Drivers driving a vehicle supplied by principal found to be contractors
A recent Federal Court decision, Fair Work Ombudsman v Avert Logistics Pty Ltd (2022), is the latest in a series of court and tribunal decisions that have applied an approach to contractor status that was set earlier this year in the cases ZG Operations Australia v Jamsek (2022) and CFMMEU v Personnel Contracting (2022).
What is the approach?
The decisions in ZG Operations Australia v Jamsek (2022) and CFMMEU v Personnel Contracting (2022) reset the analysis as to when a worker is an independent contractor as opposed to an employee.
According to these rulings, when seeking to characterise whether a worker is a contractor or employee:
- the description of the nature of the legal relationship in the contract is not conclusive, and you need to look at all the terms of the contract to determine for whose business is the worker contracted to provide services – the contractor’s own business or the principal’s business; and
- you look to the legal rights and obligations established by that contract, not evidence as to how the contract is actually performed (unless an issue arises that the relationship is not entirely governed by a written contract, or is invalid because it is a sham, or has been varied, waived or the subject of an estoppel).
Find more information about the cases in our 17 February bulletin.
What’s the latest?
Since those rulings, a series of court and tribunal decisions have applied this approach to uphold contractor status. Fair Work Ombudsman v Avert Logistics Pty Ltd (2022) is the latest in such cases.
In this case, the Fair Work Ombudsman (FWO) commenced proceedings against a transport company for underpayment of four workers undertaking driving duties, arguing they were employees.
A comprehensive written agreement governed their relationship with the company and no issue arose as to its application. The agreement described the relationship as principal/contractor.
Provisions pointing to an employment relationship
The Court observed a number of provisions made by the agreement that pointed towards an employment relationship, namely:
- driving services were to be provided in accordance with the directions and instructions of the transport company and reporting to the company when requested to do so;
- the drivers used a vehicle supplied by the company in providing the services, which vehicle was to be registered and insured by the driver in their name and at their cost;
- the drivers had to allow the company’s signage to be displayed on their vehicle; and
- the company could terminate the agreement if the driver was found to be insubordinate in respect to the company or its customers.
The Court noted the provisions allowing the company to control the performance of driving services. However, it ruled the drivers’ obligations to observe the company’s directions were confined to those directions that were reasonable (this qualification wasn’t expressed in the agreements, but the Court felt it was implied to give business efficacy to the agreements). The transport company could not “micromanage” the conduct of the deliveries; it could only direct when and where goods were to be picked up and delivered.
Provisions pointing to a contractor relationship
The Court considered a more powerful consideration telling towards the relationship being one of independent contractor were the provisions in the agreement for the drivers to:
- arrange substitute drivers when they were unavailable to work; and
- supply their services through an incorporated entity within a month of the agreement commencing (albeit only one of the drivers actually complied with this requirement).
Other provisions in the agreement found to be inconsistent with an employment relationship included that the drivers:
- could render services to others (subject to the company’s written permission);
- must indemnify the company for all loss or damage to the goods in transit and take out their own insurance; and
- must cover any costs associated with training, licence, subscription or accreditations.
Ultimately, it appears the Court was willing to overlook the fact that the transport company supplied the vehicle, and focused on the fact that each of the drivers became the registered owner of the vehicle, took it into their ‘own business’ and assumed responsibility for fuel, running costs and insurances.
The FWO may seek special leave to appeal this case to the High Court.
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