Summary of changes impacting independent contractors from 24^th August 2024

On the 24^th of August, new definitions for independent contractors in the Fair Work Act 2009 will take effect, which could impact existing contract agreements. 

The changes apply to how an independent contractor is defined, with the Fair Work Commission applying broader considerations to determine whether someone is an employee or an independent contractor.

New Definition for Independent Contractors

Instead of concentrating on the contract's terms, evaluating whether an individual is an independent contractor will depend on how they execute the contract. These changes emphasise the practical reality and true nature of the working relationship rather than relying solely on written agreements.

Ability to opt-out of the new definition

Contractors earning above the high-income threshold (which was $175,000 at 1 July 2024) can exclude themselves from the new definition. If the employer permits, these contractors can decide to maintain their existing relationship.

Change to the defenses for sham contracting

Sham contracting occurs when an employee arrangement is misrepresented as an independent contractor arrangement to avoid providing employee entitlements.

The previous defence, which required employers to prove they were neither aware nor negligent about the employment status, has been updated. Now, employers must show that they had a 'reasonable belief' that an independent contractor arrangement was suitable at the time of engagement.

Ability to appeal unfair contract terms

From August 24, independent contractors will be able to appeal the Fair Work Commission if they believe their services contract contains an unfair contract term.

The commission will be able to determine whether a term in a services contract is unfair and order the contract aside, amended, or varied. The laws only apply where the contractor performs work under a services contract with a Pty Ltd or Ltd company and if they are below the contractor's high-income threshold.

Minimum standards for contractors for certain workers

There are new laws for contractors who undertake certain work, including those who undertake ‘employee type work’ on digital platforms and those who work in the road transport industry.   These contractors are referred to as ‘regulated workers’.

To be considered a regulated worker, an employee-like worker or contractor in the road transport industry must

:

• be a party to a services contract (either as an individual or as a member of a body corporate, trust or partnership)
• perform all (or a significant majority) of the work under the services contract
• not perform any work under the services contract as an employee.
• 
  

These changes only apply when the regulated worker works under a services contract with an organisation with Pty Ltd, or Ltd within their business name.

A summary of the changes for independent contractors by the Fair Work commission can be found here.

What are the penalties for non-compliance?

The penalties for non-compliance were increased on February 27^th 2024 with the maximum civil penalty reaching $469,500 for sham contracting and underpayments. For severe breaches this can increase to $4,696,000.

General Disclaimer

The information provided above is on the understanding that it is for illustrative and discussion purposes only. Any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances.