Between 2012 and 2015, a husband and wife operated a radio base for a truck repair company in Wagga Wagga. The question of whether they did so as employees or contractors, however, was anything but basic.
After 7 days of hearing in the Federal Court, a judgment of 343 paragraphs was delivered. The judgment identified 10 matters which indicated an employment relationship, and 7 matters which indicated that the radio base operators were contractors. So, when 10 plays 7, 10 wins, yes? As it happened, this was the result, although for reasons considerably more complicated than the application of simple mathematics.
Lest it be though that the task of distinguishing employees and contractors was getting any easier, the Court explained that:
“The outcomes of prior cases cannot simply be applied to reach the necessary conclusion in a given case. What really matters is principled analysis of the facts and circumstances of the case at hand”.
The Court also said that:
“While the degree of control remains important, the modern approach is multifactorial and the totality of the relationship must therefore be considered. A range of indicia may, and usually will, need to be examined and those more useful favoured over those that are less useful as an indicator of the true relationship”.
These statements, although undoubtedly correct, are the nearest a Court can come to answering the question before it with the answer, “it depends”. Everyone who has read this far is likely to know just how peculiarly unappreciative most clients are when lawyers answer the client’s question with, “it depends”. But in this area, as it plainly does depend, the next question must be, “well, depends on what?”
On that front, some more guidance can be given. Although the Court listed 10 indicators which pointed in the direction of the radio base operators being employees, the overwhelming factor was the 11th factor, which was the company’s authority to control the work done by the radio base operators. The Court noted that with the ability to perform work away from the direct supervision of the employer, it will often be the existence of authority to control, rather than the day-to-day exercise of control, which will be significant. In this case, when the managing director of the company gave directions, those directions were followed by the radio base operators, even if the managing director was rarely in the radio base (which was in any event, located for much of the time in the radio base operators’ home).
The Court also emphasised the importance of looking to objective factors over subjective factors. The subjective factor which might in this case have told most strongly in favour of a contractor relationship was the issuing by the radio base operators of tax invoices on which they quoted ABNs (and collected, although may not have remitted, GST). The Court said that taxation arrangements:
“reflect a subjective view of the nature of the relationship and may therefore be considered in the same category as declarations of intent, which, while not necessarily wholly irrelevant, must be approached with caution and may not assist at all”.
The consequence of this is that those engaging workers with the intent that they will be treated as independent contractors cannot simply assume that an ABN makes it AOK.
In the context of new forms of work such as those in the gig or sharing economy, the distinction between employees and contractors has never been more important. However, as this case demonstrates, skilled advice in relation to the way that work arrangements are designed and implemented has never been more necessary. If you are just tuning in to the employee/contractor programme, the fact-specific nature of the test (and the Federal Court’s division of the factors into “more useful” and “less useful” factors) demonstrates that when the Federal Court is on the radio, you need advice which distinguishes the signal from the static.
For more on our employment law capabilities, contact Angus Macinnis