In this series of blog posts, we have examined the use of independent-contractor relationships by multinational organizations. In our last three posts, we identified issues for global entities that are considering using independent contractors when expanding their operations overseas, including international legal implications of an independent-contractor relationship (part I); a checklist of considerations before choosing an independent-contractor engagement (part II); and tips for drafting effective independent-contractor agreements (part III). In this, our fourth and final blog post in this series, we provide a short survey of particular considerations in several major and secondary market countries where independent-contractor vehicles are frequently used.
Below are a few illustrations of noteworthy jurisdiction-specific issues in independent-contractor relationships. These are by no means exhaustive of the listed jurisdictions’ laws on the subject—the bottom line is that any company should understand the local laws in advance of entering into an independent-contractor engagement.
Australia – The Fair Work Act of 2009 levies penalties for “sham” contracting and provides some protections against discrimination for contractors. The definition of “employee” is also broader for certain statutes such as superannuation retirement benefits. Where a contractor does not have an Australian Business Number (ABN), the company may also need to comply with certain withholding requirements. Depending on the relevant province or territory, other laws may also apply.
Brazil– In Brazil, the core functions of a business—such as nursing in a hospital—cannot be subcontracted and must be performed by employees. Additionally, independent contractors should be used in Brazil on a project basis only—indefinite relationships are presumptively employment relationships. Companies using independent contractors are strongly recommended to require contractors to set up their own commercial entity—but absent this, should obtain the contractor’s registration as an autonomous worker or individual taxpayer from the INSS (Instituto Nacional doSeguro Social) as well as the municipality. Payments should be documented by professional services receipts, and it is important that payments be tied to services rendered. A service tax will apply to these payments.
Continue reading here.