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

Photo by Harrison Haines on Pexels.com

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

Emancipated Labour Contracting: Could it be a thing?

Over the past couple of weeks, I’ve been talking about the unintended consequences of the recent High Court decisions that have led to the supposed demise of the Odco model of labour hire contracting. I’ve been writing about and discussing the legal significance of those cases and what they really mean. You can find most of what I’ve been writing here. on the Recruiters’ Casebook.

Today, and in the lead up to WorkAccord’s Tuesday TalkAbout on 29 March, when we’ll be discussing the topic: Independent Contracting On-Hire: Where to from here? I want to shift direction and plant the seeds for a forward-looking discussion about something that I’ll call, emancipated labour contracting.

Emancipated Labour Contracting

Emancipated labour contracting is simply labour contracting that is freed from the type of contractual dependency, subservience, and control which led the High Court to find that the Odco contractors in CFMMEU v Personnel Contracting were employees.

In Personnel Contracting, Kiefel CJ and Keane & Edelman JJ said that the labour hire firm:

 “…was exercising, and commercialising, its right to control the work that [the worker] would do and how he would do it. The marketability of … a labour‑hire agency turned on its ability to supply compliant labour; without that subservience, that labour would be of no use to [its] clients. That right of control was therefore the key asset of [its] business.”

para [76]

That largely untested understanding of the nature of a labour hire business led those three judges to conclude:

“[the worker’s] work was dependent upon, and subservient to, [the labour hire firm’s] business. That being so, [the worker’s] relationship with [the labour hire firm] is rightly characterised as a contract of service rather than a contract for services. [The worker] was [the labour hire firm’s] employee.” [89] – [90]

paras [89] – [90]

Gageler & Gleeson JJ said much the same thing

…by supplying his labour to [the Host], [the worker] was at the same time supplying his labour to [the labour hire firm] for the purposes of [the labour hire firm’s] business. He was not in any meaningful sense in business for himself”

para [158]

Gordon J similarly said that:

“[the worker] agreed to work in the business or enterprise of [the labour hire firm] promising he would work at its direction for the benefit of [the labour hire firm’s] business of supplying labour to [its] customers and, in return, he was paid by [the labour hire firm].”

para [200]

Control + Integration = Subservience

Can you see what is happening here; how the court has commodified the labour hire firm’s control of the worker (and the work opportunity) to make it appear that the worker is working in the labour hire firm’s business so as to reject any notion that the worker might have retained a measure of independence?

Although the judges are using the language of “control”, they really appear to be applying  a version of the integration test.

New Questions

So, the questions that we might now ask begin to look like this:

  • 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 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.

Let’s talk!

Andrew C. Wood


When your “contractors” turn out to be your employees (#10) …

  • 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.

Let’s talk!

When your “contractors” turn out to be your employees (#9) …

What will your regulators do?

It’s not only your relationship with your workers that’s been affected by the High Court’s recent decisions about how we should be deciding if a worker is a “contractor” or an employee.

What about all those regulatory and revenue authorities – tax, super, workers compensation, payroll tax, WHS , labour hire licensing etc – that have published guidelines and “contractor tools” that apply the multi-factor test as it was used before the High Court restricted its operation?

You’re cordially invited to bring your questions along to WorkAccord’s Tuesday TalkAbout on 29 March 2022, and engage in the extended discussion via the Labour Hire Licensing & Regulation (Aust. & N.Z.) LinkedIn Group? We’d love to hear from you.

Let’s talk!

“Odco” Contracting: Where to from here?

You’ve probably heard enough about the Personnel Contracting Case and the supposed demise of “Odco” contracting by now …

… to be asking some questions of your own. At least you should have, if you’ve been running or working in an on-hire contractor services model and are now seeking to disentangle yourself from it.

Some of the questions you might be asking could be:

  • Must you reclassify your workers? If so, how?
  • What are your best guides now that the multi-factor test has been restricted to what’s in the contract, and the courts won’t give much weight to how you’ve described your relationship?
  • What might a contract include to preserve the independence of the contractor?
  • What penalties might employers now be facing?  After all, the Personnel Contracting Case involved an application for penalties for breach of the Award and the High Court has sent it back to the trial judge to be decided on the basis that the worker was an employee after all?
  • What about claims for past entitlements, like leave? Will there be double dipping? Are the “off set” provisions in your contracts any good?
  • If you’re left to pick up the bill, can you pass on additional costs to your client?
  • What happens to your client contracts, if you’ve agreed to supply on-hire contractor services but your workers are not contractors?
  • What are the FWO and Labour Hire Licencing regulators doing about this?
  • Should you be stepping away from supplying on-hire contracting services altogether? What other engagement and supply models are viable?
  • Could an on-hire engagement and supply model that didn’t promise “compliant” or “controlled” labour really work?
  • What does “compliant” or “control” really mean now anyway?
  • What about your staff consultants who may be engaged as independent contractors?
  • What happens to other provisions in your contracts – like your restraint of trade provisions – if your workers were engaged on the basis that they were independent contractors but now turn out to be your employees? Are those provisions still any good?
  • What happens if the contractor is working through their own company?
  • What about your contractors whom you’ve put out to be engaged by a payroll provider?
  • Where is the line drawn between sham contracting and simply getting it wrong?
  • What happens if your contract is NOT wholly in writing? Or if what is written is pretty light on?

Why not bring your questions along to WorkAccord’s Tuesday TalkAbout on 29 March 2022, and engage in the extended discussion via the Labour Hire Licensing & Regulation (Aust. & N.Z.) LinkedIn Group?

You can register for the session via the Eventbrite portal here.

We’d love to hear from you.

Let’s talk!

Andrew C. Wood

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

CFMMEU v Personnel Contracting: What did the High Court really say about the “own business” test?

This is the first of The Recruiters’ Casebook’s micro-analyses of the recent Australian High Court’s decision in CFMMEU v Personnel Contracting

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.

Context

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.[39] 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, [39] leading to a conclusion that the worker, in this case, was an employee. [73]

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.[114] 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[143] and its interaction with performance of the labour hire agreement between the labour hire provider and its client. [144]

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 [113].

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, [152] 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.”[158]

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”. [113]

Gordon J thought that the Court was “not assisted by seeing the question as involving a binary choice between employment and own business”. [162] She thought that it was “not necessary to ask whether the purported employee conducts their own business” [180] and that it “may not always be a suitable inquiry for modern working relationships, [181] because that inquiry will “ordinarily direct attention to matters which are not recorded in the contract”. [182]

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” [183]

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, [198] in consequence of which he had agreed to work in its business or enterprise and was therefore its employee. [200]

Steward J agreed with Gordon J’s statement of the test to determine whether a person is an employee;[203]  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.

Fall Out    

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 shouting is not over yet.

Andrew C. Wood

On-hire contracting after CFMMEU v Personnel Contracting: Has labour become a commodity?

Photo by Andrea Piacquadio on Pexels.com

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 [89]).

Abstracting their honours’ reasoning at para [90], 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 [158]:

…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 [89], 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]:

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.

Andrew C. Wood

Keep Checking Your “ACN Contractors”

I wonder if the message is getting through to labour hire providers, yet, that the reason why all four Australian labour hire licensing schemes need an “incorporated worker exemption” is that all those companies that their “ACN contractors” are working through are supplying their people to other people to perform work.

In short, they’re micro labour hire firms.

There are probably thousands of them – maybe tens of thousands.

So, the regulations and exempt worker declarations exclude some individuals who are supplied to perform work through their own companies from the definition of “worker“.

And because you can only be a labour hire provider under a supply arrangement if you suppply a “worker” as defined, excluding them from the definition means that the individuals are not “workers” for their own companies, which therefore don’t need licences.

Pretty cool work-around when you think about it. But there’s a hitch.

The exemptions are very technical and they differ from jurisdiction to jurisdiction. Basically, that can mean that your ACN Contractor mightn’t need a licence in, say, Victoria; but could need one in the A.C.T.

The sort of factors you need to consider include:

  • how many directors the company has;
  • how many individuals it supplies to perform work for other people;
  • whether the individuals have a management role or share in profits.

You also need to check how the individuals actually get paid by their ACN entities, because not all payments are payment for the work performed. Some are share dividends; others are trust distributions; some payments might be by way of directors fees – all of which might not be able to be characterized as payments for the work performed.

So, keep checking the arrangements that your ACN contractors have with the individuals who perform the work.

And keep in mind that circumstances can change. Someone’s mother is appointed as a director and suddenly the maximum number of directors required for the exemption to operate is exceeded; or someone’s little brother starts freelancing through the Contractor’s entity, and the maximum number of workers required for the exemption to operate is exceeded.

Before you know it – and perhaps without knowing it – you’re involved in an unlicenced labour hire supply arrangement.

You wouldn’t want that, would you?

Andrew C. Wood