Independent Contracting: Back in the Spotlight

Photo by tyler hendy on Pexels.com two spotlights.

Labour hire providers should note that there are currently two appeals before the High Court, which challenge accepted approaches to the characterisation of independent contractors. The outcomes could upset independent contracting arrangements that are overly dependent on the technicalities and “deep entrenchment” of the Odco system and may lead staffing agencies to a fresh need to review their use of independent contractors.

CFMMEU v Personnel Contracting[1]

Trial

A young UK backpacker, who “had no aspect of a business or intended business, no expressed desire to act in any capacity other than as a builder’s labourer, and merely sought remuneration for the deployment of his labour on a building site supervised, directed and controlled by the builder”[2] was characterised, at first instance,[3] as an independent contractor on an application of the multi-factor test and Odco principles.

Appeal

The Full Court of the Federal Court of Australia upheld the finding despite the absence of any business clearly having been carried on by the worker.[4] However, in doing so, the Chief Justice expressed a preference for a different outcome though feeling constrained by intermediate appellate decisions which had previously supported Odco contracting arrangements.[5]

Special Leave

The High Court granted special leave to appeal in February this year. The Appellant’s submissions were filed last Friday (16 April 2021).

At issue is a question of whether the multi-factor test was correctly applied in a labour-hire context. There is a related question about the need for workers to be carrying on their own independent businesses in order to be independent contractors.

ZG Operations Australia Pty Ltd v Jamsek & Ors[6]

Trial

The case concerned the various entitlements of truck drivers, who derived their sole income by working for same business for nearly 40 years – and the corresponding obligations of the company for which they worked. It’s not a labour hire case, but it raises similar characterisation questions about the role of the business test in determining whether workers are employees or independent contractors.

The drivers were required to purchase a truck to retain work and contracted with the company through their family partnerships, which owned the trucks.  The drivers were required to be available to work during set hours. The company logo was displayed on drivers’ trucks and company branding appeared on the drivers’ clothing. Although the drivers theoretically may have had the ability of sell their goodwill, they had no practical capacity to generate any goodwill of their own.

On an application of the multi-factor test the drivers were held to be independent contractors.[7] A deciding factor was that the workers were held to be running businesses of their own.[8]

Appeal

The Full Federal Court reversed the decision on appeal.[9]  Wigney J’s judgment highlights the problems facing those who rely too much on cleverly crafted documents and overly sophisticated or artificial arrangements.

To my mind, the primary judge concluded as he did by giving primacy and excessive weight to contractual labels and theoretical possibilities and insufficient weight to the reality and totality of the working relationship between the parties, as demonstrated by the way they actually conducted themselves over many years.”[10]

Although the drivers’ arrangements displayed some of the trappings of carrying on their own businesses, that was not sufficient to displace the reality, observed after consideration of the whole work relationship, that they were employees.[11]

Special Leave

The case is to be heard together with CFMMEU v Personnel Contracting. The Appellant’s submissions were filed last Friday (16 April 2021). At issue are questions about whether the drivers were “employees” for purposes of Fair Work Act 2009 (Cth), Superannuation Guarantee (Administration) Act 1992 (Cth) and “workers” for purpose of Long Service Leave Act 1955 (NSW).

What next?

Respondents’ submissions in both cases are due to be filed in May, and any replies in early June. After that, the matters will be listed for hearing.

In light of these developments, it might be prudent for staffing agencies to review their independent contracting arrangements, and make contingency plans for managing any that could unravel should the High Court hand down a decision that indicates that they may no longer be sustainable.

Andrew C. Wood


[1] Construction, Forestry, Maritime and Energy Union & Anor v Personnel Contracting Pty Ltd [2021] HCATrans 30 (12 February 2021).

[2] As described by Alsopp CJ on appeal. see fn.5 below.

[3] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2019] FCA 1806 at paras [171] to [181].

[4] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122

[5] At para [31].

[6] ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors [2021] HCATrans 27 (12 February 2021).

[7] Whitby v ZG Operations Australia Pty Ltd [2018] FCA 1934.

[8] At para [213].

[9] Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119.

[10] At para [19].

[11] At para [248].

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