Workers’ compensation: employee vs independent contractor

At Denning Insurance Law, clients regularly ask us the following questions about workers’ compensation:

I went to work the other day and suffered an injury. Am I entitled to claim workers’ compensation?

There was an accident at our business’ workplace the other day and unfortunately one of the crew was injured. Is that crew member covered under our workers’ compensation policy?

Can I claim workers' compensation if I am an independent contractor?

These are not simple questions to answer. There are many factors to consider. Here we shed some light on the test applied in Queensland to determine whether an individual is a “worker”. 

However, please contact us at Denning Insurance Law for reliable advice in response to your specific situation in respect of workplace injuries.

The law in Queensland regulating workers' compensation

Workers’ compensation claims in Queensland are regulated by the Workers’ Compensation and Rehabilitation Act 2003 (Qld) (WCRA) and the case law which considers the WCRA.

An injured person needs to be considered a “worker”, by WorkCover Queensland or a self-insurer, to be covered by the workers’ compensation scheme in Queensland.

So, the first question to ask is – At the time of the accident, was the injured person a “worker” under the WCRA?

Under the WCRA, a “worker” is a person who is employed under a contract and who is an “employee” for the purpose of assessment for PAYG withholding under the Taxation Administration Act 1953 (Cth). 

Parts 1 and 2 of Schedule 2 to the WCRA also expand and limit the definition of “worker”, identifying specific situations circumstances where the injured person will be, or will not be, considered a “worker”.

The exclusive list which spells out who is not a “worker” is considered further below.

How do I apply the law to my situation?

Determining whether a person is a worker is not always easy or straightforward.

Over the past 30 or so years, businesses have altered the way they engage and remunerate staff.  It is no longer the norm for staff to be full-time 9 to 5 workers receiving a salary. 

Staff engagement now takes the form of contracting, sub-contracting, freelancing, tasking and the like.  These arrangements make it difficult to ascertain who actually is a “worker” entitled to claim workers compensation.

Every situation is different.  Workers should not assume they are entitled to workers’ compensation, just as businesses should not assume they are relieved from their obligation to purchase workers’ compensation because they believe their workers are contractors, and not employees.

Each arrangement a business has with each individual at the place of work may be unique.

The key indicators for determining who a "worker" is for workers' compensation

Our summary below sheds some light on the key indictors used by courts to determine if a person is a “worker”.  However, please contact us at Denning Insurance Law for reliable advice in response to your specific situation. 

Terms of the Contract for performance of the work

The terms of the contract between the injured person and the business are an important consideration to determine whether the person is a “worker”.

A contract of employment can be formed in writing, orally or implied by conduct.  For there to be a binding contract, there must be the following elements: an offer by one party, communicated acceptance by the other party, consideration and an intention to create legal relations.

There are instances where employment contracts are entered into as a result of very informal discussions.  As a result, the actions of one party commencing to perform work for another party may give rise to an inference of the intention to create legal relations, the offer of work and the acceptance of the work offered.

Also, just because the contract states, or the parties may agree, that the person performing the work is an “independent contractor” does not mean that relationship will be accepted as the true or genuine relationship between the parties.

Control

The amount of control exercised by the business over the injured person is a very important indicator.

To determine whether a person is a “worker”, courts will consider questions like:

The greater the control exercised by the business over the person, especially in terms of how, when and where the work is to be done, may mean the person is a “worker” and not an independent contractor.

Delegating and subcontracting

The ability for the person to delegate their work, or subcontract their work to another person/entity, demonstrates a form of control, because a contract of service is personal in nature, unlike a contract for services.

If the person is contractually obligated to do the work themselves for the business and it is not open for the person to delegate the work to another party, this is an indicator the person may be an employee and not an independent contractor.

However, if the person may delegate or subcontract the work to another person/entity, but the person is obliged to meet the wages or expenses of that person/entity, then the person is most likely acting as an independent contractor.

Plant, tools and expenses

Ordinarily, an employer is responsible for a worker’s business expenses, tools, plant and personal protective equipment (PPE).  This is another example of control.

If the person is expected to undertake the work using their own PPE, tools or equipment, this may indicate the person is an independent contractor rather than an employee. However, there are some cases where tradespeople or professional workers do use their own tools in the course of their employment as an employee (e.g. hairdressers or chefs).

Payment

The manner in which the person is remunerated is also a key indicator to determine if the person is a worker.

Traditionally, an employee works designated hours and receives a payment which remunerates the employee for the hours worked.  Additionally, superannuation payments and tax deductions are attended to by the employer.

To determine whether a person is a “worker”, courts will consider questions like:

The greater the control exercised by the person over their own hours of work, finances and payments, may mean the person is not a “worker”.

Additionally, undertaking work under an ABN may be a strong indicator of the person being an independent contractor, but it is not definitive. All of the circumstances of the employment will be considered in making such a determination.

Obligation to rectify defective work

Where a person doing the work is expected to rectify, at their own expense, any defective work performed by them, this is usually an indicator the person is an independent contractor.

Risk

In the usual course, an employer is vicariously liable for any actions undertaken by the employee.  Any insurance effected by the employer should cover the employee for any loss or damage caused by the business.

Therefore, where the person undertaking the work bears little or no risk of having to bear the cost of any injury or damage resulting from a defect in the work, this is an indicator they are most likely an employee rather than an independent contractor.

If, however, the business requires the person to purchase their own liability insurance, or if the contract between the parties indicates the person is liable for their own mistakes, this is an indicator they are most likely an independent contractor.

“Results” contracts

Where the substance of the contract between the person and the business is to achieve a specified result, there is a strong (but not conclusive) indication the person is an independent contractor.

Who is not a “worker” under the WCRA?

As stated above, Schedule 2 to the WCRA limits the definition of “worker” by identifying specific situations including:

Obligation to insure

In Queensland, an employer must, for each worker employed, insure and remain insured for their legal liability to pay compensation and damages to their workers. 

If an employer fails to take out workers’ compensation insurance within five (5) business days of employing any worker, WorkCover Queensland may impose a penalty. 

Therefore, it is important to know whether the people assisting with your business are workers or independent contractors. 

What happens if an employer doesn't have workers' compensation insurance?

WorkCover is the statutory insurer for workers’ compensation in Queensland. Regardless of whether an employer held a policy of insurance or not, an employed “worker” is entitled to make a claim for benefits in the same way as any other worker (as though the employer was insured).

WorkCover is then entitled to pursue the employer for all compensation and damages paid on the claim. 

For further information about recoveries against uninsured employers, see our previous article: What happens if you don’t have workers’ compensation insurance?

What if a person is a contractor and not a worker?

If an individual is injured and they are not a worker for the purposes of workers’ compensation, they may be entitled to pursue a claim for personal injuries against the entity that engaged their services. 

These claims are generally regulated by the Personal Injuries Proceedings Act 2002 (Qld). There are advantages and disadvantages to being a contractor over a worker and vice versa. 

Individuals should seek legal advice regarding which type of claim is best to pursue, having regard to their specific circumstances. 

How we can help

Denning Insurance Law represents individuals and businesses in workers’ compensation claims, public liability claims and insurance disputes. 

If you are involved in a claim and believe that you or someone engaged by you has been incorrectly identified as a worker, employer or contractor, we can help. Call (07) 3067 3025 for an appointment.