30 year “gig” upheld by High Court as contractor and not employee
A recent decision by the High Court of Australia will lend significant legal support to employers in the “gig economy”.
The appeal of independence, autonomy and the flexibility of freelance-style contracts may have a certain glossy allure. However, many gig economy participants, including well-known ride-share app Uber, have come under criticism for the way that they treat their drivers.
Uber have repeatedly maintained that drivers on the app are classified as “independent contractors” and in doing so, avoid the need to pay certain employee entitlements such as minimum wage, overtime and worker’s compensation insurance.
On 9 February 2022, the High Court allowed an appeal from the Federal Court of Australia in ZG Operations & Another v Jamsek & Others. The case concerned whether two truck drivers, who had been driving for the same company for 30 years, were engaged as employees or independent contractors.
The most important facets of the case, were that:
- The two men were originally employed by the company in 1977 to drive the company’s trucks.
- Around 1985, the two men were encouraged by the company to take up an opportunity to “become contractors”.
- They agreed to the arrangement and subsequently implemented it by setting up partnerships with their respective wives, each partnership executing contracts with the company for its delivery services.
- As part of the arrangement, the two men also bought the company’s trucks.
- The partnerships proceeded to invoice the company for delivery services and the income earned was declared as partnership income.
The two men commenced proceedings in the Federal Court claiming certain employment entitlements which they alleged were owed to them as employees under the Fair Work Act 2009 (Cth), the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Long Service Leave Act 1955 (NSW), and which had not been paid by the company.
The High Court then unanimously upheld the appeal and found that the two men were not employees of the company. In its decision, the High Court placed particular weight on:
- A written contract which comprehensively set out the agreed terms of the relationship between parties.
- The parties had acted consistently with the terms of that agreement;
- The trucks were owned by the partnerships, not the individuals;
- Where the efficacy of that relationship is not challenged as a sham or otherwise being unlawful, the classification of whether that relationship is one of employment or independent contractor, must be interpreted according to the actual rights and obligations agreed to by the parties under that contract.
In this case, the relationship was not a relationship of employment and so the two men were not entitled to the various entitlements that they had claimed.
This case shows a shift away from the Courts focusing primarily on the substance of the relationship. It shows that the Courts are now also giving substantial weight to the agreement between the parties. Moving forward, this means that written contractor agreements are going to be more important.
The case presents a significant precedent in employment law by the High Court. The High Court’s decision will inevitably lend support to employers. It also shows that employers are free to legally change the status of a worker from employee to contractor, without that decision being overturned.
If you are unsure if your workers are employees or contractors, you can download our free checklist here – https://tauruslawyers.com.au/service/employee-disputes/. You can also contact one of our experience employment lawyers at Taurus Legal Management on (03) 9481 2000 or email@example.com.