High Court Hands Down Independent Contractor Judgments

The High Court has handed down two significant judgments in relation to independent contractor arrangements.  Both decisions highlight the need for contractual terms to determine working relationships and the primacy of contractual terms.

CFMMEU v Personnel Contracting [2022] HCA 1

In the first case, the CFMMEU appealed a decision by the Federal Court which found that a British traveller engaged by a labour hire company was an independent contractor.

The High Court allowed the appeal and overturned the Federal Court decision, ruling that the worker was in fact an employee. In its reasoning, the High Court emphasised that the employment relationship must be characterised by the ‘rights and obligations of the parties under the contract’, and those matters were clearly set out in a lawful written contract. Under the contract, and despute the label of ‘contractor’ the labour hire company had full control over whom the worker could work for, and the worker promised [the labour hire company] that he would ‘co-operate in all respects’ in the supply of his labour.

The level of control the company has over the worker is a well-established key factor when determining whether a worker is an employee or contractor.

ZG Operations Australia v Jamsek [2022] HCA 2

The second case concerned two truck drivers, who had worked for the Appellant company (ZG Operations) between 1977 and 2017. Initially engaged as employees driving the company’s trucks, in 1985 the two truck drivers were offered to ‘become contractors’. The two drivers agreed, setting up partnerships with their respective spouses and purchased their own trucks. The drivers were responsible for all costs related to the operation of the trucks, while still being engaged solely by ZG Operations.The drivers commenced proceedings against ZG Operations, claiming employee entitlements under the Fair Work Act 2009, superannuation and long service leave. In the first instance, the Federal Court held that the drivers were employees, as it considered the ‘substance and reality’ of the relationship indicated one of employer and employee.

The High Court overturned this decision and held that the drivers were contractors. Using the same logic as the decision of Personnel Contracting, the High Court reasoned that the context in which the contracts were entered into involved ZG Operations refusing to continue to engage the drivers as employees, with the express intention that the only relationship between them and the drivers would be to contract their services for delivering goods.

The matter has been returned to the Federal Court to determine the question on superannuation, and whether the drivers fell within the expanded definition of ‘employee’ under s 12(3) of the Superannuation Guarantee (Administration) Act 1992. This further decision will also be of significance and interest.

These decisions emphasise the importance of written contracts, and clear terms, to define the working relationship.

EMA Legal can assist employers with all queries in relation to independent contractor and contractual arrangements.