The Federal Court has dismissed an underpayment case brought by the Fair Work Ombudsman against a transport company that alleged the workers were not contractors as claimed by the business, but were in fact employees.  This weeks Case Review explores this latest Contractor or Employee case.

 Case Review

 The Fair Work Ombudsman (FWO) alleged in the case that the four drivers that were engaged by the transport company were not Contractors, that they were in fact Employees and as such were underpaid by $63,803.26 when the employee entitlements of the Road Transport and Distribution Award were applied.

 The FWO argued that the drivers were employees because they worked at times set by the business, wore the businesses uniform and drove company vehicles.  Judge Jarrett noted that “There is considerable merit in the submissions” and particularly that “the measure of control exerted by [the business] over the work to be done by the drivers, the use of [the business] vehicles, the wearing of [the business] uniforms at insistence, the inability to generate any goodwill on their own behalf and the leave approval arrangements are significant matters”

 However, in assessing the case the Judge noted that the control of work and equipment is an element of the definition of employment, but attention also needs to be paid to the clear intentions of the parties when they entered into the relationship and their conduct throughout, “it is necessary to look at the totality of the relationship to determine whether a person was effectively employed under a contract of service” and that means giving “significant weight” to the terms of the contract.

 The contracts themselves, and the fact that the drivers had indeed set up businesses and those businesses had entered into a contract with the transport business and that these elements made it very clear that all parties were aware that they were being offered contract work not employment; “The contracting parties were not the individuals themselves in most cases but were entities set up by the drivers for their own purposes.  There is no suggestion that [the business] required the drivers to enter into the contracts in any particular way although it is clear that [the business] were offering engagement as a contractor”.

 As a result of the finding that the contracts were valid and not a sham, the Judge upheld that the drivers were contractors and not employee and dismissed the application from the FWO for underpayment on the basis of employee entitlements “in those circumstances the application must be dismissed”.

 Learnings for all businesses

 Anytime a business is engaging a contractor it is important to explore the concept of control and direction.  Where the business has high levels of control and direction over the contractors work and conduct there is a risk that the contractor could be deemed to be an employee, who would be entitled to leave and other employee entitlements. 

 This case highlights however, that where the intentions are clear and well documented, even when there is a close level of control a contractor can still be a contractor.

 What needs to be noted is the nature of the work being contracted, in this case it is common for uniforms and equipment to be provided in the transport space, however in other industries such provision of equipment may tip the scales towards employee instead of contractor.

 Concerning in this case was the leave application processes that were applied to the contractors, which were not different than the leave application process that were applied to emp

Here to Help

 HR Highlights are things to consider, implement and watch out for in your business.  They are provided as general information for you to consider and do not constitute advice.  You should seek further advice on your situation by contacting your legal advisor.  ACAPMA members can access resources and receive advice, guidance and support from the ACAPMA employment professionals via , it is free for members.  ACAPMA Membership delivers this and more benefits, see;  for more information.

Elisha Radwanowski BCom(HRM&IR)