High Court hands down decisions in two key independent contractor vs employee cases
The High Court has recently handed down key simultaneous decisions in two long-running cases that examined the legal status of particular workers. The decisions largely demonstrate that the High Court continues to affirm the significance of contractual terms entered into by the parties when determining employment and contractor relationships and classifications.
Both cases highlight the critical fact that employers need to seek legal advice when drafting employment contracts.
The two cases are Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek (Jamsek).
The Personnel Contracting case involved a 22-year-old backpacker who was engaged by a labour-hire firm, Construct, and hired out to building companies to undertake labouring work. Under the terms of his contract with Construct, he was regarded as a self-employed contractor.
With the support of the CFMMEU, the backpacker brought a claim against Construct alleging that he was, in fact, an employee and, therefore, entitled to additional award payments and other entitlements.
The High Court agreed, largely on the basis that the labourer could not exercise any control over what work he was to perform and how that work was to be carried out.
Under the terms of his agreement, he promised to work as directed and was entitled to be paid by Construct in return for the work he performed pursuant to that promise. The fact that various parties involved in the arrangement labelled him as a ‘contractor’ did not alter the true nature of the employment relationship, which the court found to be one of ’employer’ and ’employee’.
The High Court reached a different decision in the Jamsek case.
The case involved two long term truck drivers who were initially employed in 1977 as employees.
However, in 1985, they were told that their ongoing employment was conditional upon them purchasing the trucks themselves and entering into contracts to carry goods on behalf of the company.
Both drivers agreed to the new arrangements, formed legal partnerships with their respective spouses, and entered into written contracts whereby they agreed to purchase trucks from the company as well as pay for the maintenance and operational costs of the vehicles.
Consistent with the principles developed in Personnel Contracting, the High Court unanimously held that the two drivers were independent contractors, as opposed to their claims that they were actually employees.
The reason for the decision was the High Court’s determination that the parties’ relationship for the contractual arrangements were the respective partnerships that had been formed (as opposed to the individual drivers) and the company.
The court held that the partnerships, rather than the individual employees, were the parties contracted to provide delivery services through the use of their own trucks, as well as being financially responsible for the maintenance and operational costs, and responsible for providing relevant insurances and invoicing.
However, the High Court did remit to the Full Court to determine whether the arrangement meets the definition of ’employee’ for the purposes of the Superannuation Guarantee (Administration) Act 1992.
For questions about employees, independent contractors, superannuation liability, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 925 529, 0417 622 178 or via email to email@example.com
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.