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  3. Why you cant trust a label what nicholls v built mg means for contractor classification

Why you can’t Trust a label: What Nicholls v Built MG means for contractor classification

By 2 minutes read time

In a recent decision of the Fair Work Commission (FWC), an independent contractor who provided services to a principal via a Trustee entity for a family trust has been held to be an employee of the principal for the purposes of the Fair Work Act 2009 (Cth) (FW Act).  

 

For members who engage independent contractors that provide workers through Trustee entities, this decision is a reminder that simply labelling someone an independent contractor does not necessarily mean they are an independent contractor at law, even when the contracting party is a Trustee. 


In this case, Built MG Pty Ltd (BMG) entered into a contract with the Trustee for the Nicholls Family Trust to provide project management services through Samuel Nicholls.


After BMG terminated the contract with the Trustee, Mr Nicholls filed a general protections application alleging that he had been unlawfully terminated from his employment.  In response, BMG lodged a jurisdictional objection, arguing Mr Nicholls was an independent contractor and was not entitled to make the application.


Following amendments to the FW Act in late 2024, in determining whether a person is a contractor or employee, the FWC and Courts are required to consider the “real substance, practical reality, and true nature of the relationship”. 


In this case, the FWC found that the relationship between BMG and Mr Nicholls exhibited a number of factors pointing to an employment relationship, including the provision of leave entitlements to Mr Nicholls, restrictions on his ability to subcontract or delegate work, and a requirement that he work 45 hours per week. Importantly, the FWC also found that BMG had labelled Nicholls an independent contractor to facilitate his request for his income to be paid into a trust account, despite Nicholls actually being an employee.


As such, the FWC found that Mr Nicholls was an employee for the purposes of the FW Act and was able to proceed with his general protections application.  


This case is a timely reminder that engaging a worker as an independent contractor, even when done through a Trustee entity, does not guarantee that they will be treated as such. Where the real substance, practical reality, and true nature of the relationship is more consistent with employment, there is a risk that the FWC and Courts may find worker to be an employee for the purposes of the FW act, despite any contrary description in the contract.


For a detailed look at this decision, please visit the Gadens website.