Farmers may hire independent contractors for specific tasks requiring specialist skills, such as silage or hay making. It’s important to distinguish between an independent contractor and an employee, as each involves different legal rights and obligations.

This section focuses on situations where a worker’s status as employee or contractor may be unclear. It does not cover professionals and tradespeople (e.g. electricians, vets, AI technicians), whose service arrangements are usually straightforward.

 

The common law

Simply calling someone an independent contractor does not remove your legal obligations if, in reality, they are an employee. The true nature of the working relationship — not the label used — determines which laws apply.

The laws around independent contracting changed in 2022 and again in 2024.

• Before 2022, courts used the “totality” or “multifactorial” test, which looked at the overall nature of the relationship and how the work was performed.
• In 2022, High Court decisions placed greater emphasis on the terms of a comprehensive written contract, even if parts of the agreement weren’t followed in practice.
• From August 2024, the totality test is again relevant in deciding whether a person is an independent contractor or an employee.

Key factors considered under the totality test:

• Control: Contractors decide how and when work is done; employees usually cannot.
• Delegation: Contractors can delegate work to others; employees must perform the work themselves.
• Business structure: Contractors operate their own business and bear commercial risk; employees work within the employer’s business.
• Payment: Contractors are usually paid a fixed fee for a result, not by the hour for labour.
• Business indicators: Contractors may have invoicing systems, standard terms of trade, insurance, debt collection processes, and financial records typical of a business.

Other relevant indicators (though not decisive on their own) include:

• Payment by invoice rather than wages.
• Responsibility for their own tax.
• Holding an ABN.
• Paying for their own accident and public liability insurance.

Further considerations:

• Do they work for multiple clients or advertise their services publicly?
• Can they make a profit (or loss) from the work?
• Was the contract price commercially negotiated?
• Do they bear the risk of poor performance?
• Do they use their own tools, assets, and equipment?
• Do they benefit from goodwill?
• Are they engaged to deliver a specific result and leave once it’s achieved?

Not all factors will apply in every case, and no single factor is decisive. However, having a comprehensive written agreement is essential.

Important: Labelling an arrangement as “independent contracting” does not make it so if the reality of the work is that of employment.

For more on the criteria of whether a person qualifies as an independent contractor or an employee, visit understanding independent contractors.

 

Other laws

Whilst industrial laws about employees do not apply to common law independent contractors, some other state and federal laws do apply, regardless of their status at common law. Under these laws, common law independent contractors are ‘deemed’ or taken to be employees and the laws apply to them as if they are employees.

 

Workers compensation

Superannuation

Under federal superannuation guarantee laws, employers must make super contributions for all employees, so it’s essential to determine whether a worker is legally an employee or an independent contractor for superannuation purposes.

Penalties for non-compliance are severe, so seek professional advice if unsure.

For detailed guidance, see the ATO resource: Difference between employees and independent contractors | Australian Taxation Office.

 

Unfair contracts laws

The Federal Independent Contractors Act 2006 applies to all independent contractor arrangements where at least one party operates and trades through a company structure, and the contract is at least partly for the performance of work. It also applies in the territories.

The Act allows the Federal Court to review, vary, or set aside contracts found to be unfair. In assessing fairness, the court considers factors such as the relative bargaining power of the parties; any undue influence, pressure, or unfair tactics and; whether the contractor is paid less than an employee performing the same work would receive.

Read more about understanding independent contractors

It is important to seek advice from a legal adviser or your state farming organisation if you are in doubt about whether a worker is an independent contractor or an employee.

Take a draft Contract for Services on the Dairy Farm to your legal adviser.