Controlling the contractor
This article forms part of the series “Contractors – Shifting Sands for Medical and Allied Health Practices”
The measure of control exercised by one party over the other is an important factor in determining the nature of the relationship between a purported contractor and principal, or employee and employer.
An employer usually has the right to control how, when and where an employee performs their role, and that role is delineated by, and completed at the request of, the employer. A true independent contractor generally works on their own initiative to deliver a result, and maintains a considerable discretion and flexibility in terms of how, when and where the work is carried out.
If your practice exercises a significant level of control over a purported contractor, or reserves the right to do so, then arguably the purported contractor is not a contractor at all, and is in fact functioning as an employee.
The type of control exercised by a medical practice which could suggest an employer/employee relationship may include:
preventing the individual from working at another clinic or elsewhere;
preventing the individual from commercially competing with the practice;
requiring the individual to work under supervision, report to management, or comply with your directions;
requiring the individual to attend training and follow your techniques, methods or procedures;
deciding which patients, the individual must see, or which tasks the individual must complete; or
something as simple as requiring the individual to work set hours, at a set place of work.
As with all factors that are considered in determining whether an individual worker is an employee or contractor, what matters is what happens in practice, not just what you say.
For example, in the case of Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd [2013] FCCA 216, the Federal Circuit Court considered the classification of alleged “independent agents”. The relevant contracts sought to engage individuals as kitchenware consultants and expressly stated that the consultants engaged were not employees of the business and not subject to its control. Irrespective of this term, the Court concluded that the work arrangements between the parties did not establish a contractor relationship.
Among other factors considered by the Court, it was found that the company in fact exercised a broad control in respect of the manner in which the consultants carried out their work. The consultants retained little independent control. Metro Northern Enterprises was found to have engaged in sham contracting and ordered to pay penalties of more than $160,000, as a result of incorrectly characterising its employees as independent contractors.
If your practice effectively controls individuals you have engaged as “contractors”, you may be at significant risk of having incorrectly classifying your practitioners and exposed to a range of adverse consequences, including risk of penalties pursuant to sham contracting provisions of the Fair Work Act 2009.
Next steps
Consider your current arrangements and review your practice structure. We invite you to contact us with any questions.
Rod Payne
Principal
T: 03 5226 8541
E: rpayne@ha.legal
Paul Gray
Principal Lawyer
T: 03 5225 5231
E: pgray@ha.legal
Sonia McCabe
Senior Associate
T 03 5226 8558
E: smccabe@ha.legal
Harriet Burton
Associate
T: 03 5225 5215
E: hburton@ha.legal