The High Court of Australia has, in two new decisions, reaffirmed that when it comes to determining the rights and obligations of employees (i.e., is the person performing the work a subcontractor or employee, ongoing or casual) the terms of the contract of employment are the most important thing.

In a nutshell, the position in Australian employment law is now clear – the contract is king.

Members will recall that last year the High Court handed down the landmark “Rossato” decision which made clear that the correct approach to determining an employee’s status was reference to the terms of the contract of employment. The Rossato decision cleared up years of confusing law, which had previously held that the contract was not the key indicator and had led to ludicrous results such as a casual employee making claims for entitlements (e.g., annual leave) that had already been provided for by way of the casual loading. 

The two new decisions follow in Rossato’s footsteps and have given Australian employers an unmistakable guide for interpreting the rights and obligations of employers and employees. In the two cases, the High Court has made clear that contractual terms are the primary means of determination for employment status questions.

In CFMMEU v Personnel Contracting, the union had appealed a full Federal Court ruling which found that a young British traveller engaged by a labour hire company was an independent contractor. 

Finding in favour of the CFMMEU, a High Court majority held that where parties have clearly set out the terms of their relationship in a lawful written contract, the employment relationship is determined by their mutual rights and obligations according to established principles of contractual interpretation. Under the labour hire company's contract, it could dictate who the labourer worked for, while he promised to provide his labour to a prescribed builder. The employer's ability to supply a compliant workforce was the key to its business, the court found, producing an employer-employee relationship despite the use of the "contractor" label.

In ZG Operations v Jamsek, the employer had sought to overturn a full Federal Court ruling that two truck drivers, one of whom is now dead, were employees. 

One member of the full Federal court, Justice Michael Wigney had previously said that despite the drivers signing contracts in 1986 that described them as contractors, "the reality was that, aside from the fact that the men took over the risk and expense of owning and operating the delivery trucks, little else changed" [and that] "The men certainly had no real independence,".

The High Court disagreed, unanimously holding that after 1985 or 1986, the contracting parties were the drivers' partnerships and the company. The High Court found that the context for the first contract between the parties was the company's refusal to continue to employ the drivers and its insistence that they only contract to carry goods.

The employment law contract space is complex, and MBA NSW will update members as the impact of these cases is felt. The key take-away for MBA NSW Members from these decisions is to ensure that their contracts are up to date and clearly set out the terms and conditions that reflect the relationship correctly.