Employee or contractor; fair work cases Part 2

Here is a useful analysis of the way in which the Fair Work Coimmission deals with the issue of the distinction between the relatrionship of employer and employee and that of principal and agent following substantial judicial reviews of the issue by the High Court of Australia this year.

“4. The required approach to the characterisation of the relationship

[50] The High Court of Australia in Jamsek and Personnel Contracting pronounced on the approach to be adopted under the law in determining whether, absent a specific statutory definition or rule, a person is an employee or contractor. This also involved the High Court reviewing past decisions of the Court and other courts. Relevantly, elements of the past approach of the Commission (itself based on the extant court authority) as outlined in the Full Bench decision of French Accent 19 are, to a large degree, no longer to be applied.

[51] Amongst the principles that now apply, the following are apposite in this matter:

  • The characterisation of the relationship is to be determined by reference only to the parties’ legal rights and obligations.
  • Where a comprehensive written contract is in place, this will be the primary source of the parties’ legal rights and obligations, and these will be decisive of the characterisation of the relationship. This will apply unless the contract is a sham, or has been varied after it was made, or post agreement conduct or context demonstrates that a term is legally ineffective. 20
  • The conduct and expectations of the parties after entering into the contract are not generally relevant to the assessment. 21
  • The manner in which the relationship is worked in practice may be relevant for certain limited purposes, such as to find contractual terms where they cannot otherwise be ascertained 22or to determine the nature of any variation to agreed terms.23
  • It is permissible to have regard to objective events, circumstances and things external to the contract known to the parties at the time of contracting which assist in identifying the purpose or object of the contract. 24
  • The relative bargaining power of the parties is not relevant. That is, the fact that the arrangement was brought about by the superior bargaining power of the company has no bearing on the meaning and effect of the contract. 25
  • The “multifactorial” test remains appropriate; however, it is to be applied by reference to the parties’ legal right and obligations not to the post contract conduct. In that respect, the terms of contract between the parties are not merely “factors” but are determinative. 26The manner in which the contractual terms address the mode of remuneration, provision of equipment, obligation to work, hours of work, delegation of work, holidays and the right to control may show that it is not an employment contract.27
  • Whilst all relevant factors require consideration, two factors in particular assist in assessing the ultimate question of whether an applicant was an employee:
  • Control: The greater the degree (rights) of control exercisable by the principal/employer over the work performed, the greater the likelihood that an employment relationship existed.
  • Own business/employer’s business: The resolution of the question whether a person engaged to work for another as an employee or an independent contractor depends upon the extent to which, upon an analysis of the parties’ rights and obligations under the terms of their contract, it can be shown that the person acts in the business of, and under the control and direction of, the other. 28In this way, one may discern a more cogent and coherent basis for the time-honoured distinction between a contract of service and a contract for services than merely forming an impressionistic and subjective judgment or engaging in the mechanistic counting of ticks on a multifactorial checklist’.29

While the “own business/employer’s business” dichotomy may not be perfect or universal (because not all contractors are entrepreneurs), it usefully focuses attention upon those aspects of the contractual relationship which bear more directly upon whether the worker’s work was so subordinate to the employer’s business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise. 30

It is not necessary or suitable to ask whether the worker is working in their own business. This is not a binary choice between employment or own business. The better question is whether, by the terms of the contract, the worker is contracted to work in the business or enterprise of the purported employer. 31

  • The notion of the generation of goodwill by the worker is not necessarily relevant or decisive. 32
  • When assessing the significance of a relevant fact in the characterisation process, the court (Commission) should consider the extent to which the fact bears directly or obliquely on whether the worker is contracted to work in the employer’s business rather than part of an independent enterprise. The more directly it bears on that issue, the more significant it is. 33
  • The label applied by the parties to the contract is not decisive and does not act as a “tie-breaker” where the multifactorial test is ambiguous. The proper characterisation of the relationship is a matter for the courts, not the parties. 34
  • Non-exclusive work may be consistent with casual employment and not just contracting. The fact that the worker was free under the contract to accept or reject any offer of work, and not precluded from working for others, are not necessarily contraindications of employment, since this is also commonplace for casual employees. 35
  • Terminability at short notice and the absence of a guarantee of work of any direction are not decisive given that they may also be indicative of casual employment. 36

[52] In relation to the overseas cases relied upon by the parties, I do not consider that they are of much assistance now given the emphasis placed upon the contract-based legal rights and obligations of the parties under Australian law following the recent High Court judgements. In particular, those jurisdictions that have given significant weight to the practical post-contract conduct of the relationship, such as in Aslam and DTFU are now of limited guidance in Australia as to the proper legal characterisation of the relationship. 37”

Nawaz v Rasier Pacific Pty Ltd T/A Uber B.V. (2022) FWC 1189 delivered 17 June 2022 per Hampton C