28 July 2020
The Full Bench of the Federal Court of Australia (Court) this month ordered a company to pay two contractor truck drivers significant unpaid leave and superannuation entitlements, despite the drivers being engaged under independent contractor agreements for nearly 40 years.
In the recent decision of Jamsek v ZG Operations Australia Pty Ltd  FCAFC 119, the Court reinforced the view that a long-standing relationship between parties where workers are an integral part of the company, can demonstrate an employment relationship.
Mr Martin Jamsek and Mr Robert Whitby (Applicants) worked for the respective companies that owned the business from time to time (for simplicity, together, Company) as truck drivers most of the time. The Applicants initially commenced working with the Company in 1977 as employees.
In late 1985, the drivers of the Company requested a pay rise. However, the Company rejected the request but offered the opportunity for the drivers to become contractors. The drivers, including the Applicants, were informed that the Company cannot guarantee their job going forward if they do not agree to become contractors. The proposal was for the drivers to buy the trucks they were using. The drivers took up the offer to become contractors.
The Applicants set up a partnership each with their spouse (Partnerships) and entered into a contract with the Company as contractors on behalf of their respective Partnerships in early 1986 (1986 Contract).
The Applicants purchased new trucks on behalf of their respective Partnerships and were responsible for the registration, maintenance and other costs associated with the upkeep of the trucks. From time to time, the Applicants were asked to, and did, install a tarpaulin on their trucks bearing the Company’s logo. The applicants were also provided with the Company uniforms.
In 1993, the drivers of the Company, including the Applicants, entered into a new arrangement with a minimum work hour of nine hours a day, an allowance for annual leave, public holidays and sick days (1993 Contract). The 1993 Contract guaranteed nine hours of pay each day although it was expected that the drivers might not necessarily have to work nine hours per day.
The Applicants executed further arrangements with the Company as “contractors” in 1998 and 2001. There were some periods where the Applicants did not have a written contract with the entity owning the business at the time, as the business changed hands on various occasions.
On some occasions, the Applicants were required to do some clerical work such as completing a “manifest run sheet” and scanning delivery dockets.
The Court found that the Applicants were employees rather than independent contractors, despite some observations that supported a contrary view.
In making an assessment as to the status of the employment relationship, the Court applied the multifactorial test and considered the following:
The Court ultimately found that the Applicants were employees of the Company although it appeared on the face that the Applicants were operating independent businesses.
The Court reiterated that when a court is required to characterise a relationship as that of employment or not, the court will need to consider the substance and reality of the relationship.
In this case, the Court also highlighted that, in addition to the parties’ working relationship in practice, the long and uninterrupted period during which the Applicants worked for the Company was “a striking feature” – which indicated that the Applicants were an integral part of the Company’s business rather than conducting their own independent business.
Lessons for employers
This decision is another example where a court has confirmed that an employment relationship cannot be characterised solely by reference to the terms of a written contract. It highlights the importance of looking at the reality and totality of the relationship. When engaging contractors, employers must ensure that they are acting in a manner consistent with a contractor relationship practically, not just relying on contractual labels and theoretical possibilities.
Authors: Michael Selinger & Jamie Kim
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