Dismissing to engage as independent contractor

An employer must not dismiss, or threaten to dismiss, an individual who:

1. is an employee of the employer; and
2. performs particular work for the employer;

in order to engage the individual as an independent contractor to perform the same, or substantially the same, work under a contract for services.

An employer cannot dismiss an employee so that the former employee can be engaged as an independent contractor. For the protection to apply the dismissal must occur with the intent to subsequently re-engage the employee as if they were an independent contractor.[1]

Example

An employer must not dismiss their existing staff and make them get ABNs and operate as independent contractors to perform the same jobs because it will be cheaper for the employer.

There are no exceptions.

Employee dismissed to be engaged as independent contractor

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (No 2)

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (No 2) [2013] FCA 582 (14 June 2013).

The respondent provided serviced apartment accommodation and employed receptionists and various housekeepers. In 2009 it was determined that particular employees would be ‘converted’ to independent contractors and their employment terminated. Thereafter they would perform the same service for and under the control and direction of the respondent. The respondent entered into an agreement with Contracting Solutions to carry out this process.

The applicant argued that the employees had no real option but to participate in the process of conversion if they wanted to continue working with the respondent in the same capacity.

The Court considered that the workers concerned were talked into or persuaded to sign forms agreeing to become independent contractors, but, with one exception, not threatened with dismissal if they refused to do so.

The applicant succeeded on an allegation that the respondent threatened one of the employees with dismissal if she did not become an independent contractor.