Contracting Workforce: “The winds of change blow shrilly…”

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I would like to acknowledge the 18 August 2022 LinkedIn post by Anthony Wood, Partner at Herbert Smith Freehills, Lawyers (and no relation of mine, so far as I know). Anthony brought to the attention of the LinkedIn community an important decision of the Full Bench of the Fair Work Commission this week, which sheds further light on the way in which Australian courts and commissions are likely to apply recent decisions of the High Court that have changed the rules about how we distinguish between employees and independent contractors. He concludes his insightful post as follows:

“With job security one of the themes underpinning Labor’s 2022 election platform, it’s now likely to become a political and legislative issue before the new federal parliament”.

Please be sure to read Anthony’s post and engage in the conversation.  You can find Anthony’s post on LinkedIn here.

“…as winds of change blow shrilly round my poor abode.” [i]

FWC Full Bench decision

Earlier this week, the Full Bench of the Fair Work Commission finally handed down its delayed decision in Deliveroo Australia Pty Ltd v Diego Franco.[ii]The case was an appeal from a finding of unfair dismissal in relation to a food delivery worker. 

The decision was delayed whilst the case was put on hold to give time for the High Court to consider the appeals in Personnel Contracting[iii] and Jamsek;[iv] and then to allow the Full Bench to consider the effect which those decisions were to have on disposal of the matter before it.

Distinguishing between casual employment and independent contracting

Platform-based work, or gig-economy work, often presents as either casual employment or independent contracting.  Sometimes it can be difficult to distinguish between them. That was certainly so in this case.

However, feeling constrained by the recent High Court’s decisions to limit its consideration to an analysis of the contractual rights and obligations of the parties, the Full Bench reversed the finding at first instance and determined ultimately that Mr Franco was an independent contractor. Consequently, his unfair dismissal claim was beyond the Commission’s jurisdiction.

Equivocal and weak factors

The following factors, though somewhat equivocal, were considered by the Full Bench to be not inconsistent with conventional understandings of casual employment:

  • that Mr Franco was not obliged to do any work for Deliveroo and that Deliveroo was not obliged to make any work available to Mr Franco (clause 2.2)[v]
  • that Mr Franco could accept or reject any work offered to him when logged into the Deliveroo Rider App (clause 2.4)[vi]
  • that Mr Franco was free to work for any other party including competitors of Deliveroo (also clause 2.2)[vii]

The following factors, though difficult to reconcile with conventional understandings of casual employment and weighing somewhat against a finding that Mr Franco was an employee, were still not determinative by themselves:

  • that Mr Franco had the right to elect not only when but where he chose to work, and that Deliveroo was restricted to offering work within the parameters thus determined by Mr Franco (clause 2.3)[viii]
  • that Mr Franco, even once he had accepted an order, was allowed to subsequently “unassign” himself from that order, in which case he was not obliged to perform it (clause 2.5.1)[ix]

The lesson, here, is that these factors are not decisive either of themselves or in aggregate.

Weightier factors

However, the Full Bench considered that four aspects of the work contract did weigh decisively in favour of the conclusion that Mr Franco was in an independent contracting relationship with Deliveroo. 

Keep in mind that the factors might weigh differently in other cases. This was a case involving food delivery work. In a case involving construction or horticultural labour or academic work, the factors might not carry the same weight.

1. Deliveroo lacked control over the manner of performance of the work which Mr Franco agreed to undertake.[x]

Mr Franco was able to determine the route and what type of vehicle he would use to carry out his deliveries.

The Full Bench considered that the requirement for timely delivery was typical for independent contracting arrangements in the road transport industry and constitutes a performance standard rather than a right of control.

 Similarly, broadly stated contractual obligations “to deal with others professionally” when performing delivery services and to “provide the services with due care, skill and ability” were interpreted by the Full Bench as merely establishing performance standards rather than a contractual right to control the manner in which the work was performed.

2. Mr Franco was obliged by clause 4.1 of the contract to provide, at his own expense, the vehicle used to carry out his deliveries.[xi]

Drawing upon the language of Gageler & Gleeson JJ in Jamsek, the Full Bench considered that the contract required Mr Franco to provide a “substantial item of mechanical equipment” such that “the personal is overshadowed by the mechanical”.

3. The contract did not require personal service on the part of Mr Franco.[xii]

Clause 9 of the contract provided that Mr Franco had the right, without the need for prior approval from Deliveroo, to arrange for someone else to perform delivery services on his behalf.

Many contracts provide for delegation.  What was significant about this contract was that Deliveroo did not try by its contract to control Mr Franco’s right to delegate performance of the work to others. Whether or not it did so by other means was not relevant to the task of characterising the relationship.[xiii]

4. Although the method of remuneration (payment by results) was not inconsistent with an employment relationship, and would not have been determinative by itself, Mr Franco was required to pay an administrative fee of 4% of the amount earned by him.[xiv]

The fee was charged for access to Deliveroo’s software and for Deliveroo’s providing invoices and other administrative services. The Full Bench considered that this was not consistent with an employment relationship.

A word of caution, however.  Reliance on this factor can quickly lead you into error if the weight of factors points to the relationship being one of employment. In those circumstances, charging an “administration fee” might amount to nothing more than making unlawful deductions from a worker’s wages.

Alternative redress and remedial frameworks

From a reading of paragraphs [53] to ]55] of the decision, one gets that the Full Bench reached its conclusion with a deep sense of regret. Anthony Wood, in his recent LinkedIn post,[xv] which I again encourage you to read, foreshadowed the need for a legislative solution when he wrote:

“With job security one of the themes underpinning Labor’s 2022 election platform, it’s now likely to become a political and legislative issue before the new federal parliament.”

Anthony Wood ,18 August 2022

He may well be right; and a legislative solution might eventually look something like the UK extension of employment entitlements to certain classes of dependent contractors defined as “workers” under the Employment Rights Act 1996 (UK). But I fear that such a solution will take time to develop, and that the complexities of applying a characterization tri-chotomy to the wide range of situations in which the distinction between employees and independent contracting is important under federal, state and territory legislation[xvi] may add an extra layer of complexity and confusion.  That is not to say that it should not be attempted.

Commercial rather than industrial remedies?

For now, workers who find themselves in the position of Mr Franco may need to consider what alternative remedies may be available to them under the Independent Contractors Act 2006 (C’th) and the unfair-terms-in-small-business-standard-form-contracts of the Australian Consumer Law. They (and their representatives) may need to consider how to take advantage of the small business collective bargaining class exemption under the Competition and Consumer Act 2010 (C’th) if they seek to redress bargaining imbalances[xvii] and seek commercial, rather than industrial remedies.

A group of Boral concrete carters in Western Australia obtained protection under the ACCC’s class exemption earlier this year to collectively bargain with Boral Limited over “terms of agreement for the provision of cartage services including payment for carting concrete including using own vehicles, and other related terms”.

Whilst the outcome may not be as satisfactory as extending employment-like entitlements or providing legislative clarification of their worker status, there would be no reason in principle why Deliveroo independent contractors (and others in the same position) could not do likewise were someone to step forward to assist them with organization and representation.

Let’s hope somebody does.

Andrew C. Wood


[i]      Anon.

[ii]     Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156 (17 August 2022).

[iii]    Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd  [2022] HCA 1.

[iv]    ZG Operations Australia Pty Ltd v Jamsek  [2022] HCA 2.

[v]     At para [43].

[vi]    At para [43].

[vii]    At para [44].

[viii]   At para [45].

[ix]    At para [45].

[x]     At para [46].

[xi]    At para [48].

[xii]    At para [49].

[xiii]   At para [54] the Full Bench observed, with regard to the workplace reality (as distinct from the legal character of the parties’ relationship): “As a matter of reality, Deliveroo exercised a degree of control over Mr Franco’s performance of the work, Mr Franco presented himself to the world with Deliveroo’s encouragement as part of Deliveroo’s business, his provision of the means of delivery involved no substantial capital outlay, and the relationship was one of personal service. These matters, taken together, would tip the balance in favour of a conclusion that Mr Franco was an employee of Deliveroo. However, as a result ofPersonnel Contracting, we must close our eyes to these matters.”

[xiv]   At para [50].

[xv]    18 August 2022.

[xvi]   Consider how such a tri-chotomy would apply to state and territory payroll tax or workers compensation schemes.

[xvii] Collective Bargaining Class Exemption Notice Form 15th July 2022, ACCC Class Exemptions Register, https://www.accc.gov.au/system/files/public-registers/documents/Boral%20concrete%20carters_0.pdf

FWC Unfair Dismissal Jurisdiction: Contest where labour hire worker engages payroll provider

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A recent Fair Work Commission decision might be worth a read if you’re scanning the labour hire horizon for signs of squalls ahead. It was an unfair dismissal case in which the applicant claimed she had been dismissed by Hays from her labour hire engagement as a project manager. However, it was not a typical tri-partite labour hire scenario.

Contractual Arrangements

Here’s how the Commission, described the multi-party contractual arrangements that underpinned the work relationship:

[13] It is necessary to briefly mention the contractual arrangements that were applicable to the work performed by [the applicant]. [The applicant] had entered a contract with a company called PayMe in May 2017 to provide what is in effect a payroll service to her …

[14] In November 2020 [the applicant] contracted through PayMe to provide her services to a client of Hays… Hays made weekly payments to PayMe in relation to the hours worked by [the applicant] while she was on the assignment.

per Deputy President Dean

Jurisdictional Contest

Although it was not included as a respondent to the application, the interposition of PayMe, in the arrangement for the supply of the applicant’s labour to Hays’ client, raised a question about the identity of her true employer (as distinct from her employer-of-record). Was it Hays, or was it PayMe?

Hays contested jurisdiction[i] on the grounds that:

  1. the applicant was not an employee of Hays;
  2. the applicant was not dismissed;
  3. Her application was out of time; and
  4. She earned more than the high-income threshold.

The parties agreed to contest the high-income threshold point as a preliminary issue on the basis that, if the application was knocked out on that ground, there was no need to argue the other points.[ii]

The Commission held that the applicant earned above the high-income threshold and that she was not an Award covered employee. It appears that only three awards were contended by her to apply to her employment:[iii]

  1. Australian Government Industry Award 2016;
  2. Clerks Private Sector Award 2020; or
  3. Miscellaneous Award 2020.

Coverage under the Professional Employees Award 2020, which might also have been a contender, was not argued.

In view of its findings on income and Award coverage, the FWC determined that the applicant was an excluded employee and that her unfair dismissal claim was beyond its jurisdiction.[iv]

A “Missed Opportunity” or a “Near Miss”?

Consequently, the question of who was the true employer did not need to be decided. 

There was no examination of Hays’ back-to-back contract with its client, as there was in Personnel Contracting[v]; and therefore, no core asset analysis of the type that might have determined whether Hays or PayMe controlled the provision of the worker’s labour[vi], or rendered the work performed by her dependent upon and subservient to[vii] either Hays or PayMe.

An answer to those questions may have provided further clarification of how the approach adopted by the High Court in Personnel Contracting and Jamsek[viii] should be applied in cases, where the contest is not merely about whether a worker is an employee or an independent contractor, but concerns the need to identify the true employer when there is more than one contender for that honour.

Whilst those questions remain unanswered, workers will continue to bear the cost and uncertainty of having to decide who, as between the person who pays them and the person who controls the supply of their labour to its clients, should respond to matters such as their worker entitlements, casual conversion and unfair dismissal claims, and their applications for anti-bullying orders.  In harsh cases, they may be left without timely, reliable and effective remedies.

So, we will have to wait for answers to those questions.

I’m guessing it might not be too long.

Andrew C. Wood


[i] Grounds as summarised at para [2].

[ii] See para [3].

[iii] At para [27].

[iv] At paras [25] and [32]-[33].

[v] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89[2022] HCA 1. See in the judgments of Kiefel CJ, Keane & Edelman JJ at paras [11]-[13], despite the view taken by their Honours that it was not necessary to refer to the LHA “in detail”. See also in the judgments of Gageler & Gleeson JJ at paras [144] and [158]; and Gordon J at para [168].

[vi] Personnel Contracting per Kiefel CJ, Keane & Edelman JJ at para [89].

[vii] Personnel Contracting per Kiefel CJ, Keane & Edelman JJ at para [90].

[viii] ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144[2022] HCA 2.

As the Dust Begins to Settle on the Employee/ Independent Contractor Dichotomy

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Six months on from the High Court’s decisions in Personnel Contracting[i] and Jamsek,[ii] the dust is beginning to settle and we’re getting a clearer look at how those decisions may be affecting the labour hire landscape. In that time, I’ve seen many things written about the High Court’s new approach to determining whether a work relationship is one of employment or independent contracting. But one of the clearest and most helpful explanations of the new approach that I’ve seen so far, comes from the recent Federal Court decision in JMC Pty Limited v Commissioner of Taxation.[iii]

Background

The case concerned JMC’s liability as an employer to pay superannuation to a worker whom it engaged to provide it with “teaching services”. Those teaching services comprised delivering lectures to JMC’s students at its Melbourne campus and marking student examinations or assignments.[iv] JMC contended that the worker was an independent contractor and that it was therefore  not required to make superannuation contributions on his behalf.  The Commissioner for Taxation disagreed.

Six Key Principles

In the course of holding that the worker was an employee, Wigney J outlined six key principles that can be extracted from Personnel Contracting; Jamsek and related cases. I’ve set them out in “digest” form below, without their references and additional elaboration.

The decision from paragraphs [16] to [27] is worth reading in full. It should only take you about five to ten minutes. But if you’re pressed for time, here are the six key principles in digest form:

  1. Where the rights and duties of the parties are comprehensively committed to a written contract, the legal rights and obligations established by the contract are decisive of the character of the relationship provided that the validity of the contract has not been challenged as a sham, or that the terms of the contract have not been varied, waived or are subject to an estoppel.
  2. In order to ascertain the relevant legal rights and obligations, the contract of employment must be construed in accordance with the established principles of contractual interpretation. …regard may be had to the circumstances surrounding the making of the contract, as well as to events and circumstances external to the contract which are objective, known to the parties at the time of contracting and which assist in identifying the purpose or object of the contract. 
  3. …the characterisation of the relationship between the parties is not affected by circumstances, facts or occurrences arising between the parties that have no bearing on their legal rights.
  4. The contractual provisions that may be relevant in determining the nature of the relationship include, but are not limited to, those that deal with the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, the deduction of income tax, the delegation of work and the right to exercise direction and control.
  5. Characterisation of the relationship …, often hinges on two considerations. The first consideration is the extent to which the putative employer has the right to control how, where and when the putative employee performs the work. The second is the extent to which the putative employee can be seen to work in his or her own business, as distinct from the business of the putative employer. Neither of those considerations are determinative and both involve questions of degree
  6. A “label” which the parties may have chosen to describe their relationship is not determinative of the nature of the relationship and will rarely assist the court in characterising the relationship by reference to the contractual rights and duties of the parties. The characterisation of a relationship…, is ultimately an evaluative judgment that takes into account the totality of the parties’ contractual rights and obligations.
My emphasis

A common mistake

One common mistake that I’ve observed, both in commentary about the High Court’s new approach and in attempts to apply it in drafting contracts, is that there is often a failure to distinguish between what the contract says, on the one hand; and the legal rights and obligations that it creates, on the other.

So, you get the situation where employers are still going to great lengths to include and rely on acknowledgements that the relationship is one of independent contract.

Then they say something like: “Well, the High Court decided that you can only look at what the contract says. And look, see, it says right here that our relationship is one of independent contract. So, it can’t be anything else.”

They’re entirely wrong, of course. What they’ve missed is that the High Court was really saying that you look to contract to find “the totality of the parties’ rights and obligations”, and proceed from there.  Look, again, at points 1, 2, 4, 5 and 6 of the principles summarised so comprehensively by Wigney J in JMC.

Don’t confuse mere acknowledgments with legal rights or obligations. You can acknowledge, in your contract if you want to, that the world is flat, or that a duck is a rooster; but it doesn’t make it so. Neither does it give you the legal right to make it so; or to oblige someone else to make it so for you.

Some emerging issues

There are also several emerging issues that it may be important to note in labour hire arrangements that do not conform to the traditional tripartite model.

Loose and uncertain arrangements

Personnel Contracting and Jamsek apply in cases where the parties’ rights and obligations are “comprehensively committed to a written contract”.  But in cases where there is some uncertainty or looseness in the arrangement, the courts may still undertake a more wide-ranging examination of the totality of the relationship.

At least, that was the view of the Fair Work Commission in Waring v Hage Retail,[v] where the specific terms under which the work was to be performed were found not to be the subject of any express agreement, oral or written arrangements between the parties;[vi] and their arrangements, whatever they were, were described as “vague, opaque and amorphous”.[vii]

The issue should not arise where carefully drafted contracts that are used in traditional labour hire tri-partite settings. However, it may crop up in non-standard arrangements involving additional parties as supply or payment intermediaries, including where payroll services providers are appointed as employer-of-record, or where “pyramid” or tiered supply arrangements are used – especially if the written contracts used to support those arrangements are misaligned.

Where arrangement not contractual; or alternatives not limited to employment and independent contracting  

Personnel Contracting and Jamsek both “start from the position that there is a contract between the worker and the organisation”.[viii] However that may not be so in all cases.

For example, various unpaid work trial, work experience, internship and volunteer arrangements might not be underpinned by an identifiable “work contract”. In those cases, it may be difficult to identify what the terms of the arrangement were, and a court or commission might still embark on a wider inquiry.  

That is what happened in the Victorian Supreme Court case of O’Connor v Comensoli, where a question arose concerning the vicarious liability of the Catholic Archdiocese of Melbourne for alleged conduct of one of its priests.

After observing that the relationship between the Archdiocese and its priests is not contractual and that the employee/ independent contractor dichotomy, which permits only two alternatives neither of which applied in the circumstances of the case, Keogh J held that High Court’s decision in Personnel Contracting did not authoritatively dispose of the vicarious liability issue.[ix]

The case highlights that there may still be situations that were not addressed by the High Court’s new approach and that parties will need to be on their guard to identify situations in which that approach will not apply.

In a labour hire setting, the issue could arise between a labour hire provider and its temps, noting that a person can still be a “worker” for a labour hire provider even in the absence of a contractual arrangement between them[x]  – especially where non-standard arrangements that involve additional parties as supply or payment intermediaries are used.

Parties to such arrangements will need to exercise special care to identify where the legal rights and obligations fall, how they control the provision of the worker’s labour, and who is responsible for them.

Employer identity question

Whilst Rossato,[xi]  Personnel Contracting, and Jamsek clarified the approach to determining employment status questions, they did not deal with the separate employer identity question – that is to say: who, amongst more than one contender, is the true employer.

In Spitfire Corporation[xii], the NSW Supreme Court carefully distinguished the High Court decisions, saying that they did not apply to a determination of the employer identity question, in the circumstances of that case.

Conclusion

Whilst the High Court’s decisions in Personnel Contracting and Jamsek have clarified the approach that the courts will adopt in classifying a work relationship as either employment or independent contracting, a number of issues regularly encountered in the labour hire setting were not addressed. Moreover, the approach can be difficult to apply for anyone who is not familiar with the categorisation of legal rights and obligations. Those difficulties can be exacerbated in cases where the parties’ arrangements are loose and uncertain, or where they are misaligned.

Labour hire providers and their intermediaries (as well as their advisors) will therefore need to exercise considerable care in applying the approach adopted by the High Court in Personnel Contracting and Jamsek and remain alert to identify those situations in which it might not apply at all.

Andrew C. Wood


[i] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89[2022] HCA 1.

[ii] ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144[2022] HCA 2.

[iii] JMC Pty Limited v Commissioner of Taxation [2022] FCA 750.

[iv] JMC v Commissioner for Taxation at para [1].

[v] Nicholas James Waring v Hage Retail Pty Ltd [2022] FWC 540 (23 March 2022).

[vi] Per Deputy President Anderson at para [76].

[vii] Per Deputy President Anderson at para [58].

[viii] As explained by Keogh J in O’Connor v Comensoli [2022] VSC 313 (10 June 2022) at para [327].

[ix] Per Keogh J at para [327].

[x] See for example, Labour Hire Licensing Act 2017 (Qld) s. 7(2)(b); Labour Hire Licensing Act 2018 (Vic) s. 9(3)(b), Labour Hire Licensing Act 2020 (ACT) s. 7(3)(b).

[xi] WorkPac Pty Ltd v Rossato (2021) 95 ALJR 681; [2021] HCA 23.

[xii] In the matter of Spitfire Corporation Limited (in liq.) and Aspirio Pty Ltd (in liq) [2022] NSWSC 340.

Employer of Record Arrangements: Not the panacea you were hoping for?

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Recently, I was asked to comment on how an employer-of-record (EoR) arrangement might affect an on-hire firm’s employment and labour hire licensing responsibilities. It seems that there’s a bit of a view circulating to the effect that, if you put in place one of these EoR arrangements with a payroll company, you can avoid both sets of responsibilities. Frankly, I doubt that you can.

And if you try to do so, I think you could end up with egg on your face… or worse still, with residual employment obligations (for tax, super, redundancy, unfair dismissal and the like), as well as leaving yourself open to a range of claims for anything from involvement in misleading conduct in respect of an offer of employment[i] all the way through to sham contracting and labour hire licence avoidance.

Employer of Record (EoR)

Firstly, let’s clarify what I mean by an EoR.

Corporate Groupings

An EoR is a third party that appears “on the record” as the employer of your workers. It’s a common arrangement within corporate groups of related entities. One entity in the group will go “on record” as employer for workers in the group.  It will handle payroll and will probably be the named employer in the employment contract. It will issue pay slips and pay summaries and remit tax and super.  These arrangements are often unravelled in insolvency proceedings, where group entities that thought they were shielded from employer responsibilities can be left having to pay up.

Payroll Services Providers

It’s also a common feature of many arrangements made by on-hire firms for the appointment of a payroll services provider. The contract of appointment might even include the individual worker as a party and might go to considerable lengths to insist that the payroll company must employ the individual. I’ll talk some more about those contracts (and some of their common flaws) in a later post on the topic.

Incorporated Worker Entities (IWEs)

You can also encounter aspects of employer-of-record issues when you’re dealing with a worker owned and controlled company through which the worker operates. 

We’re talking, here, about those entities that are effectively the alter ego of the individual who actually performs the work.  Usually, the entity is engaged to provide the required services (e.g., ITC services) and it is left to the entity to employ or engage the individual worker.

If that’s the arrangement you’re working with, you’d want to make pretty sure that the IWE has employed the individual and that the terms of the employment are comprehensively set out in a written contract between the IWE and the worker. Otherwise, you might find that any looseness or uncertainty, or any mistake about the form of contract used, opens the door to an inquiry about whether you, in fact, might be the employer.

We’ve now looked briefly at three different arrangements under which a third party might be identified as the EoR, and we’ve looked at the sort of things that the EoR might be doing.

But, for present purposes, none of that means that the EoR is necessarily the true employer.

The True Employer and How To Find It

The true employer will be the entity which, on an examination of the totality of the relationship, actually controls the work relationship. 

Now, you’re probably going to say that the Golden Trio of recent High Court Cases[ii] put an end to the multi-factor/ totality of the relationship test, and that we can only now have regard to the terms of the contract. 

Well, that is mostly true … if we’re trying to decide if a worker is an employee or an independent contractor – that is to say, if were trying to decide the work status question.  

But it seems it may not be true if we’re trying to answer the different question of who is the employer – the employer identity question.  At least, that’s what the NSW Supreme Court recently said in Spitfire Corp.[iii]

And it seems that the FWC is now finding reasons to distinguish the Golden Trio Cases – even on the work status question.[iv] So, unless your contract is wholly in writing, pretty tight, not a sham, and not unsuited to the use to which you’ve put it, you might still find yourself having to answer some embarrassing questions about how your relationship actually works.

A Panacea?

Taking all this into account, can we be confident that entering into an EoR arrangement with a related entity, a payroll provider, or an Incorporated Worker Entity will relieve an on-hire provider from its employer or labour hire responsibilities.

I don’t think we can. That’s my take on it.

But you can make your own mind up about that!

Andrew C. Wood


[i] Australian Consumer Law s. 31.

[ii] WorkPac Pty Ltd v Rossato (2021) 95 ALJR 681; [2021] HCA 23 (“Workpac”); Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (“Personnel Contracting”); ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (“ZG Operations”).

[iii] In the matter of Spitfire Corporation Limited (in liq.) and Aspirio Pty Ltd (in liq) [2022] NSWSC 340 (“Spitfire Corp”).

[iv] See Waring v Hage Retail Pty Ltd [2022] FWC 540, where, at paras [52] to [56] Deputy President Anderson summarized the principles in the High Court’s decisions in Personnel Contracting and ZG Operations. DP Anderson’s summary was subsequently cited with approval by the Full Bench in Azad v Hammond Park Family Practice Pty Ltd T/A Jupiter Health Warnbro [2022] FWCFB 66 at para [14]. Hage Retail is noteworthy because of the way in which DP Anderson applied the legal principles to the facts of that case in order to find scope to conduct an inquiry which extended well beyond the strict terms of what purported to be the employment contract.

Labour Hire Licensing & Payroll Providers: A simplified or simplistic explanation?

A female temp desk consultant looking over some documents, whilst discussing an assignment with her labour hire worker.The worker is wearing hi vis jacket , and their safety clothing is scattered about the office.

Discussion of the topic, “Who needs a labour hire licence” often gets diverted by red herring issues about whether a payroll provider is the employer, or at least the employer-of-record, and whether the worker is an employee or not.

My simplified or perhaps simplistic explanation of the licensing schemes is that, regardless of whether you are an on-hire firm or a payroll provider, you’ll need a licence if:

  • you have an arrangement with an individual to supply the individual perform work for someone else;
  • the individual qualifies as one of your “workers” (as defined); AND
  • your arrangement with the individual includes an obligation to pay the worker for the work.

This is what we call having a labour hire “supply arrangement”.

There are some subtle variations between the four existing state and territory schemes. There are also additional circumstances in which you might need a licence in Victoria.

Now, some payroll providers do have such an arrangement; others don’t.

Payroll providers which do have such an arrangement with a worker would seem to need a licence.

Those which don’t would not seem to require a licence. Indeed, I’m aware that this is a view that has been confirmed by at least one scheme regulator and that some payroll providers may be in a position to provide regulator confirmation that they do not require a licence. Of course, it’s always important to make sure that you fully understand the facts and circumstances on which that confirmation is given. Don’t assume that one-size-fits-all in this space.

The fact that a payroll provider, which has such an arrangement, requires a licence will not necessarily relieve the on-hire firm that appoints the payroll provider from having a licence as well.

It won’t matter whether the individual is an employee of the person who has the arrangement or not.

The supply of the worker can be direct or indirect; and it needn’t be contractual.

And if the arrangement needn’t be contractual, then it would seem to follow that the payment obligation needn’t be contractual either. Perhaps a moral or equitable obligation, arising from representations or a loose understanding, would suffice.

So, it would seem to make no difference to the licensing requirement whether the payroll provider is the employer or not.

The focus of the inquiry is always on identifying the presence of the labour hire supply arrangement/s. The involvement of multiple parties: typically, on-hire firms, payroll providers, and incorporated worker entities (IWEs) just makes the inquiry that little bit more difficult.

I’ll say something more about contracts with IWEs in a later post. That’s a whole other story!

Andrew C. Wood

CFMMEU v Personnel Contracting Back in Court

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If you’ve been following the CFMMEU v Personnel Contracting saga, you may be interested to know that the case is back in the Federal Court, with the HCA Remittal Order having been filed on 30 March 2022.

What that means, is that the FCA will now have to decide if Personnel Contracting breached award terms and conditions when it engaged, supplied, and paid its labour hire worker as though he were an independent contractor, when in reality, he was its employee.

This story still has a way to go, and the shouting is not over yet.

Andrew C. Wood

Employer of Record v. True Employer: Distinguishing the High Court’s “Golden Trio” Cases

Photo by EKATERINA BOLOVTSOVA on Pexels.com

You might not want to place all your trust in the written contract and the “Golden Trio” of recent High Court cases[i] if you’re still using an employer-of-record payroll arrangement in the belief that it relieves you from your employer responsibilities. That’s because the NSW Supreme Court has recently held[ii] that the High Court’s guidance about characterizing employment relationships by reference solely to the terms of the contract does not apply to the challenge of identifying the “true employer” – at least, not where the provisions and policy of Part 5.6, Div. 6 of the Corporations Act 2001[iii]are engaged.

Whether the NSW Supreme Court’s decision withstands challenge on appeal and whether it stands for any broader principle are matters that remain to be seen. In the meantime, what many may have regarded as having been clarified by the Golden Trio cases may still be a “grey area”.

Background

Spitfire Corporation was the holding company of seven wholly-owned subsidiaries, including Aspirio. Aspirio was set up as employer-of-record for the group. Aspirio:

  • was party to the employment contracts, which provided for the payment of wages, superannuation and other entitlements to employees of the Spitfire Group;
  • took out workers’ compensation insurance and paid premiums for employees of the Spitfire Group;
  • reported PAYG for employees in BAS lodged through the ATO portal;
  • recorded leave entitlements of the employees; and
  • was identified as the payer on payslips issued to the employees.

Before going into liquidation, Spitfire Corporation gave security over its assets to Resilient Investment Group Pty Ltd (Resilient). In the course of the liquidation, a question arose as to whether assets of Spitfire should be used to pay the workers, who were apparently employees of Aspirio, in priority to Resilient as secured creditor.

Determination of the issue required the Court to decide whether Spitfire Corporation or Aspirio was the true employer. If Spitfire Corporation were the true employer, its assets would have been available for payment of the employees ahead of any payment to Resilient.

Argument

Resilient argued, relying on the Golden Trio of recent High Court cases, that determination of the true employer’s identity “does not permit inquiry beyond the employment contract (other than in cases of sham or contractual variation) and that, by reference to the written employment contracts and orthodox contractual principles, Aspirio was the relevant employer of the employees”. It contended that reference to the “totality of the relationship” or to a “multifactorial analysis” was no longer available after the High Court’s decisions.[iv]

In support of a less constrained approach, the liquidators and the Commonwealth (with an interest in payment in the employees’ superannuation) argued that the High Court’s decisions did not deal with a question of who, between competing entities within a corporate group, was the true employer, and that they did not address the question of how the identity of the employer, for the purposes of the insolvency provisions of the Corporations Act, was to be approached. On those grounds, they argued that the High Court decisions did not overrule existing case law that required the true employer’s identity to be determined by reference to the “totality of the relationship” or on the basis of a multifactorial analysis.[v]

Decision

The workers were held to be the employees of Spitfire Corporation.

Black J accepted that earlier “true employer” cases directed to Pt 5.6 Div 6 of the Corporations Act comprised a discrete line of authority which the Court was bound to follow unless the line of authority was overruled by an appellate court.[vi] 

His Honour did not consider the High Court, in Workpac, Personnel Contracting or ZG Operations  expressly or impliedly overruled the earlier line of authority, where the Golden Trio cases “did not need to address and did not address the terms, functions or policy of Pt 5.6 Div 6 of the Corporations Act and the High Court did not there need to consider the implications of treating employment contracts with corporate shells, that have no assets or nominal assets and perform no real business functions, as a means of defeating employee entitlements in insolvency or shifting the liability for them to the Fair Entitlements Guarantee scheme”.[vii]

Although the employment contract named Aspirio as the employer, a number of provisions imposed on the employee obligations owed to members of the Spitfire Group. To that extent, they indicated that Aspirio was merely the agent of the true employer.[viii]

Moreover, the evidence did not establish any business reason for Aspirio, a company without assets, to be the employer of record for all but the managerial employees.[ix]

Significantly, Aspirio:

  • did not carry out any business activities, other than as a formal employer of record;
  • did not have any external clients or customers;
  • had no substantial assets or revenue stream to meet its employment liabilities
  • held only minimal amounts in its bank accounts, except when other entities in the Spitfire Group transferred money to Aspirio to enable it to make tax payments
  • did not make payments to employees from its bank accounts, and Spitfire Corporation made those payments, which were recorded as loans from Spitfire Corporation to Aspirio
  • did not repay the resulting debt that it owed to Spitfire Corporation, and could not do so where it had no assets of substance and did not charge management or other fees to Spitfire Corporation or any other entity in the Spitfire Group.[x]

Further:

  • employees nominally employed by Aspirio undertook work for other companies in the group, each of which conducted different and separate business activities;
  • each business unit had its own supervisors, who made their own decisions about bringing on more staff, dismissing staff, and employee entitlements;
  • each business unit entity was responsible for managing the day-to-day operations of each entity, including giving directions to employees;
  • Aspirio did not carry out any business activities and had no assets or revenue streams to meet its employment liabilities
  • Spitfire Corporation paid the employees and relinquished, without consideration, its formal entitlement to pursue Aspirio for the value of those payments; and
  • there was no evidence of a contractual arrangement between Aspirio and Spitfire Corporation (such as a management services agreement) which would have allowed Aspirio to receive payment for the services it undertook in making its employees available for the benefit of the Spitfire Group, or to fund the payment of their salaries.[xi]

When those factors were considered, and the totality of the relationship examined, the Court held that there was no “intelligible business objective” consistent with the “financial and administrative organisation of the business” in Aspirio’s being the employer of the relevant employees[xii] and that Spitfire Corporation rather than Aspirio was the true employer of the relevant employees, at least for the purposes of Pt 5.6 Div 6 of the Corporations Act.[xiii]

Observations

This seems to have been a fairly clear case in which the evidence overwhelmingly pointed to Aspirio being nothing more than an employer of record or agent for Spitfire Corporation. Its significance lies not so much in the outcome of the multifactorial approach, as in the fact that the multifactorial approach was applied at all following the High Court’s decisions in the Workpac, Personnel Contracting and ZG Operations

The NSW Supreme Court felt able to distinguish those cases because of what the High Court had not dealt with – the question of identity; application in a corporate group situation, where questions of agency might arise; and the circumstance that the provisions and policy of the insolvency protections in the Corporations Act were engaged. 

That should be enough at least to start alarm bells ringing for anyone who might have thought that the Golden Trio cases represented the last word on the topic, and that it was now safe to rely wholly on the terms of the written contract.

Andrew C. Wood


[i] WorkPac Pty Ltd v Rossato (2021) 95 ALJR 681[2021] HCA 23 (“Workpac”); Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (“Personnel Contracting”); ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (“ZG Operations”).

[ii] In the matter of Spitfire Corporation Limited (in liq.) and Aspirio Pty Ltd (in liq) [2022] NSWSC 340 (“Spitfire Corp”).

[iii] Proof and ranking of claims in insolvency. The division includes s. 561 Priority of employees’ claims over circulating security interests.

[iv] Summarised at para [72].

[v] Summarised at paras [73]-[74].

[vi] At para [74].

[vii] At para [76].

[viii] At para [80].

[ix] At para [82].

[x] At para [83].

[xi] At para [84].

[xii] At para [85].

[xiii] At para [90].

Tuesday TalkAbout is Returning

Hooray! The veil has been lifted on the keenly anticipated autumn collection of Tuesday TalkAbout, which features four webinars on essential topics for recruitment and staffing professionals.

New Inclusions for Extended Discussion

We’ve updated the engagement design to include an extended Q&A session, when you can ask the questions that you’ve been wanting to ask and we’ll see if we can put you on the right path to getting the information you need.

We’ll also be providing prep materials to registrants on the Friday before the webinar so that you can join in, already having a basic understanding of the topic we’re discussing and so that you can formulate questions specifically tailored to your interests.

You can even join in discussion, before or after the webinar, via one of our two moderated LinkedIn forums so that you can follow through on questions that are of particular interest to you.

Finally, for webinar attendees, we’re including a post-webinar 15 minute complimentary phone chat, when you can raise those “quick questions” that you weren’t able to raise in the public session. Appointments do need to be made via the WorkAccord website, and the booking “window” will be open only in the week of the webinar (Mon to Fri) whilst appointments are available.

Autumn Collection:

Independent Contracting On-Hire: Where to from here? (29 March 2022)

The Australian High Court’s recent decisions in CFMMEU v Personnel Contracting and ZG Operations Australia Pty Ltd v Jamsek have certainly NOT made life easier for on-hire agencies who, overnight, may have discovered that workers whom they thought were their contractors are, in fact, their employees.

So, what can you do about that? You plan your service model restructure – that’s what you do. But there are plenty of questions to be answered as you set about doing that.

You can find out more about the webinar and register via the Eventbrite portal here.

Labour Hire Licensing Five Years On: What we know and still need to know. (26 April 2022)

Since 2017, we’ve been learning to live with four separate licensing schemes. What have we learnt and what do we still need to know?

Join us as we examine the performance of the four state and territory schemes and examine some of their more difficult aspects – taking a closer look at difference at the difference between labour providers who need a licence and mere “intermediaries” who don’t.

We’ll talk about:

  • the Victorian extensions
  • the worker exemptions
  • the data on licence conditions, refusals and cancellations
  • the prosecution cases so far – who is getting prosecuted and why
  • the challenges of regulatory over-reach in a federal system

We’ll talk about avoidance; how you might detect it; and what you need to do about it.

You can find out more about the webinar and register via the Eventbrite portal here.

Talking Privacy: What recruiters need to know (3 May 2022)

It’s Privacy Awareness Week. So what better time to schedule a privacy refresher for recruiters, whose day-to-day work involves the handling of large amounts of personal information ?

In this session we’ll be looking at the different privacy frameworks that apply to recruitment operations – especially those using cloud-based technologies, artificial intelligence, and offshore processing or sourcing.

We’ll talk about:

  • what is really “necessary” and how necessity operates to limit the type of information you can collect, use or disclose
  • ID scanning
  • data breach notification
  • what case determinations are telling us
  • responsibilities as a contracted service provider to government agencies
  • privacy impact assessments – when and why you need to conduct them

You can find out more about the webinar and register via the Eventbrite portal here.

Care & Support Sector Workforce & Governance Reform: What it means for recruitment & staffing agencies (31 May 2022)

The Care & Support Sector (Aged Care, NDIS & Veterans Support) is undergoing significant workforce and governance reform. What is going on and what does it mean for recruitment & staffing agencies? Will it be business as usual, or will the changes affect the way you need to operate?

In this webinar, we’ll be reporting on the state of the reforms and examining the role of recruitment & staffing agencies as “facilitators of care”.

We’ll ask whether there still scope for “all care, no responsibility” service models, and start to explore the changes you may need to be making to your agency’s operations and networks.

You can find out more about the webinar and register via the Eventbrite portal here.

A Free Spirit’s Guide to Saying “No” to Employment; and “Yes” to Independent Contracting

Do the common law tests used to distinguish employment from independent contracting, override my decision to work for someone but not be their employee; to work for them, but not have them as my master?

We all know that there’s no longer any point in trying to define work relationships in our contracts.  We can set out our respective rights and obligations; but only a court can say what the legal effect of that will be.[i]  Everything else is just opinion. And, whilst some opinions are better than others, a court won’t give much weight to the label we have ascribed to our relationship – at least, not in Australia.

Is it a matter of consent rather than “labelling”?

Let’s accept, for argument’s sake, that the contract, which the court is going to interpret in order to define our work relationship, can never be any better than the consent that underpins it.  So, what if, instead of “labelling” our relationship as one of “independent contract”, we were to insert a clause that made it clear that we did not consent to be an employee?

We’re talking, here, about a genuine refusal of consent to accepting the status of an employee. There’s no room for sham contracting or equivocation in this.

But, assuming that the withholding of consent is genuine, could a court, limiting its consideration of the relationship to an examination of the express terms of the contract (as it now says it must do), ignore an express withholding of consent, coupled with an interpretation provision along the lines of:

“Parties acknowledge and accept that the contractor does not consent to be an employee or to enter into any relationship of employment and reserves full capacity to perform the work required by this contract as an independent contractor (the contractor’s reservation).

The parties agree that any provision of this contract that contradicts the contractor’s reservation must be read down or severed to the extent necessary to uphold the contractor’s reservation.”

[Experimental drafting for discussion purposes only]

A bit dramatic, perhaps. But would it work? Might it tip a court’s interpretation of an obligation to “co-operate”, say, from one of “control” (importing employment)[ii] in favour of one that recognises that “the parties intended to reserve to [the worker] a degree of independence and wished to avoid a relationship of subservience”.[iii] 

But who wouldn’t want to be an employee?

Why might a person not consent to be an employee? Here are some reasons that reflect the unattractive status of employment under current Australian employment laws:

  • I might not wish to be bound to my employer by a wide-ranging legal duty of fidelity and loyalty…
  • especially as I might not wish to work under a legal relationship in respect of which the common law does not recognize an implied duty of mutual trust and confidence…[iv]
  • … and is equivocal about whether my employer owes me any duty of good faith.

How are we doing so far? We might consider that we’d do better relying on a duty of good faith to the extent to which it has received some recognition in Australian commercial law. But let’s keep going…

  • I might not wish to subject myself to an employer’s vaccination and other health mandates that are based on its power to command and my duty to obey what a court considers to be the employer’s reasonable and lawful directions. [Please note: I am not advocating an anti-vax position. Do I need to say that?]
  • I might not wish the privacy of my personal information to be denied under the so-called “employee record exemption” in the Privacy Act.[v]
  • I might not wish to be subjected to an employer’s power of control over my conduct outside the workplace.
  • I might not agree with my employer’s position on matters of sustainability, politics, human rights, gender etc.
  • I might have a philosophical, ideological or religious objection to being the employee of my boss.

And now, some more positive reasons…

  • I might wish to maintain a greater measure of control over what work I do and how I do it.
  • I might wish to maintain a measure of control over where I work (eg. from home) and when I do it.
  • I might wish to preserve my intellectual property and not have it automatically vest in my employer.
  • I might wish to have the assurance of small business standard form contract fairness protections in the Australian Consumer Law.
  • I might wish to have the Independent Contractors Act assurance of protection against harsh and unfair terms.
  • I might wish to collectively negotiate terms for the supply of my services under small business class exemption protections of the Competition & Consumer Act.
  • I might want a labour hire agency to help find work for me with its clients, without being subservient to it merely because it has agreed to help me.[vi]

You might be able to think of some more. But perhaps there’s enough there to at least fairly ask the question.

It’s a shame, really…

It’s a shame that one would need to go to these lengths and raise these objections to avoid becoming an employee against one’s wishes.

In his dissenting judgment, Steward J in Personnel Contracting pointed out:

In 2005, the House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation published the result of its inquiry into “independent contracting and labour hire arrangements”. The Standing Committee noted that the growth in “independent contracting and labour hire employment” had “clearly” indicated that it had “become a preferred employment choice for many Australians”. It also observed that “over 10 per cent of the workforce” at that time identified themselves as being “independent contractors across a wide variety of industries”.[vii]

That percentage has likely increased significantly by 2022 with the growth of the gig economy.

His Honour went on to trace the history of the development of the Independent Contractors Act 2006 (C’th), observing:

Section 3 of the Independent Contractors Act states that the objects of the Act include protecting “the freedom of independent contractors to enter into services contracts”; the recognition of “independent contracting as a legitimate form of work arrangement that is primarily commercial”; and the prevention of “interference with the terms of genuine independent contracting arrangements.”[viii]

Steward J, critical of the overturning of precedent which recognised the worker’s choice of status of an independent contractor, concluded that it will:

…potentially deny to workers a choice they may wish to make to supply their labour as independent contractors, thus possibly undermining one of the objects of the Independent Contractors Act.[ix]

In his Honour’s view, it was properly a matter for the legislative branch of government to consider. [x] And perhaps it is.

If nothing else, the government will at least have to deal with the spate of “double dipping” and award breach claims that will inevitably surface, now that a model for engaging workers that has stood for 30 years has been overturned.

Andrew C. Wood


[i] CFMMEU v Contracting Personnel [2022] HCA 1 per Kiefel CJ and Keane & Edelman JJ at paras [58] and [63]; Gageler & Gleeson JJ at para [127].

[ii] Interpreted in CFMMEU v Contracting Personnel to indicate employment by a combination of control and integration tests. See: Kiefel CJ, Keane & Edelman LL at paras [71] and [75]; Gordon J at paras [195], [196], [200] and [201].

[iii] Per Steward J (dissenting) in Contracting Personnel at para [204].

[iv] Commonwealth Bank of Australia v Barker [2014] 253 CLR 169.

[v] Privacy Act 1988 (C’th) section 7B(3).

[vi] See discussion of the evolving “labour hire subservience test” in related posts: Wood AC (2022) CFMMEU v Personnel Contracting: What did the High Court really say about the “own business” test; and Wood AC (2022) Constructing the ratio of CFMMEU v Personnel Contracting.  

[vii] Personnel Contracting at para [210].

[viii] At para [212].

[ix] At para [222].

[x] At para [222].

Constructing the ratio of CFMMEU v Personnel Contracting

I opened a book today – one that I’ve not needed to look at since 1973.  In fact, I don’t think I could have looked at it too much, even back then. The pages were in pretty good condition…

The book is Maher, Waller & Derham (1971) Cases and Materials on the Legal Process (2 ed).  I opened it because I needed to refresh my memory (now fading) about the relationship between the binding rule of a case (its “ratio decidendi”) and its material facts. I wanted to do that because several aspects of the High Court’s recent decision in CFMMEU v Contracting Personnel were causing some panic in the labour hire industry, and I wanted to see if it was justified.

The aspects that were proving especially troublesome were those passages in the judgments that seemed to be suggesting that, as a matter of binding principle, the mere making of a promise to work through a labour hire firm might be enough to make a person that firm’s employee – if the promise were used by the labour hire firm in running its business, as of course it is. 

Such a principle, if indeed it were the correct principle to extract from the case, seemed to conflate the “control test” with the “integration” or “organizational test”, applying selected elements of the “multi-factorial test” (though only to the terms of the written contract – mostly), whilst viewing all through the “prism” of the “own business test”, or something not entirely unlike it.

Heaven help us if we’re teaching employment law this semester!

But there, on pages 113-114 of my cherished copy of Maher, Waller & Derham, purchased at the exorbitant price of $8.50, was what I was looking for – a lucid but barely remembered account of the relationship between the binding rule of a case and its facts, showing how the material facts of Donoghue v Stevenson (the famed “snail-in-the-ginger-beer-case”) could be divided into fact families, the members of which could be “stated at various levels of generality”.

Applying the method recommended by those esteemed authors, I was able to discern four families of important facts that might go some way towards explaining what the High Court really said, and which might allay some of the alarm currently circulating through the labour hire industry.   

I’ll set them out, and then see if I can combine them into a workable statement of principle.

  1. Facts as to the worker’s identity & capacity: The worker was an individual, not in his own business.
  2. Facts as to the contract: The contract with the labour hire firm was wholly in writing.
  3. Facts as to preservation of independence: the worker’s promise to perform work for the labour hire firm’s clients as directed was not subject to a sufficient reservation of independence – eg. as to what work he would do or how he would do it.
  4. Facts as to the labour hire firm’s control and use of the worker’s promise: The labour hire firm controlled and used the worker’s promise as an asset in its business.

It’s going to be difficult for labour hire firms to avoid #2 and #4.  But #1 and #3 might suggest there is some scope to fashion a different outcome in some cases.

So, here’s a first attempt to extract the principle in CFMMEU v Personnel Contracting:

Where A, being an individual not in business for themselves, makes a promise to B, in a wholly written contract without sufficient reservation of independence, to perform work for C, which promise B controls and uses in its business, then A may be characterized as B’s employee.

Don’t hold me to that. I’ll need time to refine it. In fact, it might not be settled until later courts tell us what the High Court really meant. But might it work?  Might it keep the doors of a few locum agencies and professional on-hire firms open a bit longer?

Here’s hoping a court that needs to consider the issue in a different occupational context might think so!

Andrew C. Wood