Workers’ compensation laws in Victoria are mainly applicable to employees, not contractors or sole traders. However, in some cases, a contractor may be deemed a worker for compensation purposes. To determine eligibility, seek legal assistance and engage with Maxiom’s workers compensation lawyers Melbourne for the best chance of success. 

Workers’ compensation is a type of insurance that provides financial support to employees who are injured or sick on the job. It covers medical expenses, rehabilitation costs, and income replacement throughout recovery. 

This article focuses on the regulations and criteria for contractors and sole traders worker compensation in Victoria, and it provides important information and guidance to assist in understanding your workers’ compensation rights and obligations. 

Who is a Contractor or a Sole Trader? 

The Contractor: 

A contractor is an independent person who is contracted to undertake certain activities or offer services for a company or organisation, but is not classified as an employee. Contractors are self-employed and generally work on a project-by-project basis. 

Contractors can be: 

  • IT consultants 
  • Tradespeople (electricians, plumbers) 
  • Freelance workers (writers, designers) 

Sole Trader: 

A sole trader is a business structure in which a single person owns and operates the whole business. Sole traders are self-employed and accountable for all parts of their business including any employees they hire. 

Sole traders can be: 

  • Hairdressers 
  • Personal trainers 
  • Small retail store operators 

Trade or Business: Understanding the Differences 

It’s important to recognise that, despite their frequent interchangeability, the phrases “trade” and “business” have different meanings when discussing contractors and sole traders.  

Trade: Refers to the act of buying and selling goods or services, often involving specialised skills and transactions.  

Business: Encompasses a broader range of activities, including management, marketing, and operations, to generate revenue. 

Key Differences: 

Aspect  Contractors  Sole Traders 
Nature of Work  – Provide specific services or complete projects
– Temporary and project-based
– Examples: IT consultants, freelance writers 
– Operate and manage an entire business
– Responsible for ongoing operations
– Examples: hairdressers, small retail store operators 
Level of Responsibility  – Fulfill contract terms
– Manage own work within scope defined by hiring company 
– Bear full responsibility for business success or failure
– Include financial risks and compliance with laws 
Regulatory and Tax Obligations  – Simpler tax obligations
– Mainly related to contracting income 
– More complex regulatory requirements
– Include income tax, GST, and employee-related obligations if applicable 

Are Contractors and Sole Traders Eligible for Workers’ Compensation in Victoria? 

As a contractor or sole trader, you’re typically self-employed and not classified as an employee under the Workplace Injury Rehabilitation and Compensation Act 2013 WIRC Act. This means you don’t automatically qualify for workers’ compensation.  

However, there are circumstances where you might be considered a “deemed worker” and eligible for compensation. 

Contract for Service vs. Contract of Service 

Contract for Service: Indicates that the individual is running their own business and is responsible for their own tax and superannuation. 

Contract of Service: Typically an employee-employer relationship, where the employer is responsible for tax and superannuation. 

Implications: The distinction affects eligibility for workers’ compensation. Contractors engaged under a contract for service usually need to prove they meet the deemed worker criteria to be eligible.  

Criteria for Eligibility 

  1. Proving Income: The 80% Rule 
    • Requirement: To be considered a deemed worker, you must demonstrate that at least 80% of your earnings in the 12-month period prior to your workplace injury came from the one employer you’re making the compensation claim against. 
    • Key Point: If you can prove that 80% or more of your income came from one employer, you may be eligible for workers’ compensation as a deemed worker. 
  1. Remuneration
    • Definition: Compensation in the form of money or valuable consideration, governed by the Fair Work Act Fair Work Act. 
    • Regulations: Ensure fair compensation; employees have entitlements like minimum wage and benefits. 

Take a look at our client case study for a real-world example:

Case Study: Contract of Service 

Approach and Agreement: An individual was approached at a gym to participate in a marketing campaign, involving being photographed at various locations for the gym’s advertising. 

Compensation: In exchange for participating in these photo shoots and the use of their images, the individual received a free gym membership, for a period of time. 

Incident: During a photo shoot at an off-site location, the individual suffered a lower leg injury requiring surgery, leading to chronic pain and a secondary psychological injury. 

WorkCover Claim: A WorkCover claim was lodged on the basis that the individual was arguably a ‘worker’ according to WorkCover legislation. 

Claim Rejection: The WorkCover claim has currently been rejected.  

Legal Consideration: An experienced Barrister is reviewing the case to determine the potential for taking the dispute to the Magistrates’ Court of Victoria. 

Assessment: We assess that the individual was under a contract of service to participate in the advertising campaign and was compensated through a tangible non-pecuniary benefit (gym membership) with a defined financial value. Based on this, the legislation should recognise the individual as a worker, not a subcontractor. 

  1. Personal Manual Labour
    • Requirement: Perform personal manual work or services. 
    • Differentiation: Employees receive workplace protections; contractors manage their own insurance. 
    • Example: Work performed actively, not passively, is a key criterion for determining eligibility. 
  1. Control and Direction
    • Definition: Subject to the control and direction of the hirer. 
    • Significance: Determines the degree of supervision and autonomy. 

Want to see how this works in practice? Check out our client case study:

Case Study: Successful Sub-Contractor Claim 

Initial Advice: A sub-contractor approached Maxiom Lawyers seeking advice on pursuing a WorkCover claim. 

Worker Definition: Given the nature of the working relationship with the principal contractor, it was arguable that the sub-contractor could meet the definition of a ‘deemed’ worker under WorkCover legislation. 

Initial Claim Rejection: WorkCover initially rejected the claim, maintaining that the sub-contractor did not qualify as a worker.  

Court Proceedings: The matter was escalated to the Magistrates’ Court of Victoria for further adjudication. 

Financial Analysis: A detailed analysis of the sub-contractor’s financial records was conducted, revealing that 80% of their gross income was derived from providing services to the principal contractor. Additionally, the evidence demonstrated that the sub-contractor was not conducting an independent trade or business. 

Successful Outcome: The comprehensive forensic analysis led to the court recognising the sub-contractor as a deemed worker. Consequently, their WorkCover claim was accepted, entitling them to statutory benefits and lump sum compensation under the WorkCover scheme. 

Do Contractors and Sole Traders Have Workers’ Compensation? 

Generally, contractors and sole traders generally do not have workers’ compensation. However, they can explore eligibility through the deemed worker provision.  

Here’s how to proceed: 

  • Consult an Accountant: An accountant can help you analyse your income sources and determine if you meet the 80% threshold. 
  • Seek Legal Advice: Consulting with experienced lawyers, like those at Maxiom, can provide clarity and improve your chances of a successful claim. 
  • Third-Party Claims: If you’re deemed a worker, you can make a compensation claim against the employer from whom you derived most of your income. 

How to Claim Workers’ Compensation as a Contractor or Sole Trader in Victoria 

If you meet the eligibility criteria, as a contractor or sole trader, you can file a workers’ compensation claim. Here’s a detailed guide to help you through the process: 

To be eligible, contractors and sole traders must: 

  • Demonstrate that at least 80% of their earnings in the 12 months prior to the injury came from one employer. 
  • Meet other requirements such as proving personal manual labour and being under the control and direction of the hirer. 

Steps for Making a Workers’ Compensation Claim 

1. Notify Your Employer/Hirer 

  • Action: Inform the person or entity you worked for about your work-related injury or illness within 30 days. 
  • Document the incident thoroughly in an incident report, detailing what happened and any immediate actions taken. 

2.Obtain a Certificate of Capacity 

  • Action: Visit a medical practitioner to obtain a Certificate of Capacity, which details your injury, work capacity, and treatment plan. 

3.Seek Legal Advice from Maxiom 

  • Action: Consult with our legal team at Maxiom to ensure you understand your rights and the strength of your claim. We will give you tailored advice and guidance regarding specific questions on your case.  

4.Gather Financial Records 

  • Action: Collect invoices and financial records from the past 12 months to prove that 80% of your earnings came from the employer you’re claiming against. 
  • Organise the documents in a clear and chronological order to facilitate the review process. 

5.Complete a Worker’s Injury Claim Form 

  • Action: Fill out the Worker’s Injury Claim Form, available from your employer/hirer or the WorkSafe Victoria website. Include detailed information about your injury, employment, and time off work.

6.Submit the Claim 

  • Action: Send the completed claim form and Certificate of Capacity to your employer/hirer or their workers’ compensation insurer. 
  • Keep copies of all documents submitted for your records. 

 7.Provide Additional Information 

  • Action: Be prepared to supply extra documents if requested, such as medical reports, wage records, and any other supporting evidence. 
  • Respond promptly to any requests for additional information to avoid delays in processing your claim. 

Summary 

  • Eligibility: Contractors and sole traders must meet specific criteria, including proving that 80% of their income came from one employer. 
  • Steps: Notify your employer, obtain a Certificate of Capacity, seek legal advice, gather financial records, complete and submit the claim form, and provide any additional information as needed. 

Knowing your rights and following these procedures will greatly increase your chances of a successful workers’ compensation claim. Contact Maxiom’s skilled lawyers for tailored advice to help strengthen your case and give you the best legal representation you deserve. 

What are the time limitations for workers compensation? 

  • Notification: You must notify your employer or hirer within 30 days of sustaining the injury or illness. Failure to do so may affect your eligibility for compensation. 
  • Lodging a Claim: It is recommended to lodge your workers’ compensation claim as soon as possible. While there is no strict deadline, lodging promptly ensures that your claim is processed in a timely manner and reduces the risk of complications. 
  • Common Law Damages: There is a 6-year limitation period from the date of injury to pursue common law damages against your employer or a third party. This means you have six years to file a lawsuit if you believe your injury was due to negligence. Prompt action is crucial to ensure your legal rights are protected. 

What Claims Can You Make as a Sole Trader or Contractor? 

  • Weekly Payments: You can receive compensation for lost income due to your injury. This helps cover your living expenses while you are unable to work. 
  • Medical and Like Expenses: You are entitled to reimbursement for medical costs, including treatments, medications, and rehabilitation services required for your recovery. 
  • Impairment Benefits: If you suffer a permanent impairment, you may be eligible for a lump sum payment. There is no time limit for claiming impairment benefits, allowing you to apply when your condition stabilises. 
  • Common Law Damages: In cases of negligence, you may pursue common law damages against your employer or a third party. This can provide additional compensation beyond statutory benefits if it is proven that negligence contributed to your injury. 

Common FAQs 

What Happens If I Don’t Have Workers’ Compensation?

If you do not have workers’ compensation as a sole trader or contractor insurance in Victoria and you are required to, you may face significant fines and penalties.  

The Victorian WorkCover Authority can impose fines and take legal action against businesses that fail to comply with this legal obligation. This can result in severe financial repercussions and legal consequences for your business. 

What Happens If a Contractor Gets Injured at Work? 

If a contractor gets injured at work, their eligibility for workers’ compensation will depend on whether they can be classified as a deemed worker under the Workplace Injury Rehabilitation and Compensation Act 2013. 

If they meet the criteria, they can file a workers’ compensation claim. If not, they may need to rely on their personal insurance or pursue a common law damages claim if negligence was involved. 

Do Sole Traders Need Workers’ Compensation Insurance for Their Employees? 

Yes, if you are a sole trader in Victoria and employ workers, including contractors or subcontractors, you are required to have workers’ compensation insurance to cover those workers.  

This insurance is mandatory if you expect to pay more than $7,500 in wages and benefits to your workers in a financial year.  

Failure to obtain this insurance can result in fines and legal action by the Victorian WorkCover Authority. 

Why Maxiom? 

At Maxiom, we are accredited specialists in workplace injuries under the Law Institute of Victoria, ensuring the highest quality legal services for our clients. Our expertise in understanding and navigating workers’ compensation laws allows us to provide personalised guidance and representation tailored to your unique situation. 

We thoroughly review all financial documentation, such as invoices and wage records, to confirm eligibility for compensation. Our experienced lawyers conduct an in-depth analysis of complex cases, strategically presenting evidence that satisfies compensation requirements strengthening the chances of a successful claim. 

By choosing Maxiom, personal injury lawyers Melbourne you will benefit from our specialised knowledge and comprehensive support, which significantly improves your outcome. We encourage you to seek professional assistance to secure the benefits you deserve. Contact us today to ensure your rights are protected and your claim is handled with the utmost care and expertise.