Full Federal Court reluctantly confirms Brit on working holiday is an independent contractor, not an employee Full Federal Court reluctantly confirms Brit on working holiday is an independent contractor, not an employee

Full Federal Court reluctantly confirms Brit on working holiday is an independent contractor, not an employee

15 March 2021 | General Insurance

A CFMMEU backed worker has had his claim for compensation and orders for penalties under the Fair Work Act 2009 (Cth) rejected  on the basis that he was an independent contractor and not an employee covered by the legislation. Judges lament being bound by “somewhat less than intuitively sound” precedent.

Special leave has now been granted for a High Court appeal with the decision expected later this year.

Overview

Daniel McCourt was a 22 year old British man with around eight months experience working as a bricklayer when he arrived in Australia and started work with Personnel Contracting Pty Ltd (Personnel).

Personnel arranged for McCourt to work for Hanssen Pty Ltd (Hanssen), a construction company, where he performed mainly basic laboring duties.

Mr McCourt and his union, the Construction, Forestry, Maritime and Energy Union (CFMMEU) claimed against Personnel and Hanssen under certain provisions of the Fair Work Act 2009 (Cth) (the Act) for orders for compensation and penalties based on the allegation that McCourt was not paid or treated according to, the Building and Construction General On-Site Award 2010.

It was agreed that he was entitled to be paid under the award if he was an employee but not as an independent contractor.

Administrative Services Agreement

In its “Administrative Services Agreements” (ASA) with workers (including McCourt), Personnel described itself as an “administrative services agency operating essentially within the building industry, liasing between builders … and self-employed contractors for the provision of labour by self-employed contractors to builders and supplying to the self-employed contractors financial administrative services’.

It was not in issue that McCourt was a “self-employed contractor” as that term was defined in the ASA but the CFMMEU argued that the realities of McCourt’s work arrangements were indicia of service rather than independence.

A Multifactorial Approach

In affirming the trial judge’s decision, the Full Federal Court confirmed that:

  • It remains the case in Australia that “the employee-independent contractor distinction is ‘too deeply rooted to be pulled out’” and the distinction is binary…."A worker must be placed (or perhaps shoehorned) into either the employee or the independent contractor classification."
  • A multi-factorial approach to assessing the “totality of the relationship” is required to determine the true nature of the relationship between McCourt and Personnel.

The Court identified relevant characteristics of the claimant’s work with Hanssen (as summarised by Lee J in his judgment):

  • Mr McCourt was directed in his work by employees of Hanseen.
  • Mr McCourt provided his own steel cap boots, hard-hat and ‘hi-vis’ shirt. However, all other equipment required for him to carry out his duties was supplied by Hanssen.
  • The majority of the work performed by McCourt was that of a low skilled labourer.
  • Mr McCourt worked around 50 hours per week for Hanssen. The work was physically demanding. It was not feasible for him to have another job. He was also never told that he could delegate the performance of the work assigned to him to a third party. Nor was he ever asked to organise a substitute worker to perform the work.
  • McCourt clocked on and off by means of fingerprint scan and then filled in a timesheet. He did not keep a record of his hours worked and was never asked to provide an invoice or statement of hours worked. He was paid weekly by Personnel with a superannuation contribution. The hourly rate of pay was set by Personnel and was not the subject of negotiation between McCourt and Construct or McCourt and Hanssen. In the event that work was not completed to the standard required, McCourt would be instructed to redo the work. There was no penalty schedule in place whereby McCourt would be paid less if he did not perform the work in a competent and diligent manner.
  • If McCourt was ill or running late he would inform the site manager ahead of time. He also took leave of a few days to go on a short holiday in October 2016 for which he was required to put in a request for leave with Hanssen. However,  when he was absent due to holiday or illness he was not paid.

Despite strong indicia that McCourt was an employee rather than a contractor running his own business (notably, payment without invoices and payment of superannuation), the Court found that it was bound to follow the decision of the Full Court of the Supreme Court of Wester Australia (sitting as the Industrial Appeal Court) in Construction, Forestry, Mining and Energy Union of Workers v Personnel Contracting Pty Ltd trading as Tricord Personnel1.

The older case considered an arrangement that was “materially identical” (again involving a CFMMEU supported worker and Personnel).

The Court subsequently held that McCourt was an independent contractor that did not have standing to claim under the Act.

In his lead judgement Lee J noted that the decision was “somewhat less than intuitively sound”. However, ‘the importance of certainty means this Court ought not to depart from a decision in relevantly indistinguishable circumstances”.

In confirming his agreement with Lee J, Allsop CJ echoed the above sentiment and explained the important “public policy of comity between intermediate courts of appeal” and noted that “unrestrained by authority I would favour an approach which viewed the relationship between Mr McCourt and Personnel as that of casual employment”.

Implications for You

The CFMMEU has taken invitation to appeal implicit in the abovementioned comments of Allsop CJ and Lee J and on 12 February 2021, special leave was granted  for a High Court appeal.

Pending the High Court’s decision, it is of concern to organisations that rely on labour hire staff and their insurers that Courts feel hamstrung when it comes to declaring “contractors” who are treated much the same as employed workers “employees”. This is because if there is no actual employer the principal may well be left “carrying the can” when it comes to liability for injuries to those workers.

Further, the Court of Appeal noted in its judgment that much of the jurisprudence about the employee/contractor dichotomy arises from vicarious liability cases (i.e. cases considering whether a principal should be held liable for the actions of a non-employee worker).

Traditionally, Courts have been reluctant to ascribe liability for the actions of a non-employee worker to a principal. However, the judges in this case strongly hinted that given McCourt was not an employee of Personnel, it would follow that Hanssen would have been vicariously liable for any negligence on his part during the course of his duties.

This is problematic for the potential liability exposure of organisations with a large contracted work force.

 

1 [2004] WAIRComm 11445; [2004] 84 WAIG 1275.
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 1122

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Emma Topen

Emma Topen

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