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Limebite 02/22

High Court clears up contractor law

Joel Zyngier

On 8 February 2022,  the High Court of Australia issued two seminal decisions on the law in Australia relating to independent contractors: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.

The decisions have significant repercussions for employers and anyone engaging independent contractors in Australia. It is critical for anyone engaging independent contractors to undertake an urgent review of their contracts, to ensure the contracts align with the High Court’s decisions.

In the decisions, the High Court held that whether someone is an independent contractor or an employee is to be determined by reference to the rights and duties created by the contract between the parties (written or otherwise) that regulates that relationship. The conduct of the parties after they enter into the contract and/or the circumstances of entry into the contract is not relevant to the determination. The sole inquiry is to be the meaning and effect of the contract as at the time the contract is formed.

This clarification of the law in Australia is substantially different from prior approaches of the courts. Previously, the Courts have considered the totality of the relationship between the contractor and the entity engaging the contractor, having regard to a set of indicia; just one of which was the terms of the contract between the parties.

This type of inquiry meant the Courts had to look at how the parties conducted themselves – the facts of their relationship – after the contract was formed, often over extensive periods of time. The High Court tells us this is not the way to go about the inquiry, commenting that

as a practical matter of the due administration of justice, the task of raking over the day to day workings of a relationship spanning several decades is an exercise not to be undertaken without good reason having regard to the expense to the parties and drain on judicial time involved in such an exercise.’

This is good news for anyone engaging independent contractors, as it means disputes over whether someone is a contractor or employee will be quicker, cheaper and easier to resolve. It also means that a clear and well drafted written agreement with a contractor (which reflects the truth of the relationship as at that date) should in most cases be strong evidence to win the dispute for the entity engaging the contractor.

We will shortly publish a more detailed analysis of the High Court’s decisions, including a summary of the key facts and all the important take away points for employers/principals engaging independent contractors.

In the meantime, please contact our Workplace Law team with any questions about the impact of the decisions on your business.

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.