Employers should be mindful of the risks of mischaracterising a worker when engaging them to perform work.
In the recent decision of AB v Free Hearts Free Minds [2025] FWC 353, the Fair Work Commission (FWC) has reaffirmed that it will consider the "totality" of the relationship between parties when determining whether a worker is an employee or an independent contractor.
In this matter the FWC rejected the employer’s jurisdictional objection, finding that a remote worker was actually an employee and therefore entitled to protection from adverse action under the Fair Work Act 2009 (Cth) (FW Act).
Free Hearts Free Minds (the Employer) is a non-profit organisation based in California of the United States of America, but extended its online therapy services to many countries, including Australia.
The worker was engaged by the Employer in January 2021 as a casual Mental Health Therapist and in November 2023 was engaged full-time with the Employer as an Executive Director. As part of the new role, the worker was required to participate in marketing activities, attend to the Employer’s website and liaise with potential donors as directed by the Employer.
In 2024, the relationship between the worker and the Employer deteriorated and resulted in the dismissal of the worker. The worker was informed by email that her contract with the Employer was terminated and was directed to complete a comprehensive handover.
The worker made an adverse action claim against the Employer, alleging that the reason for the dismissal was that she was unavailable to meet with her supervisor for one week.
The Employer objected to the claim on the basis that the worker did not have access to the adverse action jurisdiction because the Employer was not a National System Employer and, failing that, the worker was an independent contractor and not an employee.
It should first be noted that the FWC denied the Employer’s first objection, finding that the Employer had a sufficient connection to Australia and would constitute a National System Employer so far as to allow an adverse action claim.
The FWC then turned to whether the worker was an independent contractor or an employee.
In this regard, the Employer submitted that the worker was an independent contractor because the worker had “full control” over how her work was performed and could accept or decline the work.
The Employer also submitted that the worker sent invoices to the Employer each month for renumeration and that these invoices did not remit tax or include provisions for leave entitlements or superannuation.
The worker argued that she was an employee because she was required to attend weekly meetings to receive direction about the work she would undertake and that the products of her work were "owned" by the Employer.
The FWC assessed the submissions of both parties with consideration of s15AA of the FW Act and applied the multi-factorial test to ultimately find that the worker was an employee and not an independent contractor.
In its reasoning, the FWC commented that although at “first blush” the relationship appeared unlikely to be one of employment, the FWC determined that the true nature of the relationship in these circumstances should be assessed based on the level of control that the Employer had over the worker’s tasks.
The FWC examined the "totality" of the relationship and determined that the Employer had significant control over the worker and provided the worker with directive communications both in tone and content. The FWC went further to say that the worker was required to follow the instructions from the Employer and was not entitled to refuse to undertake the work.
The FWC commented that the worker’s role shared similarities with many modern remote working arrangements, particularly regarding a senior or executive employee. The FWC continued that the circumstances of this matter were not unique, and it is becoming more common for individuals to receive directions from a remote location and perform work according to their own discretion “in a minute to minute, hour to hour sense”.
Criticising the Employer for having mischaracterised the relationship, the FWC stated that in this particular case, the characteristics which would usually indicate an independent contractor engagement were more reminiscent of a sham arrangement.
The FWC found that the Employer bore the responsibility for the actions and work produced by the worker, and that her work in her managerial position was “solely for the benefit of the [Employer]”.
In addition, the FWC concluded that the absence of remitted tax, leave entitlements and superannuation were largely because the Employer refused to provide them, rather than an indication about the employment relationship.
The FWC noted that it was “undoubtable” that the Employer’s communication to the worker that the employment relationship was terminated would be considered dismissal.
Therefore, the FWC rejected the Employer’s objections to the adverse action claim on the basis that the Employer constituted a National System Employer, and that the worker constituted an employee.
This case serves as a reminder that under recent amendments to the FW Act, the FWC will now have regard to the terms of the contract as well as the ‘“real substance, practical reality and true nature of the relationship” when distinguishing between an employee and independent contractor.
In this decision, the FWC has reaffirmed that it will continue to have a high regard for the level of control and direction provided by the Employer when determining whether an individual is an employee.
The FWC also made comment that in the context of modern workplaces and with the increase in working from home arrangements, employees may have a higher degree of flexibility and personnel control over their workflow, but this does not necessarily change how the relationship will be characterised.
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