Legal
Issue No. 2 - September/October 2001
employee or contractor?
by Michael Hegarty
This seems like a simple question, and is fundamental to the operation of a business, but there is not always an easy answer.
Whether you believe you are hiring an employee or using a contractor is largely irrelevant. An agreement between the parties as to the status of the worker is not conclusive either.
An employee is someone who works for an employer under a contract of service. This type of contract subjects the worker to the control of the employer.
A contractor, on the other hand, works under a contract for services. Contractors work under their own control. However, some legislation provides that certain persons are considered to be employees for the purpose of the particular Act. Further, changing circumstances can blur the distinction.
Take for example a contract to provide services at a principal's business premises. As part of that contract the contractor must comply with occupation health and various other issues of importance to the principal. The principal may dictate how the work is done, not just when and where. The contractor may face other restrictions and be required to comply with a myriad of other requests and directions. The contract work may take considerable time, requiring the contractor to be present over an extended period. The contractor might be asked to stay over after the initial work is completed and perform other work for the principal. These developments are a fact of life and require constant management and monitoring.
HOW CAN YOU DECIDE WHO IS A CONTRACTOR AND WHO IS REALLY AN EMPLOYEE?
There are several issues to consider:
- Who has control of the work? An employer has the right to direct not only what has to be done, but also how it is to be done. A principal in a contract only directs that the work be done. For example, a contractor may have the right to engage others to assist with the work.
- How has the person arranged their affairs? Are they really in business on the...
