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With the effects of Covid-19 being felt by businesses everywhere, it’s not surprising that business owners are starting to ask what can be done to minimise the impact of a similar event in the future.

Having employees and complying with employment law can be challenging at the best of times. This was only amplified by Covid-19: can they/should they be working at the various alert levels? Should they be paid if they can’t work from home? If so, how much? How does lockdown affect a 90-day trial period that started just before lockdown? What steps do we need to take before we can make someone redundant?

There are far too many questions and issues to list and the answers are complex and largely untested as none of us have navigated our way through the employment implications of a pandemic before.

Because of this, some business owners may be thinking of doing away with “employees” altogether and just engaging “contractors”, either directly or through a labour hire company. Others might be thinking that just using “casuals” is the answer.

The idea is that if a business engages only contractors and/or casuals and a lockdown or similar event happens in the future, it could simply cancel the contracts and/or not offer the casuals any work. Much simpler, right?

Possibly not. What you label a worker in their agreement or contract is only one small piece of the puzzle in determining the true nature of the relationship between you.

In relation to casual employees, it’s all in the name; to safely categorise and treat someone as a casual employee, the relationship must be truly “casual”.

This usually means the casual is back-up rather than a regular worker who you rely on to keep the business running. A true casual is offered work from time to time and, importantly, they have the option to accept the work or not. For this reason, it’s not usually a great business strategy to have only casuals on your workforce as you run the risk of them all saying no when they are offered their shifts.

It’s reasonably common for business owners to refer to an employee who works one short shift a week (say, 4 hours every Saturday) as “casual”. This is not correct – they are a permanent part-time employee.

For contractors, the factors determining the “true nature of the relationship” are more complex, but generally a true “contractor” will be an expert in their field, advertise their services, provide their services to more than one client, provide their own tools and equipment and do the job as they see fit – because they are the expert, after all.

Contractors don’t tend to feature on their client’s websites, nor do they wear their client’s uniform or get invited to the Christmas party. Contractors tend to tell their clients when they can carry out the services, how much it will cost and produce invoices for payment. Some will be GST registered.

If your business contracts another business to do some work for you (including a labour hire company), it’s likely to easily fit the bill of this description. The classic example is a building company that’s building a house and will contract a plumber, electrician etc to do work for the company.

It’s when you’re looking at contracting a particular individual (for example, you wouldn’t be happy for them to get someone else to do the work for them) that the “true nature of the relationship” needs to be carefully considered.  Some individuals will clearly fit the description above. For others, you might quickly realise you’re trying to fit a square peg into a round hole. In which case, you should probably be taking them on as an employee, not a contractor.

Some red flags that a contractor is truly an employee:

  •  It’s not a senior/expert role and the person has limited relevant experience.
  •  You don’t want them working for your competitor.
  •  You expect them to be “part of the team”.
  •  You want to have control over their work/tell them when, how and where to do it.
  •  You want them to have set hours and control over when they have time off.
  •  You want to decide how much they are paid and if/when they will get a pay rise.

If you currently have a contractor who you think might be an employee, it’s important to get legal advice as the implications can be far reaching. It’s also important to remember that relationships can and do change over time, so someone who starts out as a true “casual” or “contractor” might morph into a permanent employee over time.

If you treat a worker as a contractor or a casual, when they are, in reality, a permanent employee, the fallout from any personal grievance they raise is likely to cause you a much bigger headache (not to mention a bigger hole in your wallet) than recognising them as an employee.

In short, if you’re thinking of using casuals or contractors to “get around” your employment obligations or minimise the complications of a future situation like the Covid-19 lockdown, think again.

Next month’s column will look at what business owners who use staff from temp agencies and labour hire companies need to know about The Employment Relations (Triangular Employment) Amendment Act, which is now in force.

Amy is an associate at Wakefields Lawyers and an expert in the area of employment law. She heads the company’s employment team, which helps both employers and employees in all areas of employment law.

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