Written contractual terms can be the difference in a worker being considered an employee or a sub-contractor. And the difference goes beyond job title.

It can even impact who is entitled to be paid superannuation.

The High Court has made two decisions around when workers are considered contractors, and when they are employees.

The court found a young man employed by a labour hire company in Perth as an “independent contractor”, was in fact, an employee, as his contract did not allow him to work anywhere else.

MORE FROM MEA

• How to attract customers with Google My Business
• Death and injuries from falling from heights
• Fair Work FAQ: What electrical contractors need to know

Meanwhile the court found two long-term truck drivers who, in the 80s, agreed to buy their trucks from their employer and work as contractors but for years only worked for that employer, were in fact contractors.

The court found as their contracts did not prevent them from carrying out work for other companies, even though they did not, they were considered contractors.

Read more about these decisions here.

What do these decisions mean about contracts?

These decisions have highlighted that contractual terms are key to determining an employees status.

The two truck drivers worked exclusively for one company and worked regular hours. But as their contract did not prevent them from taking their services to other companies, they were still considered contractors.

But the Perth labourer was considered an employee, despite his job title of “contractor”, as his contract prevented him from working anywhere else.

How do they impact your business?

These decisions highlight how important it is to have clearly worded and understood contracts. A key element in determining if a worker is considered an employee or a contractor is determined by the ‘control test’.

Under the test, if the employer controls what, when, how and where the worker works, then that person is likely considered an employee. These cases highlight that genuine subcontracting arrangements must be underpinned by appropriate written subcontracting terms. These will be critical in the assessment of that subcontracting status.

Who gets paid superannuation? 

If a person is considered an employee they are entitled to superannuation. Establishing if a person is an employee depends on a number of key factors in a contract. There is no single contractual element that determines if they are an employee or not.

Importantly for the contracting industry, a person who works under a contract that is wholly or principally for the labour of the person (that is, more than 51 per cent for labour) is entitled to superannuation.

Under the Superannuation Guarantee (Administration) Act (SGAA) employers are required to make superannuation contributions to eligible employees.

If you have questions about contracts, sub-contracts, or other employment issues, Master Electricians can call the MEA Employer Advice hotline for free on 1300 889 198.