There are often questions in the workplace about whether a person that works for an employer is an employee or a contractor. The answer to this question can have tax consequences and certainly has consequences for the person concerned and their rights in relation to the employer. Also, where an agency contracts a person to a client, it is often unclear whether that person is an employee of the agency or a contractor to them. Many agencies, especially larger ones, will accept the responsibility of being an employer and of performing the obligations that accord with that status although in many cases they will only enter into engagements on a casual employment basis.
Some cases have held that building workers supplied by an agency are not employed by it, not least because the agency exercised little or no control over their work when they were on the site where the work took place. Subsequent to these decisions, it became the practice to adopt similar arrangements that precipitated the decision in this case. In this example, the court which made the decision was unable to identify a basis for saying that the workers were operating their own independent business. The only situation where this may not apply is in the case where a highly skilled labourer is a genuine contractor.
It is also necessary to consider the concept of labour hire in relation to matters like this. According to readily available data, approximately 5% of people obtain their jobs through an agency. There are differences between agencies with some simply brokering employment and others actually being involved in the direction management and control of the workers concerned. There is a marked casualisation of the labour force operating in the economy today with over 5% of people employed by labour hire firms contracted out to hosts.
Usually, the view is taken in the labour hire situation that in the absence of a contract between the worker and the host, the worker cannot be regarded as an employee of the host. Moreover, such a contract will not be inferred merely because the host exercises what may be a considerable degree of control over the worker. Accordingly, the host is usually not directly liable to ensure that the employment obligations of the host are met. They would in this situation also not usually be required to respond to a claim of unfair dismissal. Liability for workers compensation is often a subject of the contract between the host and the employment agency. In this way the identification of a person as either a contractor or an employee is resolved in the circumstance of a labour hire firm.