From: Paula Giliker <Paula.Giliker@bristol.ac.uk>
Sent: 11 February 2022 10:18
To: Prue Vines <p.vines@unsw.edu.au>; Peter Watts <pg.watts@auckland.ac.nz>; Neil Foster <neil.foster@newcastle.edu.au>; obligations@uwo.ca
Subject: Re: HCA on the test for employment status

One point particularly interested me in the CFMMEU case and it was the description of vicarious liability at [82}:

"There are two conceptions of vicarious liability of an employer: the traditional "agency" conception, where an employer has a primary liability for the actions of an employee or other agent; and the policy‑based conception, where an employer has a secondary liability for the liability of the employee."

Although the agency reference leads to a fraud case (the UK is still trying to work out where this fits into vicarious liability) I wonder to what extent agency reasoning is still given credence in Australia.  It was also interesting to see secondary liability described as 'policy-based' given the PAC case.

Any thoughts Neil?

Best wishes, 

Paula

Indeed, thank you Peter – just what I was going to say myself. What you do is really useful, Neil!

Best

Prue

Dear All, Email is a very mixed blessing, I know, but I just want to acknowledge and thank Neil (perhaps on behalf of all subscribers) for the effort he has been putting in over many years to keep us abreast of “obligations” material out of Australia. You do a great job, Neil, and long may it continue. Best regards. Peter.

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Dear Colleagues;

The High Court of Australia handed down two decisions today dealing with the same issue: how to apply the common law tests to determine whether a worker is an employee or an independent contractor? The decisions were Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (9 February 2022) http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2022/1.html and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (9 February 2022) http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2022/2.html . The CFMMEU case was the one where the reasoning of the judges was spelled out in detail; the ZG case applied those principles in the facts of that case.

On this list I assume not a lot of background is needed to the issues, but perhaps colleagues from elsewhere in the common law world should know that (1) it has been made clear over a number of years that these two “pigeonholes”, either “employee” or “contractor”, are the only two options in Australia as far as the common law is concerned for classifying someone doing paid work for someone else; (2) the main Australian decisions on the question are Stevens v Brodribb (1986) 160 CLR 16 and Hollis v Vabu (2001) 207 CLR 21 which have been generally seen in the past as authorising application of a “multi-factorial” test weighing up a range of factors to answer the question. Both these cases are now fairly old and the HCA has not revisited them during that time.

It was surprising to me to see that at least 5 of the members of the bench were scathing about applying a “multi-factorial” test. The main judgment in each case was written by Kiefel CJ, Keane and Edelman JJ; there were judgments generally agreeing with this “main plurality” decision from a “minor plurality” of Gordon J and Steward J; and a dissenting approach to the law in judgments written by Gageler and Gleeson JJ (though in the event agreeing with the outcome favoured by the majority in each case.)

The primary issue was whether, in determining employment status, the court should consider only the specific contractual terms that the parties had agreed to, or whether the court should also take into account later behaviour and consider how the contract was carried out. The majority view in both cases is that contractual terms must be given priority. At [43] in CFMMEU:

“In cases such as the present, where the terms of the parties' relationship are comprehensively committed to a written contract, the validity of which is not challenged as a sham nor the terms of which otherwise varied, waived or the subject of an estoppel, there is no reason why the legal rights and obligations so established should not be decisive of the character of the relationship.”

Support for this approach was found in two decisions of the Privy Council, Narich and Chaplin. Another quote from [55]:

“55                         To the extent that it has been supposed that a departure from the long standing approach predating, but exemplified in, Chaplin and Narich was required by this Court's decisions in Stevens and Hollis, that understanding is also not correct. In neither Stevens nor Hollis did this Court suggest that, where one person has done work for another pursuant to a comprehensive written contract, the court must perform a multifactorial balancing exercise whereby the history of all the dealings between the parties is to be exhaustively reviewed even though no party disputes the validity of the contract.”

The major plurality are clear that this does not always mean accepting a “label” put on the relationship by the parties (see [58] “The parties' legitimate freedom to agree upon the rights and duties which constitute their relationship should not be misunderstood. It does not extend to attaching a "label" to describe their relationship which is inconsistent with the rights and duties otherwise set forth.”) But primacy must be given to the actual legal relationships created by their agreement, and these will be clear where there is a full written contract.

See the following :

“59                         Where the parties have comprehensively committed the terms of their relationship to a written contract the validity of which is not in dispute, the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract. Where no party seeks to challenge the efficacy of the contract as the charter of the parties' rights and duties, on the basis that it is either a sham or otherwise ineffective under the general law or statute , there is no occasion to seek to determine the character of the parties' relationship by a wide ranging review of the entire history of the parties' dealings. Such a review is neither necessary nor appropriate because the task of the court is to enforce the parties' rights and obligations, not to form a view as to what a fair adjustment of the parties' rights might require .

60                           In this respect, the principles governing the interpretation of a contract of employment are no different from those that govern the interpretation of contracts generally. The view to the contrary, which has been taken in the United Kingdom , cannot stand with the statements of the law in Chaplin and Narich.”

The approach taken by Gordon J, supported separately by Steward J in CFMMEU, is similar with its emphasis on the initial agreement between the parties. One issue at stake in all this is the authority of a decision called Odco in which the Full Federal Court seemed to agree that a particular form of words in a labour hire contract created an arrangement where workers were not employees of either the labour hire firm or the host. For reasons I would need to explore more closely, the major plurality held that Odco was wrongly decided (see [86]), but the two dissenters held that it was correct (see [157]) and Steward J also affirmed its correctness (see [222]) on the basis that it had been followed for a long time. Gordon J, whether intentionally or not, did not refer to it. Its status now may be a matter of some doubt.

The dissenters, Gageler and Gleeson JJ, were explicit in rejecting the approach of the rest of the court. One quote may give a feel: at [103]

“The first stage involves examining the nature of a relationship of employment at common law – the critical point being that it is a relationship which exists in fact. The second stage involves identifying the scope of the inquiry to be undertaken to determine whether a relationship that exists in fact is a relationship of that nature – the critical point being that it involves looking beyond contractual terms to contractual performance. The final stage involves examining the relationship that existed in fact…”

As it turned out, though, all members of the court agreed that in CFMMEU the young unskilled backpacker engaged to do work on a construction site was not really a “contractor” as documents said, and was in fact an employee; whereas in ZG truck drivers who had set up partnerships with their wives to contract their services were not employees.

The other point to note is that there is also something of a different approach to even framing the tests. The major plurality favours the question being put in general terms as “whether a labourer is conducting his or her own independent business, as distinct from serving in the business of the employer” (at [35], CFMMEU). The dissenters saw that factor as relevant but “Each consideration is a matter of degree. None is complete in itself.” (at [114]).

There are also some interesting comments on vicarious liability, but nothing too exciting- the court accepts that the employment relationship is the main one in which VL will arise, but notes that when it comes to resolving that issue, the existence of an employment relationship is only one stage, and the second stage is to consider whether the wrong was committed “in the course of” the employment. The fact that the second stage will involve consideration of “post contractual behaviour” does not mean that such behaviour is necessarily relevant to the first stage, the existence of the employment relationship. (See Kiefel CJ, Keane and Edelman JJ at [82]-[82]; Gordon J at [191]).

Regards

Neil