What's in a Name? A closer look at the difference between “employees” and “independent contractors” Webinar to the Dietitians Association of Australia Rima Murray, Senior Associate Allens Tarsha Gavin, Associate Allens 11 June 2015

What we will cover Criteria to differentiate “independent contractor” from “employee” Implications for tax, leave and termination Raising disputes Restraints of trade

Employee vs Independent Contractor Contract of Service VS Contract for Services

Relevant Factors Does worker advertise own services? Does worker perform work for others? Regular wages / salary or pay at completion of task? Degree of control? Separate place of work? NB: no single determinative factor Term used to describe worker Ability to delegate / subcontract? Own equipment (e.g scales)/ own handouts? Expectation of ongoing work? Regular hours of work?

Employee Bears no financial risk Regular salary / wages Equipment / material usually provided by employer (or reimbursed) No inherent right to subcontract Regular salary / wages Performs work under direction and control of employer Ongoing expectation of work Prescribed hours / location

Independent Contractor Engaged for specific task High degree of discretion / flexibility / control Bears risk of loss / profit Provides own equipment / incurs expenses Paid for work completed / contract performed Ability to delegate / subcontract Likely to advertise services to public Sets own hours

Other key differences Independent Contractor Employee No paid leave No parental leave No redundancy pay Pays own superannuation* Pays own tax and GST Often own insurance * In some instances a company engaging an independent contractor may be required to pay superannuation on behalf of the independent contractor. Employee Paid leave Parental leave Redundancy pay Superannuation contributions paid by employer Income tax deducted by employer

Termination of relationship Independent Contractor: contract comes to an end; or in accordance with contract Employee: notice (except summary dismissal)

Causes of action Independent Contractor Employee Unfair Dismissal X (if termination at end of contract)  (if employee meets eligibility requirements) Adverse Action  Discrimination / Harassment Bullying

Sham Arrangements Employer must not: Misrepresent employment relationship as independent contractor relationship Dismiss / threaten to dismiss employee to re- engage as independent contractor Make false statements to persuade individual to enter into independent contracting relationship

Sham Arrangements Penalties Maximum penalty - $51,000 / contravention Injunctions Reinstatement / compensation

Disputes re classification ATO Fair Work Ombudsman Litigation (can sometimes be costly / lengthy) Backpay of annual leave/long service leave

Restraints of trade Can apply to both employees and independent contractors Unreasonable restraints unenforceable Must protect legitimate business interests Customer connections Confidential information Stable workforce

Types of restraints Non-competition provisions Non-solicitation provisions Non-dealing provisions

Enforceability of restraints Necessity Reasonableness: Activities Geographical reach Duration Certainty (not ambiguous) Opportunity to obtain legal advice

© 2015 Allens. Reproduced by Dietitians Association of Australia with the license of Allens. Allens is an independent partnership operating in alliance with Linklaters LLP. The information provided in this presentation is not intended to be comprehensive and does not constitute and must not be relied on as legal advice.