Employee or Independent Contractor? The High Court Decides.


Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (‘CFMMEU v Personnel Contracting’)

ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (‘Jamsek’)

The High Court of Australia recently handed down two important decisions relating to the determination of employee status, something which has preoccupied many Courts in recent years, in many jurisdictions.  These cases provide important guidance on how this issue is to be dealt with and the approach judges will take where the issue is in dispute between parties. 

The key principle for determining employee status

The High Court held that a written contact can and should exclusively determine the nature of an employment relationship (subject to statutory provisions or awards).  The contract is the key determining factor unless there is clear evidence of departure from it.  The orthodox principle is that ‘courts are not concerned with what has ‘actually occurred’ in a relationship but rather with the ‘obligations by which the parties are bound.’ 

There are some exceptions to this position for instance if the contract is a sham or where subsequent conduct could be shown to have varied or displaced the terms of the contract after it was made.  Nor does the supremacy of the written contract grant companies a limitless ability to record in writing whatever they like.  For instance, a false label cannot be attached to the relationship which is inconsistent with the rights and duties in the contract.  Simply calling someone an independent contractor does not necessarily make it so. 

However, where the terms of the relationship are clearly set out in a written contract and there is no dispute as to its validity nor claim of a sham, there are no grounds to determine the characteristic of the parties’ relationship by a wide-ranging review of the entire history of the parties’ dealings.  It is not ‘necessary nor appropriate’ because the role of the Court is to enforce rights and obligations and not ‘form a view as to what a fair adjustment of the parties’ rights might require’. 

The Court acknowledged that the circumstances around the contractual relationship being established may have been a product of superior bargaining power by one party but did not consider that this changed the meaning and effect of the contact.   The orthodox approach to the interpretation of contracts was to give regard to the circumstances of the making of the contract but the respective bargaining positions or different bargaining power of the parties has ‘no bearing on the meaning and effect of the bargains struck.’  This is not to say that this issue is never to be of any relevance, but the Court concluded that it was not relevant in the case before it.

Employee or independent contractor?

The High Court held that the distinction between a contract of service and a contract for services is not a question of a broad investigation with a tick box list using a multifactorial test in order to determine employee status.  The focus must be the contractual terms. 

Factors which point to employee status will include the ability of the company under the contract to:

* Have the right to control the provision of labour as an essential part of the business by for instance:

* Fixing the rate for work

* Acting as pay master

* Setting obligations regarding the work

* Being able to terminate the work arrangement

* Where a labour-hire company does more than simply introduce labour to third parties and leave the parties to set up an arrangement between themselves.

* Where the worker’s work was dependent upon and subservient to the business.

Factors which point to independent contractor status include:

* Where the individual is clearly working on their own account

* Where there is clear provision of services and the provider of such services had responsibility for conduct of how the services were provided

* Arrangements such as partnerships are in place where individuals enjoy the benefits of such structures

* Use of company logos and uniforms when not obligatory, exclusive work for one company not due to a contractual term but because of the volume of available work, lack of entrepreneurial activity are not contra-indicators of independent contractor status.


What is clear from these judgments is that terms set out in written contracts are critical for determining rights and obligations and the establishment of employee or contractor status.  Courts are to take a narrow approach in interpreting contractual terms and not go behind them or beyond them and examine the relationship in practice between the parties unless there are strong grounds to do so.