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LAWS5146
Labour Law Contents
Week 1 ....................................................................................................................................... 4
SEMINAR 1: STUDYING LABOUR LAW.................................................................................... 4
What relationships are regulated by labour law? ............................................................. 6
Historical overview of the development of Australian labour law .................................... 7
The regulatory environment of labour law ....................................................................... 8
Main players in workplace relations area .......................................................................... 9
Summary ............................................................................................................................ 9
SEMINAR 2: A GLOBAL PERSPECTIVE ON LABOUR LAW ...................................................... 10
The International Labour Organisation and International Labour Standards ................. 10
Challenge to the continued relevance of the ILO ............................................................ 14
Week 2 ..................................................................................................................................... 17
SEMINAR 3: THE SUBJECT OF LABOUR LAW: EMPLOYMENT AND INDEPENDENT
CONTRACTING ...................................................................................................................... 17
The control test ................................................................................................................ 18
Multifactor test ................................................................................................................ 20
SEMINAR 4: LABOUR HIRE AND SHAM CONTRACTING ....................................................... 26
Labour hire ....................................................................................................................... 26
Sham contracting provisions in the FW Act ..................................................................... 30
Week 3 ..................................................................................................................................... 35
SEMINARS 5 & 6: THE EMPLOYMENT CONTRACT ............................................................... 35
Introduction ..................................................................................................................... 35
The wage–work bargain ................................................................................................... 36
The contract of employment – express and implied terms............................................. 39
Variation of the employment contract ............................................................................ 44
Week 4 ..................................................................................................................................... 45
SEMINARS 7 & 8: EMPLOYMENT RIGHTS AND RESPONSIBILITIES UNDER CONTRACT ....... 45
Rights and obligations within the employment contract ................................................ 45
Obligations owed by employees ...................................................................................... 45
Employer duties ............................................................................................................... 64
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Week 5 ..................................................................................................................................... 67
SEMINARS 9 & 10: TERMINATION OF EMPLOYMENT ......................................................... 67
Introduction ..................................................................................................................... 67
Lawful termination ........................................................................................................... 68
Remedies for unlawful termination at common law ....................................................... 73
Unfair dismissal ................................................................................................................ 76
Week 6 ..................................................................................................................................... 96
SEMINAR 11: THE AUSTRALIAN FAIR WORK SYSTEM: OVERVIEW AND CONSTITUTIONAL
BASIS .................................................................................................................................... 96
The Australian Constitution – the Conciliation and Arbitration Power ........................... 96
Options for a ‘National’ Industrial Relations System ....................................................... 98
The Fair Work Act 2009 (Cth) ........................................................................................... 99
SEMINAR 12: THE STATUTORY SAFETY NET: THE NATIONAL EMPLOYMENT STANDARDS,
MODERN AWARDS AND MINIMUM WAGE SETTING ........................................................ 107
National Employment Standards ................................................................................... 107
The Modern Award System ........................................................................................... 134
Week 8 ................................................................................................................................... 143
SEMINARS 13 & 14: AGREEMENT MAKING – THE FORMALITIES ...................................... 143
The Fair Work Act Bargaining Regime ........................................................................... 143
Content of Agreements ................................................................................................. 148
Making an Enterprise Agreement .................................................................................. 156
Effect of Enterprise Agreements .................................................................................... 163
Terminating Enterprise Agreements ............................................................................. 165
Week 9 ................................................................................................................................... 167
SEMINAR 15: AGREEMENT MAKING – RECOGNITION AND GOOD FAITH BARGAINING ... 167
Right to be Represented ................................................................................................ 167
Good Faith Bargaining .................................................................................................... 171
Other bargaining related powers of the FWC ................................................................ 181
Week 10 ................................................................................................................................. 185
SEMINARS 16 & 17: AGREEMENT MAKING – INDUSTRIAL ACTION .................................. 185
Introduction ................................................................................................................... 185
Protected industrial action ............................................................................................ 186
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Employer response acction ............................................................................................ 196
Ending protected industrial action ................................................................................ 197
Unprotected industrial action ........................................................................................ 203
Strike pay ....................................................................................................................... 203
Week 11 ................................................................................................................................. 205
SEMINAR 18: JOB SECURITY - GENERAL PROTECTIONS ..................................................... 205
SEMINARS 19: REVISION AND SUBJECT OVERFLOW .............. Error! Bookmark not defined.
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Week 1
SEMINAR 1: STUDYING LABOUR LAW
Course administration
Communication
In emails, need to mention that I am in JD/LLB version of Labour Law
Shae’s preferred means of answering questions is by phone – include phone number in
Reading material
Stewart’s Guide to Employment – more principle-based; less dense than the prescribed
textbook
Don’t need a hard copy of the Fair Work Act – download a copy
Cases
Will be discussed in depth – try to keep on top of them
Lecture schedule
No classes in weeks 7, 12 + 13
Assessment regime
Essay (40%)
- Critical reflection
- 3000 words (including footnotes but not bibliography)
- Choice of topic from set 1 – due 24 April
- Or from Set 2 – due May 29
- Words going beyond 3000 will not be read
- Submit through LMS by due date; then hard copy
- DO NOT include name – student number only; even on coversheet
Exam (60%)
- Practical application of the law
- All material is assessable
- 40% - 1 compulsory problem question
- 20% - short answer
- Open book
What is work?
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Focus of labour law is on an area of human activity – work
“Work” is a very broad idea – it encompasses a range of activities
1. A human endeavour for remuneration
2. Unpaid domestic labour
3. Volunteering, training, interning
4. Studying
An investment in your earning power
Labour law encompasses a variety of areas of law:
- Contract
Money is involved
- Tort
Negligence
Vicarious liability
- Collective regulation
- Anti-discrimination
- Equity
Confidentiality
Restraint of trade
- Welfare law
Leave entitlements
Unemployment benefits
- Superannuation
Providing for people once they leave the workforce
- Taxation
How workers are engaged impacts their tax liabilities
Payroll tax, PAYE, PAYG
- Insurance
Workers Compensation
- Migration
- Bankruptcy/insolvency
If an employer becomes insolvent, employees become creditors, in respect of
their entitlements
Scope of this course
Based on three major themes (Creighton and Stewart):
1. The need to rationalise the relationship between individual units of labour (workers) and
those who own or control capital (employers);
2. The need to regulate collective relations between organised labour and capital and/or
the state;
3. The need to moderate the operation of the market in the interests of any or all of
workers, unions, employers and the public
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Creighton and Stewart conceptualise labour law through the relationships that are created and
regulated in the context of work.
Relationships in the workplace:
1. The individual relationship between worker and employer - 1–to–1;
“Employment law”
2. The collective relationships - between employers and collectives of workers - usually
trade unions;
“Industrial relations”
Collective agreements govern the terms of individual workers’ employment
3. Public dimension – role of the State
Impact of labour law on the public
What have been the dominant labour law issues in the news?
Cut to penalty rates
- Awards set minimum terms of conditions of employment for workers who don’t have a
collective agreement impacting them
- Traditional expectation that those who work on Sunday (the “day of rest”) should have
increased award rates
- Secular society – less rationale for treating Sundays differently
Industrial dispute in Victoria – workers have been locked out of their jobs
7/11 scandal
- Workers having to give half their pay back to their employers
What do these issues suggest about the public interest in regulating work relationships?
Labour law is very political
What relationships are regulated by labour law?
Labour law is predominantly concerned with paid work
Key regulatory concepts
Contract
- Key legal relationship
- Voluntary and domestic labour excluded
Absence of consideration
Absence of parties’ intention to be legally bound
Employment
- Primary focus is on contracts of employment
- Not independent contractors - with contracts of services
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- Fundamentally important question of whether someone is an employee or not –
protective labour regulations use ‘employment’ as the threshold for the provision of
rights and protections
- Businesses will thus try to avoid engaging some people as employees
Historical overview of the development of Australian labour law
Australian labour law derives from British history
Employment r/ship began as a domestic r/ship – was a part of the law of persons
- Worker/servant the property of the master
- Rights were not fixed through a negotiated contract – instead they were fixed by status
- Hierarchical relationship – the worker was the equivalent of a child; control of the
master equivalent to the control of the parent
Master and servant relationship evolved under 2 primary influences:
- Structure of the feudal system – status based on land tenure
Lord could compel the service of the peasant; could only leave with the
master/lord’s blessing
- Guild system for tradesmen
Composed of master craftsmen (skilled) and their apprentices
Progress from apprentice to craftsman governed by status
Apprentices were tied to the master’s household
Statute of Labourers enacted in middle of the 14th century – in response to the Black Death
- In the aftermath, workers were scarce
- Workers demanded better pay/conditions
- Statute compelled a man/woman who could not support themselves to work for anyone
who required them to, at a wage rate set by the Statute.
- Also made it an offence for the servant to leave their service before the end of their set
term without permission.
- Statute a substitute for the feudal system; imposed State discipline on worker
Early 18th century – Poor Laws passed which required destitute individuals to work to receive
State-provided food and shelter
Up until 19th century, workers regulated on the basis of the status as servants; no independent
will and no capacity to impact this. Successive legislation reinforced this.
Industrial revolution in the 20th century – transformation towards workers being able to
negotiate their arrangements through a freely entered into contract
- Machines in factories could do the work of workers; but still need workers to operate
them
- Not helpful if masters in rural areas could control the workers and prevent them from
working elsewhere
- Industrialists pushed for new ways of regulating labour, allowing workers to leave their
master’s household
- Economic changes thus demanded a freer labour market, and the law of contract
embraced this
However, the security of workers was reduced
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- Workers lived in the house of their master; had somewhere to sleep, eat etc.
- Early factories had small children working in them under dangerous conditions
- Contracts did not help – no responsibility acknowledged by the common law on the part
of the employer
Parliament enacted early factory legislation
- Banned women and children from working in factories – women cheaper to employ;
were competition for men
- Hours of work started to be regulated
- Campaigns for days of rest, workers’ compensation
In the 20th century, legislation becomes more extensive – discrimination, minimum wage etc.
- The legislation overlay contract; did not displace it
Growth of collective action – workers demand a greater say; greater share of the profit
- UK legislation allowed workers to strike bargains with employers – “collective laissez-
faire”
- Different approach in Australia:
Significant labour relations problems in Australia in the late 19th century – unions
wanted employers to negotiate with trade unions; employers only wanted to deal
with individuals. Prompted widespread strikes.
Constitution enacted in the 20th century – s 51(xxxv) gave Cth the power to form
laws around the conciliation and arbitration of industrial disputes
Tribunal established under Conciliation and Arbitration Act to help resolve
industrial disputes between employers/employer organisations and trade unions
Their decisions (re minimum wages etc.) would take effect as legally binding
‘awards’ – instruments that had the force of statute
1000s of awards made over the course of the 20th century – established the
conditions of employment.
Still did not displace contract
Conciliation and arbitration was supposed to be used as a large resort; instead
was routinely used
In the 1980s, this system broke down
- FW Act no longer provides for the resolution of industrial disputes by conciliation and
arbitration - except in the context of certain bargaining disputes, or with the consent of
the parties
- Though FW Act also contemplates the making and variation of ‘modern awards’
- Fair Work Commission has less extensive powers than the old industrial tribunals, but
can still intervene in any type of bargaining dispute, at least to regulate the process of
negotiation
Shift to collective bargaining – legally regulated system that allows for electives to enter into
‘enterprise agreements’
- These sit above contacts
The regulatory environment of labour law
Contract of Employment
9
- Relationship between employer and employer legitimated through an enforceable
agreement
- Now at the bottom of regulation hierarchy of labour regulations
Award Obligations
- It is legislatures rather than the tribunals which remain principally responsible for the
maintenance of employment standards
- Nevertheless, the award system remains extremely important in setting minimum
standards for many Australian workers
- There are over 120 modern awards that apply to particular industries or occupations,
together with a small number of enterprise-specific instruments
- These awards not only set basic wage rates that vary according to the nature of
particular jobs, they typically require the payments of additional loadings or penalties,
accord to whether work is performed as a casual, or by way of overtime or night-shifts,
or on weekends or public holidays
Enterprise Agreement Obligations
- Industrial legislation is now firmly focused on encouraging management and labour to
negotiate formal agreements that set wages and working conditions at the level of the
enterprise or workplace, and to establish their own processes for resolving any
differences that might subsequently arise
Statutory Obligations
- There are now standards dealing with discriminatory conduct, compensation for work-
related injuries, maximum weekly hours, minimum wages, payment of wages, flexible
work arrangements, the right to take leave from employment in various circumstances,
termination of employment, redundancy pay and superannuation
Main players in workplace relations area
Fair Work Commission
- Used to be the Australian Industrial Relations Commission
- Tribunal; made up of judges and civil society actors (e.g. former employee advocates,
union officials) appointed to the tribunal as commissioners
- Responsible for arbitration of disputes under the FW Act – e.g. unfair dismissal; modern
awards; enterprise agreements
Fair Work Ombudsman
- Statutory agency responsible for enforcing the provisions of the FW Act
- Has the power to initiate litigation for breaches of the FW Act
Summary
Two basic components to the regulation of labour relationships:
1. R/ship between individual employee with employer
Governed at common law by contract
Most terms/conditions of relationship will likely come from another instrument
(statute, awards, enterprise agreements)
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2. Collective agreements – between all employees working for employer and that employer
These r/ships moderate and impact the contractual r/ship that each employee has
Awards and agreements
Employment r/ship governed by the CL of contract began as a r/ship of status b/w masters and
servants
- Servants had very little say and no rights
- R/ship shifted during the Industrial Revolution – from status to contract
- Benefit to workers = no longer considered property of their masters
- Detriments = masters no longer owe them obligations to care/provide for them etc.
Impetus to collectivise arose when workers became freed from individual ties to individual
masters, and lost the protections of feudal bonds
- Pushed for collective guarantees to conditions; struck bargains with employers
- CL was hostile to this movement; required the intervention of Statute
- Australia provided for compulsory conciliation and arbitration system – unions able to
compel employers to negotiate with them; otherwise an independent tribunal would
arbitrate the dispute
- In theory, workers had conceded the right to strike to achieve these gains
In recent years in Australia, shift from compulsory conciliation and arbitration model to a
model of collective bargaining
- Re-institution of legal strike action
The form of regulation of collective relationships has been highly political
- Content of Fair Work Act, the way collectives are regulated etc.
- Several Commissions investigating/reviewing workplace relations
SEMINAR 2: A GLOBAL PERSPECTIVE ON LABOUR LAW
The International Labour Organisation and International Labour Standards
‘Labour is not a commodity’
Idea draws a distinction between product/commodity markets, and markets in which the
primary sale-point is labour
- Product markets regulated on the basis of:
Competition theory – allows production companies to set their own prices,
forces companies to act efficiently, keeps costs down
Super profits = charge for the product exceeds the cost to produce it
- Labour markets treated differently
O’Higgins:
- The price of labour is not to be settled, as in commodity markets, by supply and demand
Humans would not be provided with enough to subsist
- The labour of others cannot be traded
- Intermediaries should not profiteer by the placement of labourers
- There is to be no trafficking in labour (including migrant labour)
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Idea that ‘labour is not a commodity’ underpins the operation of the ILO
History of the ILO
ILO established 1919 at the end of WWI; to set labour standards at the international level
- Contained in Part 12 Treaty of Versailles 1919
- End of WWI had been brought about by the Communist Revolution
- The ILO Constitution negotiated in this context
Preamble contains 3 principles:
Lasting peace in the world requires social justice
Improvement of working conditions is required – e.g. regulation of hours
of work
Countries with good labour standards have an incentive to increase the
labour standards of other countries – i.e. competitiveness
ILO originally functioned as part of League of Nations
Only international body to survive WWII. Since 1946, an agency of the UN.
Declaration concerning the aims and purposes of the International Labour Organisation
(Declaration of Philadelphia 1946)
Reconfirmed commitment to underlying principles:
- Labour is not a commodity or article of commerce
- Right of association for all lawful purposes
- Payment to the employed of a wage adequate to maintain a reasonable standard of life
in their time and country
- Adoption of 8 hour working day/40-hour week is the standard to aim for where it has
not already been attained
- Adoption of weekly rest for at least 24 hours, including Sunday
- Abolition of child labour
- Men and women should receive equal remuneration for work of equal value
- Equitable economic treatment of all workers in a country
- Each state should make provision for a system of inspection in which women should
take part, to ensure enforcement of laws and regulation for the protection of the
employed.
Structure of the ILO
3 principal organs:
- International Labour Conference
The parliament of the ILO;
Meets once a year
4 delegates from each member state
2 from govts, 1 from employer associations and 1 from worker
associations; therefore is a tripartite body
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These representatives are all equal and independent
Sets international labour standards in the form of Conventions and
Recommendations
Conventions may be adopted by the ILC w/ the approval of 2/3rds of the
delegates present and voting
Once adopted, Conventions are open for ratification by member-states;
become operative 1 year after they have been ratified by 2 countries
Ratified Conventions have the effect of a treaty in international law
Recommendations are not open to ratification, and do not create
binding obligations in their own right
Conventions and Recommendations of ILO collectively referred to as the
International Labour Code.
- Governing Body
The government/executive of the ILO
Cabinet of 56 (28 representing govts; 14 representing workers, 14 representing
employers)
Sets the Conference agenda, adopts the budget, elects the Director-General etc.
- International Labour Office
The public service of the ILO
Run by the Director General
Administration, research, investigation, communication.
Functions of the ILO
1. Standard setting through the passage of Conventions and Recommendations; and supervision
of standards
- Now 108 Conventions and 204 Recommendations
- ILO Declaration on Fundamental Principles and Rights at Work commits all members of
the ILO to respect, promote and realise the principles embodied in 7 core human rights
standards, including:
Freedom of association and the effective recognition of the right to collective
bargaining
Elimination of forced or compulsory labour
Abolition of child labour
Elimination of discrimination in employment and occupation
- Domestic Workers Convention 2011
Targeted at domestic workers who live and work in the homes of others
Often overworked as they do not have set working hours – Convention Articles
reflect this
2. Technical cooperation - vocational training; employment and education; working conditions;
industrial relations; labour legislation and administration; and social security.
- Offices all around the world assist in development of policies and programs
3. Research and studies
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ILO supervisory structure
1. Supervision and enforcement of ratified conventions
- Ratifying states have to report to the Office as to the effect given to ratified Conventions
(Article 22 ILO Constitution)
Historically, Australia has ratified ILO Conventions only when law and practice in
all jurisdictions were in compliance
- Committee of Experts on the Application of Conventions and Recommendations (CEACR)
reviews these reports
Produce reports on the status of countries
Can open a ‘dialogue’ with a govt in relation to apprehended non-compliance;
Sometimes the CEACR gives Australia ‘direct requests’ asking for
information about how Australian laws comply with the ILO Code
CEACR has no formal standing under the ILO’s Constitution – the International
Court of Justice is the body reposed with responsibility for the authoritative
interpretation of the ILO Constitution and the Code.
In reality, CEACR’s views on the meaning and effect of Conventions and
Recommendations are generally regarded as authoritative
- Committee on the Application of Standards of the International Labour Conference
Australia brought before this Committee regularly in the 2000s
2. Supervision of unratified conventions
- To try and encourage states to ratify
3. Complaint mechanisms
- Complaints by Member States (about each other)
- Complaints by non-State actors (i.e. unions, employer groups)
- Governing Body’s Committee on Freedom of Association
Tripartite committee – 3 employers, 3 unions, 3 states
Idea that workers have a right to associate and pursue their activities as collectives
contained in the Constitution
Member states bound by the principle even if they have not ratified a relevant
Convention; can be brought before the Committee
Does the supervisory system work?
As well as any other soft sanction system based on public pressure
However, this ‘naming and shaming’ can be instigated by non-state actors
Impact of ILO standards on Australian labour law
ILO’s labor standards are the principal international influence on Australian labour law and
practice
Australia relies on the External Affairs Power (s 51(xxix) Constitution) to give effect to
International Conventions, which is how conventions find themselves in Australian law (must
first be ratified and then enacted).
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- Difficult for ILO standards to be given a legislative effect in reliance on the external
affairs power
- ILO standards do not deal with many issues that might seem to merit legislative
intervention – e.g. regulation of the activities of multinational corporations
- The standards embodied in many Conventions are minimalist in character - they are
promotional rather than prescriptive
Even though ratified ILO Conventions do not have a legal effect in Australian domestic law
unless expressly given such effect by Parliament, they can also be taken into account in
interpreting legislation that is intended to give effect to them.
- New legislative proposals are routinely assessed by reference to relevant ILO standards
(ratified or otherwise) to ascertain whether they are consistent with those standards
Industrial tribunals use ILO Conventions and Recommendations as reference points on
occasion, and courts also use them as an aid to interpretation
Challenge to the continued relevance of the ILO
Internal challenges
The search for a role in the post-Cold War era
- Creighton: countries in the West ratified many labour standards simply to show that
they were better than the Eastern countries
- Rise of neo-liberalism and free market ideology conflicts with the central idea
underpinning the ILO that labour is not a commodity
Standard setting and supervision
- Disagreement within the ILO over the recognition of the right to strike – a component of
the freedom of association
Structural and organisational issues
- Very large organisation; ‘dumping ground’ for international bureaucrats
The emergence of other sources of international norms
- European Union has its own labour regulation
External challenges – internationalisation v globalisation
ILO and our own domestic systems the product of 20th century thinking.
- Work then was carried out in the context of vertically structured firms
- Assumption was that people would have the same career for life; welfare system
structured around this (e.g. health insurance tied to employment)
- Underpinning gender contract – men do the paid work, women do the caring work
- Whole labour system predicated on the assumption that someone else is doing the
unpaid work
- This industrial structure spread to the developing world as well
The world of work then is fundamentally different to what it is today, because of globalisation
Globalisation (Arthurs, ‘Reinventing Labour Law for the Global Economy’):
15
- “An integrated system of business arrangements that seeks to move large volumes of
goods, services, information and capital across international borders with low friction
and at high velocity”
- It is also “a technological system that uses transportation and communication and
manufacturing techniques to make such movements possible”
- It depends upon a neo-liberal political system that believes “that market forces are
superior to all other forms of social ordering”
What effect does this have on domestic law?
Laws amended to diminish trade union power and increase managerial control
Ability of business to source labour cheaply is facilitated; many services have been moved
overseas
Destruction of the integrated firm – businesses now comprised of networks of companies
- More casual workers engaged
- Leads to a significant attenuation of the relationship between employer and employee
Flexibilization of work
- Psychological contract = workers agree to be controlled by their employer in return for
the promise of long-term job security
- Now, workers do not get security, they get “employability”
Rise of the gig economy
- People bid for work – e.g. Airtasker; Uber
Response of the ILO
ILO Declaration on Fundamental Principles and Rights at Work 1998
Four principles set out in the Convention are:
- Freedom of association and the right to collective bargaining;
- The elimination of forced and compulsory labour; (including prison labour)
- The abolition of child labour, and;
- The elimination of discrimination in the workplace.
The Decent Work agenda
- Decent Work means productive work in which rights are protected, which generates an
adequate income, with adequate social protection.
- It also means sufficient work, in the sense that all should have full access to income-
earning opportunities.
- It marks the high road to economic and social development, a road in which
employment, income and social protection can be achieved without compromising
workers’ rights and social standards
ILO Declaration on Social Justice for a Fair Globalisation (Fair Globalisation Declaration) 2008
Expresses the contemporary vision of the ILO’s mandate in the era of globalization
16
Priority areas: employment, social protection, social dialogue and tripartism.
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Week 2
SEMINAR 3: THE SUBJECT OF LABOUR LAW: EMPLOYMENT
AND INDEPENDENT CONTRACTING
Introduction
When a person is performing work for another person, generally speaking the work will be
performed under 1 of 2 different types of contract – either:
1. A contract of service
Employees
2. A contract for services.
Non-employees - independent contractors, consultants, entrepreneurs, self-
employed persons etc.
Why is the distinction important?
There are layers of regulation that distinguish between employees and non-employees
Importantly, most of the Fair Work Act 2009 (Cth) applies to employees
Where an employee has been wrongly treated as a contractor, the employee will typically be
required to compensate the worker for any wages or leave entitlements they have been
denied
Increasingly, however, there are areas of the law in which the distinction has been abandoned
– e.g.:
- Workplace health and safety - uses the term ‘worker’
- Paid parental leave
Contract of Service of Contract for Services?
The common law tests - development
Employees = those who work under the control of another person and are dependent on that
person for remuneration
Contractors = supply services as businesses in their own right
At common law, the distinction between the two is drawn from cases concerning vicarious
liability for another’s negligence, and many statutes have adopted this understanding for
defining their scope and coverage - e.g. the FW Act
- Under the principle of vicarious liability, an employer could be held responsible for
wrongs inflicted on a 3rd party by a ‘servant’ employed under a contract of service,
provided that the servant was acting in the course of their employment
- No liability would be occasioned where the worker involved was an independent
contractor
18
The legal and financial consequences of the way we categorise workers have become much
more significant, so there is an incentive for labour engagers to push labour and the risk of
engagement onto workers themselves, rather than the business
There are a lot of commonalities between contractors and employees, and it is not always
obvious which category workers fall under
The control test
Earliest test used by the Courts
Yewens v Noakes (1880)
Bramwell LJ:
- “A servant is a person subject to the command of his master as to the manner in
which he shall do his work.”
i.e. the employee is controlled by the employer in terms of the way in which
they perform their work
Performing Right Society, Limited v Mitchell and Booker [1924]
McCardie J at 767 – 8:
- The test to be generally applied in determining this question lies in the nature and
degree of detailed control over the person alleged to be a servant.
- If the work done by one person for another is done subject to the control and
direction of the latter person as to the manner in which it is to be done the worker is a
servant.
- If, however, the person doing the work agrees only to produce a given result but is not
subject to control in the actual execution of the work, he is an independent
contractor.
Gould v Minister of National Insurance (1951)
Ormerod J:
- “It is clear that the real question is one of degree of control exercised by the person
employing the artiste, and this, as I see it, means not only the amount of control but
the nature of that control and the direction in which it is exercised.”
Thus two elements of the control test:
1. The nature of the control
Control over the execution of work – over when, where and how the work was
to be done
Can be the case with either an employer/employee or principal/contractor
relationship
2. The degree of that control (amount)
More extensive notion of controlling the manner in which that work is done is
characteristic of employer/employee relationships
19
Humberstone v Northern Timber Mills (1949)
Facts:
- Humberstone was a common carrier – he transported goods in his truck for the D
- He did this for 23 years – owned the truck, paid for his own petrol, paid for repairs to
the trucks, and paid for his own license to be a common carrier
- However, he worked almost exclusively for the D. He did not advertise his services, did
not have his own business number, and he essentially did shift work for them.
- He had to account for himself if things look longer than expected.
- He was paid each week on the basis of the distance he had travelled and the
weight/amount of carriage.
- One day, Humberstone got a flat tyre. He over-exerted himself whilst trying to change
it; died the next day.
- Humberstone’s wife brought an action against D – sought worker’s compensation on
behalf of Humberstone’s estate
- In D’s interest to characterise Humberstone as a contractor – worker’s compensation
comes out of the business and insurance premiums become more expensive
Held:
- The court focused mainly on the contract
- The emphasis of the contract between the company and Humberstone was on the
mechanical traction – the transportation of goods carried out by Humberstone’s own
truck, which he possessed and controlled
- The company had no intention of controlling the vehicle management, or the way in
which that vehicle was operated
- He was engaged to produce an outcome – how he achieved this was entirely up to
him
Dixon J:
- “For a case like the present, the test of the existence of the relation of master and
servant is still whether the contract placed the supposed servant subject to the
command of the employer in the course of executing the work not only as to what he
shall do, but how he shall do it…”
- “…the question is not whether in practice the work was in fact done subject to a
direction and control exercised by an actual supervision or whether an actual
supervision was possible but whether ultimate authority over the man in the
performance of his work resided in the employer so that he was subject to the latter’s
order and directions”
The Courts apply the control test to the totality of the relationship between the parties – not
just the work performed
Zuijs v Wirth Bros (1955)
Principle:
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- To satisfy the control test, have to demonstrate that the employer had ‘ultimate
control’
Facts:
- Two trapeze artists working for the circus
- One of the artists was injured in the performance of the work – they sought an action
seeking coverage under workers’ compensation legislation
- The circus argued that they were not employers – the circus director said that he
could not control the performance of the workers, because he lacked the skills that
they had
Held:
- Court acknowledged the argument made by the circus company, but held that in this
case, there was an ultimate authority which rested with the company
- The company dictated when the performance was performed, for how long, and how
many times it would be performed, how many rehearsals were necessary etc.
Multifactor test
Test emerged out of the deficiencies of the Control Test – less applicable where working
relationships became more complex.
At common law, the difference between employees and independent contractors is now based
on a number of circumstances of the working relationship
- No factor is determinative; rather all are considered together
- Control remains an important factor, but the mere existence of control is not decisive
This approach is drawn from the HCA in Stevens v Brodribb Sawmilling Co (liability for
negligence of a truck driver) and confirmed by the HCA in Hollis v Vabu (vicarious liability for
bicycle couriers).
There has, however, been a shift in the application of the multi-factor test since Hollis v Vabu –
now a much greater willingness to look past contractual descriptions and ask whether the
worker in question is really in business on their own account (see ACE Insurance v Trifunovski)
Stevens v Brodribb Sawmilling Co (1986)
Principles:
- The existence of control is only one of a number of indicia relevant to determining
whether a person is an employee or an independent contractor, alongside a range of
factors including:
Mode of remuneration
i.e. whether you are being paid for your time, or for the product
More likely to be an employee if the person is paid for hours worked
Provision and maintenance of equipment
If the person doing the work owns the equipment suggests that
they own their own business
The obligation to work
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If the person has to account for themselves if they do not show up for
work suggests that they are an employee
The hours of work and provision for holidays
The deduction of income tax
If the person has their income tax automatically deducted by the hirer
suggests that they are an employee
The ability of the worker to delegate the performance of his or her work
If the worker is not guaranteeing that they can do the work
themselves, and the work can be done by someone else, this is highly
suggestive that the worker is not an employee
Employment contracts are contracts of personal service
Degree of integration of the worker into the business of the hirer
The right of the hirer to have a particular person do the work
The right of the hirer to suspend or dismiss the person engaged
The right of the hirer to the exclusive services of the person engaged
A person cannot genuinely be in business for themselves if they are
not allowed to work elsewhere
The right of the hirer to dictate the place and hours of work
Facts:
- Brodribb engaged 3 types of workers:
Fellers – cut down the trees
Sniggers – moved the logs into the trucks
Truckers – transported the logs
- Each different groups of workers owned their own equipment – truckers had their
own trucks, fellers had their own chainsaws etc.
- Groups worked their own hours, and for different companies
- Case went to the HCA because a snigger, whilst moving a log, got the chain stuck, and
asked a trucker (Stevens) to help by getting up on top of the log. Log shifts; trucker
was crushed underneath it and was seriously injured.
- Trucker brought an action against Brodribb. Snigger was clearly negligent, but Stevens
pursues Brodribb under workers’ compensation (could get more money out of them)
on the basis of vicarious liability.
Held:
- Snigger was an independent contractor
All groups of workers owned their own equipment
Groups were not obliged to work – they presented themselves on their own
terms
Australian Mutual Provident Society v Chaplin (1978) (UK)
Held (Privy Council):
- “It seems to me, then, that there is no magic touchstone. The court has to look at a
number of indicia and then make up its mind into which category the instant case
should be put. It is a question of balancing the indicia pro and con … But the power of
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control over the manner of doing the work is very important, perhaps the most
important of such indicia”
The current approach of the courts
The multifactor test is the test that we apply today
It is an intuitive idea - categorisation is approached on a case-by-case basis
But the degree of control is the most important factor
The weight that the law should give to other factors is unclear
Abdalla v Viewdaze (2003)
Industrial Relations Commission:
- For ease of reference we have collected the following list of “indicia” – non
exhaustive:
Whether the putative employer exercises, or has the right to exercise, control
over the manner in which work is performed, place of work, hours of work
and the like
Whether the worker performs work for others (or has a genuine and practical
entitlement to do so)
Recognition of the fact that it is not uncommon for clauses in
contracts to say that the worker has the right to work elsewhere, but
in practice, the worker does not really have this ability
Whether the worker has a separate place of work and/or advertises his or her
services to the world at large
Whether the worker provides and maintains significant tools or equipment
Whether the work can be delegated or subcontracted
Whether the putative employer has the right to suspend or dismiss the person
engaged
Whether the putative employer presents the worker to the world at large as
an emanation of the business
Whether income tax is deducted from remuneration paid to the worker
Whether the worker is remunerated by periodic wage or salary or by
reference to completion of tasks
Whether the worker is provided with paid holidays or sick leave
Whether the work involves a profession, trade or distinct calling on the part of
the person engaged
Whether the worker creates goodwill or saleable assets in the course of his or
her work
Whether the worker spends a significant portion of his remuneration on
business expenses
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Significance of labels
Re Porter; Re Transport Workers Union of Australia (1989)
Gray J at 184:
- “the parties cannot create something which has every feature of a rooster but call it a
duck and insist that everybody else recognize it as a duck”
The label that the parties give to their relationship is only one factor of the Multifactor Test
If the label is not reflective of the reality of the label, the Courts will not give it an effect
The multifactor test in operation
Vabu v Federal Commissioner for Taxation (1996)
Facts:
- Application to Full Court of NSWSC by Vabu for a declaration that the workers they
engaged are not employees, for the purposes of the superannuation legislation
- Vabu hired couriers to make deliveries - couriers signed documents relating to
working hours, their behaviour and uniforms.
Held (NSWSC):
- The workers were contractors - they supplied and maintained their own vehicles, bore
the risk of loss, were taxed as independent contractors and received commission but
no wage or salary
- Taxation is an important factor because the Commission of Taxation has acquiesced to
the way that the parties have categorised themselves
- Vabu was not liable to pay superannuation
*Hollis v Vabu Pty Limited (2001)
Principles:
- When classifying the status of a worker, courts and tribunals primarily look to the
substance of the relationship rather than the contractual language adopted by parties.
This means that workers and employers cannot agree to characterize their r/ship as
something that it is not
- The test requires a consideration of the ‘totality of the relationship’
- The indicators of employment include, but are not limited to:
The terms of the contract
Intention of the parties
The existence of control or the right to control
Deduction of tax
The form of remuneration
The presence of subcontracting
How ‘businesslike’ the activities are and whether one party ‘represents’ the
other [very important]
Who receives the benefit of goodwill
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Whether the employer provides uniforms, holidays, tools or capital
equipment
Facts:
- P was knocked down by one of the couriers engaged by Vabu on a bicycle; the courier
rode off
- P pursued Vabu for compensation because the courier had been wearing a uniform
Held (HCA):
- The control test is no longer a conclusive test for a requisite relationships. Various
factors are to be considered
- Factors for employment:
Low level of skill
Little control over how they perform and work hours – i.e. could not refuse
work
Workers wore uniforms with the D’s name - thus were presented to the
public as workers of the D
D paid the workers fixed rates (could not negotiate rates) and deducted a
certain amount from their remuneration to contribute towards insurance
Workers didn't perform an ‘added’ or corollary part of the business of the D -
they carried out the main purpose.
Equipment was provided and maintained (bar the bicycles) by the D.
Deterrence - the D should be deterred from not caring if his workers harm
people and should have an incentive to make sure they can be identified
- Factors against employment:
Workers owned their own bicycles
Though the fact that the worker had to supply its own bicycle
shouldn’t be viewed as conclusive that the worker was independent -
practically, it was not his business but the D’s
Workers were paid per job, not per hours worked
Workers did not get leave
Workers labelled as contractors
- The relationship between the D and the bicycle courier who struck down the P was
that of an employer/employee.
HCA focused on the fact that the workers were not in business for themselves
“Viewed as a practical matter, the bicycle couriers were not running their own
business or enterprise, nor did they have independence in the conduct of
their operations”
- D was vicariously liable for the consequences of the courier’s negligent performance
of his work
*Ace Insurance Ltd v Trifunovski [2013]
Principle:
- Even where there are written contracts that state that the relationship is not one of
employment – that will not determine the issue
Facts:
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- Ace Insurance engaged 5 sales representatives as “independent contractors” to sell
insurance policies
- After termination of the contracts, the 5 sales reps brought proceedings against Ace
Insurance in the Fed Court for unpaid leave entitlements
- Factors for employment:
Ongoing and intensive training program which the sales reps had to partake in
Integrated into an existing business model
The sales reps were unable to delegate their work - were not entitled to
engage anyone else to sell Ace Insurance's insurance on their behalf.
The company was significantly involved in their day-to-day activities -
reported to a Regional Manager who was an employee of the company
The sales reps generally worked in a particular geographical area
No practical ability to work independently – they could not sell another
product
No trailing commission
- Factors against employment:
Contract stated explicitly that they were independent contractors.
They were rewarded exclusively on commission (task-based) and paid by
invoices
Did not pay income tax
Could hire their own secretaries
Had to bear their own expenses and indemnify Ace Insurance against loss
Two of the sales reps have provided services to Ace Insurance through their
incorporated companies
Held (FCA):
- Buchanan J:
The basic question in all types of cases remains the same
Though if 3rd parties are involved (i.e. tax authorities, tort creditors),
this may produce subtle influences
Parties may agree on the terms of their contract, but statements as to
whether the workers are employees or contractors are not determinative
The key element in determining a relationship of employment is the right of
the company to control the organisation of their work and the deployment of
the various agents in their team.
Notion of working in the business of yourself – very important indicator of
contractor relationship
Indicia such as leave, taxation, superannuation, insurance arrangements are
less important
- In this case, there was a relationship of employment
The sales reps were trained to work a particular system of selling insurance,
were under close supervision
- The fact that two of the reps were contracted through a company did not change the
reality that the relationship was one of employment