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In the case of Jamsek v ZG Operations Australia Pty Ltd  FCAFC 119 (16 July 2020), the Full Federal Court unanimously held that the relationship between two truck drivers and the business conducted by the respondent companies was a relationship of employer and employee.
Mr Jamsek and Mr Whitby commenced full time employment driving delivery trucks for the respondents’ business in 1980. They had each previously worked for the business in different capacities since leaving school in 1977. As delivery drivers they worked nine hours per day, five days per week, on conditions and at pay rates set by the business.
In 1986, the two men purchased their trucks at values determined by the business and entered into contracts with the business, in partnership with their wives. The alternative was probably redundancy.
The men took over the risk and expense of owning and operating the delivery trucks and incurred expenses including for fuel, maintenance and tolls. The men had some flexibility in the way they carried out their work, but no real or effective control in respect of the key aspects of the relationship. The business dictated the hours during which the men were to be available for work, what they were to do, the remuneration that they were to receive, the annual leave that they could take, the paperwork they had to complete and other key rights and obligations. Their trucks and shirts bore the names and logo of the respondents’ business.
In 2000, Mr Jamsek took six or seven weeks of leave. A friend of Mr Jamsek drove his truck and the Jamsek Partnership paid him for his work. The Jamsek Partnership received payment from the business for the services. At other times, other drivers from the business would do the deliveries if the men took leave, or external couriers were used.
The purported contractual relationship between the applicants and the respondents’ business was terminated by the business in 2017 due to financial constraints. By that time, the applicants were earning $1,995.95 per week working nine hours per day, five days per week.
Following the termination, the applicants commenced proceedings seeking declarations and orders in respect of unpaid statutory entitlements.
In looking at the true nature of the relationship, the Full Federal Court referred to the series of central considerations identified by Perram J in ACE Insurance Ltd v Trifunovski  FCA 1204; 200 FCR 532 at :
“[T]he terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party “represents” the other; for the benefit of whom does the goodwill in the business inure; how “business-like” is the alleged business of the putative employee — are there systems, manuals and invoices; and so on …”
After examining all relevant considerations, the broad fundamental distinction is between a person employed under a contract of service, who serves the employer’s business, and a contractor engaged under a contract for services, who conducts a trade or business of his or her own.
The decision of the primary judge in support of a contract for services emphasised that after 1986, the men could have used their trucks to serve others. The primary judge also relied on the proposition that the men could have sold their businesses and that such sales may have included goodwill.
On appeal, the Full Federal Court dismissed these assertions as notional only and not a true reflection of the arrangement.
There was no real scope for the workers to serve others, as they were required to be at the disposal of the respondents’ business for nine hours per day, five days a week, and their trucks were, for the most part, adorned with the business’s livery.
There was in reality no scope for the men to generate their own goodwill. They had no customers of their own and had always driven their trucks in circumstances which required them, for all intents and purposes, to appear to be representatives of the respondents’ business.
It was held that the primary judge gave excessive weight to contractual labels and theoretical possibilities and insufficient weight to the reality and totality of the working relationship between the parties, as demonstrated by the way they actually conducted themselves over many years.
The Full Federal Court accepted that the partnership arrangements and the purchase of vehicles were relevant and important considerations supporting the conclusion that the applicants were operating independent businesses. However, the evidence of the totality of the relationship including the degree of control exerted over the applicants and their lack of special skills compelled the conclusion that the applicants were employees of the business at all relevant times. The Full Federal Court found that the primary judge erred in concluding otherwise.
The matter is remitted to the primary judge to determine contraventions of the relevant legislation, outstanding entitlements and penalties.
It is increasingly clear that any arrangement that involves the use of labor without provision of employment entitlements has the potential to lead to subsequent adverse outcomes for business. A true subcontractor sells their services in the market. They typically offer a service that the business does not provide, involving special skills and/or equipment, and service more than one customer or client. A true subcontractor is a representative of their business, not of your business.
This decision serves as a reminder to periodically review any subcontract arrangements to ensure that the balance of factors support the proposition that the worker is a true contractor, in order to prevent a subsequent determination of an employment relationship and a liability for penalties and outstanding entitlements.
Further information / assistance regarding the issues raised in this article is available from the author, Emma Reilly – Partner, or your usual contact at Moray & Agnew.