Last year has seen an emerging trend where judges are evolving and changing the way we identify and categorise principal-contractor relationship and employer-employee relationship.
In the aftermath of the High Court judgments earlier this year, including
Construction, Forestry, Maritime, Mining And Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 (
Personnel Contracting) and
ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (
Jamsek)), we are seeing rapid changes in judges’ view on these commercial relationships.
What has changed?
While the performance of the contract and the conduct of each party to the contract were always the most relevant determinators on the commercial relationship, with the latest judgments, this is no longer the case. After Personnel Contracting, judges are relying completely on the terms of the contract (i.e., when characterising this relationship, if regulated by a written contract, the question is to be determined solely by reference to the rights and obligations under that contract).
What does this imply?
The terms of a contract are key to determine the relationship of the parties. Any subsequent conduct of the parties may be considered to ascertain the existence of variation of contractual terms, but it is not determinative. The multifactorial approach, while still relevant, is only used to analyse the terms of the contract.
Deliveroo Australia Pty Ltd v Diego Franco
In a recent decision, the Full Bench of the Fair Work Commission overturned an unfair dismissal claim by a Deliveroo rider, Mr Diego Franco, stating that he was not an employee.
The circumstances of Mr Franco’s termination are not relevant, what is relevant however, is whether Mr Franco had rights emerging from such unfair dismissal under the legislation.
Initially, the Commissioner’s consideration of the nature of the relationship between Mr Franco and Deliveroo included an analysis of the multifactorial test. After weighing several factors under this test, the Commissioner found that the relationship between Deliveroo and Mr Franco was one of employment. Such an analysis is now evolved.
Decision
In delivering the judgment, the Full Bench stated that the Commissioner only “erred” in finding that Mr Franco had been an employee of Deliveroo in a formal sense, since, on the common understanding of the law at the time the Commissioner made his decision, his finding was correct. It is the High Court’s subsequent statement of the law in Personnel Contracting which rendered this finding erroneous.
The four main aspects that determined this case were:
- The terms of the Agreement indicated lack of control over the manner of performance of any work;
- Mr Franco was to provide a vehicle – “substantial item of mechanical equipment” such that “the personal is overshadowed by the mechanical” (as relied in Jamsek);
- The terms of the Agreement did not require personal service on the part of Mr Franco (delegation was not only allowed, but required no prior approval from Deliveroo); and
- Payment of an administrative fee by Mr Franco for access to Deliveroo’s software and for Deliveroo providing invoices and other administrative services.
How does this affect you?
These judgments continue to impact the cases that are coming before the Fair Work Commission.
It is important for small and large businesses to realise that some common practices that in contractor agreements may now be considered completely erroneous, such as, existence of a contractual right to control the activities of the worker (including how, where and when the work is done) is a major signifier of an employment relationship; or the label that a principal may add in the agreement to define the nature of the relationship will no longer be determinative of the relationship.
Now is the time for businesses to have their contractor arrangements reviewed by their solicitors to ensure that these arrangements in principle continue to remain the same arrangement as agreed upon.
Warwick is a recognised specialist in employment law and workplace relations.
Please contact Hicksons Partner, Warwick Ryan, at
[email protected]u if you need any assistance or guidance.
Post by Hicksons’ Partner, Warwick Ryan and Solicitor, Isha Aprajita.