Employee or Contractor in the age of the gig economy - The Olias case

An organisation will have different tax and superannuation obligations depending on whether its workers are employees or contractors. This has become particularly relevant as more workers engage in casual or sporadic work over platforms such as 'Uber Eats', 'Airtasker' or 'Deliveroo'.

In an earlier article, we set out the factors an organisation should consider when working out if a worker is an employee or contractor. This included the worker's ability to delegate, the basis of their payment and the degree of control they have over their work.

The recent decision in Olias [1] provides interesting real-world guidance on the factors an organisation needs to consider, including new insights on the 'Results Test', the 'Control Test', the indicia of delegation and the level of the worker's integration into the business.

The Olias decision

Olias concerned a music teaching company (Applicant) which engaged the services of Mr Jayden Rowell (Mr Rowell) to provide private lessons for guitar and singing to students from 1 July 2014 to 30 September 2017. The Applicant argued it had engaged Mr Rowell as an independent contractor and not as an employee.

However, the Commissioner of Taxation assessed the Applicant on the basis that Mr Rowell was an employee, and accordingly issued superannuation guarantee charge (SGC) assessments. The Applicant had asked for, and been provided with, Mr Rowell's ABN, paid a set hourly rate to Mr Rowell in return for him teaching at a set location at certain times, provided him with a uniform to wear, suggested that Mr Rowell use the "Rockschool Method" of teaching and could only terminate arrangements with Mr Rowell if he broke the law or failed a police check.

The case came before the Administrative Appeals Tribunal (Tribunal). The Tribunal, having considered each indicia individually, together with an intuitive assessment of the entirety of the relationship, found that Mr Rowell had indeed been engaged as an employee of the Applicant.

An "employee" for Australian superannuation purposes is defined at section 12(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (Act). The statutory definition includes the ordinary meaning, and the tests outlined below are tests which assist the courts in determining the ordinary meaning.

The Results Test

The results test requires consideration of whether the contract was to produce a particular result or provide a service. If the contract was to produce a result, payment is for the result, rather than as compensation for the time spent on the job. In this instance, the worker is more likely to be an independent contractor.

The Commissioner argued that:

"The substance of Mr Rowell's contract was not to produce a specified result as distinct from his labour, it was to teach for a specific period of time. Payment for the lesson was calculated by reference to the time taken for the lesson and was, in essence, payment for Mr Rowell's labour. If a student missed their class (without notice) Mr Rowell was sometimes paid despite not delivering any tuition." [2]

Whilst the Tribunal did not consider this particular indicia useful for this case, they did look at the overall ongoing nature of the contractual agreement and saw similarity to a casual employment agreement.

The Control Test

The degree of control an organisation has over its worker will also be salient in determining whether the relationship is an employee-employer one.

The Applicant submitted to the Tribunal that it had no control over how Mr Rowell taught his lessons. Whilst it could suggest that Mr Rowell use the "Rockschool Method" of teaching, it could not insist.

The Tribunal decided that just because the Applicant chose not to impose its preferred method of teaching upon Mr Rowell did not mean it did not have the right to do so. Moreover, the degree of control the Applicant had in terms of lesson times, duration and location, fees paid for lessons, uniform to be worn, as well as the fact that there was no negotiation in relation to Mr Rowell's rates of pay, weighed more heavily towards a relationship of employment.

The indicia of delegation

The Applicant submitted that Mr Rowell was able to delegate his work with its approval as an implied right. However, the Tribunal found that the reality of the relationship between the Applicant and Mr Rowell was that Mr Rowell was required to deliver the lessons himself. The parties to the relationship envisaged Mr Rowell personally doing the teaching, not someone else. In addition, there was no evidence of any other instrument teachers engaging in a subcontracting/delegation arrangements.

This tells us that it is important to consider the totality of the relationship (rather than implied rights) and the actual processes undertaken when rearranging lessons. The Tribunal found that Mr Rowell didn't - in matter of fact - have a true power to delegate the work.

Level of integration into the business

The Tribunal considered that the level of integration into the business is a fundamental indicator of whether the worker serves as an employee. In this case, the Applicant set the price, kept the profit and had a lot more oversight than 'a mere commission agent or a booking agent for the teachers.' This weighed in favour of an employment relationship. On the other hand, Mr Rowell was free to provide private music lessons or teach for another company. The non-exclusive nature of the engagement weighed toward a contractor relationship.

In addition the goodwill of the Applicant versus the personal rapport Mr Rowell had with students was also considered. The Tribunal stated that there can be two sets of goodwill (one that goes with the business and one that is associated with the individual worker) and there can still be an employee-employer relationship.

Other examples from the "gig economy"

The gig economy refers to the casual and sporadic work which workers undertake via the digital platforms that connect them with discrete jobs.

Companies in this space have in the past been caught out. Not only does this have superannuation ramifications, but it changes the employers' obligations under the Fair Work Act 2009 (Cth). In Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818, the Fair Work Commission ruled Deliveroo was an employer of Mr Franco, a Brazilian national who delivered for them, as the company had significant control over how he as a rider was to deliver food and how much he was paid to do so. This is far removed from the delivery rider conducting their own business and therefore being an independent contractor.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Markets & Revenue Practice Group.

More Cleardocs information on related topics

You can read earlier ClearLaw Articles on a range of topics, including the following topics which you may find relevant:

• Full Federal Court sheds light on JobKeeper eligibility (cleardocs.com);
• Thomson Reuters Weekly Tax Bulletin - 2021 Federal Budget Report (cleardocs.com);
• Leasing during lockdown - land tax and payroll tax relief during COVID-19 (cleardocs.com); and
• Full Supreme Court Overturns Optometrist payroll tax case (cleardocs.com).

Order related document packages

• Employment Contract
• Discretionary (Family) Trust Minutes & Resolutions
• Discretionary Trust - excluded beneficiaries

[1] Olias Pty Ltd as trustee for the Storer Family Trust and Commissioner of Taxation [2021] AATA 1524

[2] Olias at 104, Exhibit 3, Respondent's Outline of Argument, page 7, paragraph 28.