an employer/employee relationship.
3. The facts do not establish an employer/employee relationship and there are no applicable worker compensation laws which deem there to be an employer/employee relationship.
When an injury occurs while working
Knowing whether the worker is an employee or an independent contractor in the eyes of the law takes on greater significance when a worker is injured at work. Who is liable for workers compensation payments – the worker or the tech platform provider as their perceived employer?
Tech platform providers often encourage workers to take out their own workers compensation insurance for this very purpose. From where they sit, they see the worker as an independent business owner who needs to cover themselves for any medical expenses or lost time incurred when injured on the job.
But this does not always mean a worker is ultimately liable and not entitled to workers compensation payments.
There are many variables that need to be ascertained and proven in determining whether a worker is considered to be an employee of the company or an independent contractor and responsible for their own workers compensation insurance.
The Clarity Solution
Clarity Workplace Solutions conducts Factual Investigations to clarify the legal status of a worker and determine whether they are independent contractors or employees at law or in accordance with workers compensation legislation*. This information is essential in conducting contractor claim investigations.
We help workers compensation insurance companies determine if an injured worker is in fact deemed to be an employee or a contractor.
Do you know if you have hired a contactor or an employee? Here’s how Clarity can help.
You don’t need to be a large multinational to be subjected to a contractor claim investigation. You might have contractors in your small business who see themselves as employees.
Are you prepared for any possible workers compensation claims?
This can be daunting for any small business owner, but you don’t need to know the intricacies of workers compensation legislation to save time. Preparation is key.
Contractor claim investigations can be a detailed process. Our investigators know this is a difficult time for business owners. Therefore, making sure you’re well informed and comfortable is our primary goal. When briefing an owner on how best to prepare, we encourage them to consider the following prior to our claim investigation:
- The 80% services and income test. A worker who earns more than 80% of their income from the one provider may be deemed an employee. Documentation here is paramount. Providing the worker’s full remuneration records is required – invoices, payslips. Is there any documentary evidence of them earning income from any other third parties? Are taxation records available?
- Sub-Contractor work. Is there documentary proof of sub-contractor work performed? If the worker performs more than 80% of the work himself (rather than by his “sub-contractors”) he may be deemed an employee.
- Is there a written agreement between the worker and the company? Is the agreement an Employment Agreement or Contractor Agreement? Are the terms of the agreement outlined in the document? Does it outline the terms in relation to Payment, Control, Advertising, Equipment, Rectification?
Organisations who have a good understanding of the terms of their staff’s agreements can save valuable time in the investigation process.
For advice tailored to your particular employment situation, please contact our expert team at Clarity Workplace Solutions on 03 9938 7007.
Factual Portfolio Manager
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If you’re confused by the blurred lines which determine employment relationships, you’re in good company.
This case in point highlights the difficulty and necessity to get the facts and get it right. Recently the Federal Government, the Federal Court and the High Court of Australia disagreed on the employment benefits to which casual and permanent employees are entitled:
- In May 2020 the Federal Court ruled that casual employees were entitled to the same benefits (holiday pay etc) that permanent employees enjoy. The Court ruled casual employees were entitled to back-paid annual leave and the like.
- Employer groups feared that this decision exposed businesses to a back pay bill of up to $8 billion.
- In response Federal Industrial Relations Minister, Christian Porter amended the Fair Work Act effectively nullifying the decision of the Federal Court.
- On 4 August 2021 the High Court in the WorkPac Pty Ltd v Rossato  matter overturned the Federal Court’s decision.
*Workplace Injury Rehabilitation and Compensation Act 2013