Determination of independent contractors overturned on appeal

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Determination of independent contractors overturned on appeal

A recent Federal Court appeal, overturning an earlier decision that two truck drivers were independent contractors, again highlights the multitude of factors that courts can assess when determining the legal basis of employment relationships.

It is a long-established principle that Courts will consider the totality of facts. As the appeal judges noted, “there is no single standard for whether an employment relationship exists … It is instead necessary to undertake what is commonly referred to as a `multi-factor test’ or a `multi-factorial assessment’, which requires the consideration of all relevant indicia’.

The initial case involved claims for a raft of award conditions and superannuation payments by two truck drivers, who owned and operated their own work vehicles and undertook the delivery of goods on behalf of ZG Operations Australia (ZG), and several earlier entities. Their arrangement can be summarised as thus – the operators worked regular 9-hour shifts Monday to Friday for flat rates, their vehicles displayed ZG logos as did their workwear, they supplied their own insurances and charged GST on goods and services.

The operators from the beginning had operated as separate Partnerships with their wives, and only provided services to ZG, for a continuous period of nearly 40 years. In assessing the relationship overall, the Primary Judgement upheld their status as independent contractors and rejected their claims.

On appeal, however, a different determination was made by a Federal Court Full Bench, based primarily on several key factors:

  • The provision of services by the Partnerships, rather than the individual, did not reflect the arrangements as it was held that the purpose was effectively to enable splitting and for the spouse to gain tax advantages. Further; the Partners did not actively contribute to the arrangements as payments were primarily made for the delivery services (drivers);

  • ZG was held to exercise control over the operators, based on the regularity of the hours, and the length of the ongoing relationship between the parties;

  • The requirement to wear company logos and, at various times, ensure company logos were present on their vehicles;

  • The ability to subcontract or delegate their work, or undertake work for others, was theoretical only, at best. It would be practically impossible for them, after working their standard 9 hours, plus the factual issue of ZG being their only source of income for nearly 40 years;

  • If the operators sold their trucks, `goodwill’ would not have been seen as part of the sale (diminishing the notion of them operating as separate businesses). In the event of a sale, there was no guarantee of continuing to contract with ZG.

Consequently, when assessing all of the evidence presented, the appeal judges found both truck drivers to be employees for the purposes of both the relevant Modern Award and for superannuation entitlements.

ZG Operations Australia (Australia) Pty Ltd [2020] FCAFC (16 July 2020)

For queries about employees, independent contractors or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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