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Australia: Are Your Workers Employees or Contractors?

By - - Employment Law, Employment Status

In August 2024, the Fair Work Act 2009 (FWA) introduced section 15AA: a new multifactorial test to determine whether a worker is an employee or an independent contractor.

Two recent Fair Work Commission decisions offer early insight into how this test is being applied, with significant implications for Australian businesses.

The Test: Substance Over Labels

Section 15AA requires an assessment of the “real substance, practical reality and true nature” of the working relationship. This means that even if a contract labels someone as an independent contractor, they may still be deemed an employee if the actual working arrangement suggests otherwise.

Case 1: Dickerson v Kagura Games LLC

Despite being engaged as a contractor, Ms Dickerson was found to be an employee. Key factors included:

  • Kagura’s control over her work (e.g. mandatory reports, supervision, no delegation rights)
  • Lack of autonomy in work execution
  • Inability to subcontract

The Commission ruled her dismissal was unfair, highlighting the importance of process and valid reasoning in termination.

Case 2: Elezaj v Baldwin Living

In contrast, Ms Elezaj was deemed a genuine contractor. The Commission noted:

  • Baldwin Living had limited control over her work
  • Clients directed her duties and hours
  • She operated under an Australian Business Number (issued to businesses and sole traders operating in Australia) and invoiced for services

This distinction protected Baldwin Living from an unfair dismissal claim.

Commercial Impact for Employers

These cases underscore a critical shift: contractual labels alone won’t shield businesses from employment obligations. The Commission is scrutinising:

  • Degree of control over workers
  • Payment structures
  • Day-to-day working arrangements
Action for Employers
  • Review contractor arrangements to ensure they reflect the practical reality
  • Avoid “sham contracting” risks by aligning contracts with actual work practices
  • Implement fair dismissal procedures even for contractors, where ambiguity exists

Understanding and applying the multifactorial test is now essential to managing workforce risk and compliance under the FWA.

This is a high-level general update only. Legal advice should be obtained on specific circumstances.
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