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Foundations in Human Resources Law

Issue

  • Whether Mr. Locky Gilbert is considered as an employee of the Breezy Deliveries or an Independent contractor.
  • If he is working in the capacity of the employee then whether he is acting as a full time or part-time employee.
  • Whether Mr. Locky Gilbert falls under the definition of employee given under the Fair work Act 2009

Rule

  • Fair work Act 2009 (Cth)
  • Part 3, Section 6 Fair Work Regulation, 2009 (Cth)
  • 382 of the Fair work Act 2009 (Cth)
  • 365 of the Fair work Act 2009 (Cth)
  • Section 385 of the Fair work Act 2009 (Cth)
  • Sham Contracting Arrangement Division 6 of General Protection Benchbook. Fair Work Commission.

Application:

Understanding whether Locky is an Independent contractor or an employee is significant in specified deals. It can have tremendous ramifications and result in consequences for both the business and the individual so it the utmost importance to ensure the status of the legal relationship of the entity and individual. To check if the personnel is an Independent contractor or employee whether full time or part-time the emphasis should be given to the entire working course of action. A few components should be thought of, not simply the particulars of the business contract. The determination cannot be based on one factor.

Employees and independent contractors in Australia independently appreciate benefits, and owe obligations and liabilities that are remarkable. Independent contractors are, essentially, private ventures and in this manner they are not shielded from unfair dismissal[1], nor are they qualified for get work benefits gave under laws and other industrial awards, including yearly leave and superannuation. Furthermore, Entities that appointed independent contractors might be protected from public liabilities emerging from the lead of their contractors[2], guarantee their contractors for injuries resulted in the course of the employment[3] and have essentially decreased authoritative commitments comparable to mandatory filing, reporting and record keeping[4].For these reasons, along with expanding work costs, independent contracting plans are appealing to entities. The Australian regulatory bodies have adopted a strict approach towards independent contracting arrangements specifically in private sector[5] due to alarming increase in the rise of exploitation and irresponsible attitude of the entities.

The legal frame to differentiate employee from independent contractor.

  • The Basis of Difference by Following General Interpretation.

An employment contract is the basis of the relationship between employee and the employing entity, which sets out the basic terms like consideration to be paid, services to be provided.[6] In the current scenario Mr. Locky has not entered into any employment contract with the Breezy Deliveries. On the other hand, he is providing services to Breezy Deliveries for the benefits of his commercial enterprise. The person is said to be an independent contractor conduct business activities for providing services to other person or entity i.e. principal for the benefit of his own business enterprise.[7]

From the preliminary discussion on the generality of the case Mr. Locky can be considered as Independent Contractor.

  • The Basis of Differnce by Applying Legal Test

The legal definition of the term employment is not clearly mentioned in the statute which gives scope of the scope of interpreting by the common law on different cases and circumstances which adheres to establish vicarious liability in torts.[8] In order to determine the legal status of the individual, Multifactorial ‘totality’ test can be followed to indeterminate indicia of employment and contractor relationships[9].

Indicia of Employment Relationship discussing in the context of the given situation.

  1. The entity has a right to give direction to perform in a certain manner. In the current situation, the working scenario can be divide into two timelines. First where Locky has the authority to do work according to his routine plan and second whenBreezy Deliveries introduces a more systematic plan by applying a roaster that has strict working directions to be followed by Mr. Locky. This shows that Mr. Locky is working under the capacity of the employee.
  2. The Breezy deliveries prescribe the timeline and detailed prescriptions of deliveries i.e. how to perform and when to perform.
  3. The consideration is been paid on an hourly basis to Mr. Locky, not on a task basis. The remuneration is paid according to Minimum wages prescribed under the Act.
  4. The Breezy Deliveries reimbursing the repairs and maintenance expenses claimed by Locky for using his Personal Van for deliveries

Indicia of a Business

  1. Locky cannot avail of the benefits of paid leaves. There was no provision of paid leaves in the arrangement with Breezy Deliveries.
  2. Locky provides an invoice for payment on fortnightly basis and quotes an Australian Business Number ABN.
  3. Locky have the authority to appoint works of his own and provide compensation insurance.
  4. Locky do delivers by his personal car. No assets are been provided by Breezy Deliveries

In the given situation Mr. Locky is classed as a ‘contractor’ for taxation purposes, as he files tax returns as self-employed. This won’t necessarily conclude that he is an independent contractor at common law. Being a contractor for tax purposes might be a significant thought however, it doesn't decide a person's status as an employee or a contractor. Mr. Locky as an individual may be called a ‘contractor’ according to other federal and state laws. This doesn’t automatically make him an independent contractor. The person can’t be concluded as an independent contractor by merely possessing the Australian Business Number (ABN).

On the basis of the independency of work

Mr. Locky has not been involved in any other operation with other entities, though he has the option to work with different organizations due to a strict timing schedule he is solely providing services to Breezy Delivers. He doesn't have any rights to choose work to perform, he cannot refuse to perform any task assigned to him. There was a lack of independence. On the other hand, Independency is the basic characteristic of an Independent Contractor.

The applicability of "sham contracting arrangements" under The Fair Work Act. It is a situation where an independent contractor is been treated like the workers of the entity in an attempt to avoid the employee entitlements to be due to an employee. If the Employers practices such acts might end up in prosecution for tax evasion and may be penalized for disobeying superannuation laws and avoiding worker's compensation laws. In the current scenario, Breezy Deliveries have managed the Control over decision making regarding work routine, by providing a systematic roaster which is mandatory to be followed. In case of any exigencies, the person has to inform the supervisors in advance. The payment is on an hourly basis, not on task basis. The entity is also providing perquisites like regular health checkups, repairs, and maintenance expenses of vehicles. On the other hand, Mr. Locky has issues Invoice and Files Tax Return as Self Employed. From the above discussion it can be easily concluded that Breezy Deliveries has indulged in "sham contracting arrangements".

The penalty provisions under for the Sham Contracting Arrangement under the FW Act.

If the Employer makes any false representation that the workers are hired in the capacity of the Independent contractor and circumstantially they are been working as employees, in that case Company would be liable for the Penalty of up to $54,000 and $10,800. The penalties imposed included punishments for distorting work contracts as self-employed entity plans and for neglecting to meet award entitlements. The punishments penalties were notwithstanding the business qualification underpayments owed to the individual drivers.

Protection of the unfair dismissal regime under the FW Act.

 Mr. Locky was dismissed on the discretion of the employer not by breaching any terms of workman. He can take the protection under the provisions of Unfair Dismissal by exercising the common law right of the employee of providing reasonable notice for such dismissal. It is a Statutory Protection prescribed by the laws[11], dismissal on the based harsh, unjust, or unreasonable grounds[12]. Mr. Locky may plea for the remedy available for the unfair dismissal under this clause, as he has not served just and reasonable notice for his termination. For this Protection the Court must satisfy that Mr. Locky is working in the capacity of the Employee of the Company. An Independent Contractor cannot be considered as Employee under the FW Act, therefore, he cannot avail of this protection in the capacity of the Independent Contractor.

Conclusion

The Fair Work Ombudsman and the Courts have adopted a firm stance strategy to hoax contracting as of late because of foundational misuse of laborers by organizations over different enterprises, specifically, friendliness and the travel industry, assembling, farming, and showcasing. In the vast majority of these cases, the laborers have been unsophisticated, untalented, or semi-talented workers with almost no business information. In such cases, the Courts have held that it is exceptionally implausible that work being performed by workers could uphold a finding that they were leading business for themselves. So then again, people working in positions requiring authority aptitudes and capabilities, and appropriately drew in to perform explicit assignments for a charge, are undeniably bound to be held to be Independent Contractor.

The basic rule is: if there is any engagement just for the labor, then that is considered an employee rather than a contractor, from a tax point of view. This may sound simple, but in reality it quickly becomes quite complicated. Although some believe that possessing an ABN is enough to qualify as a contractor.

Despite the ongoing patterns, organizations should even now consider utilizing Independent Contractors as an alternative because of the adaptability and potential work costs reserve funds, especially in the long run. Nonetheless, organizations should be careful that it is beyond the jurisdiction to expect to dispose of all danger of a hostile conclusion of fraud contracting, and subsequently, they should look for lawful direction before engaging the workers as Independent contractors.

In the above case study Mr. Locky can be considered as Employee of the Breezy deliveries in the light of test discussed in detailed above. Breezy Deliveries holds the total control over the work routine by specifying what is to be done and how is to be done. They make workers follow the systematic roaster and have strict working hours. Further they paid workers Hourly basis. They also provides regular Health Checkups for the workers. All the mentioned factors indicates the Breezy Deliveries workers are working in the capacity employees but has been treated as Independent Contractor. The Breezy Delivers may have the Malice Intention to evade tax Liability. Further Breezy Deliveries have violated the Sham Contracting Arrangement given under the Fair Work Act. Mr. Locky may also take protection under the Provisions of Unfair dismissal of Fair Work Act.

The most significant issue to consider while involving with self-employed entities, is that the substance of the contracting relationship must mirror the character of a business relationship, thus the composed agreement, and everyday administration of the relationship must be organized appropriately.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help

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