Contractor vs Employee – Shifting Sands for Medical and Allied Health Practices

Medical, dental and allied health professional structures have and continue to be designed to engage professional staff that are labelled and treated as independent business operators known as “independent contractors”.

However, is this a proper way to structure your practice? What risks are involved in doing this?

In many cases, people who are labelled as independent contracts are actually employees. The legal test as to whether a person performing work for your business as either an employee or contractor is not based on what you call them, but on an overall consideration of all of the circumstances of a relationship.

This is becoming a significant issue due to an increasing tendency by the Courts to find an employment relationship and a more aggressive approach from regulators including State Revenue Offices, Work Safe, Fair Work Ombudsman and the Australian Taxation Office.

This is particularly problematic for practices that continue to seek the economic outcome of a contractor relationship with professional staff, but practically operate as if professional staff are employees.

Changing risk profiles

The risks and penalties for incorrectly characterising an employee as an independent contractor are increasing. In addition, individual workers are becoming more and more aware of their rights and entitlements and are more willing to pursue legal claims.

Ultimately our view is that in light of all these developments, engaging professional staff as independent contractors will become increasingly risky for the practice itself, particularly where an ‘independent contractor’ may:

• provide services to the practice;

• owes personal obligations to the practice;

• perform work that is integral to your practice;

• work exclusively at the practice;

• works fixed days or hours as directed by the practice;

• be advertised as a representative of your practice;

• be assigned patients by your practice;

• be provided with training by your practice; or

• be required to follow policies and procedures of your practice;

Implications

If you have not been meeting your obligations, your practice, and subject to the nature of the obligations involved, the directors, managers and others involved in running your practice, may be required to backpay unpaid entitlements, as well as be subject to financial and non-financial penalties for non-compliance.

You may also be exposed to unanticipated and costly claims by your workers, such as unfair dismissal claims if you terminate the engagement of someone who was wrongly characterised as an independent contractor.

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