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When a duck is not a duck: Differentiating contractors from employees

24 August 2021

4 min read

#Workplace Relations & Safety

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When a duck is not a duck: Differentiating contractors from employees

Earlier this month, the High Court handed down a landmark decision providing certainty on casual employment in WorkPac v Rossato & Ors [2021] HCA 23 (WorkPac v Rossato). In WorkPac v Rossato, the High Court rejected that the courts should focus on the “real substance, practical reality and true nature of that relationship” and found that the relevant test is to be determined by the terms of the employment contract.

This article examines the potential impact of this decision on the upcoming appeals the High Court will hear regarding the distinction between employees and contractors.

The WorkPac v Rossato decision

In WorkPac v Rossato, the High Court found that Mr Rossato, a long-term employee who WorkPac engaged on a “casual” basis, was correctly employed as a casual employee and therefore not entitled to entitlements for permanent employees. In doing so, the High Court upheld that casual employment is one where the employee has no “firm advance commitment” to ongoing employment.

However, the High Court clarified that the courts would recognise the characterisation made between the parties by the employment contract if it genuinely reflects casual engagement, irrespective of how the employment relationship has developed thereafter.

Will WorkPac v Rossato have any impact on the employee and contractor distinction?

Shortly after the WorkPac v Rossato decision, the Fair Work Commission (FWC) recognised the impact the ruling may have on the distinction between employees and independent contractors.

In an application of appeal of Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 (Deliveroo), a case that ruled a Deliveroo rider was an employee, the FWC agreed that “the decision in Rossato has, intentionally or otherwise, called into question what principles are to be applied in determining whether a relationship is one of employment or independent contracting and the status of [the leading High Court decision] Hollis v Vabu in that respect”. As such, the FWC decided to defer the decision of the appeal until after the High Court hears and determines the two cases that were granted leave to appeal to the High Court, which deals with disputes around whether a worker is an employee or an independent contractor.

One of the cases that is due to be heard by the High Court is an appeal of Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119 (Jamsek). The case involved two truck drivers who were found to be employees despite being engaged under independent contractor agreements for nearly 40 years.

The other case is an appeal of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 (Personnel Contracting), which ruled an individual engaged by a labour hire company as an independent contractor despite not running his own business.

The FWC’s deferral of the Deliveroo case was in anticipation that the appeals of Jamsek and Personnel Contracting would provide further guidance as to what principles are to be applied when assessing employee and contractor relationships after WorkPac v Rossato.

The appeals of Jamsek and Personnel Contracting will be before the High Court on 31 August and 1 September 2021.

Will Hollis v Vabu be revisited?

Up until WorkPac v Rossato, the courts have looked at the substance and true nature of the relationship rather than focusing on the form and categorisation of the relationship when determining the relationship of an employee, such as a casual. This approach is similar to that taken historically by the courts when assessing whether a person is an employee or an independent contractor at law.

It is well established in many authorities, including Hollis v Vabu Pty Ltd (2001) 207 CLR 21 (Hollis v Vabu), that the “totality of the relationship” between the parties must be considered when determining whether a relationship is one of employment or independent contracting. In following the leading decision in Hollis v Vabu, subsequent courts have adopted a multi-factor test when determining the relationship. A written agreement stating the nature of the relationship has always been just one relevant consideration but not conclusive in itself. Unlike WorkPac v Rossato, the contract was not the primary factor.

The High Court in WorkPac v Rossato did not deal directly with Hollis v Vabu but distinguished the case. This approach was taken because the High Court considered that distinguishing employee and contractor relationships has consequences for third parties, whereas the character of an employment relationship is limited to the right of individuals within the relationship. Nevertheless, the High Court’s narrow approach in WorkPac v Rossato gives rise to a question of whether this judgment will have any impact on the longstanding test for distinguishing a contractor from an employee.

Despite the High Court stating that it would be a different matter to consider, it will be interesting to see (in the appeals of Jamsek and Personnel Contracting) whether the High Court will take the opportunity to revisit and reconsider Hollis v Vabu and take an approach consistent with the decision in WorkPac v Rossato in placing the primacy of the contract ahead of other factors.

Authors: Michael Selinger & Jamie Kim

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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