The multi-factor test for employees and contractors
When people think of work, they think of it as life’s only real guarantee. If a person wants money, they are going to have to work to obtain it, and because of this it is easy for people to just assume that each worker is the same and each worker has the same rights. This however is not the case, as evidenced by the Worker’s Compensation Act 1987. Under this Act, only those employed under a contract of service (employee) are covered by it, while those that are engaged under a contract for services (independent contractors) are not covered. Due to this difference, the important to understand the test that distinguishes the two groups.
The multi-factor test
The present test utilised by Australian courts is the multi-factor test. The multi-factor test consists of courts looking at the totality of the employment relationship to determine whether the worker is an employee or an independent contractor. Although there are many various factors taken into account, some prominent factors taken into account in the test are:
- Personal relationship – the relationship is such that the employee owes a duty of loyalty and fidelity towards the employer.
- Mutuality of obligation – this requirement is based on the premise that a contract of employment not only requires an exchange of work for wages but also mutual promises for future performance.
- Degree of control – detailed control over what and how a worker does something is a strong indicator that there is an employment relationship.
- Right to delegate or subcontract – an employment contract is an agreement to render personal services. If a person engages someone else to complete the work, it is a strong indicator they’re not an employee.
- Representation as apart of an employer’s business – work uniforms/badges with logos tend to suggest an employment relationship.
The list of factors could go on, but this gives an indication as to what the courts look to when determining whether an employment relationship exists.
It should be noted that the test does not require all these factors to be satisfied, but through looking at all these factors the court aims to “paint a picture” that establishes whether the worker is an employee or an independent contractor.
To help clarify this, it is important to look at previous cases that have utilised the multi-factor test, such as the one below.
Stevens v Brodribb Sawmilling Co Pty Ltd (1986)
- In this case, Brodribb was a saw milling company that hired contractors for three specific tasks; tree fellers, sniggers and truckers.
- The plaintiff (Roy Stevens) was a trucker who was working with a snigger (Stan Gray) to move logs.
- While Gray was loading logs, one dislodged and fell onto Stevens causing him severe injuries.
- Stevens as a result of the injuries attempted to obtain damages against Broribb as well as Gray.
Totality of the relationship between Brodribb and Stevens:
- Sniggers and Truckers used their own vehicles, set their own hours of work, and were paid according to the volume of timber delivered to the mill.
- Sniggers and truckers were not guaranteed work and were free to seek other work if weather and other circumstances prevented them from working at the sawmill.
- Brodribb had general supervision, but had no control over the manner in which sniggers and truckers carried out their tasks.
- Workers were also able to delegate work to others if they were unable to work.
- The whole court found that neither the snigger nor the trucker was an employee of the saw miller, so that Brodribb was neither vicariously liable for the snigger’s negligence nor personally liable to the trucker for breach of the duty of care owed by an employer to an employee.
- The whole court believed that the saw miller owed a general common law duty of care to the trucker, but it was not in breach of this duty.
- High Court agreed with this decision.
Through looking at the above case, we are able to understand how the multi-factor test is applied in the Australian legal system. In doing so, it makes it easier to distinguish between an employment relationship and contract for service. Through understanding this distinction, we are able to determine who may apply for workers compensation and who may not.
If you are an employee that has been injured during the course of your employment, you may be entitled to compensation. For more information, and to arrange a free, no-obligation assessment of your claim, please contact Stacks Goudkamp on 1800 25 1800, or alternatively, make an online enquiry.
Written by Michael Greene.
Michael Greene is a paralegal to Cali Baldwin and Sian Louise-Perez. Michael works on a variety of different compensation matters, including workers compensation claims, work injury damages claims, and motor vehicle accident claims.