Are Your Staff Employees or Contractors?

Your Contracts May Not Work As Intended!

The following case summary is an excellent reminder that close attention to detail is extremely important when creating your employment contracts. If you intend to engage someone as an independent contractor rather than as an employee then the contract must be very clear.

In a recent case a man was hired as a financial consultant for a finance broking business. He was employed under a contract of employment headed “employment agreement ”. Within the contract of employment the man was referred to in some sections as a “contractor” but in others as an “employee”. His job description stated that the position held was a “Finance Consultant”. The contract also listed the businesses address as the man’s “place of employment” and specified that he had to work from 8.30am to 5.30pm. The employer and the man had a dispute about whether he was being paid the correct amount. The man sued the employer claiming the amount that he said he was underpaid, being partly unpaid salary and partly unpaid benefits.

The Court decided that, as the contract of employment required certain duties and imposed certain obligations normally only applicable to employees, he was entitled to all benefits associated with being an employee. The Court’s order shows what an expensive mistake this was because when the contract of employment was interpreted to mean that he was an employee rather than an independent contractor the company had to pay $27,000 of unpaid salary, $11,000 of unpaid sick leave, $11,000 of unpaid public holiday leave, $22,000 of unpaid annual leave, $11,000 of unpaid superannuation as well as fines of $1,980 for its failure to keep employment records and $1,100 for failure to issue pay slips.

This case proves how important it is for your business that you ensure you are aware of what your contracts really mean and that they operate the way you intend. If you think this issue might apply to your business please contact our office. We would be pleased to review your employment contracts and contractor agreements to provide you with peace of mind.