In a recent unfair dismissal case that we were involved in, the Commission held that a person who had claimed to have been unfairly dismissed was by law considered a ‘contractor’and not an employee, and was therefore not entitled to protection under unfair dismissal laws – Daniel Alexander v Travel Industry Club (U2016/2544).

The Facts

1. The Employer operates a travel agency business;

2. Mr Alexander had his own company called Navigator Travel Management Pty Ltd (“Navigator”), and Mr Alexander was the sole director, shareholder and employee of Navigator;

3. Navigator had been contracting to the Employer from November 2013 under a comprehensive written Contractor Services Agreement, on a commission only basis, where the majority of the travel booking services were provided by Navigator remotely (i.e away from the Employer’s business location);

4. In September 2014, the Employer offered Mr Alexander full-time employment, to be based within the Employer’s office, on a salary plus commission basis;

5. Although Mr Alexander was interested in this offer, he indicated to the Employer that he wished to remain as a “contractor”;

6. Given Mr Alexander’s wish, from September 2014 the Employer continued to engage Navigator as a contractor, with the only differences being that Mr Alexander was mainly based in the Employer’s office, and the Employer paid Navigator an annual retainer plus commission, instead of commission only.

In May 2016, the Employer suspected that Mr Alexander was planning on diverting potential clients away from the Employer’s business to another competing business that he and his partner had set up.  After providing Mr Alexander with ample opportunities to respond to those allegations, the Employer terminated the Contractor Services Agreement between the Employer and Navigator.

Mr Alexander then filed an unfair dismissal application, claiming that from September 2014, he had been an employee of the Employer and that he was entitled to protection under unfair dismissal laws.  The Employer argued that it had only ever engaged Navigator under the Contractor Services Agreement to provide services to the Employer, and that Mr Alexander was an employee of his own company, being Navigator, and that he was not an employee of the Employer.

The Law

Section 382(a) of the Fair Work Act 2009 (Cth) provides that a person is protected from unfair dismissal if the person is an “employee”.  This provision makes it very clear that the individual who seeks the protection of unfair dismissal laws must be an EMPLOYEE, and not a contractor.

The Decision

The Commission held that Mr Alexander was NOT an employee of the Employer, and that Navigator was a contractor to the Employer, with Mr Alexander instead being an employee of his own company, Navigator.  The Commission took the following factors into account in making its decision:

• Although the Employer retained a level of control over the work performed, ‘even the most independent of independent contractors is subject to some direction in the performance of his work’;
• Mr Alexander was not required to work particular hours on particular days of the week, within reason given the annual retainer that was paid to Navigator.  However it was in Mr Alexander’s interests to do so as this was how he earned commission;
• Mr Alexander was able to undertake work for others, but was not able to take business from the Employer;
• There was evidence of at least one occasion whereby Mr Alexander advised a client of the Employer that Mr Alexander’s partner would assist with a booking;
• Mr Alexander’s had a signature block on his emails which indicated he was part of the Employer’s business, however, the evidence of the Employer that independent contractors are common in the travel industry negates the argument that clients, suppliers and the like would assume that Mr Alexander was an employee;
• No pay slips were issued to Mr Alexander, and he was paid after a ‘Recipient Created Tax Invoice’ had been generated by the Employer;
• All money was paid directly from the Employer to Navigator (and not to Mr Alexander), and no income tax was deducted from the monies paid to Navigator;
• No paid leave was provided to the Applicant, nor was any superannuation paid on behalf of Mr Alexander;
• There was a comprehensive written Contractor Services Agreement in place that clearly described the legal relationship between the parties.

Given the above, Mr Alexander’s unfair dismissal application was dismissed by the Commission.

When dealing with contractors that you engage or propose to engage, you should:

1. ensure that you plan all aspects of the arrangement between your business and the contractor;

2. have a detailed written contract in place; and

3. obtain advice from us where appropriate.