The characterisation of a person as an employee or a contractor has a number of important consequences. First, there is the issue of pay and benefits. Then there is the question of responsibility for negligence (generally an employer is responsible for the acts of its employees, when it may not be responsible for the negligence of contractors). Generally, calling a person a “contractor” doesn’t mean that they are not an employee and there can be very significant issues coming from that, particularly if they are in truth an employee and become entitled to overtime and penalty rates.
Courts have been ready to find that a person described as a contractor is in fact an employee if the circumstances warrant it – in particular where the “contractor” is not in truth operating their own business. The Courts would look at the totality of the relationship. The Fair Work Commission website has a useful discussion of the question here https://www.fwc.gov.au/unfair-dismissals-benchbook/coverage/people-excluded/independent-contractors
The High Court recently decided (in respect of the characterisation of casual employment vs permanent employment) that the terms of the contract itself were of greater significance in determining the true relationship. While this decision is limited to the question of casual vs permanent employment, the High Court will be likely to be considering the issue again when determining two appeals to be heard within the next month, one involving truck drivers who were found to be employees after having worked under contractor agreements for some decades, and another in respect of a person working under a labour hire company.
The Fair Work Commission itself has chosen to defer the decision of an appeal in respect of the issue until the outcome of these matters (Franco v Deliveroo Australia Pty Ltd  FWC 2818.
More to come…