Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (HCA 2022)
ZG Operations Australia Pty Ltd v Jamsek (HCA 2022)

Link to Personnel Contracting Decision

Link to Jamsek Decision

Key Takeaways

The High Court of Australia (HCA) has recently allowed appeals from two separate decisions concerning the employee versus independent contractor relationship. The HCA did not adopt a multifactorial approach and instead focused on the rights and obligations of the parties’ under contract. It was concluded that where no party seeks to challenge the efficacy of a contract on the basis that it is either a sham or otherwise ineffective under the law, there is no need to seek to consider the totality of the relationship between the parties using a multi-factorial or multiple indicia approach.

Brief Facts

Case 1: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (HCA 2022) (‘Personnel Contracting’)

Mr McCourt obtained a role and signed an Administrative Services Agreement (ASA) with Construct, a labour hire company. The ASA described Mr McCourt as a ‘self-employed contractor’. Construct assigned Mr McCourt to work on construction sites with Construct’s client, Hanssen Pty Ltd, where Mr McCourt performed basic labouring tasks under the supervision and direction of Hanssen’s employed supervisors.

Mr McCourt commenced proceedings against Construct seeking compensation and penalties under the Fair Work Act 2009 (the Act). The crucial issue was whether Mr McCourt was an employee of Construct for the purposes of the Act.

The primary judge held that Mr McCourt was an independent contractor and an appeal to the FCA was dismissed. Both Courts applied a multifactorial analysis referring to the terms of the ASA and the work practices imposed by Construct and Hanssen.

Case 2: ZG Operations Australia Pty Ltd v Jamsek (HCA 2022) (‘Jamsek’)

The respondents (Mr Jamsek and Mr Whitby), both truck drivers, were initially engaged as employees in a business run by the second appellant company. They were later offered an opportunity to become contractors and purchase their own trucks. They were told that they would no longer be employed by the company and that the company would continue to use their services only if they purchased their trucks and entered into contracts to carry goods for the company. The respondents agreed and set up partnerships with their respective wives.

The partnerships purchased trucks from the company and entered into written agreements for the provision of delivery services. The respondents made deliveries as requested by the second appellant and each partnership invoiced the company for the delivery services provided. Part of the revenue earned was used to meet the partnerships’ costs of operating the trucks. The net revenue was declared as partnership income and split between husband and wife for the purposes of income tax.

The agreement between the partnerships and the company was terminated in 2017 and the respondents commenced proceedings seeking declarations in respect of statutory entitlements alleged to be owed to them as employees. The primary judge held that the respondents were independent contractors and the FCA overturned that decision finding that the respondents were employees.

Judgments

In Personnel Contracting, the HCA considered the ‘multifactorial test’ to be problematic on the basis that such a test could result in considerable uncertainty, both for parties and for the courts. The HCA referred to the decisions in Stevens v Brodribb Sawmilling Co Pty Ltd (CLR 1986) and Hollis v Vabu Pty Ltd (HCA 2001) where it was said that the characterisation of a relationship as being either one of employment or one of principal and independent contractor is to be determined by reference to ‘the totality of the relationship between the parties’.

The HCA clarified that it was not suggested that the multifactorial test should be used as a checklist and that it had never been suggested that the factors identified to be relevant are of equal weight in the characterisation of the relationship. Instead, the HCA considered that there was weight to the question of whether a labourer is conducting his or her own independent business (as distinct from serving in the business of the employer) as this provided a more meaningful framework to guide the characterisation of the parties’ relationship.

It was noted that once Mr McCourt accepted an offer of work, his core obligation under the ASA was to co-operate with Construct in the supply of labour to Hanssen and this included the obligations to attend Hanssen’s worksite at the nominated time and supply labour for the duration required. The HCA concluded that Mr McCourt’s work was dependent upon, and subservient to, Construct’s business and as such was a contract of service rather than a contract for services. Mr McCourt was held to be Construct’s employee.

In Jamsek, the HCA noted that the primary judge described the respondents’ partnerships as having ‘conducted their affairs as one would expect of a business’ which involved significantly higher risks than the risks the respondents would have faced as employees. It was accepted that the respondents, as members of their partnerships, were engaged in the conduct of their own businesses. As such, the HCA held that the respondents were not employees.

The HCA noted that the contracts between the parties came about because of the company’s insistence that the only ongoing relationship between them would be that established by contract and that the basis of the contract was the company’s refusal to continue to employ the respondents as drivers which the respondents had accepted.

Implications

While the HCA decisions came about following claims brought predominantly under the Act rather than under workers compensation legislation, they highlight the importance of considering the rights and duties established by any contracts between the relevant parties in characterising whether a worker is an employee or independent contractor.

The HCA did not suggest that it was not appropriate to consider the totality of the relationship between the parties by reference to the various indicia referenced in the earlier authorities. Rather, the HCA considered that its task was to enforce the parties’ rights and obligations under contract and not simply to form a view based on a multi-factorial or multiple indicia approach.