Contract is key: landmark High Court decisions provide clarity

15 February 2022

In two landmark decisions, the High Court has indicated a significant shift in focus when determining whether a worker is an employee or independent contractor.

JUMP TO:
JUMP TO:

Before the decisions*, a ‘multi-factor' legal test was applied. The test required the court to look at the relationship as a whole.

Consideration was given to: the degree of control, whether the worker could refuse to work, the flexibility the worker was able to enjoy, how the worker integrated with the business (for example, did they use their own tools, premises or clothing), as well as how income was taxed, who made superannuation contributions and whether or not leave accrued.

The test made it clear that it was insufficient to simply rely on a contract or agreement describing the relationship as contractual.

However, both High Court decisions found workers were independent contractors. Those decisions were reached by significant weight being attached to the written agreements:

“…where the parties have comprehensively committed the terms of their relationship to a written contract, the efficacy of which is not challenged on the basis that it is a sham or otherwise ineffective under general law or statute, the characterisation of that relation as one of employment or otherwise must proceed by reference to the rights and obligations of the parties under that contract … a wide-ranging review of the parties’ subsequent conduct is unnecessary and inappropriate.”

The High Court confirmed that, where there is a comprehensive agreement and no concern as to whether the arrangement is a sham, there is no need for a detailed analysis into the arrangement.

What does this mean for business?

Businesses using independent contractor arrangements should take comfort, while those using sham arrangements could face significant adverse implications.

Businesses need to exercise caution and take time to review existing arrangements. Comprehensive agreements will be essential. Vague terms will lead a court to revert back to the multi-factor test.

The Victorian Chamber’s workplace relations advisors and consultants are also available and on hand to answer any question you may have. Members can call on (03) 8662 5222.

*Construction, Forestry, Maritime and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd 7 Anor v Jamsek & Ors [2022] HCA 2

New Memberships for wherever you are in business

Hard times. Good times. Crunch time. Growth time. We’re here to support you at all those pivotal times in your business life. We’ve now tailored our range of memberships to fit wherever you are in business – today and well into the future.

Restricted Page

You are being redirected to our login page!