Nick Duggal, Moray & Agnew
Nick Duggal, Moray & Agnew

Can an employee also work as a contractor at the same organisation? Does using the same policies for contractors and employees create legal risk? An employment lawyer answers these questions and more.

In an HR Daily Premium webcast, Moray & Agnew partner Nick Duggal discusses contemporary contingent labour risks and how to manage them. The questions below are just a sample of those asked during the 24-minute Q&A session held with webinar attendees.

Q: Can someone be an employee and a contractor for the same organisation while doing quite different jobs?

A: Technically it is possible, but you would really have to take a very close look at the distinction of the duties as to when the worker is working as an employee and then what they are doing as a contractor.

If there is any overlap between those duties and responsibilities, I think you would be in a heightened risk environment in relation to the work that worker is doing as a contractor being found to be [performed as] an employee.

It's [similar] to when you have an employee, then you push them off to a third party, and then they continue to supply labour for you as a contractor. You'd have that same issue of concern, so it would need very close examination.

Q: Is there any risk of contractors being deemed employees if they're required to comply with exactly the same policies as employees?

A: It's a good point and it's a real risk in the blended workforce. If a third party can't tell the difference between what a direct employee is doing and what a labour hire worker is doing, there's going to be a greater risk, not only at law that that worker's an employee, but there can also be findings that that worker is actually an employee of the third-party labour user; courts have on some occasions gone that far.

You've got to [have] a stream of induction or training for contractors that tells them what they need to do in order to do their job safely and lawfully, but doesn't go so far as to blend them in and make them indistinguishable from direct employees of the company.

Q: If a third-party contractor makes a bullying claim against an employee, who has to investigate – the third-party employer or the host employer?

A: I would say potentially both. The site occupier has an obligation to provide a safe place of work, they also [might be] exposed to, for example, a stop-bullying application or a WorkSafe investigation, so I think they would want to be having a look at it. Likewise, the labour hire company has responsibilities to its own worker.

You would look at the contract, see if there is any delineation there, but otherwise... if I were the site occupier, I'd want to be knowing what's going on in my workforce, and I think I'd want to be doing my own investigation for the good of my business as a whole. For example, what other workers is that worker bullying, if they're bullying anyone?

Q: What are the implications of a host employer offering non-job-specific courses, such as leadership or resilience training, to contingent workers? Could it increase the risk of being deemed the employer of those workers?

A: I think it could, which is unfortunate because it's a good opportunity for the contingent labour worker, but really what the courts tend to look at – and take a broad view [on] – is anything that makes the contractor indistinguishable from other employees. So, for example, they look at whether the contractor has to wear a uniform and presents themselves as an emanation of where they're working. In the same way, if you send a contingent worker on a leadership course which is quite disconnected from the specific nature of the service that they're supplying, that risk is created.

What I would want to do, if I was advising the host employer in those circumstances, is not to deprive the benefit of the contingent worker of that sort of opportunity but perhaps dress up how that third-party training is supplied, such that it is clear it is on the basis that they're a contractor.

Q: What practical measures – checklists, for example, or questionnaires – can an organisation put in place to ensure contingent workers are engaged properly as contractors, particularly in circumstances where the volume is very high?

A: Your front-end systems and processes can really go a long way in enabling the mass engagement of contingent labour in a manner that mitigates risks. It's all about having processes that confirm the nature of their engagement but also give them the occupational health and safety training that they need, and [ensuring] there's contracts behind them with the third-party suppliers or with the contractors directly that are consistent with all of that.

Really, there's a lot that you can do to mitigate risk in front-end system and process without there having to be an individual analysis of each and every worker, which may well be commercially impossible and defeat the administrative convenience that you get from using contingent labour.

Q: Can employers insist on exclusivity from contingent workers?

A: A strong indicia of work being employment is whether the supplied service is exclusive. So if you impose upon a worker that they can't work for anyone else, then that creates risk of there being an employment relationship. That's not to say that a site occupier who insists on exclusivity with a third-party supplier will [necessarily be] found to be their employee, but it does certainly create risk of there being an employment relationship. If you were going to insist on an exclusive relationship, I would certainly look at making that contingent relationship very short-term and project-based.

HR Daily Premium members can access the full Q&A session and webcast, which covers recent case law on contractor deeming risks. Upgrade here if you're not already a premium member.