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Full Federal Court deems contracted owner drivers’ employees

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Full Federal Court deems contracted owner drivers’ employees

23 July 2020 by Nes Demir

The Full Federal Court upheld the appeal of delivery drivers, Mr Jamsek and Mr Whitby, finding they were employees under the Fair Work Act 2009 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth), and workers under the relevant long service leave legislation.

The drivers’ former employer, ALI, offered them an opportunity to purchase the company trucks, cover operating and maintenance expenses and “become contractors”. They were told there could be no guarantee of a job moving forward if the offer was refused. The drivers accepted and entered services agreements.

ALI was transferred to Thorn EMI Pty Ltd (Thorn EMI). The drivers entered a new agreement with Thorn EMI which guaranteed 9 hours pay per day at an agreed rate including an allowance for annual leave, public holidays and sick leave. Under this agreement, the drivers were required to follow Thorn EMI directions, refrain from using the trucks for driving services external to Thorn EMI without prior and continuing approval and be on call under certain circumstances. Thorn EMI later became incorporated and changed its name to ZG Operations Australia Pty Ltd (ZG Operations). The drivers continued work and updated the agreements to reflect pay increases.

In the course of their work, the drivers would:

  • have the company logo placed on their trucks;
  • have portions of the costs associated with maintaining their trucks covered by the company;
  • complete run sheets each morning before leaving the warehouse, having them signed off by each customer at delivery, along with a delivery docket (including the times of arrival and delivery);
  • carry out duties outside of their agreements as requested by management, including assisting warehouse employees with clean up during stocktake;
  • wear uniforms bearing the company logo; and
  • receive their sole income from the company.

Lessons

  1. It is near impossible to demonstrate a clear or mutual intention to alter the nature and structure of the relationship between the parties where an agreement was entered into following an ultimatum.
  2. An entitlement to work for third parties alone is not enough to demonstrate a contractor relationship. In this case, the drivers had this entitlement but were unable to exercise it as they were working for the business between 6:00am and 3:00pm, Monday to Friday.
  3. If the principal bears the goodwill or control of the goodwill of the work carried out by those engaged as contractors, it is strongly indicative of an employment relationship. In this case, the work carried out by the drivers was primarily in the hands of the company. They were unable to dispose of the goodwill by sale and had no possibility of acquiring it themselves.
  4. Where a principal exerts a high level of control over the work carried out by those engaged as contractors which shares the hallmarks of employment, it is important to consider where the benefit of that control is going and whether the independent contractor still has the ability to exercise their own skill and judgement.
  5. A services agreement must contain a relationship clause confirming it is not to be construed as anything but that of principal and independent contractor. While this is not determinative (as demonstrated in this case), it does serve to negate any ambiguity that may arise when looking at the circumstances. In another recent case, the Supreme Court noted such clauses “often case light on the ‘truth’ of the situation” and should not be informed by “undue scepticism”.
  6. If the relationship is in practice, indicative of an employment relationship, owner drivers are deemed workers for the purposes of workers compensation in Victoria.

See Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119

Have a question or need advice?

Our team is available to clarify any questions you have and provide the right advice for your business and workforce. Contact Andrew Douglas at andrew.douglas@fcwlawyers.com.au or on 0488 151 503.

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