Amongst the professional contracting issues, which we’ll be discussing in our first Tuesday TalkAbout Live! masterclass for 2023, is the issue of how one interprets and applies the Professional Employees Award 2020. You’ll be interested to learn that last Friday, 20 January 2023, the Full Bench of the Fair Work Commission, on its own motion, varied the coverage provisions of that Award to remove difficulties caused by the “principal purpose test”, which the Commission considered had led to excessive litigation.
You can read the full decision here. However, the gist of the decision to vary the coverage provision can be found at paras -, where the Commission said:
 … the classifications have the function of determining in what grade an employee covered by the Award will fall rather than whether an employee is covered by the Award in the first place…
 … We think that a better approach would be to add a provision to Schedule A which makes it clear that the classifications will apply in the way identified above — that is, that they apply to all employees who perform professional engineering duties, professional scientific duties, professional information technology duties or quality auditing unless the person holds a position which is principally managerial in nature…
 We conclude … that Schedule A of the Award should be varied by deleting the sentence appearing immediately under the heading and inserting in lieu thereof the following provision:
An employee performing professional engineering duties, professional scientific duties, professional information technology duties or quality auditing must be classified in one of the following classifications provided that the employee is not employed in a wholly or principally managerial position.
 The effect of the above variation will be to remove the need to apply the “principal purpose” test and thus resolve the difficulty identified in Zheng. For the reasons earlier outlined, and contrary to the submissions of the APESMA, we do not consider that the express exclusion of managerial employees will narrow the coverage of the Award and thus engage s 163(1) because no classification in Schedule A currently applies to a manager. Nor do we consider that the variation will expand the coverage of the Award, since its purpose is clarificatory and consistent with the current classification definitions. The variation is necessary, we consider, to achieve the modern awards objective in s 134(1) of the FW Act. In reaching this conclusion, we regard the consideration in s 134(1)(g) as having determinative weight, with the other identified considerations being neutral.
The Commission has published a draft determination and the parties now have until Parties may file submissions in response to the draft determination by 4:00 pm (AEDT) on Friday, 10 February 2023 to file submissions in response to the draft determination.
To find out what else we’ll be covering in our Tuesday Talkabout Live! livestream masterclass, and to reserve your place, check out the Eventbrite online event page here.
It’s been almost 12 months since the High Court delivered its decision in the landmark case, CFMMEU v Personnel Contracting and that’s the perfect opportuinity for Tuesday Talkabout Live! to kick off its 2023 program with an exploration of the topic, Professional Contracting …One Year On. You can check out what we’ll be convering via the Eventbrite registration page here.
Throughout 2023, WorkAccord will be presenting monthly masterclasses for recruitment, staffing and HR professionals on the following topics:
February: Professional Contracting.
March: Fair Trading
April: Fair Competition
June: Human Rights
July: Reference Checking
August: Licensing & Regulation
September: Ethics & Professional Conduct
October: Care & Support Sector
November: Sustainable Employability.
Tuesday TalkAbout Live!
Tuesday TalkAbout Live! masterclasses are small group, interactive livestream discussions. We’ve strictly limited registrations to 15 for each session to give all participants an opportunity to join in, ask questions and have their say. However, to make sure nobody misses out, you have a choice of multiple sessions that you can register for. *
So that discussion can occur freely, we don’t record the live sessions. If, for some reason, you can’t attend the live session you’ve registered for, you’ll be able to access a pre-recorded session and have an opportunity to raise your questions with our presenter by email, or else book a short (10 minute) private call to raise your question by phone or video conference.
Continue the Conversation
Tuesday TalkAbouts Live! are carefully designed to create significant learning experiences and provide a grounding that allows you to carry on the conversation confidently in other forums, where you can learn with and from your peers. That’s where the action really happens! So, after you’ve completed your live masterclass, you can head across to the RCSA-hosted Labour Hire Licensing & Regulation (Aust. & N.Z.) LinkedIn Group, where you’ll be able to continue your exploration and deepen your understanding of our topic.
And for the first time in 2023, we’ll be supporting your learning with short, accompanying mobile microlearning courses that you can access on your mobile device! There will be a modest charge for these courses, but masterclass registrants will be able to take advantage of atrtractive concessional pricing.
So, make sure you register for one of the sessions, head across to our LinkedIn discussion area and…
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]
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  to  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:
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.
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.
…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.
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.
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
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.
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.
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.
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.
Is it possible to free or emancipate contractors from the type of control that the Court now regards as indicative of employment in a labour hire context? What sort of control is that, anyway?
What would emancipation involve? How would you present it in a contract – given that the court will focus on the terms of the contract to determine the nature of the legal relationship.
Could an on-hire engagement and supply model that doesn’t promise “compliant” or “controlled” labour really work? Is it marketable? Are the on-demand platforms already doing something similar?
Why would anyone NOT want to be an employee? Is it possible to point to any intelligible business purpose that could underpin an emancipated labour contracting model?
Join the Conversation
I hope you’ll start to ask some questions of your own and either bring them along to WorkAccord’s Tuesday TalkAbout on 29 March 2022, or engage in the extended discussion via the Labour Hire Licensing & Regulation (Aust. & N.Z.) LinkedIn Group? We’d love to hear from you.
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.
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
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.
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  HCA 1 per Kiefel CJ and Keane & Edelman JJ at paras  and ; Gageler & Gleeson JJ at para .
[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  and ; Gordon J at paras , ,  and .
[iii] Per Steward J (dissenting) in Contracting Personnel at para .
[iv]Commonwealth Bank of Australia v Barker  253 CLR 169.
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.
Facts as to the worker’s identity & capacity: The worker was an individual, not in his own business.
Facts as to the contract: The contract with the labour hire firm was wholly in writing.
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.
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!
The case is important to the recruitment and on-hire community because it challenges established workforce services business models, and because it may leave some suppliers of on-hire contractor services exposed to employment claims.
The case concerned the status of a young UK backpacker, who was engaged and on-hired, as an independent contractor, to work as a labourer on a construction site. The Court, held that he was not an independent contractor, but was, instead, an employee.
Issue: The “Own Business Test”
The case is about how the court decides if a person is an employee, when the contract is wholly in writing. Different principles might possibly apply to a contract that is not wholly in writing.
At issue was a question about the extent to which a court should consider whether independent contractors must necessarily be in business on their own account.
Kiefel CJ, Keane & Edelman JJ said the own business requirement, though not essential, was still useful when checking whether the terms of the work contract preserved the worker’s legal right to perform the contracted work, independently in their own business. They said that the legal relationship had to be determined from the terms of the contract, and that the absence of a contractual right to carry on business highlighted the subordinate or subservient nature of the relationship,  leading to a conclusion that the worker, in this case, was an employee. 
Gageler & Gleeson JJ thought that the “own business ” test really only posed the ultimate question of whether the worker was an employee in a different way. They departed from current orthodoxy in holding that the court should go beyond the terms of the contract to consider the manner in which it was performed and its interaction with performance of the labour hire agreement between the labour hire provider and its client. 
They said that it was legitimate for a court to consider the extent to which the worker can be seen to work in his or her own business as distinct from the business of the putative employer .
For that purpose, regard could be had to whether the work was performed under a labour hire arrangement involving back-to-back contracts between a labour hire provider and a host,  which they considered to be a strong indicator that the work was for the benefit of the labour hire business and that the worker, in this case, “was not in any meaningful sense in business for himself.”
They used the “own business” test as a sort of intuitive cross-check against a conclusion, which they reached on an application of what was, in reality, a version of teh “control test” or “integration test”. 
Gordon J thought that the Court was “not assisted by seeing the question as involving a binary choice between employment and own business”.  She thought that it was “not necessary to ask whether the purported employee conducts their own business”  and that it “may not always be a suitable inquiry for modern working relationships,  because that inquiry will “ordinarily direct attention to matters which are not recorded in the contract”. 
The “better question to ask”, according to her Honour, is “whether, by construction of the terms of the contract, the person is contracted to work in the business or enterprise of the purported employer” 
Construing the terms of the work contract, Gordon J found that the worker had agreed to perform his work so as to enable the respondent to carry on its labour hire business,  in consequence of which he had agreed to work in its business or enterprise and was therefore its employee. 
Steward J agreed with Gordon J’s statement of the test to determine whether a person is an employee; but was not prepared to overrule the long line of authorities on which the legitimacy of the on-hire contractor services (Odco) model was based.
The attention given by the judges to the interaction between the work contract and the labour hire contract seems problematic. In a later post, I’ll discuss whether it indicates that the control test and the integration test have merged, in a labour hire setting, into a new “subservience test”, the application of which will, in nearly every case, produce the result that the contracted worker is the employee of the labour hire firm.
In the meantime, it’s worth recalling the context in which the question of the worker’s status arose.
The union and the worker sought compensation from the on-hire firm for contraventions of the FW Act and modern award. The union also sought compensation from the on-hire firm’s client on the basis that it was accessorily liable for the on-hire firm’s alleged breaches.
The appeal has not resolved the claims for compensation. Those claims will now go back to the primary judge to be determined on the basis that the worker was an employee. The claim against the host is likely to raise fresh questions about the circumstances in which a host can be liable as an accessory to an on-hire firm’s contraventions of the FWA and award. Those questions were not considered at first instance, or on appeal.
The Conference reaffirms the fundamental principles on which the Organization is based and, in particular, that:
(a) labour is not a commodity;
ILO Declaration of Philadelphia 10th May, 1944
Whilst the outcome seems intuitively sound – a young UK backpacker, working as a casual labourer on someone’s building site, is surely an employee – on looking a bit more deeply into the High Court’s reasoning in CFMMEU v Personnel Contracting, I’m beginning to wonder whether the Court’s approach to the back-to-back contracts accords with the reality of the on-hire business model, and whether the decision shows signs of treating labour as a commodity.
It’s always risky to paraphrase what the High Court says, but basically, what it appears to have said in this case is that, if you’ve got a contract with a labour hire firm to perform work for its clients, then you’re its employee because, through that contract, it controls the provision of your labour. (Kiefel CJ and Keane & Edelman JJ at para ).
Abstracting their honours’ reasoning at para , you discover that if your work is “dependent upon, and subservient to” someone else’s business through back-to-back contracts, then you must be that person’s employee – you’re working under a contract of service.
Gaegler and Gleeson JJ appear to have adopted much the same approach saying, at para :
…by supplying his labour to Hanssen [the host], Mr McCourt was at the same time supplying his labour to Construct [the labour hire firm] for the purposes of Construct’s business.
You could almost see how that is intuitively sound in the case of a young UK backpacker supplied to work as a construction labourer. But, to be sound in principle, it has to be capable of wider application. And it’s at that point that the approach adopted by the High Court warrants closer scrutiny.
To test it, take the key passage from the joint judgment of Kiefel CJ and Keane & Edelman JJ at para , and simply swap the names and context around to apply to a medical locum agency. Then ask yourselves whether the result is still intuitively sound.
Here it is in translation. The names of the agency and the client are, of course, fictitious:
89 Under the Locum Agreement, Dr McCourt promised LocumsNow to work as directed by LocumsNow and by LocumNow’s customer, Whiteacre Health Service District. Dr McCourt was entitled to be paid by LocumsNow in return for the work he performed pursuant to that promise. That promise to work for LocumsNow’s customer, and his entitlement to be paid for that work, were at the core of LocumsNow’s business of providing [medical] labour to its customers. The right to control the provision of Dr McCourt’s labour was an essential asset of that business. Dr McCourt’s performance of work for, and at the direction of, Whiteacre HSD was a direct result of the deployment by LocumsNow of this asset in the course of its ongoing relationship with its customer.
We can do the same thing with the corresponding passage from the judgment of Gaegler and Gleeson JJ at para :
158 …by supplying his labour to Whiteacre HSD, Dr McCourt was at the same time supplying his labour to LocumsNow for the purposes of LocumsNow’s business.
This sounds dangerously like the heresy of treating labour as a commodity.
What patients were treated at the office of the labour hire firm? A locum agency doesn’t provide, supply, or perform medical labour or services. It arranges for its locums to attend hospitals and health practices to supply the medical services required by the hospital or health practice. That does not make the locum’s work “dependent upon, and subservient to” the agency’s business in any way that compromises the independence of the locum such as to make them the agency’s employee. It does not place them in service of the locum agency.
Neither does a locum agency’s business model involve the acquisition of medical labour or services; it merely involves the acquisition of contractual rights, freely bargained for, which it utilises to discharge its contractual agreement to provide workforce services to facilitate the marshalling of its client’s workforce.
Its workforce services comprise, not the supply of medical services, or the performance of medical services; but rather, the making of arrangements for their supply.
What, I suspect, will now become critical in distinguishing between on-hire employment and on-hire (independent) contracting will be the extent to which those arrangements compromise, or preserve, the capacity for the locum to work independently in the performance of his or her work – including in the absence of needing to demonstrate the exercise of entrepreneurial skill on his or her own account.
The same would be true for any professional locum agency and its locums.
And it is true, at a conceptual level, for on-hire providers in any sector – horticulture, engineering, logistics, teaching, cleaning, aged care etc.
What the decision seems to require is a reappraisal of the Court’s understanding of “control” as it was laid down in Zuijs (1955) and in Stevens v Brodribb (1986). And perhaps that’s the direction in which a legislative solution now needs to be found.
It’s sometimes said that, “hard cases make bad law”. This case may prove the saying true.