Two recent High Court decisions have the potential to shake up the long-held divide between ‘contractors’ and ‘employees’. Prior to these decisions, it was established that the key thing to consider was a multi-factored approach about the nature of the work involved. However, as discussed below, case developments have swung in favour of the contract being crucial. This arguably acts as a win for ‘gig economy’ employers and has opened the door to an appeal of the Deliveroo unfair dismissal case we covered previously.
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd
The crucial issue in this decision was whether Mr McCourt, as a British backpacker on an Australian ‘working holiday’ visa, was an independent contractor or an employee. Mr McCourt was hired as a ‘self-employed contractor’ by Construct, a labour-hire company, who was contracted to undertake work for construction company Hanssen. Mr McCourt did not have a contract with Hanssen, however, it was noted in McCourt’s contract with Construct, there was a clause that required him to follow the client’s (in this case, Hanssen’s) orders.
The question was raised about whether in the course of working for Construct and Hanssen if Mr McCourt was carrying ’on his own business’ as to determine whether he was an independent contractor or an employee. It was determined the terms and conditions of the contract highlighted Construct’s obligations, as well as Mr McCourt's obligations to work for Construct’s clients. Further to this, it was determined that Mr McCourt had no control of where he wanted to work and how it ought to be carried out. It was ruled that Mr McCourt was working as an employee due to these conditions.
Further, three of the judges ruled that in instances where the contract explicitly details the rights and duties of the parties, it is of the utmost importance. The exception to this is where conduct post-contract could result in varying the contract. It was also noted by the same three judges, that whilst the multifactorial test was established, in which the contract plays a part, the High Court has never departed from the importance of a comprehensively written contract. This is because a comprehensive contract was not discussed when establishing the multifactor test.
Other judges have commented that courts are not limited to reviewing the terms of a contract but can also consider the performance pursuant to the contract. It was also determined there was merit in determining the control the agency has over the way temporary workers performed their work when establishing back-to-back contracts between temporary workers and employment agencies as well as the employment agency and its clients. Finally, it was determined when dealing with a full and well-written contract that the doctrine of reviewing the entirety of the relationship is to be confined to the rights and obligations provided in the contract.
ZG Operations Australia Pty Ltd v Jamsek
The facts of this case are as followed:
Two workers were employed as truck drivers over a 30 year period by a business that has undergone multiple owners and structural changes
The two workers were initially employees but due to structural changes, eventually relied on contracts with the business.
The two workers established individual partnerships with the company whereby they purchased trucks from the company and had a written contract with the company for providing delivery services
The agreement between the partnerships and company was terminated in 2017 and the two employees sought statutory entitlements owed as employees.
The issue was whether the two workers were indeed employees or independent contractors. It was determined that it was a contract between a partnership as opposed to a worker. The company in which an obligation to undertake services that were ‘reasonably directed’ per the contract does not amount to a company’s power over another person. Rather, it was to be understood in the context of the partnership, thus highlighting the service to be utilised rather than how it was to be done, thus lacking a degree of control. It was also noted that since an employment relationship is a personal one, where the work performed and paid for by an individual uses a substantial mechanical item that is provided by the other party, the personal nature of the relationship is diminished.
Implications of High Court Decision for Employees and Employers
Following the two High Court judgements, it is paramount that an employment contract must be well written and detail the rights and obligations of the worker. This is despite the long-held assumption that the employment relationship is to be determined through multiple factors and examining the entirety of those factors. It will be an interesting time for the gig economy as noted there would be implications for the Deliveroo case discussed in 2021.
If your organisation requires assistance with contracts for employees, or contractors, please get in touch with our team at enquiries@karenansen.com