Can Contractors Claim Unfair Dismissal?

To determine whether a contractor can claim unfair dismissal, it is first necessary to understand the definition of unfair dismissal.

What is Unfair Dismissal?

Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner.

If an employee believes they have been unfairly dismissed, they may apply to the Fair Work Commission for compensation or reinstatement of their employment.

The eligibility of an employee to make a claim for unfair dismissal depends on several factors, including:

whether they have been dismissed;
whether they are an eligible employee;
who they worked for;
how long they worked; and
whether they are making a claim within 21 days of the dismissal taking effect.

Who is an Independent Contractor?

Unlike an employee, a contractor is a person who owns and operates their own business either as a sole trader with an ABN or through a company.

They are usually free to determine the price they charge for their services and how their services are provided.

New Protections for Contractors

Under the 2024 amendments, some additional protections now apply to contractors earning below a specified income threshold.

The Fair Work Commission is empowered to set aside or review contracts if deemed unfair to ensure fair treatment.

Contractors working in specific industries, such as the gig economy, are now covered by minimum standards similar to those applied to employees.

Sham Contracting

Sometimes, a worker is told that they will be engaged as a contractor and need to invoice for their services and obtain an ABN even if the worker does not own or operate their own business.

If this occurs, ‘sham contracting’ may arise and the worker may be deemed an employee rather than a contractor. In Australia, sham contracting is illegal.

The fact that the parties agree to create a contracting relationship does not necessarily mean that the worker is a contractor.

If a court or tribunal is asked to decide whether an independent contracting relationship or an employment relationship exists, it will consider the substance of the relationship rather than the type of arrangement or label that the parties have agreed to.

When considering the substance of the relationship, the court or tribunal will consider a range of factors including (but not limited to):

how and by whom the work is controlled;
how the work is performed;
whether the worker can delegate the performance of their work;
whether the worker works solely for one company;
whether the worker advertises their services; and
how the worker is paid for their work.

Both parties are usually required to provide evidence of the relationship to the court or tribunal during a hearing.

The court or tribunal will then determine whether a contracting or an employment relationship exists.

So, Can a Contractor Claim Unfair Dismissal?

If a court or tribunal determines that a person is an employee rather than a contractor, then the employee will be able to make a claim for unfair dismissal provided that they satisfy certain requirements.

To make a claim, the employee must have worked continuously for the employer for at least 6 months (the ‘minimum qualifying period’).

For a permanent employee, calculating this period is generally straightforward based on the date that the employee commenced their employment until the date they were dismissed.

If you are a casual rather than a permanent employee, the requirements for the ‘minimum qualifying period’ vary.

Summary

In short, a contractor cannot bring a claim for unfair dismissal.

However, if you agreed to work as an ‘independent contractor’ but believe you may be an ‘employee’ based on the above, you may be a victim of sham contracting.

If a court of tribunal determines that you are an employee, you may be able to make a claim for unfair dismissal provided you satisfy the above requirements.

With the 2024 updates, it’s also worth noting that contractors earning below a certain threshold now have access to protections around unfair contract terms.