The High Court clarifies the test for an employee/independent contractor

The High Court handed down its decision in ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 and found that Mr Jamsek and Mr Whitby (the Respondents) were not employees of ZG Operations Australia Pty Ltd and ZG Lighting Pty Ltd (collectively referred to as “ZG”).

Facts

The Respondents were truck drivers employed by a predecessor company of ZG.

In late 1985 or early 1986, ZG advised the Respondents that it would no longer employ them and would continue to engage in their services only if they purchased their own trucks and entered into independent contractor arrangements (Contract). The Respondents agreed to the arrangement and set up a partnership, which included their respective spouses.

Under the Contract, the Respondents invoiced ZG for the services provided and paid their own operational costs and other expenses associated with operating the partnership.

In 2017, the Contract was terminated. The Respondents filed proceedings seeking payment of their entitlements (superannuation and long service leave) as employees of ZG.

Decision

At first instance, the Court held that the Respondents were independent contractors. This decision was subsequently overturned on appeal to the Federal Court of Australia and was subsequently appealed to the High Court.

The High Court held that the Respondents were not employed by ZG but were independent contractors. In support of its decision, it found:

1. the partnerships rather than the individuals (Respondents), owned and operated the trucks. Therefore, it is [63]: “…not possible to square the contention that the respondents were not conducting a business of their own as partners with the circumstance that, for many years, they enjoyed the advantages of splitting the income generated by the business conducted by the partnerships with their fellow partners”; and
2. it is essential to consider the orthodox approach to the interpretation of the Contract, which meant that the Respondents agree to own and operate their own trucks in order to carry goods to ZG.

Implications

The decision shows a departure from the holistic approach to assessing the employee/employer relationship and emphasises a greater focus on the terms of the contract between the parties. This suggests that the Courts will start adopting a more ‘black letter’ approach to the contractual interpretation of contracts for working arrangements.

Companies should ensure that their employment relationship with their employees/independent contractors is explicitly stated in the employment contract, including associated duties and obligations to avoid any complications in the future.

 

If you have any questions or concerns please contact Chamberlains and talk to our dispute resolution team today.