Queensland University of technology | Employee-Contractor Case Study | By Monil Mehta | | Word Count: 1450 | 8/21/2014 | n8911941

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1.0 Introduction
The main purpose of this report is to distinguish and provide evidence to the fact that Anne Parish, a former employee at Ace Accident Insurance in Cairns was treated unfair by her former employer. In employment relations all employees should be treated and remunerated fairly, irrespective of them being an independent contractor or an employee (Fair Work Act, 2009).
In this report it shall be determined whether Anne Parish was an employee or an independent contractor to Ace Insurance Co. using the multi-factor test. Further it shall also be argued upon whether Anne was dealt fairly or not. 2.0 The Multi- Factor Test
The Multi- Factor test is important because it determines the entitlements for a worker as an independent contractor or an employee. The test started to be used by the legislature and federal courts from 1990’s to determine and decide upon, if an individual or group of individuals is an employee or a contractor (Stewart, 2009).
The multi-factor test takes into account certain criteria’s and facts to determine whether a person is an Employee or Independent contractor . This facts fall into 3 main category namely behavioral control, financial control and type of relationship (Megerdomian, n.d). Behavioral control relate to the amount and nature of control exercised by the employer on worker. Financial control involves the type of remuneration and investments by either party. And the type of relationship is determined by factors such as delegation of work and reporting relationships between the parties.
3.0 Anne Parish’s Case
Below is the application of the common law test on Anne Parish’s case to determine whether she is a contractor or an employee.

Summary of common law test* | Factor | Indicative of employment | Indicative of independent contracting | Do you have control over the way you perform a task? | | Yes | Do you supply or maintain your tools or equipment? | | Yes | Do you work standard hours? | | No | Are you paid according to task completion, rather than receiving wages based on time worked? | | Yes | Do you incur any loss or receive any profit from the job | | Yes | Do you accept responsibility for any defective or remedial work that was your doing? | | Yes | Are you free to work for others at the same time? | No | | Do you accept that work lasts for the term of each particular task or contract? | No | | Do you have the right to employ or subcontract any aspect of your work to another person? | No | | Do you have the right to employ an apprentice or trainee in the execution of contracts? | No | | Do you understand the arrangement as a contract for services? | | Yes | Is tax deducted by your hirer from your pay? | | No | Do you provide your own public liability and sickness and accident Insurance Cover | | Yes | Do you receive paid holidays or sick leave? | | No | Do you render tax invoices for payment? | | Yes | Do you file GST returns? | | Yes |
Source: Australian Business Lawyers & Advisors, 2011
Summing up the common law test Anne has a contract for service, which makes her an independent contractor. Anne Parish had signed a contract for employment with Ace Insurance Company which stated her duties and responsibilities as a contractor. She was paid on a commission basis only on every policy sold. Anne was also insistent of the fact that she won’t go to the office on a daily basis as she was self-employed. She controlled her remuneration and had her own transport. All of these points suggest that Anne had been a contractor to Ace Accident Company.
The multi-factor test is not always accurate and depending from case to case it shall be determined and different indicia should be valued differently upon different situations. 3.0 Argument for Anne Perish Being a Contractor
In Anne Parish’s case taking into consideration all the factors of the employability test it is revealed that she has a contract for service, only for which she is remunerated. Therefore she is considered as an independent contractor. But there are many criteria’s such as tax cut, reporting relationship and liability of sick leave on Anne which indicates her an employee as well. 4.1 Duties Performed and Control
The amount of input put and the reporting relationship between Anne and Ace Accident Company is evident to Anne being performing duties as like the employees of a company. Anne had to provide a report on a daily basis about her productivity and efforts put to sell policies. Although being an independent contractor she had no legal obligations to establish reporting relationship: Zuijs v Wirth Bros Pty Ltd. (1955). She was subjected on not submitting the daily reports on being sick for which she had to provide a medical certificate as an evidence, which shows an employee and employer relationship as well (Egan, 2008)
Ace Accident Company also provided Anne with relevant formulae’s, forms and programs necessary to write policies for clients, suggestive of a direct control and therefore Anne using material provided by the company which is indicative of employement: Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd (1924) 4.2 Taxation
In the context of the Case Study it is clearly mentioned that Ace Accident Company used to deduct the tax from the commissions earned by their workers and kept in a bank account for sales person. While an independent contractor pays his own tax and the employer cannot cut their tax from their income (Independent Contractor, n.d). Further the amount of tax cut from Anne’s income was not paid by Ace Accident Company claiming it to cover their expenses incurred upon Anne’s training. This is also stated to be unethical along with against the rights of an employee or a contractor (Fair Work Act, 2009). 4.3 Contract
The contract of employment clearly stated of Anne being an independent contractor and was self-employed. Since this was the case she didn’t have to account for breaking the contract which clearly states her as a contractor. Further it was no where mentioned in the contract if she is liable for any liabilities to the company. If she would have a contract of service, in which case she could be considered as an employee for Ace Accident Insurance, she is liable for the loss of the firm. Further she had to notify the Company in advance to leave the job, but this was not the case. 4.0 Anne as an Employee
After discussing the above factors which clearly states Anne’s role as an employee and proves she had an contract of service it is evident from the argument that: * Remuneration in form of wages at an initial stage and commission as a form of income can be considered to be under a contract of employment as Ace Accident Company considers Anne’s action as a breach of contract and refused to pay her the money she owed them when she resigned the job: Commissioner of Pay-Roll Tax (Vic) v Mary Kay Cosmetics Pty Ltd (1982). * Dismissal for misconduct is also indicative of employment relations (Sappey, R., Burgess, J., Lyons, M., & Buultjens, J, 2009). Anne had to pass certain tests which allowed her to get the job. Moreover she was also answerable for not making reports when she was sick. She was called by the Manager from Brisbane and was insisted to form reporting relationship to the Area Manager Eva, by submitting her a copy of medical certificate * No direct control by Anne to the activities performed, primarily because she sold insurances for Ace Accident Company and the provider of service was Ace Accident not Anne Perish, which notably make her an employee for Ace Accident (Marshall, 2006). 5.0 Conclusion
It is clear, therefore, Anne Perish was an employee to Ace Accident Company with reference to employment relations between the two parties. Anne had to follow a code of conduct to be a sales person at Ace Insurance Company and was ethically bind not to work elsewhere unlike a contractor. Although she signed an independent contractor, but her daily work was reported, indicative of an employee and she had tax cuts which she was not entitled to at the end.
Ace Accident Company considered Anne as an independent contractor to their company, according to which she was entitled to all the money and commissions she earned. Taking her obligations as an employee and not paying her the commission she earned was unethical and hence also prove that terms with which Anne was dealt with, were of those who are permanent employees to a company. If this was the case, Anne shouldn’t be paying tax and should also be entitled Workers Compensation Fund. It is therefore advised to Anne to legally take action against Ace Insurance and claim her income back or be entitled as an employee at Ace Insurance and get Workers Compensation and her tax sorted by the company themselves.

References
Commissioner of Pay-Roll Tax (Vic) v Mary Kay Cosmetics Pty Ltd (1982) 82 ATC 4444
Egan, D. (2008, December 1). CONTRACTOR OR EMPLOYEE: CONSEQUENCES OF GETTING IT WRONG. Retrieved from http://www.tresscox.com.au/resources/resource.asp?id=393#.U-harRCLNoc
Fact sheet: Independent Contracting. (2011, January 1). Retrieved August 21, 2014, from http://www.australianbusiness.com.au/lawyers/expertise/industrial-relations/fact-sheet--independent-contracting
Fair Work Act 2009. (2009, July 9). Retrieved from http://www.fairwork.gov.au/about-us/policies-and-guides/best-practice-guides/small-business-and-the-fair-work-act#The-Fair-Work-Act
Independent Contractors. (n.d.). Retrieved August 21, 2014, from http://www.fairwork.gov.au/find-help-for/independent-contractors
Megerdomian, L. (n.d.). Retrieved August 21, 2014, from http://www.law.msu.edu/clinics/tax/IC_Employees.pdf
Marshall, B. (2006, January 10). Working it Out Employee or Independent Contractor? Retrieved from http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1102&context=nle
Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd [1924] 1 KB 76
Sappey, R., Burgess, J., Lyons, M., & Buultjens, J. (2009) Industrial Relations in Australia, 2nd edition, Pearson Education: Frenchs Forest NSW.
Stewart, A. (2009). Who's an Employee. In Stewart's guide to employment law (2nd ed., pp. 43-56). Sydney: The Federation Press.
Zuijs v Wirth Bros Pty Ltd(1955) 93 CLR 561