Contractor or Employee? What a Recent Fair Work Decision Means for Businesses
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Contractor or Employee? What a Recent Fair Work Decision Means for Businesses
- Key Takeaways
- Some direction or oversight of an independent contractor does not, by itself, make them an employee.
- When determining whether someone is a contractor or employee, the Fair Work Commission (FWC) will look at the whole relationship - including the terms of the contract and how the arrangement operates in practice.
- Businesses engaging contractors should ensure their agreements accurately reflect the intended relationship and, importantly, that the arrangement operates consistently with those terms in practice.
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Businesses engaging independent contractors will often need to provide some level of direction or oversight to ensure work meets their operational and professional requirements.
But when does that oversight become enough to suggest the contractor is actually an employee?
A recent Fair Work Commission decision involving a registered psychologist provides useful guidance for businesses, particularly professional and healthcare practices engaging independent contractors.
The Case
In Williams v Mind Matters Sydney Pty Ltd [2026] FWC 1163, a registered psychologist engaged under an Independent Contractor Agreement claimed that, despite the terms of his agreement, the way he worked in practice meant he was actually an employee.
This distinction was important because he was seeking to pursue a general protections dismissal claim under the Fair Work Act 2009.
The psychologist argued that he was effectively an employee because:
- he was subject to day-to-day supervision;
- he received instructions about how to perform certain tasks;
- he was required to complete administrative tasks;
- he was required to meet Key Performance Indicators (KPIs);
- he did not have complete freedom to select his clients; and
- he was required to provide six weeks’ notice to suspend his room rental arrangement.
Mind Matters maintained that he had always been engaged as an independent contractor.
What Did the Fair Work Commission Consider?
The FWC looked at the overall relationship between the psychologist and the practice and found that the way the arrangement operated was consistent with the Independent Contractor Agreement.
Importantly, some of the factors the psychologist relied on did not necessarily point to an employment relationship.
For example, his supervision was a requirement of his professional registration. The administrative requirements and alleged KPIs were also consistent with obligations contained in his contractor agreement.
He retained control over his availability and therefore when he could accept clients.
The FWC also found that a business can place certain requirements on a contractor without automatically creating an employment relationship. Mind Matters could set requirements around when and where services were provided, documentation and professional standards, but it did not control how the psychologist delivered his professional services to clients.
Other practical factors also supported his status as an independent contractor. He worked at another psychology practice, operated as a sole trader, invoiced under his own ABN and charged GST.
The Decision
Looking at the relationship as a whole, the FWC found that the psychologist was an independent contractor, not an employee.
The Independent Contractor Agreement was found to be valid and enforceable, and the way the parties worked together was consistent with its terms. As a result, the psychologist could not pursue his claim on the basis that he had been dismissed as an employee.
What Does This Mean for Businesses?
This decision is a useful reminder that having an Independent Contractor Agreement is important - but the agreement also needs to accurately reflect the relationship in practice.
If your business or practice engages contractors:
- make sure your contractor agreements clearly reflect the intended working relationship;
- ensure the way you work with contractors is consistent with those agreements;
- be mindful of the level and type of control you exercise over contractors; and
- regularly review contractor arrangements as roles and working practices evolve.
Getting the arrangement right from the outset can help reduce uncertainty and the risk of costly disputes later.
If you engage independent contractors and are unsure whether your agreements or working arrangements appropriately reflect the relationship, our Employment & Industrial Relations team can help.
Contact Robert Lamb or Claudia Molachino on 07 3220 1144, or email our team at email@hillhouse.com.au to discuss your contractor arrangements.
