High Court rules on employee vs independent contractor distinction

February 17, 2022

The High Court has made two rulings in relation to the distinction between employees and independent contractors.

In Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1, in relation to an employee of labour hire company, the High Court ruled that a labourer engaged by a labour hire company (Construct) to work on construction sites under the supervision and control of a builder was an employee of Construct.

The decision deals with tensions in applying the multi-factorial approach in relation to tripartite labour hire arrangements. Under the Administrative Services Agreement, Construct had the right to determine for whom the labourer would work, and he had promised to co-operate in all respects in the supply of his labour to Construct’s client Hanssen Pty Ltd. The High Court said this right of control, and the ability to supply a compliant workforce, was the key asset of Construct’s business as a labour-hire agency and constituted an employment relationship. That the parties chose the label “contractor” to describe the labourer did not change the character of that relationship.

In ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors [2022] HCA 2, truck drivers were found to be contractors. The High Court held that two truck drivers were not employees of a company for the purposes of the Fair Work Act 2009 and Superannuation Guarantee (Administration) Act 1992. In 1986, the two truck drivers had accepted a change to their working arrangements whereby they each set up a partnership with their wife and signed contracts with the company to purchase trucks and provide delivery services. Income from the work performed was declared as partnership income. The High Court held that the truck drivers were not employees. Where parties have comprehensively committed the terms of their relationship to a written contract (which is not a sham or otherwise ineffective), the characterisation of that relationship as one of employment or otherwise must proceed by reference to the rights and obligations of the parties under that contract.