Who is a worker?
Who is considered a ‘worker’?
To be entitled to workers compensation, a person must be a ‘worker’ as defined by NSW workers compensation legislation.
A ‘worker’ is defined as a person who:
- has entered into or works under a contract of service, or
- has a training contract with an employer (whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, and whether the contract is oral or in writing).
A contract of service exists where a worker serves his or her employer in the employer's trade or business. A contract of service is not the same as a contract for services, where a contractor carries on their own trade or business (see ‘Contractors’ below).
Determining whether a person is a worker or not requires a careful review of all the facts in favour of and against the existence of a contract of service. This includes, but is not limited to, consideration of such things as:
- whether the employer exercises control over the way work is performed, place of work and hours of work
- whether the worker performs work for others
- whether the work can be delegated or subcontracted
- tax arrangements, superannuation, uniforms, tools and equipment and leave.
No single factor determines whether a person is a worker or a contractor and other factors may also be relevant.
For more information see Insurer guidance GN 2.1 Worker or contractor.
Compensation is payable even in situations where the worker:
- is under the age of 18 years, or
- lives outside NSW.
Although a person may not be a ‘worker’ as defined in the legislation, they may still be entitled to workers compensation benefits if they fall under one of the categories of ‘deemed workers’ outlined in Schedule 1 to the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act).
These categories include:
- workers lent or let on hire
- outworkers who do not employ other workers or subcontract the work
- other contractors who do not employ other workers or subcontract the work
- contractors under labour-hire service arrangements
- rural workers
- timber getters
- salespersons, canvassers, collectors and others
- certain mine employees
- mines rescue personnel
- jockeys and harness racing drivers
- drivers of hire vehicles or hire vessels under a contract of bailment
- caddies and others employed through clubs
- shearers, cooks and others
- volunteer firefighters in fire districts
- workers at place of pick-up
- boxers, wrestlers, referees and entertainers
- voluntary ambulance workers
- ministers of religion
- ministers of religion covered by policies
- participants in training programs.
Who is not considered to be a worker?
For workers compensation purposes, the term ‘worker’ does not include:
- a member of the NSW Police Force who is a contributor to the Police Superannuation Fund under the Police Regulation (Superannuation) Act 1906
- a person employed as a casual for a period of not more than five working days, who is employed for purposes other than the employer’s trade or business
- an officer of a religious or voluntary association employed for duties outside their ordinary working hours, if their remuneration from the association does not exceed $700 per year
- certain registered participants of sporting organisations.
Volunteers are generally not considered to be workers. However, special arrangements apply to volunteer bush fire-fighters, volunteer SES workers and volunteer surf lifesavers.
These arrangements entitle volunteers, who are injured while undertaking volunteer activities, to the same compensation benefits as injured workers. See the Workers Compensation (Bush Fire,Emergency and Rescue Services) Act 1987 for more information.
A contractor enters into a contract for services. Depending on the circumstances, contractors can be:
- workers under the legislation
- deemed to be workers under the legislation
- neither workers, nor deemed workers.
An insurer will need to assess the facts of each case to determine whether the contractor is a worker under the legislation.
Further information can be found in Insurer guidance GN 2.1 Worker or contractor.
A sole trader is an individual running a business. Sole traders can employ workers in their business, but they cannot employ themselves.
If a sole trader contracts with another business, they may be recognised as a worker or deemed to be a worker of the principal contractor.
A partnership is an agreement between people to conduct a trade or business.
A partnership is different from a contract of employment as there is:
- joint ownership of capital
- joint risk-bearing in relation to the business’ ventures, and
- joint interest in profit-making.
A partnership is not a separate legal entity from its partners, therefore it cannot employ the partners. Partners cannot employ each other, so they are considered to be self-employed and not workers.
While partners cannot be workers in their own business, they may perform work for other companies and therefore may be deemed to be a worker of another employer.
An incorporated company is a separate legal entity from its owners. It can employ people directly and is recognised as the employer.
The person who owns the incorporated company can work for the company and be treated as a worker if a contract of service exists.
A non-working director’s duties may include attending board meetings, setting strategic goals and overseeing the company’s progress towards those goals.
A non-working director would not be involved in the day-to-day operations of the business, and would not generally be considered a worker under the legislation.
Here is an example of a decision on what constitutes a ‘non-working’ director:
The Commission considered whether an elected director of a club was a ‘worker.’ Ms Morse was a director and received an honorarium for her services. Ms Morse was engaged in full-time employment elsewhere. She was not required to attend the club during normal work hours. The Commission found that Ms Morse was not a worker as none of the elements necessary for the formation of a contract of service were present.
Where a director is performing work in the day-to-day operations of a business and receiving a wage, salary or director’s fees, they are working under a contract of service.
An insurer should consider each case to determine whether there is a contract of service and the person is a worker.
Here is an example of a decision on what constitutes a ‘working’ director:
Two men (including Mr Stephan) operated a cleaning business. They were the only directors and shareholders of the company and were responsible for performing the cleaning work. The company had a bank account from which all income from the cleaning contracts were banked and part-time assistants were paid.
On appeal, the court found that Mr Stephan was a worker. The nature of the business was sufficient to infer that there was an employment relationship between Mr Stephan and the company.
Claims by trade union representatives
An accredited representative of a trade union can claim workers compensation where:
- they are carrying out their duties as a representative with the consent of their employer or pursuant to an industrial award and agreement, and
- they receive the injury while carrying out those duties or on that journey.
Each Australian State and Territory has its own workers compensation scheme. When an employer operates across states (and/or territories), or a worker is injured in another state, scheme jurisdiction must be determined in order to process the claim.
Section 9AA of the Workers Compensation Act 1987 (1987 Act) states that compensation is only payable under the NSW workers compensation system if the worker’s employment is connected with NSW.
Cross-border arrangements help determine the scheme a particular claim should be managed under. This is done through a series of tests to establish a worker’s ‘state of connection’.
Determining a worker's 'state of connection'
Each state and territory has a set legislative provisions to determine a worker’s state of connection through a series of hierarchical tests.
It is only necessary to proceed to the next test if the earlier one does not establish a worker’s connection with a particular state.
The tests for determining the state of connection, in order of application are:
- Test 1: The state in which the worker usually works in that employment
- Test 2: The state in which the worker is usually based for the purposes of the employment
- Test 3: The state in which the employer’s principal place of business in Australia is located
- Test 4: In the case of a worker on a ship, then the state in which the ship is registered or, if the ship is registered in more than one state, the state where the ship most recently became registered
- Test 5: The state in which the injury occurred, provided the worker is not entitled to compensation under a law of another jurisdiction outside Australia for the same matter.