Don’t leave room for uncertainty: get your workers’ status right and in writing. By Peter Maguire.
There have been a number of developments in the past year that make it imperative that businesses:
- Have written contracts for all employees and contractors and
- Ensure that the content of the contract does not contradict the intended relationship with the other party as an employee or a contractor and
- Also make sure that the contracts reflect current standards as per the Fair Work Act and any relevant modern award.
Recently, there have been two significant High Court of Australia decisions on the question of whether a worker is an employee or a contractor.
While these cases had quite different outcomes, what they had in common was that the Court found that it is primarily the contract entered into and the terms contained in it that determine the nature of the relationship.
ZG Operations v Jamsek
This case was about two truck drivers who had worked as independent contractors for over 20 years for ZG Operations. They were originally employed by the company but switched to become independent contractors when the company told them that their jobs would not be secure if they didn’t make the switch.
After the company discontinued their engagements in 2017, the workers then made claims for pay, leave and superannuation entitlements on the basis that they should have been characterised as employees.
The court found that the contracts clearly defined the relationships as independent contracting plus the workers formed partnerships with their wives and they bought trucks which were significant investments.
The court concluded that these workers were genuine independent contractors, as characterised in the contracts.
Key takeaway: for genuine independent contracting relationships, make sure that:
- you have a proper written contract for service which clearly identifies the relationship as an independent contractor and
- the terms in the contract are consistent with an independent contractor relationship.
CFMMEU v Personnel Contracting
This case was about a labourer (Mr McCourt) engaged by a labour hire company, Personnel Contracting, to work for Hanssen Pty Ltd. McCourt was an unskilled British backpacker on a working holiday and he didn’t have his own business. The CFMMEU and McCourt made a claim that he was actually an employee and should have been paid under the Building and Construction General On-site Award 2020.
The court found that the ‘Administrative Services Agreement’ under which McCourt was engaged provided Personnel Contracting with rights of control and direction over McCourt eg in relation to who he worked for and McCourt was contractually obliged to cooperate. As a result, the court deemed this relationship to be more characteristic of an employee than an independent contractor and ruled accordingly.
Key takeaway: you should ensure that:
- If you are wanting the relationship to be that of an independent contractor, the terms in the contract are consistent with that or
- if the relationship is in reality characteristically that of an employee, you contract the worker accordingly and don’t try to disguise it as that of an independent contractor.
Changes to casual employment
On 27 March 2021, The Fair Work Act was varied to provide a new definition of casual employment. Here is the relevant excerpt from the Fair Work Ombudsman’s website:
“A person is a casual employee if they accept an offer for a job from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work.
“For example, if an employee is employed as casual, their roster changes each week to suit their employer’s needs, and they can refuse or swap shifts, that could mean they are casual.
“Specifically, under the Fair Work Act, a person is a casual employee if:
- they are offered a job
- the offer does not include a firm advance commitment that the work will continue indefinitely with an agreed pattern of work
- they accept the offer knowing that there is no firm advance commitment and become an employee.”
If there is in fact, a commitment to an ongoing pattern of work in the contract, that could well mean that the employee would not be deemed to be a casual and could create exposures as a result.
Modern award reviews
There have been substantial changes made to modern awards over the past two years though the Modern Award Review process that has been going on since 2013.
It is important that employers pick up on any variations that have been made to minimum terms of employment in modern awards and ensure that contracts are not inconsistent with current award provisions.
There have also been changes to National Employment Standards with respect to the requirement for issue of Casual Employee Information Statements and variations to Parental Leave provisions in relation to stillborn babies and those who die within the first 24 months of life.
The bottom line
If you do not have written contracts for employees and contractors, get them.
If you do have them but you haven’t reviewed them for a while, get them professionally reviewed.
Finally, make sure that they are truly reflective of the nature of the relationship.
For example, if there is an ongoing commitment to an agreed pattern of work, it isn’t casual so you should contract the person as a full-time or part-time employee.
Peter Maguire is the owner and practice leader of Ridgeline HR, an award winning HRM consulting practice which he founded in 2000. Peter is an acknowledged expert in workplace relations compliance and also a high-performance leadership coach with over 40 years’ experience in HRM. Ridgeline HR’s byline is Helping PEOPLE in BUSINESS and that is essentially what Peter does – help business people with their people business.