The High Court’s quashing of the Rossato judgment (Workpac v Rossato & Ors  HCA 23 (4 August 2020) signals a major shift in their approach to determining employment status.
While the High Court decision rejected the alleged misclassification of Rossato as a casual, University of Adelaide Professor Andrew Stewart says the significance of the High Court’s judgment is not so much in this area with the Morrison Governments new casuals legislation having already done that; the critical issue, he says, is “how far the High Court takes the primacy of freedom of contract” and this is significant in employee/contractor characterisation cases.
Professor Stewart says the High Court “has now told every court beneath it: ‘Your only job is to look at what parties have formally agreed, and unless that conflicts, explicitly, with legislation or unless it can be shown that the agreement is a sham – which is very hard to do as a matter of practice – then the contract should be given effect”.
“It’s a revolution from the High Court in terms of how employment law is to be interpreted and applied” and makes it clear that the Court is “not interested in substance or practical reality”.
In the world of work, contract is the legal foundation that underpins a relationship of service or services. It is a bundle of binding rights and obligations agreed between the parties in relation to which mutual promises of performance are made. The law of contract is founded on consent, which is presumed to exist between contractual parties, and enforced by the law on the basis that people who make promises to others who rely on them ought to be held to their commitments. The law however takes no formal account of differences in bargaining power. The law assumes the parties are equal in every way and as such freely entered into the contract, wishing it to be performed according to its terms. The presumption stands to bind the parties unless there is evidence of conduct that vitiates the underlying consensus such as, for instance, duress, misrepresentation or unconscionable conduct. The mere fact though that one party, like an employer, is in a stronger bargaining position than the other and exercises power because of that position is not sufficient to vitiate the underlying consensus.
The formal position was expressed by his Honour Justice Handley of the NSW Court of Appeal in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 42 when he said:
“Parties negotiating for a contract are free to pursue their own interests as they see fit. Within broad limits there is no duty to consider the interest of the other… Negotiations are conducted at the discretion of the parties. They may withdraw or continue; accept, counter-offer or reject; compromise or refuse, trade-off concessions on one matter for gains on another and be as unwilling, willing or anxious and as fast or as slow as they think fit”.
It is mainly because of the bargain centred focus of contract and its historical failure to deliver fair outcomes to employees and protect them from the consequences of employer power, that a remedial system of industrial law based around organised labour developed in industrialised countries.
“A lot of the shift in how we look at the law came out of Vabu” University of Sydney Professor Shae McCrystal says, including the “basis on which we now look at questions around whether workers are in business for themselves or the degree to which they’re integrated into the business of the engager”.
In the world of work there are two basic contractual categories: a contract of service and a contract for services. The first describes an employment relationship, the second describes a relationship of principal and independent contractor.
These matters were considered comprehensively by the High Court in Hollis v Vabu Pty Ltd  HCA 44. The issue before the Court was whether Vabu was vicariously liable to Mr Hollis. The facts of the case were as follows:
- Vabu Pty Ltd conducted a bicycle courier business under the name “Crisis Couriers”.
- In December 1994, Mr Hollis was knocked over in the street by a bicycle courier causing Mr Hollis injury. The bicycle courier departed the scene without being identified but he was wearing a jacket on which was printed “Crisis Couriers”.
- While courier was never identified, the trial judge found he had been employed by Vabu and was on Vabu business at the time of the accident.
- The trial judge also found that despite the fact Vabu represented to its couriers and others that the couriers were independent contractors Vabu:
- set the rates of remuneration without scope for negotiation
- allocated the work with no scope for bidding by individual riders
- assumed responsibility for the direction, training (if any), discipline and attire of the couriers;
- provided important pieces of equipment, although it did not provide or maintain the bikes, such as the radio equipment necessary for the riders to communicate with Vabu’s dispatch department and required that the radio be placed in a plastic bag when it rained;
- required the riders to pay insurance without any opportunity for negotiation.
However, the riders paid their own tax and no superannuation payments were made on their behalf by the company.
The Court emphasised that an important, although not exclusive, distinction between an employee and independent contractor is control. If in a work-based relationship, the party who benefits from the provision of work actually controls or has right to control the work of the party providing the work, the relationship is likely to be one of employer/employee. However, the question must be considered in all the circumstances often where the question of control is unclear.
Factors that may be of significance include but are not limited to:
- The right of the provider of services to contract with others to provide their services.
- The extent to which the provider of services has a special skill or expertise with an independent career.
- The identity of the party who pays tax, and the form in which the tax is paid, and superannuation.
- The identity of the party who provides the equipment.
- Whether the provider of the services is liable to rectify defective work as a condition of the relationship.
- Whether the provider of the services is required to wear a company uniform.
- Whether the provider of the services is required to attend work at particular times.
The presence of one of the above factors alone is unlikely to determine the status of the relationship, except perhaps in the presence of actual control. It is the total picture created when the particular relationship is examined that is determinative. However, to the extent the picture reveals that the beneficiary of the work controls or has a right to control the work of the other party the relationship is likely to be characterised at law as an employment relationship.
Professor Stewart notes that the “retreat from just about everything the High Court had to say in Vabu means this is an incredibly important decision for the future of labour law”.
Acknowledgement: Thanks to Malcolm Harding for his assistance with this article.