NEWS

The primacy of the written contract in the Employee vs Contractor distinction

The High Court of Australia in Construction, Forestry, Maritime, Mining And Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 allowed an appeal from the Full Court of the Federal Court of Australia, confirming the importance of contractual terms when determining whether a worker is an employee or independent contractor.

Mr McCourt was a backpacker who had travelled to Australia on a working holiday visa. In 2016, Mr McCourt was engaged by Personnel Contracting Pty Ltd (Construct), a labour-hire company, and entered into an agreement that described him as a “self-employed contractor”.

Construct had a Labour Hire Agreement with Hanssen Pty Ltd (Hanssen) and assigned Mr McCourt to work on the Hanssen construction site, where he performed basic labouring tasks under supervision. Mr McCourt worked for Hanssen for under four months, where he was paid an hourly rate. There was no contractual agreement between Mr McCourt and Hanssen.

Federal Court Proceedings

Mr McCourt commenced proceedings against Construct, claiming compensation and penalties under sections of the Fair Work Act 2009 (Cth). Mr McCourt argued that he was an employee of Construct, and was not paid entitlements under the applicable Award.

The primary question for determination was whether Mr McCourt was an employee of Construct.

The primary judge held that Mr McCourt was an independent contractor in the first instance. The Court applied the multifactorial approach, considering the contractual terms of the agreement and the work practices imposed by Hanssen and Construct. This reasoning was upheld in the Full Court of the Federal Court of Australia.

High Court Proceedings

The High Court of Australia unanimously overturned the decision of the Full Federal Court and held that Mr McCourt was an employee. The High Court held that the relationship between the parties is to be determined by reference to the rights and obligations created by the contract.

When looking at the contract between Construct and Mr McCourt, the High Court found that the contractual terms mirrored those of an employee and employer contract. Under the contract, Mr McCourt was not conducting a business of his own account and worked under the control of Construct, which had no right to exercise control over his work. The label of Mr McCourt as a “self-employed contractor” did not alter the nature of the relationship created by the express terms of the contract.

Significance

The decision highlights the importance of the contractual terms in determining the nature of the relationship between parties. The High Court has confirmed that greater emphasis will be placed on the rights and obligations imposed by the contract, despite how the parties may label the arrangement.

Businesses that participate in tripartite labour-hire arrangements should ensure their contracts accurately reflect the arrangement between the parties..

Related reading can be found at ZG Operations & Anor V Jamsek & Ors [2022] HCA 2.

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.

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