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Kept on trucking for 40 years, so 'contractors' were employees

A court has ruled that they were employees instead of independent contractors.
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Kept on trucking for 40 years, so

Kept on trucking for 40 years, so 'contractors' were employees

29 July 2020

By Mike Toten

Two truck drivers who had worked only for the same organisation for almost 40 years were found to be employees instead of independent contractors. What the workers actually did mattered more than what their written contracts said. This entitled them to receive leave, redundancy and superannuation entitlements. The case applied a “totality of the relationship” test to determine whether the drivers were employees or contractors.


Cost-cutting exercise

In 2017, the drivers’ work was terminated due to cost-cutting. They claimed that they had been employees, but in 2018 the Federal Court ruled that they were independent contractors, after applying the multi-factor test and assessing the intentions of the parties at the time of making work arrangements, the drivers’ use of partnership arrangements, and the change to ownership of the trucks. The drivers then appealed to the Full Federal Court.

Their claim included payment for annual leave, leave loading, personal leave, long service leave, public holiday pay, overtime, redundancy and termination of employment entitlements, and Superannuation Guarantee contributions.

The circumstances under which they worked were as follows:
  • The business was the drivers’ sole source of income for the entire period. Therefore, the arrangement lacked the key feature of an independent business – entrepreneurial or profit-motivated activities.
  • Their duties and work arrangements remained constant and their working hours were “more or less” the same – usually from 6am to 3pm five days per week, which provided little scope to seek other work. It was impracticable for them to work for other clients, and whether it would have been economic to subcontract driving their trucks to other drivers/jobs was doubtful.
  • Their trucks and work clothes had to wear the company logo.
  • The drivers lacked the capacity to generate “goodwill” from their “businesses” if they were to sell their trucks. It could therefore be argued that the employer possessed any “goodwill” that existed.
  • Work duties, remuneration rates, administrative obligations (“paperwork”), annual leave (four weeks unpaid leave per year) and various other rights and obligations were dictated by the employer.
  • The circumstances in which they drove the trucks required them to appear to be representatives of the employer.

Until 1986, the drivers were definitely employees. But in that year, they signed an agreement to become “contractors” after receiving an ultimatum that they would be retrenched if they did not sign. They were then required to buy the trucks they had been driving at a non-negotiable price set by the employer. The contract did not prevent them from using the trucks for other purposes and clients, but the court found that this was not a significant issue and that it also indicated the new contracts did not significantly change the previous relationship between the parties.

The court also commented that the bargaining power relationship at the time of making the new arrangements strongly favoured the employer, which indicated that the parties’ intentions were not completely “mutual”.

The only substantive change that occurred in 1986 was that the drivers took over the risk and cost of owning and running the trucks. The contracts were called a “contract carriers arrangement” and the drivers were referred to as carriers. Since 1986, the arrangement was renewed several times with contracts being updated (eg remuneration rates increased), and the drivers had partnership family member arrangements for most of the time. The name of the company they worked for also changed during this time.


Decision

The full court reversed the Federal Court’s 2018 decision. It said that the Federal Court had placed too much emphasis on the wording of the work contracts and other documents, and what could theoretically occur from them. Instead, it should have focused on what actually happened afterwards – that is, what the drivers actually did. The totality of the relationship between the parties pointed to them being employees and not independent contractors.

For the purposes of the Fair Work Act 2009 and Superannuation Guarantee legislation, the drivers were employees between 1993 and 2015, and they were “workers” for the purposes of the NSW Long Service Leave Act 1955 between 1977 and 2017.

The full court remitted the matter to the Federal Court to determine whether the employer had committed any breaches, and to assess compensation for the employees.

The bottom line: “Employee or contractor?” disputes are often complex, and courts will closely scrutinise all aspects of the work relationship. In this case the decision was based on what actually happened at the workplace, not the wording of a contract or the stated intention of one or more parties.

The drivers here were in practice full-time employees of the employer, who did not (and realistically could not) work for other clients, and who were presented as representatives of the employer. Their work and work conditions were very largely controlled by the employer.


Read the judgment

Jamsek v ZG Operations Australia Pty Ltd, [2020] FCAFC 119, 16 July 2020

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