2.1.1 Define a worker


2.1.1.1 Test for a worker | 2.1.1.2 Contract of service | 2.1.1.3 Contractors | 2.1.1.4 General contractor provisions


The legislation defines who is a worker and who are deemed workers or deemed to be working under a contract of service.

A worker is defined as an individual:

  • who
  • performs work for an employer or
  • agrees with an employer to perform work
  • at the employer's direction, instruction or request, whether under a contract of employment (whether express, implied, oral or in writing) or otherwise or
  • who is deemed to be a worker by the legislation.
Contractors

A contractor is a person who is deemed to be working under a contract of service.

See: Contract of service

Deemed workers

A deemed worker is a person who is treated as a worker and therefore entitled to claim compensation.

Other people in specific areas and under specific conditions are deemed to be workers. They are entitled to claim for compensation.

See: Deemed worker checklist


Student

The following students are deemed to be workers:

  • students at a school on a work experience arrangement
  • students enrolled in an accredited senior secondary course at a TAFE institute or a university with a TAFE Division or with a person or body registered by the Victorian Registration and Qualifications Authority who are engaged in work experience or a structured workplace learning arrangement
  • students of a school aged over 15 years and undertaking an accredited course of study who undertakes a structured workplace learning arrangement for training as part of that course of study
  • post-secondary students of a TAFE provider employed under a practical placement arrangement.

See: Students in work experience | Education and Training Reform Act 2006 (Parts 4.1, 4.3 and 5.4)

 

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2.1.1.1 Test for a worker

To determine if a person is entitled to compensation, the Agent first needs to determine if they are a worker as defined by the legislation and under the principles of common law.

Contract of service

For Agents to determine if the person is working under a contract of service see Employer & worker relationship checklist.

Contractor assessment tool

If it is unclear whether a person is a worker under a contract of service or if they are running their own business as a 'natural person' or 'partner in a partnership' use the online Contractor Assessment Tool on WorkSafe website.

Stated intention of parties

If it is still unclear whether a person is a worker, the Agent needs to consider the stated intention of the parties as to the type of relationship to be created.

After reviewing the facts if:

  • the person is a worker, they may be entitled to compensation
  • a contractor, consider if they are a deemed worker.

See: Contractors

2.1.1.2 Contract of service

The relationship between employer and employee has been recognised at common law for a long time but with many new work situations, the meaning of the term continues to develop.

The term 'contract of service' recognises the relationship between the employer and employee. This is often referred to as a master and servant relationship.

A contract for service is any contract agreeing to do work if there is no contract of service.

Contracts can be defined or implied, verbal or in writing.

Contracts do not invalidate a worker's entitlement

A person cannot contract out of their entitlements under the legislation. This means that if a person who is clearly a worker signs a contract to say they are not a worker, it does not alter their status.

True nature of contractual relationship

A contract’s conditions are evidence of the nature of the contractual relationship.

Contracts that claim to define a relationship as independent contractor and principal cannot alter the true nature of the relationship.

The true relationship is revealed by the facts and/or behaviour of the parties.

Rights and obligations of a contract

It is necessary to determine the characterisation of a contractual relationship by the rights and obligations that the contract creates and not merely by the label the parties put on it.

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2.1.1.3 Contractors

Depending on the circumstances, contractors can be:

  • workers under the legislation
  • deemed to be workers under the legislation.

Although the sections of the legislation describing contractors and workers are separate, Agents need to consider the circumstances described in both because the contractor might be entitled to compensation under either section.


Natural person contractors

Persons working under a contract for service may in fact be workers as defined by the legislation and/or at common law.

Compensation entitlements are for natural persons and can apply to those working as contractors in the course of and for the purposes of a trade or business carried on by another person or entity.

Tests to determine if a natural person contractor is a worker at common law and therefore under the legislation or if they are providing contractual services in the course of running their own business are derived from precedent court cases. These tests are the:

If the four tests indicate, on balance, that the individual is not a worker and is in fact a contractor, then the individual’s relationship to their hirer must be examined.


The control test

If a principal has the right to control the work an individual performs, how they perform it and when they perform it, the individual concerned is likely to be a worker (working under a contract of service).

The test of control will vary based on the industry standards and the nature of the work being performed by the contractor.

The test of control to determine a contract of service is not based on actual exercise of control, but the ability or right to exercise such control over how duties are performed.

The following factors are not meant to replace the test of control but can help to establish if the test of control is satisfied. Determine if the worker:

  • has no right to delegate his or her work
  • has no right to employ others to perform his or her contractual obligations
  • is usually required to work at set times
  • usually works at the employer’s place of business or at those locations as directed or approved by the employer.
The integration test

A worker is generally an integral part of or is presented to the public as an emanation of, the business carried on by the principal (ie the employer).

A worker has no ability to accumulate goodwill or saleable assets in the performance of his or her duties.

The results test

If an individual is hired to produce a specific result or to complete a specific task, the individual is more likely to be an independent contractor. In contrast, workers generally fill a position and have an ongoing role unrelated to a specific task.

A worker is usually paid regularly irrespective of the work performed (eg fortnightly) as opposed to an independent contractor who is usually paid based on the production of a result.

It is important to note that the Results Test is not a good universal indicator and can be challenged by the Courts.

The risk test

Independent contractors are more likely to be exposed to a commercial risk if that work is not completed satisfactorily. They will either be required to rectify defective work or may be sued for any loss or damages from defective work. Workers are not usually exposed to these risks.

Other factors can be if a worker:

  • bears no (or minimal) costs in the performance of his or her duties
  • has no ability to make a profit or loss in the performance of his or her duties.

Applying these four tests to a contractual relationship can be achieved by using the online contractor assessment tool on WorkSafe website.

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2.1.1.4 General contractor provisions

Contractors can be either incorporated entities or ‘natural persons’.

If a contractor is a natural person (ie they are operating as a sole proprietor or a partnership) and the common law test determines they are genuinely operating their own business, then the contractual relationship between them and their hirer (the 'principal' in the contractual relationship) must still be assessed under the General Contractor Provisions.

See: General contractor guidelines


The main purpose of the general contractor provisions is to deem an individual to be the worker of the hirer for WorkSafe purposes. The contractual arrangement is akin to an employment relationship. In most cases, an objective three-part test will determine if deeming applies.

Three tests

If, under a contractual arrangement between a contractor and a hirer, all of the following three conditions apply:

  • the provision of materials or equipment is not the principal object of the arrangement
  • at least 80% of the work is performed by the same individual
  • at least 80% of the contractor’s overall services income in the relevant period is earned from the hirer

and unless WorkSafe determines that the arrangement is part of the contractor’s independent trade or business:

  • the individual is deemed to be a worker of the hirer for that period and
  • the total amount paid or payable to the contractor under the arrangement less any applicable statutory percentage or any part of that total amount not attributable to the provision of labour is deemed to be rateable remuneration for the purposes of the legislation.

Applying these three tests to a contractual relationship can be achieved by using the online contractor assessment tool on WorkSafe website.

See: Contractor assessment tool

Relevant period

To assess the source of the contractor’s income from the provision of services the measuring period is referred to as the 'relevant period'.

Each financial year (1 July to 30 June) or 12 month period is called a 'relevant period'.

Example 1

If the work under the contract starts on 1 February 2016 and finishes on 30 June 2016, then the services would be provided in the 2015/16 financial year. So the relevant period would be the 2015/16 financial year (1 July 2015 to 30 June 2016).

Example 2

If the work under the contract starts on 1 August 2015 and finishes on 1 March 2017, then the services would be provided in two consecutive financial years. Therefore, the relevant periods would be:

  • 1 August 2015 to 1 August 2016
  • The 2015/16 financial year
  • 1 March 2016 to 1 March 2017
  • The 2016/17 financial year

Example 3

If the work under the contract starts on 1 November 2017 and finishes on 1 December 2020, then the services would be provided in four consecutive financial years (i.e. two or more consecutive financial years) . Therefore, the relevant periods would be:

  • 1 November 2017 to 1 November 2018
  • The 2017/18 financial year
  • The 2018/19 financial year
  • The 2019/20 financial year
  • 1 December 2019 to 1 December 2020
  • The 2020/21 financial year

Note: The relevant period, as a measurement of time, is only applied when evaluating a contractual relationship.

Incorporated contractors can be deemed to be the worker of the hirer. An individual may be a deemed worker of a hirer under the general contractor provisions and also be a worker of their own company when they are performing work under the relevant contract.

The legislation clarifies:

  • when an incorporated contractor is required to be registered for WorkCover Insurance
  • what is rateable remuneration under that registration
  • how WorkSafe will handle a compensation claim from the deemed worker.
Remuneration and contractual arrangements

If an incorporated contractor is found to be a deemed worker of the hirer then the payments made to the contractor that relate to the provision of the contractor’s labour are considered to be rateable remuneration for the purposes of calculating the principal’s WorkCover insurance premium.

Payments made by the contractor to an individual engaged by the contractor to perform work for the principal is not remuneration for calculating the contractor's WorkCover insurance premiums.

Claims against the principal’s WorkCover insurance registration

If an incorporated contractor is deemed to be the worker of the principal and they injure themselves, a claim for compensation relates to the principal’s WorkCover Insurance registration.

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