When is a ‘working director’ not a ‘worker’?

In this edition, we look at three recent decisions which deal with cases where the ‘working director’ of a business made a workers compensation claim and the insurer argued that the claimant was not a ‘worker’ under the Act.

Summary

As it will be seen, all three decisions are from the Tasmanian Civil and Administrative Tribunal (Tribunal), and in all three decisions, the Tribunal found that a reasonably arguable case existed.

For convenience, we will refer to the alleged ‘working director’ in each case as the ‘claimant’.

The Jago Family Trust case

The claimant worked as a supervisor / carpenter for the employer. The employer was a family trust. The insurer stepped into the shoes of the employer and lodged a section 81A referral.

The insurer’s case was that the claimant was not a ‘worker’ as defined in the Act.

However, before the Tribunal could consider the insurer’s case, a preliminary issue was raised. The issue was whether the family trust could be an employer. This enquiry was prompted by the decision of the Tribunal in a previous decision where the Tribunal decided that a trust could not be an employer of a worker because a trust is not a separate legal entity and thus cannot be a party to a putative contract of service.

The Tribunal’s decision

As such, the alternative argument that there was no contract of service because the family trust could not be an employer, succeeded.

The key takeaways

This case further enshrined the notion that a trust cannot be an employer on the basis that a trust is not a legal person. It follows, if there is no employer, there can be no ‘worker’.

Insurers should keep this mind when considering applications for workers compensation by applicants.

Businesses should obtain appropriate advice on setting up the right business structure to ensure their employees and business owners are covered by workers compensation insurance policies.

The Vet case

In this case, the claimant was a vet and the director of the veterinary clinic.

The insurer’s case was that because employment contracts are by their very nature bilateral contracts, two distinct parties are required for there to be a bilateral relationship. Otherwise, it is a unilateral relationship.

However, the claimant had a compelling case. They had set up a separate company and it is accepted that companies are legal entities in their own right.

Practically, as the claimant was the sole office holder and director of the employer, she was the employer’s ‘controlling mind’. So, whilst it was accepted that there was an employer (unlike the situation in the Jago Family Trust case), the insurer’s case was that the ‘worker’ and the ‘employer’ cannot be the same person.

The Tribunal’s decision

The Tribunal accepted the worker’s position to the extent that it was confirmed there is no doubt that a director of a company may be also an employee of that company, engaged under a contract of service, and therefore a worker for the purposes of the Act.

However, the Tribunal said receipt of wages and superannuation, provision of payslips and accumulation of leave are things that would usually be suggestive of the existence of a contract of service between an employer and a worker.

Given that these indicia did not exist, the Tribunal found in favour of the employer that a reasonably arguable case existed that the claimant was not a worker for the purposes of the Act.

The key takeaways

Business owners are reminded that the establishment of a ‘Pty Ltd’ alone would not create an employer-worker relationship.

As the Tribunal said, a final determination of the issue of whether a company director is also a worker would turn on the facts of each particular case.

The Spit and Polish case

This case was slightly more nuanced.

The insurer’s arguments

The employer was a family trust. As we know, trusts cannot be employers because trusts are not legal entities.

Further, just like the Vet case, the insurer argued that the claimant and the employer were the same person and the true relationship was a unilateral relationship (instead of a bilateral relationship).

The claimant’s arguments

The claimant raised the point that in this instance the trustee of the family trust in question is the trustee company. As a separate legal entity, the trustee company could enter into a contract of service.

Further, unlike the Vet case, the claimant here had received payslips.

The Tribunal’s decision

It was argued for the insurer that the payslips filed by the claimant, showed no leave was recorded as being available or having been taken, including over the Christmas and New Year period. Further, every payslip covering the particular period 2 December 2024 to 30 November 2025 records the payment being for the same number of ‘ordinary hours’ each week, irrespective of public holidays.

The Tribunal had some reservations about whether the payslips that are issued to the claimant support the existence of a contract of service. The Tribunal said, “It would be unusual for a worker employed under a contract of service, in a business of the kind operated by the employer, to apparently work over every day of a Christmas and New Year period without taking any leave. It would also be unusual for a worker employed under an award in a retail industry to work public holidays but without apparently attracting the benefit of penalty rates.”

As such, the Tribunal found that a reasonably arguable case existed.

The key takeaways

Whilst it was not a final finding, this case illustrates the principle that whether a claimant is a worker under the Act is a question of fact. Many factors are relevant to the question of whether a contract of service exists.

Business owners and company directors seeking to cover themselves under workers compensation policies should seek appropriate advice on the right business structure and the right insurance policy.

Insurers should contact us if they require a review of their workers compensation policies especially where the payslips appear to record a homogeneous pay pattern as that could suggest that the recipient might be receiving dividends from a trust / profits from a business; rather than actual fruits of their labour.