All employers are obliged to take out workers’ compensation insurance for each of their workers. In this respect, it is important to have a clear understanding of the definition of ‘worker’ under the Workers’ Compensation & Rehabilitation Act 2003 (Qld) (‘the Act’).
Definition of ‘worker’
A worker is defined under section 11 of the Act as a person who works under a contract, and in relation to the work, is an employee for the purpose of assessment of PAYG withholding under the Taxation Administration Act 1953 (Cth), Sch. 1, Pt. 2-5.
In addition, certain persons are included in the definition of ‘worker’ (see Sch. 2, Pt. 1 of the Act) including but not limited to:
- a sharefarmer if they do not provide farming machinery and receive less than a third of the farm proceeds
- a salesperson paid entirely or partly by commission
- labour hire, group training, holding company employees (they are workers of the relevant labour hire, group training, holding company).
Who is not a ‘worker’?
Certain persons are excluded from being deemed as ‘workers’ (see Sch. 2, Pt. 2 of the Act), including but not limited to:
- a director of a corporation (if the corporation is the employer)
- a trustee of a trust (if the trust is the employer)
- a partner of a partnership (if the partnership is the employer)
- an employee of the federal government
- a professional sportsperson.
It is important to note that only an individual can be deemed as a ‘worker’ under the Act (see section 11(4)). For instance, if you have engaged a company, trust, or partnership, they are not considered a ‘worker’ under the Act.
What happens if I don’t realise someone is a ‘worker’ under the Act?
Whether a person is classified as a ‘worker’ under the Act can carry significant ramifications for you as an employer. If a particular person, or class of persons have been overlooked in your business or organisation, in that they are not covered by workers’ compensation insurance, you or your organisation are at risk of facing significant fines and penalties as well as recovery action by WorkCover Queensland for unpaid premiums and any compensation or damages paid in respect to any workplace injuries or illnesses.
Contract of service vs Contract for service
You may have also heard of the distinction between a contract of service and a contract for service. A contract between an employee and employer is referred to as a contract of service. In contrast, the relationship with an independent contractor is referred to as a contract for service.
WorkCover Queensland uses the ATO online decision tool to determine whether a person is engaged under a contract of service or a contract for service, that is, whether they are an employee or an independent contractor. For more information see What are your obligations to workers? Part 1: Employees and Independent Contractors.
What about household workers?
If you employ a household worker – that is, a worker you employ in and about, or in connection with, your private residence or the grounds of the residence (including any residence that you rent as a tenant) – it is compulsory to take out a Household Workers’ Insurance Policy to cover you against potential compensation costs if the worker is injured while working for you.
Household workers include cleaners, nannies, baby sitters, gardeners, handymen and in-home carers. Individual sole trader contractors with ABNs operating their own business may also be considered household workers.
In what circumstance is personal insurance recommended?
An employee will not be a worker for the purposes of the workers’ compensation scheme if the worker is a director, trustee or partner of the entity for whom the worker performs work. If this applies to you, it is important that financial advice is obtained to ensure adequate personal insurance to meet your needs in the event of injury.
Key take aways
It is not always straightforward to determine whether a person is a worker under the Act. For instance, an independent contractor may be deemed as a worker in certain circumstances. Generally speaking though, a person classed as an independent contractor will not be deemed a ‘worker’ under the Act.
Failure to take out adequate workers’ compensation insurance for workers can expose businesses, organisations and householders to significant fines, penalties and recovery claims.
If you need legal advice regarding your specific circumstances, regarding your obligations to workers under the Act, or about broader workplace issues, including workplace injury law and employment law matters, please contact our Toowoomba office on (07) 4637 6300.
Did you know?
- Having an ABN does not automatically make a worker an independent contractor.
- The use of invoices does not automatically make a worker an independent contractor.
- Just because it is ‘common industry practice’ for employers to treat workers as contractors (and deny entitlements such as paid annual leave), does not make it legal to do so.
- Workers can be employees on one job for an employer, and a contractor on the next job for the same entity that engaged them as an employee on the previous job.
- A written document stating that a genuine employee is a contractor will not make the worker a contractor at law.