Laws and their interpretation evolve over time, but few more quickly than the area of law dealing with the terms and conditions under which a person is engaged to undertake work for another person, or a company.
Whether a person is an "employee" or an "independent contractor" can be a very vexed question. The answer can have far-reaching consequences for payouts, job security and entitlements.
In January, the High Court made two decisions in cases effectively run side by side. The two cases both involved terminations and appeared similar, but the High Court came to opposite conclusions.
Both cases involved the interpretation of sections 13 and 14 of the Fair Work Act 2009.
High Court rules drivers were independent contractors, not employees of the company
In ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2, two plaintiffs had been employed as truck drivers by ZG Operations since the late 1970s. In 1985 they accepted an offer to become contractors.
The drivers had written contracts to provide delivery services for ZG and had some control over their vehicles, times and routes.
When their contracts were terminated in 2017, the drivers argued in court that they were in reality employees and they wanted the benefits they would have received as employees. Their first approach failed, but they won on appeal.
However, the High Court overturned that result, finding the drivers were independent contractors, because both parties had entered into the contractor arrangement with a full understanding of what that entailed.
High court rules contractor was employee of construction company
Conversely, in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1, a young British backpacker was taken on by a labour hire company, which described him as a self-employed contractor. He was allocated to a construction firm.
There was a written contract between the construction firm and the labour hire firm, but not with the backpacker. When the construction firm refused to pay him benefits as an employee, saying he was a contractor, the backpacker's union went to court.
The backpacker lost in the Federal Court, but the High Court reversed that decision, ruling that the man was indeed an employee, as he had not signed a contract with the construction firm and was paid to work under the construction firm's direction.
These two outcomes may appear to be in conflict, but the origin of these decisions lies in what was once the "control test" used by the High Court in 1955 to decide whether an acrobat was a circus employee or a contractor - Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73.
"Control test" to decide if worker is employee or independent contractor
The Zuijs case determined that while the circus could tell an acrobat what to do, it could not tell the acrobat how to do it, as the work required special skills. The circus was not in control, so the acrobat was determined to be a contractor.
By contrast, under the old "control test", the employer tells the employee both what to do, and how to do it.
That changed over time to become a so-called "multifactorial test" involving the use of a number of other indicators. These included whether the worker supplied their own tools, wore a uniform, and was told when and where to work.
Thus, the focus had shifted away from the wording of the contract to more scrutiny of what actually happened in the relationship between the parties once the contract was formed.
Now, in these two 2022 decisions the High Court has made clear that the employee/contractor question should be answered by looking at what the parties intended at the point of formation of the contract.
This does not mean that there are no longer complexities needing to be understood when entering contracts of this kind. It's always wise for a business to get sound legal advice in these areas.
Geoff Baldwin
Employment law
Stacks Champion
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
