High Court backs businesses in “groundbreaking” cases on contractor rights

It will be easier for businesses to hire workers as independent contractors, rather than having to offer the full benefits of employment, after two High Court rulings handed down yesterday.

The rulings essentially backed employers’ rights to employ contractors on separate terms to employees, without having to offer statutory entitlements such as sick leave and annual leave.

Speaking to SmartCompany, Wesley Rogers, workplace relations counsel at Marque Lawyers, says the rulings are “pretty groundbreaking” and could have long-term effects on the way such disputes are handled in the future.

While the decisions affect any business working with contractors, they will also likely shift the discussion around the rights of gig economy workers, he says.

What’s happened?

One case involved two truck drivers who had worked for a lighting company for some 40 years.

The business had undergone several changes in ownership during that period.

Both drivers were initially engaged as employees until the mid-80s, when the business “insisted” it would only continue to use their services if they purchased their trucks and entered into contracts, the court finding said.

Each driver formed a partnership with his wife, and subsequently invoiced the company for all delivery services provided.

When the agreement between the drivers and the business was terminated in 2017, the drivers took the business to court, seeking statutory entitlements they alleged were owed to them as employees.

However the High Court found there was “mutual intention” to change the employment relationship.

Chief Justice Susan Kiefel added that the drivers had “conducted their affairs as one would expect of a business”.

In the second case, a labour hire company engaged a working holiday visa holder as a self-employed contractor. The worker later claimed that the nature of the work and relationship with the company constituted employment.

While the court found that the worker had clearly been hired on a contract, it also found the terms of that contract meant the business had “control over the performance of his work”.

The terms of the contract aligned with an employment relationship, the court found, and therefore deemed the worker to indeed be an employee.

What does it mean for businesses?

Rogers says the rulings mark a departure from the way the court has typically handled such cases.

Previously, the approach focused on the substance of the relationship, rather than the specific terms of the contract.

In these cases, the High Court has instead focused on the terms of the contract, Rogers says.

“Where the parties have committed themselves in writing to the nature of the agreement, courts should give that priority.”

That will “undoubtedly” give businesses greater comfort when embarking on contractor relationships.

If the worker agrees to an independent contracting arrangement, there is — in theory — no longer a question.

That said, the case regarding the labour hire company shows that “it’s not as simple as slapping a contractor label on a contract”, Rogers warns.

Businesses hiring independent contractors must not only ensure that and agreements signed are properly labelled as contractor agreements, but also that the terms in them reflect a contractor agreement.

A shake-up for the gig economy?

The rulings will likely have implications for businesses using gig economy workers.

Organisations like Uber and Deliveroo have historically generated much discussion around whether drivers should be considered employees or not, and the worker protections they should be afforded.

“It’s definitely going to cause everybody in this space to reassess the terms of their contracts,” Rogers says.

For some, the rulings will bolster their existing independent contractor relationships. Others will be looking to change the language in their contracts, to ensure they don’t fall into the same trap as the labour hire company.

Either way, those contractor arrangements are “not nearly as susceptible to challenge” as they were previously.

However this isn’t the end of the conversation. While the ruling may clarify things, there are still challenges around the gig economy, and the rights of gig economy workers, to be addressed.

“Our current system is pretty insufficient in terms of dealing with that — in terms of proper protections and rights,” Rogers says.

“The broader conversation will still continue.”