Employment relationships: When two’s company and three’s a crowd

For years, courts have been called upon to assess whether an individual worker is, at law, truly an employee or an independent contractor. This dichotomy has evolved in case law with disparate facts and outcomes, and has traditionally been applied to dual party arrangements. The common law, adaptable as it may be, is struggling to keep up with recent developments in the labour market, including the increasingly common trilateral or multilateral arrangements.

In a trilogy of decisions delivered within two days – as enjoyable a read as the Lord of the Rings trilogy – the Full Federal Court dealt with the vexed issue of whether a worker is an employee or an independent contractor.

Overview

In each judgment, the Full Federal Court affirmed that it will look at the substance over the form of the relationship. The terms of a contract, though relevant, will give way to the practical reality and true nature of the relationship. The ‘totality of the relationship’ must be considered. The Full Court also confirmed that the generally accepted, albeit not instructive, ‘multifactorial approach’ was the correct approach to determining the binary question asked as to whether an individual was an employee or an independent contractor.

The multifactorial approach

The ‘multifactorial approach’ defies precise definition. It is variously linked to legal ‘principles’ not often taught in Law School, such as ‘the elephant test’ (too difficult to define but easy to recognise when you see it) or the ‘smell test’. In Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 (‘Personnel Contracting’) the Full Court described the task of applying the test as an ‘intuitive appreciation and assessment of the whole’ (at [20]). Consequently, the approach is recognised as ‘impressionistic and amorphous’ that is ‘susceptible to manipulation and its application is inevitably productive of inconsistency’ (at [76]).

Such comments add weight to the academic speculation that the common law is ill equipped to adapt to new and evolving work arrangements, as do the open and engaging judgments of the Full Court. In Personnel Contracting, the Full Court considered itself bound by earlier authorities, but outlined a compelling case as to why the facts of the case should lead to a different outcome.

In the context of the trilateral labour engagement that was described by the Court as entrenched into modern industrial relations and employment, the Court felt compelled to answer a binary question that was ‘too deeply rooted to be pulled out’ (at [9]), namely: Was the worker an employee or independent contractor?

CFMMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122

Personnel Contracting involved the following ‘actors’:

• Personnel Contracting Pty Ltd (‘Personnel’), a labour hire provider in Western Australia;
• Hanssen Pty Ltd (‘Hanssen’), a building company that engaged Personnel Contracting to provide labour for building projects in Western Australia; and
• Mr McCourt, a 22-year-old backpacker on a working holiday visa, who entered the picture looking for work as a labourer to earn some money while in Australia.

Mr McCourt did not have any particular skills or experience in the construction industry. He approached Personnel seeking work as a labourer so as to earn money to sustain him while visiting. He was not an entrepreneur or artisan and did not run a business, nor was he attempting to commence a business. McCourt signed the documentation provided to him that enabled him to work. That documentation described him as an independent contractor. Mr McCourt was told to attend Hanssen’s site and he worked under the direction, supervision and control of Hanssen performing general duties as a labourer.