‘Loosening the reins’ in modern workplaces does not define the employment relationship
Remote control
Employers should be mindful of the risks of mischaracterising a worker when engaging them to perform work.
Read more...The Fair Work Act 2009 (Cth) (FW Act) was amended last year to introduce a new test for determining if an individual is an employee or an independent contractor.
Section 15AA of the FW Act states that the ordinary meaning of the terms ‘employee’ and ‘employer’ are to be determined by assessing the “real substance, practical reality and true nature of the relationship between the parties”.
The Fair Work Commission (FWC) was recently required to apply this statutory test in determining if a worker was an employee or independent contractor for the purposes of the unfair dismissal jurisdiction (Dickerson v Kagura Games LLC [2025] FWC 2219).
Kagura Games LLC (Kagura)is a video game development company based in the United States.
The worker was engaged by Kagura as a game tester, located in Australia. The engagement was governed by a written agreement which described the worker as an “independent contractor” (the Agreement).
In January 2025, Kagura sent the worker a letter stating that her independent contractor services had been terminated. The letter did not provide any reasons for the termination. In the proceedings before the FWC, Kagura submitted that it had dismissed the worker on the grounds of poor performance.
The worker applied to the FWC alleging that she was an employee of Kagura and that she had been unfairly dismissed from her employment.
Kagura jurisdictionally objected to the application on the basis that the worker was not entitled to access the unfair dismissal jurisdiction because she was an independent contractor and not an employee.
In considering the jurisdictional objection, the FWC applied the test under s 15AA to determine whether the worker was an employee or an independent contractor. The FWC commented at [18]:
Section 15AA sets a statutory test that requires that the real substance, practical reality and true nature of the relationship between the parties be taken into account by considering the totality of the relationship having regard to not only to the terms of the contract governing the relationship, but also to other factors relating to the relationship including, but not limited to, how the contract is performed in practice.
Looking first at the contractual terms between the parties, the FWC was satisfied that the Agreement described the worker as an independent contractor and included various terms that were indicative of an independent contractor relationship. For example, the worker was not entitled to employee benefits (such as leave and workers compensation insurance) and was responsible for her own expenses, taxes and insurances.
However, the FWC warned that while the description used by the parties or the manner in which they meet obligations may be indicative of an independent contractor relationship, it is not always a determinative factor.
Applying the “practical reality” test under s 15AA of the FW Act, the FWC found that Kagura exercised control over how the work was performed by the worker and that this aligned with an employment relationship instead of an independent contractor relationship.
The FWC considered the relationship as a whole and found that the following factors pointed to the relationship being one of employment:
- The worker was required to use Kagura's software platform, submit weekly reports, communicate with a supervisor and assist other team members when needed. She also was not permitted to subcontract her work.
- The worker was paid a fixed monthly amount, which was calculated based on what was described as a “full-time rate” which assumed 40 hours work per week. The worker did not submit timesheets or invoices and was paid this monthly rate regardless of the number of hours worked. The FWC stated that this structure indicated that work would be performed on a full-time basis and a 40-hour week was expected.
- The worker was one of several testers in Kagura’s business. She reported to a supervisor and worked in a team environment. She performed several duties that were essential to Kagura’s software development operations, and she was required to safeguard proprietary information and intellectual property.
- The worker worked from home using her own computer and internet connection. While the requirement for an individual to bear the costs of expenses is indicative of an independent contractor relationship, the reality was that the expenses actually paid for by the worker was limited.
The FWC stated that given the control exercised over the way in which the worker performed the services, it could not be said that she was conducting her own independent business, as distinct from serving in the business of Kagura.
The FWC held that while the Agreement described the worker as an independent contractor, an assessment of the totality of the relationship supports the conclusion that the relationship between the parties was one of employment and not independent contractor.
Accordingly, the FWC found that the worker was an employee of Kagura and therefore had access to the unfair dismissal jurisdiction.
Turning to the merits of the unfair dismissal application, the FWC found that the dismissal was harsh, unjust or unreasonable on the basis that Kagura did not have a valid reason for dismissing the worker and did not follow a fair termination process.
The FWC ordered the reinstatement of the worker, with continuity of service and restoration of lost pay.
Lessons for employers
While an individual may be described as an independent contractor on paper, this is not determinative of an independent contractor relationship.
As seen in this decision, the test under section 15AA of the FW Act requires consideration of the totality of the relationship between the parties, including not only the terms of the contract, but also the way in which the contract is performed in practice.
While the written contract remains important, employers should give careful consideration to how their independent contractor arrangements operate day-to-day to ensure that the contractor is not actually characterised as an employee under the FW Act.
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