Australian High Court Decision Draws Line Between Employee and Independent Contractor

A general view of the High Court of Australia in Canberra, Australia, on Nov. 5, 2020. (AAP Image/Lukas Coch)

The High Court of Australia on Wednesday handed down two landmark decisions that provide greater clarity on the definition of employee and contractor, which may have major ramifications for gig economy workers.

The High Court bench unanimously determined in one case that two truck drivers who worked for a company for 40 years under a partnership agreement were not employees but independent contractors.

Martin Jamsek and Robert Whitby, initially truck drivers employed under the predecessor businesses of ZG Operations, later agreed to contracts to purchase their own trucks and carry goods for the company.

Jamsek and Whitby argued that ZG Operations had the “most complete example of control” in directing the operations. However, the bench stated that it was power to give directions to make deliveries rather than how it should be carried out.

“The totality of that relationship was not that of employer and employee,” the judgement states.

As a result, the truck drivers are not entitled to employee benefits such as superannuation and annual leave.

The bench said their decision was in line with another case, where a labourer, who was a “self-employed contractor” under his agreement with a labour-hire company, was determined to be an employee.

The majority of the High Court held that while the contract stated the labourer, British backpacker Daniel McCourt, was a contractor, the nature of the contract was that of an employee.

The labour-hire company determined where McCourt would work and provided payment in return for full cooperation in all respects for his labour.

“These rights and obligations constituted a relationship between [the labour-hire company] and Mr McCourt of employer and employee,” the case summary states. “That the parties chose the label ‘contractor’ to describe Mr McCourt did not change the character of that relationship.”

University of Adelaide law professor Andrew Stuart said the decision was a big win for companies like Uber.

“What the High Court majority has said carries with it the implication that it will be much easier for businesses to source labour from contractors rather than employees and achieve significant cost savings from doing so,” he told The Australian Financial Review.

The Australian Industry Group Chief Executive Innes Willox said the decision for ZG Operations v Jamsek will provide more certainty to businesses that face an increase in arguments that people engaged as contractors are misclassified and entitled to employee benefits.

“The High Court’s decision is sensible, practical, and fair,” Willox said. “The outcome will increase business certainty and investment and will consequently be good for jobs.”