Employ­ment law myth No.4: ​“If they’ve got an ABN, they’re an inde­pen­dent contractor”

A fre­quent area of con­fu­sion in employ­ment law is the use of inde­pen­dent con­trac­tors. In par­tic­u­lar, whether some­one engaged as a con­trac­tor would in real­i­ty be found to be an employ­ee at law. The con­fu­sion is under­stand­able – there are dif­fer­ent tests as to when a per­son is an ​“employ­ee” under var­i­ous dif­fer­ent bits of leg­is­la­tion. Giv­en that com­pa­nies can face sig­nif­i­cant finan­cial penal­ties if they wrong­ly clas­si­fy some­one as a con­trac­tor, the ques­tion is of fun­da­men­tal importance.

Many employ­ers are of the view that if an indi­vid­ual pro­vides them with an ABN this means the indi­vid­ual will auto­mat­i­cal­ly be deemed to be a con­trac­tor. This, how­ev­er, is not the case. Courts fre­quent­ly have found an employ­ment rela­tion­ship to exist where indi­vid­u­als have their own ABN. The approach the courts tend to take is to look at the rela­tion­ship as a whole to deter­mine the contractor/​employee conun­drum. Hav­ing an ABN is just one fac­tor that will be tak­en into account, but it will not be the end of the story. 

For any advice on using inde­pen­dent con­trac­tors, please con­tact: sro@​swaab.​com.​au or rbo@​swaab.​com.​au