The High Court handed down two landmark decisions on 9 February 2022. Both cases make it clear the terms of written contract are usually the paramount consideration when determining whether an individual is an employee or contractor.
Background
Previously courts looked at the totality of the relationship between the parties to determine whether a person was an employee or a contractor.
However, the High Court has made it clear that where a written agreement governs and accurately reflects the relationship between the parties, the terms of that agreement will determine whether a person is an employee or independent contractor.
Personnel Contracting
In Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1, Mr McCourt was in Australia on a working holiday visa. He was retained to work with a labour hire company, Personnel Contracting. He signed an Administrative Services Agreement with Personnel Contracting, which described him as a ‘self-employed contractor’. However, under that agreement, Personnel Contracting had a high degree of control over how Mr McCourt worked. The High Court held Mr McCourt was an employee because the terms of the ASA made it clear:
- Personnel Contracting had the right to control the work Mr McCourt performed;
- Mr McCourt promised to cooperate with Personnel Contracting in the supply of his labour;
- Personnel was obliged to pay Mr McCourt for the work her performed.
The High Court found the use of the term ‘contractor’ did not change the nature of the employment relationship.
Jamsek
At the other end of the spectrum, in ZG Operations & Anor ats Jamsek & Anor [2022] HCA 2, Mr Jamsek and Mr Whitby were engaged as truck drivers by a business run by ZG Operations. While initially engaged as employees, ZG Operations later invited Mr Jamsek and Mr Whitby to become contractors and purchase their own trucks. They agreed and both set up partnerships with their wives. The partnerships executed written contracts with ZG Operations for the provision of delivery of services. The partnerships purchased their own trucks, paid the maintenance and operational costs, and invoiced ZG Operations for delivery of services. The income received was declared as partnership income and split between both partnerships. The High Court looked closely at the terms of the written agreement between ZG Operations and Mr Jamsek and Mr Whitby and found they were properly contractors agreements.
The Court held that where parties had committed the terms of the relationship to a written contract, and the agreement was not considered ineffective under any general law or statute, then it is the rights and obligations in the agreement that dictate whether a person is an employee or contractor.
Take-away for medical practices and doctors?
- It is crucial written contracts accurately reflect the nature of the working relationship;
- The titles used in the contract are not as important as the nature of the relationship set out in the terms of the agreement.
Next steps
Medical practices should conduct an audit of their arrangements with contractor doctors to ensure there are written agreements in place that comprehensively set out the terms of the relationship, including the rights and obligations of both parties.
This article has made particular use of the High Court’s Case Summaries.
This article was written by Scott Chapman, Partner, Chelsea Gordon, Senior Associate and Romy Sirtes, Solicitor.
