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Since the Hollis v Vabu (‘Vabu’)
decision in 2001, the courts and the Fair Work Commission
(‘FWC’) have applied a holistic assessment in determining
whether the relationship between a business and its worker is an
employment relationship or a contractor engagement.
However, in 2022, the High Court decisions of Personnel
Contracting and Jamsek threw out what had become
second nature to the courts when presented with this dilemma.
Courts have since stopped applying the ‘looks like a duck,
quacks like a duck’ approach, and are less swayed by the
characteristics and substance of the working relationship between
two parties. Even if the substance of a relationship indicates
something different, courts will focus primarily on the (hopefully)
comprehensive written terms of the contract between parties, to
which they have agreed to be bound, in order to determine whether a
particular worker should be classified as an employee or as a
contractor.
Deliveroo Australia Pty Ltd v Diego Franco
[2022] FWCFB 156 (‘Diego’)
Background
Gig economy worker Diego Franco commenced working as a delivery
driver for Deliveroo Australia Pty Ltd (‘Deliveroo’) in
2017. In 2020, Deliveroo terminated Mr Franco’s engagement
without warning due to his slow delivery times. When Mr Franco made
an unfair dismissal application to the FWC, Deliveroo argued that
he was engaged as a contractor, not an employee, and was therefore
ineligible to bring such a claim.
Decision at first instance
Applying the multi-factorial approach from Vabu the FWC
first assessed the characteristics of the relationship and found
that in substance Mr Franco was an employee of Deliveroo.
Therefore, he was protected from unfair dismissal for the purposes
of section 382(a) of the Fair Work Act and Deliveroo’s
dismissal of Mr Franco was held to be unfair on the basis that it
was harsh and unreasonable.
The Appeal
Deliveroo then lodged an appeal. However, both Personnel
Contracting and Jamsek were pending judgment at the
time the appeal was lodged so the hearing was stayed until the High
Court issued those decisions.
Following the two rulings, the FWC heard the appeal. Consistent
with the approach taken in Personnel Contracting and
Jamsek the FWC considered the terms of the written
agreement between Mr Franco and Deliveroo. As demonstrated by the
High Court judgments, it is not the case that the characteristics
of the relationship will be entirely ignored, or that the
multi-factorial approach should be entirely disregarded. The
multi-factorial assessment and a consideration of the subsequent
conduct of the parties throughout the relationship is relevant in
‘testing’ the terms of the contract (and any variations)
were enforced by the parties.
One predominant factor to consider when attempting to determine
whether a worker is an employee or a contractor, is the level of
control exerted by the “employer” or business over the
contractor. The complication in assessing both the terms of the
contract and the conduct of the parties together, as discovered by
the FWC in Diego, is that the control factor (i.e. the
lack of it) for a contractor often resembles the lack of control an
employer can exert over a casual worker. Ultimately, it was the
degree of freedom afforded to Mr Franco, as opposed to a
hypothetical casual employee, which pushed him further towards the
category of an independent contractor (as opposed to an
employee).
In the judgment, as required, the FWC considered that it would
be in the public interest to grant permission to the appeal, given
that the finding of whether Mr Franco was an employee or contractor
would have widespread effect on the gig economy. This reflects the
significance of the issue.
Secretary, Attorney-General’s Department v
O’Dwyer [2022] FCA 1183
(‘O’Dwyer’)
The first instance decision of Diego is not the only
decision which has been overturned following Personnel
Contracting and Jamsek.
The Federal Court in O’Dwyer was also faced with
the task of determining whether a worker was an employee or a
contractor, with that determination being relevant to the outcome
of a claim under the Fair Entitlements Guarantee Act
(FEG Act), made by a brother of the worker in
question.
Background
Bryan O’Dwyer, was a director of Ralan Property Services Pty
Ltd (the Company), which went into voluntary administration. His
brother, Robert O’Dwyer, was an employee of the Company. Robert
submitted a claim seeking financial assistance under the FEG
Act.
The secretary of the Attorney-General’s Department denied
Robert’s claim on the basis that he was the relative of an
employee who was a director of the Company. As such, Robert was
considered an excluded employee for the purpose of s11(1) of the
FEG Act and s556(2)(c) of the Corporations
Act.
The matter was then escalated to the Administrative Appeals
Tribunal for review, which applied Vabu to determine
whether Bryan was employed in the role of director or whether he
was fulfilling that role as a contractor. The Tribunal found that
Bryan was a contractor rather than an employee, and as such, Robert
was not an excluded employee (as he was not related to an
employee).
The Appeal
Following the revolutionary decisions of Personnel
Contracting and Jamsek, the secretary of the
Attorney-General’s department appealed to the Federal Court,
claiming that the Tribunal erred by applying Vabu in
making its determination.
Justice Goodman of the Federal Court confirmed that, in light of
the High Court decisions, the multi-factorial approach is no longer
the appropriate test to apply.
Despite there only being an oral contract between Bryan and the
Company, his Honour held that the new common law principles derived
from Personnel Contracting and Jamsek should
apply (irrespective of the form of contract, being an oral
contract, in place).
The Federal Court considered the terms of the oral contract and
allowed the appeal. Justice Goodman set aside the original decision
and remitted the matter to the Tribunal for redetermination using
the Personnel Contracting and Jamsek
principles.
Concluding remarks
The decisions of Diego and O’Dwyer
demonstrate that the courts will, as they are required to do,
continue to apply the new common law principles of Personnel
Contracting and Jamsek. Although the principles of
Vabu are not forgotten, the decisions illustrate that it
is more crucial now than ever to ensure that organisations have in
place carefully considered, tailored agreements between themselves
and their workers which clearly and comprehensively set out the
expectations and intentions of the parties to the contract.
A ‘one size fits all’ approach to employment agreements
and independent contractor agreements will not suffice in
protecting the interests of businesses and workers.
For further information please contact:
Michael Byrnes, Partner
Phone: +61 2 9233 5544
Email: mjb@swaab.com.au
Pooja Kapur, Solicitor
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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