Employment law myth No.4: “If they’ve got an ABN, they’re an independent contractor”
A frequent area of confusion in employment law is the use of independent contractors. In particular, whether someone engaged as a contractor would in reality be found to be an employee at law. The confusion is understandable – there are different tests as to when a person is an “employee” under various different bits of legislation. Given that companies can face significant financial penalties if they wrongly classify someone as a contractor, the question is of fundamental importance.
Many employers are of the view that if an individual provides them with an ABN this means the individual will automatically be deemed to be a contractor. This, however, is not the case. Courts frequently have found an employment relationship to exist where individuals have their own ABN. The approach the courts tend to take is to look at the relationship as a whole to determine the contractor/employee conundrum. Having an ABN is just one factor that will be taken into account, but it will not be the end of the story.