How High Court judgments impact transport industry

If you were going to summarise industry reaction to the landmark High Court judgment in the long-running ZG Operations v Jamsek case in two words, ‘welcome relief’ were probably the most common being bandied around.

At least that was the consensus amongst the pundits that Big Rigs contacted for reaction to the news that there was finally some badly needed certainty around the all-too-muddy waters of how to distinguish between contractors and employees.

But first a quick recap of the case for those who haven’t been following along.

The drivers in question, Martin Jamsek and Robert Whitby, had been employed by Thorn EMI straight from school and continued to drive for the same business until retirement 40 years later by which time the business had become known as ZG Operations. 

Around eight years into the job they were offered contracts involving them purchasing vehicles from their employer with the contracts stating that they were now independent contractors. 

The Federal Court initially confirmed that they were indeed contractors, but that decision was overturned by the Full Court of the Federal Court on appeal, ruling that they were employees. 

The Full Court’s decision took many in the industry by surprise, said lawyer Paul Murray, a transport employment specialist at Bristow Legal.

“The main reason for this surprise was that both owner-drivers had purchased and operated their own vehicles,” said Murray.

“Mr Jamsek had also bought a new truck in 1989 for $70,000 and Mr Whitby in 1990 for somewhere between $70,000 and $80,000. In addition, both drivers had set up partnerships with their respective wives and were paid through those partnerships. 

Until the Full Court decision the widely held view (referred to by both the Full Court and the High Court as the ‘conventional view’) was that when a contract was with a company or partnership and particularly when that business had to provide equipment as substantial as a heavy vehicle, the owner driver could safely be assumed to be a contractor. 

“Although the High Court was not unanimous in its reasons for finding the drivers to be contractors, the majority accepted that the ‘conventional view’ was correct. More importantly perhaps the majority also ruled that where there is a clear, written contract, and no other legal concerns, the contract itself determines the question of whether an owner driver is an employee or a contractor.”

The QTA says operators can continue without fears of unexpected claims.

Murray said that if the contract setting out the relationship clearly describes a contract for services, then there will be no employment relationship. 

“If the contract is only partly in writing, if there is a claim that it is a sham or contrary to some other legal or statutory provision, or if it is claimed that the parties have changed the contract over time (whether those changes have been recorded in writing or not), then a court might need to apply the multi-factor test. 

However, if none of those exceptions apply, the question is answered by looking at the contract. 

“This alone provides a significant amount of certainty to businesses that was previously lacking.”

The National Road Transport Association said the judgment draws a line in the sand for the status of owner-drivers.

“This is a hugely significant judgment for our industry,” said NatRoad CEO Warren Clark.

“It shows that owner drivers are independent contractors and that contracts with business entities should be upheld. The High Court found that the owner-drivers were not employed by the company.

“They were members of partnerships which carried on the business of providing delivery services to the company.

“The formal contractual arrangements have been given priority by the High Court.

“This means that participants in the road transport industry must ensure that they don’t sign a contract and put it in the bottom drawer. It is an essential business tool.”

Queensland Trucking Association CEO Gary Mahon also called on operators to review their written arrangements with independent contractors to ensure they include terms that explicitly address the nature of the arrangement and the degree of control the independent contractors have over their own business. 

“This decision demonstrates the value written agreements have in avoiding future disputes and, where written agreements with independent contractors are missing, operators are encouraged to begin preparing contracts that reflect current practice,” said Mahon.

Mahon welcomed the decision because road freight businesses that engage independent contractors can continue to operate without fear of unexpected claims and costs due to having historically misclassified that relationship. 

“With a longer-term view, we are yet to see if the decision will encourage operators to explore different models of operation that may benefit the industry. 

“It could also mean that those businesses who have been unsure about engaging independent contractors in situations where the contractor may only be driving for them, due to the risk of misclassification, can now feel safe to explore this as an option. If done successfully, this provides both with more secure work.”

Senator puts transport labour hire companies on notice after backpacker decision

“May the dam walls burst open!” Tweeted WA Labor Senator Glenn Sterle upon hearing the news that a young backpacker engaged by a labour hire business to work as a labourer on a construction site was indeed deemed to be an employee, rather than a contractor.

Sterle was referring to the other High Court decision last month, CFMMEU v Personnel Contracting Pty Ltd, which is expected to also have less scrupulous transport operators rethinking their employment strategies. 

“The law has finally caught up with these parasitic labour hire firms!” added former truckie Sterle on Twitter, later explaining to Big Rigs that his low opinion of the sector harks back to his days as a union organiser.

“It’s a unique decision and I welcome it with open arms. When I see these bastards using labour hire companies I just seethe because it’s done to undermine the decent people who do the right thing.

“Hopefully the decent operators now have a level playing field.”

In his summary of the case, Brisbane lawyer Paul Murray said the decision shows that merely using ‘labels’ such as ‘contractor’ will not determine the outcome; the whole contract has to be considered.

The High Court found that, despite the written contract describing the worker as a ‘contractor’, the backpacker was actually an employee. This was because the contract itself set out terms that the Court found to be the terms of an employment contract.

“Both of these findings should be welcomed by the industry,” added Murray. 

“A properly drafted contract should give the parties certainty as to what has been agreed, and where the party contracting to provide the service is a partnership or a corporate entity or where they supply a vehicle, a presumption that they are not employees is a reasonable one.  

Key takeaways:

• A written contract is the key to being able to rely on the certainty that this decision has brought. 

• The decision in CFMMEU v Personnel Contracting shows that the written contract must still be put together with care if it is to bring that certainty. (The contract must match the ‘labels’ used.) 

• Written contracts should be adhered to. Don’t start treating a driver like an employee if their contract says they are a contractor. 

• Contracts should make clear that they are for the carriage of goods, not for the provision of drivers or for the driving of vehicles.

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