What follows is an extract from a Federal Court decision which sets out the current state of the legal principles which are used by Australian courts and tribunals to determine whether a person is an employee or a contractor.
“C. Relevant Principles
13 Section 13 of the Fair Work Act provides that the following definition of a national system employee:
A national system employee is an individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement.
14 Section 14(1)(a) of the Fair Work Act relevantly provides that a national system employer includes:
a constitutional corporation, so far as it employs, or usually employs, an individual
15 The principles for determining whether there is an employment relationship have been conclusively stated by the High Court in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek (2022) 275 CLR 254; [2022] HCA 2. Those cases established that where the rights and duties of the parties are “comprehensively committed to a written contract”, the rights and obligations established by terms of that contract are decisive of the character of the legal relationship, and are to be construed in accordance with established principles of contractual interpretation: Personnel Contracting at [43]-[44], [59]-[60] (Kiefel CJ, Keane and Edelman JJ), [173], [183] (Gordon J, Steward J agreeing).
16 Where there is no written contract or specific evidence of conversations in which a contract was formed, the evidence of the parties’ subsequent conduct must necessarily be considered in order to draw inferences “as to whether the meeting of minds necessary to create a contract has occurred and what obligations they have thereby undertaken”: Chiodo v Silk Contract Logistics [2023] FCA 1047 at [9] (Kennett J) citing Personnel Contracting at [177] (Gordon J, Steward J agreeing).
17 A Full Court of this Court recently stated the principles for ascertaining the existence of an employment relationship where a contract is wholly oral in EFEX Group Pty Ltd v Bennett [2024] FCAFC 35 at [7]-[14] (Katzmann and Bromwich JJ), which principles for present purposes can be distilled as follows:
(a) the identification of the parties’ contractual rights where there is no written contract “must proceed somewhat differently”, however, the fundamental task of ascertaining and characterising the parties’ contractual rights and obligations remains the same: EFEX at [8] citing Chiodo at [9];
(b) the focus of the enquiry is on the ascertainment of the legal rights and obligations of the parties, not how they subsequently behaved in the performance of their contract: EFEX at [8]; Chiodo at [8];
(c) the terms of an oral contract may be inferred from the parties’ conduct or a course of dealing between them, or implied where necessary for business efficacy: EFEX at [9] citing Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; [2022] HCA 39 at [21]-[22] (Kiefel CJ and Gageler J);
(d) the characterisation of the relationship depends on contractual rights, not circumstances, facts or events that do not affect those rights: EFEX at [10];
(e) the principles of contract interpretation remain applicable with respect to unwritten contracts, such that regard may be had to circumstances surrounding the making of the contract and events and matters known to the parties at the time of contracting if they assist in identifying the object or purpose of the contract: EFEX at [11];
(f) things said or done after a contract is made are generally not legitimate aids to the construction of the contract, unless it is concerned with the rights and duties established by the contract, as distinct from an aspect of how the parties’ relationship played out in practice: EFEX at [11] citing Personnel Contracting at [61] (Kiefel CJ, Keane and Edelman JJ);
(g) while the dichotomy between a person’s own business and working in the putative employer’s business may not be perfect, the approach is useful as it focuses attention on whether the putative employee’s work was subordinate to the putative employer’s business, such that it is not an independent enterprise, so as to avoid the danger of the impressionistic judgment or ticking off a checklist, which runs counter to the objective contractual analysis: EFEX at [12];
(h) once the contours of the legal relationship are identified, the characterisation of the relationship as one of employment often hinges on two considerations, namely, (i) the extent to which the putative employer has the right to control how, when and where the putative employee performs the work, and (ii) the extent to which the putative employee can be seen as working in their own business, as distinct from working in the putative employer’s business: EFEX at [13] citing Personnel Contracting at [36]-[39] (Kiefel CJ, Keane and Edelman JJ); and
(i) the proper analysis, however, may be more nuanced, and the correct focus may be better characterised as “if the contract does not lead to the conclusion that the person was working in the business of the asserted employer, then the person will not be an employee”: EFEX at [14].
18 A useful summary of the principles in Personnel Contracting and other leading authorities was provided by Wigney J in JMC Pty Ltd v Federal Commissioner of Taxation (2022) 114 ATR 795; [2022] FCA 750 at [17]-[27], which summary I respectfully adopt. His Honour’s decision was overturned on appeal, but his Honour’s summary of the relevant principles was stated to be accurate: JMC Pty Ltd v Federal Commissioner of Taxation (2023) 297 FCR 600; [2023] FCAFC 76 at [8]-[9] (Bromwich, Thawley and Hespe JJ). The principles summarised by Wigney J that are relevant for present purposes can be distilled as follows:
(a) the contractual provisions that may be relevant in determining the nature of the relationship include, but are not limited to, mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, the deduction of income tax, the delegation of work, and the right to exercise direction and control: JMC at [21] citing Personnel Contracting at [113] (Gageler and Gleeson JJ), [174] (Gordon J);
(b) indicia which may suggest an employment relationship include “the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like”: JMC at [22] citing Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; [1986] HCA 1 at 36 (Wilson and Dawson JJ);
(c) indicia which may suggest a contract for services include “work involving a profession, trade or distinct calling on the part of the person engaged, the provision by him of his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of remuneration without deduction for income tax”: JMC at [22] citing Brodribb at 36-37 (Wilson and Dawson JJ);
(d) any attempt to list relevant indicia, however, may be misleading because they are no more than a guide, and the focus is on the parties’ contractual rights and obligations relevant to those matters, not in the way in which the work was carried out: JMC at [22] citing Brodribb at 37 (Wilson and Dawson JJ);
(e) a label which the parties may have used to describe their relationship is not determinative of the nature of the relationship, and will rarely assist the Court in characterising the relationship by reference to the parties’ contractual rights and duties: JMC at [26] citing Personnel Contracting at [63]-[66] (Kiefel CJ, Keane and Edelman JJ);
(f) the characterisation is ultimately an evaluative judgment that takes into account the totality of the parties’ contractual rights and obligations, which may in some cases, point in different directions: JMC at [27]; and
(g) the evaluative exercise must not be approached on the basis that there is “some checklist against which ticks and crosses may be placed so as to produce the right answer”: JMC at [27].”
Primerano v Schisan Investments Pty Ltd [2025] FCA 15 per HALLEY J delivered 22 Jan 2025