The Primacy of Employment Contracts

Last week, the High Court of Australia heard the final appeal to Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119. In this case, two truck drivers claimed that they were employees rather than contractors, and sought unpaid employment entitlements. The Full Court of the Federal Court decided that the truck drivers in question were employees, even though they appeared to be engaged as contractors for many decades.

However, in last week’s appeal, ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors [2022] HCA 2, the High Court of Australia unanimously overturned the Full Court of the Federal Court’s decision, and concluded that the truck drivers were in fact contractors rather than employees.

What led to this decision?

Whilst the Full Court of the Federal Court had decided that the “substance and reality” of the working arrangements was enough to make out an employment relationship with the truck drivers, this was not enough for the High Court of Australia. Though some elements of the working relationship suggested that the truck drivers were employees, such as mandatory working hours and uniform policies, the truck drivers also maintained flexibility over additional work. As such, the High Court of Australia focused primarily on the agreement made between the truck drivers and their place of work. The parties had agreed to a contractor agreement, and in doing so “comprehensively committed the terms of their relationship to a written contract”. This led to the decision that the truck drivers were in fact contractors. Further, this decision was unaffected by the fact that the contractor agreement eventuated as a result of the stronger bargaining position of their place of work.

What to know moving forward

This decision builds upon the High Court of Australia’s decision in WorkPac v Rossato & Ors [2021] HCA 23, which set out the factors to be considered when establishing permanent employment, and outlined the centrality of the written contract. This, along with the most recent Jamsek decision, suggests that the High Court of Australia is inclined to closely examine the terms of the written contact. However, employers are still expected to accurately identify whether workers are employees or contractors based on the realities of the working relationship. Nonetheless, comprehensive written agreements that accurately identify the terms of the working relationship and are permitted under general law or statute may protect employers from future claims for unpaid employment entitlements.

If you would like assistance in assessing your current employment agreements, employee entitlements, casual loading requirements, and risk of claim by your employees, contact one of our experienced employment lawyers at (02) 4929 7002, email us or complete an enquiry form.