The High Court of Australia has recently handed down decisions that emphasises the importance of a written contract in the employment or contractor relationship.
On 9 February 2022, the High Court handed down two landmark decisions, Construction, Forestry, Maritime, Mining and Energy union v Personnel Contracting Pty Ltd [2022] and ZG Operations Australia Pty Ltd v Jamsek [2022]. These decisions clarify the distinction between an employee and an independent contractor and set the legal test that is to be applied to such workplace relationships.
The Court held that where parties have a valid written agreement that governs the work relationship, the characterisation of the work relationship (as either employee or contractor) is to be determined by the terms of the agreement. Therefore, if a person has a written agreement that describes them as an employee and includes rights and obligations that are consistent with an employment relationship, the Court will regard them as an employee. If the person has a written agreement that describes them as a contractor and includes rights and obligations that are consistent with a contractor relationship, the Court will regard them as a contractor.
These decisions allow employers to confidently rely on a written agreement to determine the nature and scope of the relationship as an independent contractor or an employee.
Prior to these decisions, the Court took a multifactorial approach at looking at the relationship to determine whether a worker was an employee or independent contractor. Whilst the Court considered the terms of the written contract, it also considered the practical aspects of the relationship.
These decisions follow from the High Court’s decision in 2021 that clarified the definition of a casual employee and placed heavy reliance on the terms of the written employment agreement in determining whether an employee is casual or permanent.
The Court has remained silent on the approach to be taken where there is no valid written agreement.
The key point for employers to take from these decisions is that employers should ensure that they have valid written agreements with all employees and contractors and that these written agreements contain terms that are consistent with either the employment or contractor relationship.
We have a dedicated team of lawyers who are experienced in drafting employment contracts, independent contractor agreements, providing employment advice to employers, employees and contractors, and acting in employment disputes. If you would like any assistance or advice in this area of law, please contact Dean Groundwater, Anika Fleet or Matthew Coulter or call our team on 9525-8688. We also invite you to download our free Essential Business eGuide.
