The latest High Court decision on the vexed question of contractor vs employee relationships
On Wednesday the 9th of February 2022, the High Court of Australia handed down two decisions giving clarity to the complex consideration required when employers are challenged regarding the nature of workplace relationships. This decision has important implications for our clients in sport, entertainment and business, including those in the gig and blockchain economies.
In Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 (Jamsek) the High Court has given clarity to help determine whether an employment or independent contractor relationship exists.
What the Personnel Contracting and Jamsek decisions have told us are that the most appropriate way to determine whether an employment or independent contractor relationship exists is to look closely at the written contract – particularly where that contract is comprehensively written and clearly sets out the terms of the relationship.
This is a move away from the previously favoured “multifactorial” checklist method of determining whether a person is an employee or a contractor, in preference of looking to the contract itself (insert shocked look here).
What are the key principles?
The High Court outlined the following principles apply when characterising a relationship:
The relationship will be determined by reference to the rights and obligations of the parties under that contract, where parties have comprehensively committed the terms of their relationship to a written contract (which is not challenged on the basis that it is a sham or is otherwise ineffective under general law or statute).
However, the Courts will still look past a “label” in a written contract, if that label does not match the rights and obligations of the parties.
If there is no suggestion that the contract has been varied, or that there has been conduct giving rise to an estoppel or waiver, a wide-ranging review of the parties' subsequent conduct such as that undertaken in a multifactorial assessment, is unnecessary and inappropriate. In such a case parties can look directly at the contract.
What does this mean for me if I want to be sure that I engage, or are engaged as, an independent contractor?
Written contracts should be put in place where parties are looking to characterise a relationship as an independent contractor rather than an employee (well let’s be honest, contracts should always be put in place ☺).
Those contracts should comprehensively set out the rights and obligations of the contracting party and the contractor.
The obligations expressed in the contract should be consistent with those expected of a contractor.
The High Court has told us control is an important consideration.
Talk to your lawyer if you wish to terminate an employment arrangement and re-engage as a contractor.
Implications
The multifactorial test is not dead just yet, particularly as the High Court did not address what approach should be taken in the absence of a written agreement and how the multi-factorial test should be applied in that circumstance.
For now however, sporting organisations and businesses have been given clarity that the contract will be king for characterising an arrangement as one of principal and contractor, where the rights and obligations under the contract are consistent with those expected of a contractor.