Review your “Odco” arrangements…NOW!

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On Wednesday, the High Court of Australia delivered its decision in CFMMEU v Personnel Contracting, holding that a UK backpacker, who was engaged and supplied by Perth-based Labour Hire firm, Personnel Contracting, as an independent contractor under the “Odco” system was, in fact, an employee. As a result, you should review your “Odco” arrangements … now!

The majority decisions

Three of the seven High Court judges, Kiefel CJ, Keane and Edelman JJ, considered that the original Odco Case, and subsequent cases that relied on it, contained “an error”, which represented “a departure from principle which should not be perpetuated” (para 59).

Two of the judges, Gageler and Gleeson JJ, thought that the present case differed from Odco because:

  1. the subject-matter of the contracts in Odco was not unambiguously hourly labour;
  2. the contracts between the workers and the labour hire company in the Odco cases did not oblige the workers to supply labour in a “safe, competent and diligent manner” (as they did in this case), but simply to “carry out all work” which the workers agreed with the clients of the labour hire company to do and which the workers “guaranteed against faulty workmanship”; and
  3. most importantly, unlike the terms of business used by Personnel Contracting in this case, nothing in the terms of business between the labour hire firm in the Odco cases and Odco’s clients placed Odco’s workers under the direction and control of the clients.

That was enough to allow the two judges to say that Odco should not be followed in the present case (paras 157 – 158).

Gordon J did not expressly deal with the Odco Case but decided, after considering the “totality of the relationship” as evidenced by the work contract, that the relationship was one of employment, not one of independent contract (para 200). The issue was not so much whether the worker was “in business for himself”; but whether his work was performed in the business or enterprise of Personnel Contracting.

It’s a very subtle distinction to make; but an important one, because (as explained at paras. 182-183) it enables the Court to focus solely on the legal rights and obligations set out in the contract, avoiding any inquiry into “subsequent conduct” of the parties or into whether the worker’s set up demonstrates “the hallmarks of a business”. In this respect, it is consistent with the approach adopted by the High Court in WorkPac Pty Ltd v Rossato.

A sole dissenting voice

Steward J, delivering the only dissenting judgment, was not prepared to stray from Odco. Drawing on a 2005 Parliamentary Report, his Honour pointed out (at para. 210) that:

‘Odco’ arrangements operate in a range of industries. Independent contractors working under this system include farm hands, doctors, secretaries, personal assistants, family day‑care workers, fishermen, salespeople, cleaners, security guards and building workers.

Serious challenges now face labour hire firms using the “Odco” method

His Honour’s explanation for not departing from the Odco Cases will be seen by many as forecasting the serious challenges that labour hire firms, who have relied on the Odco system, now face. At para. 222 his Honour stated:

Whilst this is not a criminal law case, overturning the Full Court’s decision in Odco would expose the respondent to significant penalties on a retrospective basis. That is unfair. It will also… greatly damage the respondent’s business and the businesses of many others. That is undesirable. It will also 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. Given the severity of these potential consequences, which will apply retrospectively, the fate of the Full Court’s decision in Odco should be a matter left for the legislative branch of government to consider.

Fallout

His dire warnings, may have many scrambling to undo their Odco arrangements in the fallout, and to put in place “compliance partnerships” with the FWO … unless the legislative branch of the government intervenes.

Though I can’t see that happening quickly … can you?

Andrew C. Wood

A Duck Is Still a Duck

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Yesterday, the High Court handed down its decision in the long-awaited case of CFMMEU v Personnel Contracting. It was a win for the Union. The worker turned out to be an employee, and not an Odco contractor. Over the next few days, the judgment will be pulled apart and more detailed lessons taken from it.  But, for now, here is a quick summary.

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” was characterised, at first instance, as an independent contractor on an application of the multi-factor test and Odco principles.

First 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. 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.

High Court – A duck is still duck, call it what you will

The High Court allowed the appeal and held that the worker was an employee.

The essence of the High Court’s decision appears at paras [89] and [90] of the joint judgment of Kiefel CJ, Keane and Edelman JJ.

“[89] … Mr McCourt promised Construct to work as directed by Construct and by Construct’s customer, Hanssen. Mr McCourt was entitled to be paid by Construct in return for the work he performed pursuant to that promise. That promise to work for Construct’s customer, and his entitlement to be paid for that work, were at the core of Construct’s business of providing labour to its customers. The right to control the provision of Mr McCourt’s labour was an essential asset of that business. Mr McCourt’s performance of work for, and at the direction of, Hanssen was a direct result of the deployment by Construct of this asset in the course of its ongoing relationship with its customer.

90 In these circumstances, it is impossible to conclude other than that Mr McCourt’s work was dependent upon, and subservient to, Construct’s business. That being so, Mr McCourt’s relationship with Construct is rightly characterised as a contract of service rather than a contract for services. Mr McCourt was Construct’s employee.”

ZG Operations Australia Pty Ltd v Jamsek & Ors

The Court also delivered judgment in  the companion case of ZG Operations Australia Pty Ltd v Jamsek & Ors.

The case concerned the various entitlements of truck drivers, who derived their sole income by working for the 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 raised similar characterisation questions about the role of the business test in determining whether workers are employees or independent contractors.

The workers were held to be contractors but some aspects of the case have been remitted to the Full Court of the Federal Court for Further determination.

We’ll also pull this case apart over the next few days and see what lessons can be taken from it for the recruitment & staffing industry.

Andrew C. Wood

The Recruiters’ Casebook and WorkAccord Get Together for a Free Short Webinar Series

The Recruiters’ Casebook and WorkAccord are getting together to present two free webinars as they test their new webinar platform.

We’d love you to join us and give us your feedback.

Webinar 1

Competition & Consumer Law Brief – The New Playing Field.

Friday, 21 September 2018, 10.00 am to 10.30 am AEST.

Modern Universal Business Concept Icon SetAs job-based employment seemingly evolves toward job-based entrepreneurship in the freelance, contracting and gig economies, it’s becoming increasingly important for recruitment, contracting and staffing businesses to keep up to date with competition & consumer law developments that impact their sector and their incorporated workers.

In this free session,  Andrew C. Wood will present a short briefing to business owners & managers, consultants and contractors about the role of the ACCC in creating and supporting a fair and level playing field.

Andrew will cover the following topics:

  • Authorisations and protective notifications
  • Banning orders, penalties & remedies
  • Cartel prohibitions
  • Collective bargaining and the proposed small business class exemption
  • Misleading job ads
  • Statutory guarantees and unlawful attempts at exclusion
  • Unconscionable conduct
  • Unfair standard form, small business contracts
  • Unsolicited services (and claims for payment).

Register Now

 

Webinar 2

Transaction to Transformation

Friday, 28 September 2018, 10.00 am to 10.30 am AEST.

Modern Universal Business Concept Icon SetThe “factory model” of services production and supply, based on efficiency in repeating similar transactions has been disrupted by Artificial Intelligence. Astute suppliers in the recruitment, contracting & staffing industry are already talking about a major shift from transaction to transformation.

But what does that look like? How is it managed? How is progress measured? How is it supported by business models and the terms and conditions that underpin them? And is the transaction still important?

In this free introductory level webinar that has been designed for recruitment, contracting & staffing agency business owners and managers, we will begin to explore some of these questions and set a pathway for future discussion.

Register Now

Please send a shout out to your friends and colleagues. We look forward to seeing you there!

MegaMan

 

Andrew C. Wood

Collective Bargaining in the Freelance, Contracting and Gig Economies

Young people work in modern office.As job-based employment seemingly evolves toward job-based entrepreneurship in the freelance, contracting and gig economies, we may soon witness the emergence of new models of workforce organisation and worker representation. That is, if the ACCC’s plan to grant a class exemption allowing small businesses to bargain collectively with their customers and suppliers goes ahead.

Collective bargaining, in this context, involves two or more competitors getting together to negotiate with a supplier or customer (the “target”) about terms, conditions and/or prices.

It is distinguished from bargaining under the Fair Work Act in that the parties who get together are not employees; they are actual business competitors.

They include many contractors and freelancers, working in the on-hire and gig environments.

They may be technology contractors, medical locums, project managers, professional science & engineering contractors, designers & creatives, book-keepers, contract cleaners, contract logistics operators, or translators.

Indeed, they may be any small business that undertakes professional, skilled, or trade work that is done by workers who perform their work in, and as part of, their own businesses.

Recruitment, contracting, and staffing agencies would therefore do well to follow this new development closely; and begin to think about the challenges and opportunities that the ACCC’s proposal presents.

For example, what might an on-hire or IT contracting agency expect from a scheme that allows a pool of  its IT contractors to bargain collectively with it on price, terms and conditions of engagement?

Who might represent them? Should the current restriction on trade union representation apply? If it did, might we witness the emergence of contractor “guilds” that would be able to operate outside the Fair Work bargaining framework?

How might the ACCC’s concept of joint procurement bargaining play out, if it allowed that same pool of IT contractors to bargain simultaneously with their IT contracting agency and its clients?

What might small recruitment agencies, working in the creative or medical locum industries, gain from being able to bargain collectively with clients on price, terms and conditions of supply – without the need for any notification or authorisation?

What might the competition impact be on medium and larger businesses, who fall outside the scope of the class exemption; or who may be the targets of collective bargaining?

How might the role of industry associations develop to support members looking for collective bargaining resources and solutions?

These are just a few questions that recruitment, contracting, and staffing agencies (and their industry associations) might now be asking. No doubt there are many others.

The ACCC would like to hear about them by 21 September 2018.

 

Andrew C. Wood

Uber drivers confirmed as “employees” by UK Employment Appeal Tribunal.

silhouette-of-scaleOn 10th November 2017, the UK Employment Appeal Tribunal delivered its judgment in Uber & Ors v Aslam & Ors [PDF].   The decision will be of interest to agencies and workers operating in the “Gig economy. Here is a brief summary.

Background

Members of the Uber Group had appealed from an earlier decision of the Employment Tribunal, which found that Uber drivers in London were “workers” within the meaning of the Employment Rights Act 1996, the Working Time Regulations 1998 and the National Minimum Wage Act 1998; and that any Uber driver who had the Uber app switched on, was within the territory in which they were authorised to work (London) and was able and willing to accept assignments was working for Uber London Ltd.

Appeal

A key ground in Uber’s appeal was that the Employment Tribunal had mischaracterised the true relationship between Uber and its drivers – that rather than being one of employment, it was one of agency in accordance with which Uber provided booking services as agent for its drivers.

Uber pointed to provisions in its suite of contracts and terms of businesss, which it contended supported its view.

Outcome

The Employment Appeal Tribunal disagreed and dismissed Uber’s appeal. At the time of writing it is understood that Uber intends to take a further appeal to the UK Supreme Court.

Take-away points

In the meantime, there are a few quick points that can be made about the EAT decision.

  1. It is the reality of the situation that matters. The Appeal Tribunal said:

[The Employment Tribunal] was entitled to disregard the terms in the written agreements and the labels used therein.

…the true agreement between the parties was not one in which [Uber London Ltd] acted as the drivers’ agent.

  1. Control still matters. The Appeal Tribunal said:

 The [Employment Tribunal]…was entitled to look at all factors to determine whether this was a case in which the … Uber drivers were entering into contracts with passengers as part of their own business undertakings. Seeing that they were subjected to control on the part of [Uber London Ltd] was an indication that they were not.

  1. These matters will continue to be decided on a case by case basis. The Appeal Tribunal said:

Inevitably the assessment [the ET] had carried out was fact-and context-specific.

Moving forward

It will be interesting to see what the Supreme Court makes of this.

Whilst, it would seem possible, in theory, to construct an agency relationship of the type which Uber contended for in this case, one might wonder whether Uber would have done better to construct the agency and booking service between it and the riders, rather than between Uber and the drivers.

It could also be important to recognise that this might not really be a case, where the Employment Appeal Tribunal said that the written documentation doesn’t matter … it’s perhaps more a case of making sure that the written documentation gets it right – i.e. that it reflects the true relationship between the parties.

 

Andrew C. Wood