News | 28 February

It is all about the contract!

There have been a number of developments in the past year that make it imperative that businesses:

  • Have written contracts for all employees and contractors and
  • Ensure that the content of the contract does not contradict the intended relationship with the other party

Recently, there have been two significant High Court decisions on the question of whether a worker is an employee or a contractor.

While these cases had quite different outcomes, what they had in common was that the Court found that it is primarily the contract entered into and the terms contained in it that determines the nature of the relationship.

ZG Operations v Jamsek

This case was about two truck drivers who had worked as independent contractors for over twenty years for ZG Operations. They were originally employed by the company but switched to become independent contractors when the company told them that their jobs would not be secure if they didn’t make the switch. After the company discontinued their engagements in 2017, the workers then made claims for pay, leave and superannuation entitlements on the basis that they should have been characterised as employees.

The court found that the contracts clearly defined the relationships as independent contracting plus the workers formed partnerships with their wives and they bought trucks which were significant investments. The court concluded that these workers were genuine independent contractors as characterised in the contracts.

Key takeaways: for genuine independent contracting relationships, make sure that:

  • you have a proper written contract for service which clearly identifies the relationship as an independent contractor and
  • the terms in the contract are consistent with an independent contractor relationship.

CFMMEU v Personnel Contracting

This case was about a labourer (Mr McCourt) engaged by a labour hire company, Personnel Contracting, to work for Hanssen Pty Ltd. Mr McCourt was an unskilled British backpacker on a working holiday and he didn’t have his own business. The CFMMEU and Mr McCourt made a claim that he was actually an employee and should have been paid under the Building and Construction General On-site Award 2020.

The court found that the “Administrative Services Agreement” under which Mr McCourt was engaged provided Personnel Contracting with rights of control and direction over Mr McCourt eg in relation to who he worked for and Mr McCourt was contractually obliged to cooperate. As a result, the court deemed this relationship to be more characteristic of an employee than an independent contractor and ruled accordingly.

Key takeaway: you should ensure that:

  • If you are wanting the relationship to be that of an independent contractor, the terms in the contract are consistent with that or
  • if the relationship is, in reality, characteristically that of an employee, you contract the worker accordingly and don’t try to disguise it as that of an independent contractor.

For more detailed information, go to this article from Maddocks.

If you need assistance with contracts for contractors or employees, use your CCF Membership and contact Peter Maguire at our workplace relations advisors, Ridgeline HR on 0438 533 311 or at peter@ridgelinehr.com.au.

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