Three "Must Do's" when engaging an independent contractor

There are three critical things a business owner must do when they engage an independent contractor.

They must ensure that the contractor:

1. has workers compensation
2. has sufficient public liability insurance ($10 million is standard)
3. really is a contractor and cannot be deemed an employee (this needs to be stated clearly in the contract as well as shown by the terms of the contract, because simply saying it in the contract won't change the situation if the facts differ from the contract statement)

This was highlighted in a recent case involving a woman who was injured when a fridge door fell off its hinges at a service station.

When the victim sued the owners/operators of the servo, the Court found they had done all that they could reasonably have been expected to have done and so they were not negligent.

However, had she sued the mechanic, an independent contractor who had been called in to tighten the screws on the fridge, she would have won.

The mechanic failed to fix the defect. In fact, his botched repair was the actual cause of the injury. He was not an employee but an independent contractor to the service station owner who was responsible for the maintenance and repair of the fridge.

Why wasn't the service station owner responsible for the mechanic's negligence?

Because he wasn't their employee.

What the mechanic did was done as a principal pursuing his own business or as an employee of his own company operating that business.

So if you engage contractors to provide products or services for you, make it plain in the engagement contracts that they are independent contractors rather than your employees or agents and be certain they have sufficient insurance to protect others from their negligence.

Likewise if you are an independent contractor, be sure your workers' compensation, public liability and or professional indemnity insurance are adequate and up to date.

About the Author
Townsends Business & Corporate Lawyers offer a complete range of commercial and business legal services to help you protect your business from legal liabilities. If you would like any further advice regarding contracts, employment law or need clarification on the difference between an independent contractor and an employee, please contact Julie Cox on 02 - 8296 6222.

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Townsends Business & Corporate Lawyers publish Business Law Brief for your interest and to provide information on legal issues that may affect you. Although we use only reliable sources for the contents and do our best to ensure that the articles are accurate, every case is different, depending on its particular facts. You must not take any action based on the advice in this newsletter. You should discuss any proposed action with us first.