The Fair Work Commission (FWC) recently dealt with a case involving an employee who claimed unfair dismissal by her employer. The employee, who performed her duties remotely out of the Philippines, asserted that despite being labelled as an independent contractor, the nature of her work and the level of control exercised by her employer indicated an employment relationship.
Employee argues employment relationship
The employee performed paralegal work for a law firm which specialises in credit repair services in Australia. She worked remotely from the Philippines under a contract with an entity related to the law firm, where the work involved legal research, drafting documents, case preparation, and client communication.
The employee used a phone system that made it appear she was calling from the law firm’s office in Australia, and she had an email address with the business’s domain name.
The employer argued against the unfair dismissal application, saying that the employee was an independent contractor, leading to an examination of the working relationship, focusing on the terms of their written contract.
FWC looks at the true nature of the relationship
The FWC said that the true nature of the relationship must be determined by the rights and duties created by the contract, not by how the parties labelled their arrangement or behaved afterwards. While the contract was titled “Independent Contractor’s Agreement,” it also referred to the worker as an “employee” in some sections which the FWC deemed as inconsistent.
The FWC looked at various aspects of the contract, including the nature of the work, pay, and level of control exercised by the employer. Additionally, that paralegal duties were not considered to involve a distinct profession or trade, which is often associated with independent contracting.
The contract also required the employee to be available to perform the work personally, with the FWC noting that the right to have a particular person do the work indicates a contract of service rather than a contract for services.
The pay structure also raised questions with the contract specifying an hourly rate that was described as “Salary all-inclusive as a Full Time Employee,” which the FWC viewed as more consistent with employment than independent contracting.
Employer’s control over the remote employee
The level of control exercised by the employer was a significant factor in the FWC’s decision. The contract required the worker to follow daily instructions and meet specific key performance indicators.
The FWC also considered whether the worker was operating her own business or was integrated into the employer’s business. The use of the employer’s email address and phone system for client communication indicated integration into the employer’s business.
Findings
After considering all factors, the FWC decided that the relationship was one of employment and not independent contracting, stating that the employee was not conducting her own business. Key factors included the fact that the employee was paid an hourly rate of pay that was described as a salary as a full-time employee, took daily instruction as to the work to be performed, and was to be supervised in performing the work.
The FWC emphasised that the substance of the relationship matters more than how it is labelled, and that the description of the arrangement as an independent contractor contradicted the actual nature of the contract.
This case highlights the importance for employers to consider the true nature of their working arrangements, regardless of how they are labelled. It shows the factors involved in determining employment status in modern workplaces, particularly when dealing with remote and international workers.
Have independent contractors and need assistance understanding your obligations as an employer? Get in touch with our team today – we can help!
Find our articles helpful? Remember to follow us on Facebook, Instagram or LinkedIn to keep up to date with our practical tips and information for business owners and managers.