The prospect of workers engaged as independent contractors, claiming employee entitlements has been raised in the case of ACE Insurance Ltd v Trifunovski (2011) (No 1) 200 FCR 532 and ACE Insurance Ltd v Trifunovski [2012] (No 2) FCA 793. Five insurance agents found last year to be employees and not independent contractors, were recently awarded around half a million dollars in accrued annual and long-service leave, with one agent receiving $333,130.
First decision
In the first proceeding, the agents successfully claimed that they were employees, despite being engaged as independent contractors.This meant that they were entitled to outstanding annual and long-service leave payments. The factors which pointed towards a contracting arrangement included:
- each agent was paid commission on premiums they collected;
- no income was deducted from their earnings;
- the agents used their own vehicles;
- tax invoices were issued to the insurer;
- they had the ability to engage secretarial support; and
- the parties acknowledged it was not an employment relationship.
However, the Federal Court considered the following factors to be indicative of an employment relationship:
- the insurer gave the agents sales leads and training;
- the insurer encouraged the agents to behave as though they were part of the insurer’s organisation;
- the tax invoices were generated by the insurer and issued to itself;
- practically, the agents were unable to work for any other insurer;
- agents sold only the insurer’s policies to the insurer’s customers;
- agents were trained by the insurer in the business system designed and maintained by the insurer; and
- the agents accrued no goodwill in their own business.
The key reason for the finding that the agents were employees was that the Court found there was only one business being conducted, that of the insurer’s business.
Second decision
The Court ordered payment of $490,388 to the agents for unpaid annual and long-service leave.
Justice Perram also found that the agents were owed interest on those payments, calculated from when they each left the company.
Two separate penalties of $5,000 were imposed out of the maximum available of $33,000, treating the annual leave and long service leave breaches as two separate breaches.These were imposed ‘largely for general deterrence’ and not to punish the insurer’s conduct.
Payment of legal costs is yet to be determined.
What does this mean?
This decision demonstrates that even were a person is engaged as an independent contractor, and in some respects works as such, they may still be an employee at law.
This can have the following implications:
- entitlements to employment benefits under legislation (such as annual leave, long-service leave and sick leave);
- access to the unfair dismissal jurisdiction;
- obligation to insure under workers’ compensation legislation;
- breach of PAYG withholding laws; and
- vicarious liability for actions of the person.
How can we help?
We can review your independent contractor and employment arrangements to assist you in complying with your obligations.
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