The Full Federal Court recently held that two truck drivers who worked for the same business for nearly 40 years were found to be employees rather than independent contractors, despite contracts that said the opposite. This entitled the drivers to significant leave, redundancy and superannuation entitlements. The Court considered the "totality of the relationship" in order to determine the correct classification of the drivers.
Background to the appeal
The drivers were terminated in 2017 due to cost-cutting measures implemented by the business. They made a claim for employment entitlements, but in 2018 the Federal Court ruled that they were independent contractors, after applying a multi-factor test and assessing, among other things, the intentions of the parties at the time of making work arrangements.
The drivers then appealed to the Full Federal Court, with a claim that included payment for annual leave, leave loading, personal leave, long service leave, public holiday pay, overtime, redundancy and termination of employment entitlements, and superannuation contributions.
Facts considered by the Court
The circumstances under which the drivers worked was set out in the case as follows:
- The drivers' duties and work arrangements remained "more or less" constant - usually from 6am to 3pm, five days per week, which limited their ability to perform work for others.
- The business was the drivers' sole source of income for the entire period.
- The drivers wore uniforms and their trucks needed to display the business logo.
- The drivers' working conditions were dictated by the business.
- The drivers lacked the capacity to generate their own goodwill from the performance of their work.
- Until 1986, the drivers were employees, until they signed an agreement to become contractors - after being threatened with retrenchment if they failed to sign. They were then required to buy the trucks that they had been driving at a price set by the business.
The decision of the Court
The Full Court reversed the Federal Court's 2018 decision, noting that too much emphasis had been placed on the wording of the work contracts and what the drivers were theoretically able to do while engaged by the business.
Instead, the Court should have focused on the evidence of what actually happened during the engagement. The totality of the relationship between the parties pointed to them being employees and not independent contractors.
The full court remitted the matter to the Federal Court to assess compensation for the newly minted employees.
Pitfalls for parties considering an independent contractor relationship
Pointon Partners has previously written about the matters that a Court will take into account when classifying a worker as an employee or independent contractor.
This case confirmed the long-held position that the classification of workers as either employees or contractors will be based on what actually took place during the working relationship; not the wording of a contract between the parties.
Both principals and contractors should review their working relationship and consider whether they should be governed by a contract of employment. There is otherwise a risk that superannuation and employee entitlements are being wrongfully withheld.
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.