Legal options

Unlike employees, the performance management and disciplinary process does not apply to contractors although it is becoming more common for ongoing performance review processes to apply to contractors. Historically, if a contractor is not performing their task to the business owner’s satisfaction, there should be a provision in the contract allowing the principal to give the contractor seven or 14 days notice to remedy the defect in their performance and if it is not remedied, then the contract can be terminated on notice.

Where a contract is open ended, ie it has no specific duration, then a notice period is common. The contract may also be able to be terminated immediately in certain circumstances amounting to gross misconduct. However, this is all a matter of contract between the parties. Contractors do not have rights to make application to the Fair Work Commission for reinstatement or compensation using the unfair dismissal provisions.

However, they may be able to:

  1. make an unfair dismissal claim to the Fair Work Commission on the basis that they are really an employee and not a contractor;
  2. take action in the Fair Work Commission utilising the general workplace protections provisions or the sham contracts legislation; or
  3. sue in the common law courts for breach of contract.

There is a broad set of general protections in the Fair Work Act which include prohibitions on:

  1. the taking of adverse action against a person or coercing them because of a “workplace right” they have or the non-exercise of such a right;
  2. knowingly or recklessly making a false or misleading representation about another’s workplace rights, or their exercise;
  3. taking adverse action against a person because of their membership or non membership of an association, or their engagement or non-engagement in various industrial activities;
  4. various conduct relating to “sham” contracting arrangements.

The Fair Work Commission can be asked to convene a conference to deal with a dispute over a claim of prohibited conduct which is effectively compulsory when dismissal occurs. This must generally be done within 21 days of dismissal. This must occur before any court action can be taken.

Adverse action is broadly defined by reference to various circumstances. The Act gives instances of adverse action including by:

  1. a person (the principal) who has entered into a contract for services with an independent contractor against the independent contractor, or a person employed or engaged by the independent contractor;
  2. a person (the principal) proposing to enter into a contract for services with an independent contractor against the independent contractor, or a person employed or engaged by the independent contractor; and
  3. an independent contractor against a person who has entered into a contract for services with the independent contractor.

Sham arrangements

There are prohibitions on:

  1. employers misrepresenting employment as an independent contracting arrangement;
  2. employers dismissing an employee in order to engage them as an independent contractor to perform the same work;
  3. employers making misrepresentations to employers in order to persuade them to become an independent contractor performing the same work.

How contraventions are dealt with

There are two types of contravention of this part – those involving dismissal and those that do not. If a person has been dismissed then application must be made to the Fair Work Commission within 21 days of the dismissal taking effect (subject to a power of extension in exceptional circumstances).

The Fair Work Commission must conduct a conference in private to deal with a dismissal related dispute. If the matter cannot be resolved, the Fair Work Commission must issue a certificate to this effect and the applicant then has 14 days to make a court application.

For non dismissal related disputes, the parties must agree before a conference can be held by the Fair Work Commission. Where the parties do not agree on a the Fair Work Commission conference, a party can still make an application to the Federal Court or Federal Circuit Court for orders.

Assistance with the forms required to commence these proceedings can be found at the Federal Circuit Court website – There are time limits on the commencement of these proceedings.

Proceedings in the Federal Circuit Court are, generally speaking, more formal than in the Australian Fair Work Commission but the Federal Circuit Court does try to deal with matters as informally and as quickly as possible. After filing and serving the initiating documents, the court will convene a directions hearing to prepare the case for hearing and will generally set the matter down for hearing once these steps have been completed.

The onus of proving that the termination did not rely on an unlawful ground is on the employer at the hearing.

As with the industrial relations commissions, the general rule is that each party bears their own costs. Accordingly, it is necessary to consider the costs and benefits of engaging lawyers as part of this process.

The court (either the Federal Court or Federal Circuit Court can impose a penalty of up to 60 penalty units under these provisions. The court can also make injunctions, award compensation and order reinstatement. There is no cap on the amount of damages available to a successful applicant.