The high cost of classifying bus driver employees as contractors

26th Nov 2020

The decision of Fair Work Ombudsman v Eagle Tours Pty Limited [2019] FCCA 2099, where bus driver employees had been incorrectly classed as contractors, highlights the problem that many workers face when given an inaccurate status of employment.

Fair Work Ombudsman inspectors found that four bus driver employees of a small transport company were paid a flat rate of $22 per hour, despite working 12 hour shifts and on weekends. Three of the drivers were classified as contractors, rather than employees.

Company fined for deliberately classifying bus driver employees incorrectly

Under the Passenger Vehicle Transportation Award 2010, the drivers were entitled to receive $38.94 per hour on weekends, and $48.68 per hour on public holidays.

Classifying the bus drivers as contractors and paying them a flat rate meant that they missed out on casual loadings, overtime rates, weekend and holiday penalty rates, as well as night and early morning work penalty rates.

The Federal Circuit Court found that the four drivers were underpaid by $46,012 between 2012 and 2014. Even though the bus company had since paid the four workers back in full, the judge fined the company $89,250 for ‘deliberately’ wrongly classifying the bus driver employees as independent contractors.

A warning to other companies

The judge heard during the trial that other bus company owners had said it was normal to pay drivers a flat rate of $22 per hour when they were hired for jobs that came up.

In his decision to impose the fine, the judge stated that the company should be penalised to discourage other businesses from believing that all bus drivers – or other workers for that matter – could be hired as contractors, regardless of the nature of their engagement.

Contractor vs employee

Providing clarity on whether a worker should be hired as an employee or contractor, the Fair Work Ombudsman states that the difference is based on many factors, with no single factor determining whether a worker is one or the other.

Generally, a contractor is engaged for a specific task, has a high level of control over how the work is done, uses his or her own tools, and bears responsibility for the quality of the job. A contractor submits invoices for the work completed, pays their own tax, and looks after their own superannuation.

This may suit many workers. However, contractors miss out on a range of employee benefits, including regular pay, superannuation, workers’ compensation, standard hours, tax being automatically deducted from their pay, use of company tools, supervision, and a degree of job security.

In a court matter, the judge will look at the totality of the workplace relationship to determine the status of a person’s employment.

Employers breaking the law

Under the Fair Work Act 2009 (Cth), it’s illegal for an employer to misrepresent an employment relationship or to force an employee into a contract. There are hefty fines in place to deter this.

It’s important for workers to understand their rights, particularly if an employer tries to sign them up as a contractor. In matters dealing with employment status, it’s wise to consult an expert in workplace law.

This is an edited version of an article first published on Stacks Law.

Emily Wittig is a lawyer at Stacks Collins Thompson in Hornsby with over two years’ post-admission experience. She has a particular focus on employment law, having spent over two years prior to her admission working in employment relations, in both federal and state jurisdictions. She previously worked as a Fair Work inspector for the Fair Work Ombudsman, and as an employment relations adviser for the Motor Traders Association of NSW. Emily volunteers as a solicitor at a community legal centre and enjoys helping people who have been taken for granted by their employer.

The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).

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Tags: Employment