Tuesday, 14 January 2014

Terminating an Independent Contractor – Are you at risk of an adverse action claim?

A recent Federal Court decision demonstrates that companies need to take care when terminating the services of independent contractors who have been actively involved in industrial activities or have exercised a workplace right, and serves as a reminder that claims of adverse action may be successfully brought by independent contractors – not just employees.

The decision: Interlocutory injunction ordered in favour of contractor

An owner-driver (the Contractor) delivered pre-mixed concrete for a company, Hanson Construction Materials (the Company). The Contractor claimed that he purchased a new large concrete mixer due to the Company’s indications that the Contractor would have a contract with it until 2020. The Company subsequently terminated the contract with the Contractor.

The Contractor claimed that the Company had taken adverse action against the Contractor because of his industrial activities and because he had exercised a workplace right, namely:

  • Being an active member of a union;
  • Actively recruiting owner-drivers to join the union so that the union could collectively bargain the owner-driver contracts with the Company;
  • His involvement in a general protections dispute brought by the union against the Company; and
  • An argument with a company manager about his wearing of a union cap

The Contractor sought an interlocutory injunction to compel the Company to continue to provide him with work, pending the final hearing of the matter.

The Federal Court granted the interlocutory injunction, finding that although each incident was relatively minor if looked at in isolation, they could combine to build a complete picture supporting the Contractor’s case. The Court further found that it was appropriate to grant the injunction because damages would not be an adequate remedy for the Contractor should he succeed at trial, given the likely disruption to his business affairs if the injunction was not granted.

What this means for you

This case highlights the following:

  • The general protection provisions in the Fair Work Act prohibit adverse action being taken against contractors as well as employees;
  • Adverse action includes terminating the contract of the contractor and discriminating against the contractor in relation to the terms of engagement;
  • Precautions must be taken not to discriminate or adversely affect the working conditions of contractors, particularly where the contractor has exercised a workplace right, is entitled to pay or is associated with a union;
  • There are a range of remedies in general protection cases including injunctions, interim injunctions, compensation for loss, reinstatement in relation to employees and pecuniary penalties

Employers in similar situations are encouraged to contact HR Legal for assistance.

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This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.

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