The dividing line between independent contractor and employment relationships

12 September 2022

There is a deep-rooted distinction in common law between an employee and independent contractor. A relationship between a principal and an independent contractor does not inevitably give rise to a common law duty of care, much less to the same type of non-delegable duty of care of owed by an employer to an employee.

Where the relationship between a plaintiff and defendant is not that of employee and employer, but one of principal and independent contractor (or employee of an independent contract), it is unhelpful to describe any duty owed as one akin to an employment relationship which does not exist.

A duty of care is not imposed on principals for the benefit of employees of independent contractors engaged by them of the same kind owed to employees of a principal.

However, in certain circumstances a principal will have a duty to use reasonable care to ensure a safe system of work for independent contractors. That duty may arise for instance “where there is a risk to them of injury arising from the nature of the work and where there is a need for him to give directions as to when and where the work is to be done and to co-ordinate the various activities”.1

In a recent 2022 decision of the Victorian Court of Appeal,2 a principal transport operator was found not to have owed any relevant duty to care to an experienced contract driver in the operation of delivery vehicle. The Court of Appeal distinguished an independent driver who did not require supervision, from a complex sawmilling operation that required significant coordination, direction and supervision.

That recent Victorian decision may be compared with the outcome in a 2013 NSW Court of Appeal case,3 where the plaintiff subcontracted a mail delivery run from a contractor to Australia Post. The plaintiff injured her back while lifting a heavy parcel at Australia Post’s premises. The Court of Appeal determined that Australia Post devised the system of work, knew of the precise risk which materialised, and owed a duty of care to the contract driver.

In labour hire situations, courts are more readily willing to find a principal contractor liable, as host employer, for injuries sustained by contractors at work. Indeed, a host employer may be 100% liable to a labour hire employee where the labour hire employer has no actual control over the workplace and the work system. Further, a host employer (ie principal contractor) may be found vicariously liable for the actions of a labour hire employee.4

How similar cases will now be impacted by the recent decisions of the High Court of Australia in 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 is unclear. Those decisions emphasise the significance of formal contractual arrangements when characterising the relationship between parties, but in a workplace relations context rather than a broader civil liability context.

Plainly, each case will turn on its own facts, and there may be matters of degree involved. Nevertheless, there is a clear distinction between the duty of care owed to employee and that owed to an independent contractor.

Given the potential importance of the written contract to the employee/independent contractor analysis, principals may wish to review and update their contractor agreements.

This article was written by Anthony Highfield, Partner and Kristin Hibbard, Special Counsel.

1Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
2Acciarito v Anthony Parcel Services Pty Ltd [2022] VSCA 13
3Wooby v Australian Postal Corporation [2013] NSWCA 183
4Hallmark Construction Pty Ltd v Brett Hartford and Others [2020] NSWCA 41; Kabic v Workers Compensation Nominal Insurer (No 3) [2017] NSWSC 1281

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