Frequently asked questions
When does the legislation come into effect?
Who is an independent contractor?
Who is a ‘deemed’ employee?
What will I need to do if I am ‘deemed’ to be an employee under state or territory laws?
What if I no longer want to be ‘deemed’ an employee?
What happens to my employee entitlements if I am no longer ‘deemed’ to be an employee?
How will these laws protect employees from being sacked and then re-engaged as independent contractors?
What do I do if my employer threatens to sack me if I do not convert to an independent contractor to do the same job?
How are owner-drivers covered by the independent contractors laws?
What happens to contracted outworkers?
Will I still be covered by WorkCover if I am an independent contractor?
The laws came into effect on 1 March 2007.
You are likely to be covered if you are an independent contractor with a contract where:
- One of the parties is a constitutional corporation (this generally covers incorporated companies who have significant or substantial trading or financial activities)
- One of the parties is a federal government entity, or
- The contract was entered into, or will be performed in a territory (such as the Northern Territory or the ACT) or cone of the parties live in a territory.
The independent contractor laws use the same test as the courts to work out who is an employee and who is an independent contractor. Using this test, all of the circumstances of the working arrangement are taken into account to work out whether you are an independent contractor or an employee.
The test looks at a broad range of factors, such as the ability to control a worker, hiring, training, location of workplace, who supplies tools and equipment, etc.
A definition of who is an independent contractor is not included in the legislation as it would be less flexible than the common law test.
Under some state laws, workers have been prevented from becoming independent contractors. Instead, they are ‘deemed’ to be workers or employees even though they have been hired as independent contractors.
The Australian Government legislation will stop independent contractors being treated as employees under state laws. People will now be able to choose whether they want to work as an employee or an independent contractor.
People who are ‘deemed’ to be employees under state or territory laws workplace relations laws will have a three-year transitional period before they become ‘undeemed’, that is, become independent contractors. This means that they will continue to be covered by those state laws for up to three years from 1 March 2007.
Employees and employers covered by the transitional system may agree to become ‘undeemed’ before the end of the three year period. To do this they must both sign a written agreement that they no longer want state or territory laws to apply to their contract.
The transitional period will also not apply to workers who enter into new services contracts after the laws come into effect.
Independent contractors who are ‘deemed’ to be employees will need to get information on the different legal obligations that also apply to them, for example, different tax and superannuation arrangements.
At any time during the transitional period, you and your ‘employer’ may agree to opt-in to the new system. By opting in to the system, state ‘deeming’ laws will no longer apply and you will no longer be an employee. An agreement to opt-in to the federal system must be in writing and signed by both you and your employer.
Once you and your employer opt in to the new system, you cannot return to the state system. This means that once a worker has been ‘undeemed’, they cannot be 'deemed' to be an employee again.
What happens to my employee entitlements if I am no longer ‘deemed’ to be an employee?
You may be owed entitlements that you accrued as a ‘deemed’ employee. These entitlements are owed to you under state law and should be paid to you if you leave the transitional system and become an independent contractor. You will be able to pursue any unpaid employee entitlements under state law.
The new laws protect genuine employees from ‘sham’ contracting arrangements which are sometimes used by employers to avoid paying employee entitlements (e.g. annual leave).
A ‘sham’ contracting arrangement occurs when an employer deliberately disguises an employment relationship as an independent contracting arrangement when in fact that worker is an employee under workplace relations law and entitled to a range of entitlements.
Employees can also be pressured to become independent contractors by being threatened with the sack or being misled about the effect of changing their working arrangements.
The laws make it illegal for an employer to misrepresent an employment relationship, or employment offer, as an independent contracting arrangement.
It is also against the law to dismiss, or threaten to dismiss, an employee to re-hire them as an independent contractor to do much the same work.
It is illegal to knowingly make false statements to a current or former employee to persuade that person to become an independent contractor to perform much the same work.
An employer who behaves in this way can be fined up to $33 000.
The Office of Workplace Services and the Australian Building and Construction Commissioner have the power to prosecute employers who break this law.
You should immediately contact the Office of Workplace Services on 1300 724 200 or the Australian Building and Construction Commissioner on 1800 003 338 (if you work in the building and construction industry).
Independent contractor owner-drivers in NSW and Victoria are covered by special laws which, among other things, allow tribunals to set minimum rates of pay and settle disputes.
The Australian Government will review this issue with the aim of achieving nation-wide consistency in this area of regulation.
There are currently a range of protections available to outworkers in the textile, clothing and footwear industry, both at a federal and state level which apply to both employee and contract outworkers.
Those existing protections will continue to operate.
Examples of these laws include:
- laws for registration and record keeping requirements in the textile clothing and footwear industry
- laws regulating the giving out of work by those in the contracting chain
- industry codes of practice which apply to those in the textile, clothing and footwear industry (such as the New South Wales Ethical Clothing Trades Extended Responsibility Scheme).
The independent contractor laws will not affect the WorkCover laws. If you are ‘deemed’ to be an employee under workers’ compensation laws, or any other state law other than an industrial relations Act, that law will continue to operate.