17 May 2011
Independent Contractors – a practical test
Many employers have been perplexed about how to determine if an employment or independent contractor relationship exists. A case that was recently heard in the Federal Court looked into the ever
confusing world of independent contracting. The company, a translating company had treated their translators as independent contractors. They had relied upon information provided to them by the
Australian Tax Office in 1990 which stated that on the basis of the information provided by the company there did not appear to be an employment relationship and therefore the translators were
independent contractors.
However, more recently the Tax Commissioner decided the translators were casual employees and required the company to pay superannuation contributions for all staff on their
books until June 2007. This was a five year period at which time there were 2500 translators on their books. The company challenged the decision of the Tax Commissioner in the Federal Court
but Justice Bromberg found the translators did not own their own businesses and were not independent contractors but employees.
Justice Bromberg used the following test to determine if the translators were independent contractors
- is the person performing the work of an entrepreneur who owns and operates a business; and
- in performing the work, is that person working in and for that person’s business as a representative of that business and not of the business receiving the work?
“If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an
employee”, he said.
“The question which this approach poses appears to me to be the central question in the application of the totality test. The question provides the focal point around which the indicia thrown
up by the totality test may be examined”, he said.
The full decision can be found at:
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 (13 April 2011).