Today, the High Court delivered two long-awaited decisions regarding businesses use of independent contractors.
CFMMEU v Personnel Contracting
In the first matter, a British backpacker who travelled to Australia on a working holiday visa was engaged by a labour hire company under a contract describing him as a “self-employed contractor”. The worker worked on two construction sites operated by a client of the labour hire company, where he performed basic labouring work under the day to day direction and supervision of the labour hire company’s client.
The CFMMEU (Construction, Forestry, Maritime, Mining and Energy Union) and the worker took the labour hire company to Court seeking compensation and penalties. At first instance, the judge and then the Full Court held that the worker was not an employee of the labour hire company.
In a huge win for the CFMMEU, the High Court overturned the Full Court’s decision and held that the worker was an employee of the labour hire company.
While clear that the written terms of the contract will generally determine the relationship, the High Court found that on a proper analysis, the terms in the independent contractor agreement amounted to an employer/employee relationship, regardless of the “contractor” label used.
ZG Operations v Jamsek
In the second matter, two workers were initially employed as truck drivers by ZG Operations. However, from the mid-1980’s, they both agreed to end the employment relationship and to enter arrangements to purchase the trucks from their employer to become independent contractors. The workers both set up partnerships with their wives as the entity that entered into these contracts.
For the rest of the relationship, the workers paid for and maintained their trucks at their own expense and invoiced the company for services provided. They also enjoyed the tax benefits of splitting the partnership income with their wives.
In 2017, the workers took the company to Court seeking various employee entitlements. The judge at first instance held that the workers were not employees. The Full Court overturned this and held that both were employees.
In some back and forth, the High Court then unanimously held that both truck drivers were not employees. Consistent with CFMMEU v Personnel Contracting, the High Court concluded that when parties have committed their relationship to a written contract, which is not challenged as being false, the characterisation of that relationship must be determined by reference to the terms in that contract.
In this instance, the evidence was clear that the contracts between the partnerships and the company provided for the use of the partnerships’ trucks and the services of a driver to drive those trucks. The High Court confirmed that under the terms of the written contracts, this was not an employment relationship.
What does all this mean for employers?
These two decisions are in line with the recent approach taken by the High Court in the casual employment case of WorkPac P/L v Rossato (you can read more about the case via the link), which places primary importance on the written terms agreed between the parties and not on the subsequent conduct of the parties.
While the High Court was prepared to look beyond the label given to the relationship in CFMMEU v Personnel Contracting, reminiscent of the often cited phrase, “the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck”, it was the written contractual terms between the worker and the labour hire company that determined the true nature of the relationship.
Employers and principals can take comfort from the approach adopted by the High Court. However, it is absolutely imperative that employers and principals ensure that before hiring an employee or contractor, that they comprehensively commit to writing the terms of the relationship.
For further advice on employment contracts, our experienced Employment and Workplace Relations team are able to assist.