The recent FWC decisions of Salim v AFA Sheetmetal Components Pty Ltd, Daniel Paragalli [2023] FWC 1834 (decided on 25 July 2023) and Judith Tozer v The Trustee for the Downie Family Trust [2023] FWC 1847 (decided on 26 July 2023) demonstrate the problems that can occur when there is no written contract in place when engaging an independent contractor. Both decisions required the FWC to engage in a lengthy analysis of the available evidence to determine whether the FWC had jurisdiction to hear claims for general protections and unfair dismissal on the basis they were employees and not independent contractors.
Last year the High Court handed down two important decisions in CFMMEU & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations v Jamsek [2022] HCA 2. The Court confirmed that when determining a dispute over whether a relationship is that of an employee or an independent contractor, the focus is on the terms of any valid written contract that sets out the terms of the parties’ relationship. These decisions move away from the previously accepted approach of conducting a wide-spread multi-factorial assessment of the parties’ respective conduct over the course of the entire working relationship. If the terms of a contract are not clear, for example when the contract is not wholly in writing, then it is permissible to have regard to the subsequent conduct of the parties to ascertain what they were taken to have agreed and what the terms of the contract are.
In Salim, Deputy President Easton provided a helpful summary of how the two High Court judgments of Jamsek and Personnel Contracting have filtered down into recent FWCFB decisions (at [8]-[12]). The Deputy President then engaged in an extensive analysis of the available evidence, and remarked “[t]here was no written contract and the evidence provided from both parties is less than ideal” (at [37]). Ultimately, after assessing the relevant evidence, the Deputy President found the material terms of the contract that were ascertainable indicated Salim was not an independent contractor, but rather was employed on a casual basis by the Respondent. This included assessing the level of control of each party over the work being performed, and that the evidence established Salim was performing work as part of AFA Sheetmetal’s business, not his own business.
In Tozer, Commissioner Simpson, in applying the decision of Personnel Contracting, confirmed that “a contract focused approach is now the law in Australia for the purposes of resolving disputes of this kind”. However, given there was no written contract entered into by the parties, the FWC again had to have regard to various surrounding evidence of the parties’ conduct in determining what the terms of the contract were. The Commissioner took into account nine witness statements filed by the Respondent, the oral evidence of four witnesses, as well as documentary evidence including relevant emails between the parties and the applicant’s written resume. Ultimately, after considering all of this material, the Commissioner was satisfied (at [34]-[35]) that the nature of the rights and obligations under the contract was consistent with it being a contract for service and not a contract of service. The FWC found that the Applicant exercised a degree of control over how she conducted her work for the Respondent and it was therefore an independent contractor arrangement and not an employment relationship.
The decisions highlight the potential for significant legal costs to be incurred if the FWC (or a Court) is required to engage in a detailed assessment of surrounding evidence in order to determine the terms of a contract, where there is no valid written agreement between the parties that sets out the terms of the relationship.
The risk of such costs being incurred can be greatly reduced where there is a well drafted and comprehensive written contract between the parties.
If you require advice on drafting of written agreements for your businesses needs or reviewing and updating your current agreements, our experienced Employment, Workplace Relations and Safety team is ready to assist.
