There are a number of different tests adopted by the Australian Courts and Commissions to determine whether a relationship is an independent contracting arrangement or in fact an employment relationship.

Most recently, the approach has been to adopt a multiple indicia test, which incorporates tests previously used and looks to various factors to determine the true nature of the relationship.

Some of the factors which are taken into account when determining the nature of the relationship include:

• Does the head contractor exercise or have the right to exercise control over the manner in which work is to be performed, including place and hours of work? (the “Control Test”)
• Is the worker presented to the world at large as an emanation of the business (that is, works at the head contractors premises, is branded with the head contractor’s logos on vehicles and uniforms etc)? (the “Integration Test”)
• Is the worker engaged as an individual, or is the contract with a company, partnership or trust and payments made to that company, partnership or trust for services?
• Is payment based on an outcome or predetermined result?
• Does the head contractor pay on invoice only or by submission of a timesheet?
• Who provides the equipment, tools of trade, plant or vehicles required to complete the contracted work?
• Who is liable for the costs of rectifying defective work?
• Does the agreement require the worker to exclusively work for the head contractor?
• Who is responsible for income tax and insurance?
• Does the worker carry the risk of loss or have the opportunity to profit from undertaking the work?
• Does the agreement provide for annual leave or personal leave?
• Can the head contractor suspend or dismiss the worker?

Importantly, the basis upon which an independent contractor relationship is defined varies to some degree between various statutory authorities. It is therefore integral that each proposed arrangement is firstly carefully assessed to determine the true nature of the engagement, and secondly, the agreement is properly documented to ensure that the true nature of the engagement is recognised.

Much of the grey area, and resultant dispute, surrounding independent contracting arises from not only the failure to understand the true indicia of an independent contracting arrangement, but also the failure to properly document the agreed terms.

As the law in the area of independent contracting is complex and broad, it is integral that all necessary indicia of an independent contracting arrangement are properly documented. In doing so, the parties are also mitigating the risk for dispute during the course of the arrangement. A considered, clearly drafted contract provides parties with clear parameters for the performance of the contracted services and ensures that each party’s expectation is understood, thereby preventing misunderstanding.

Quite apart from addressing the indicia which determines whether the arrangement is in fact an independent contracting arrangement, it is also integral that an independent contract agreement contains common terms of an arm’s length commercial contract such as:

• A clear and reasonable dispute resolution process;
• Intellectual property rights;
• Means by which the contract can be terminated; and
• Any confidentiality obligations.