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Review contracting or risk huge costs, lawyer warns

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Trucking case shows courts have little tolerance for lack of independence, Fisher says

Review contracting or risk huge costs, lawyer warns
James Fisher


The likely penalty for a transport firm that lost a recent high-profile full Federal Court case could be as much as 35 years’ back pay, a top corporate lawyer estimates.

In light of the Jamsek v ZG Operations case and at a time when so-called "sham-contracting" cases generally appear regularly in courts, Hazelbrook Legal senior lawyer James Fisher warns employers to be very clear-eyed and thorough on contracting deal risks.

The case centres on truck drivers who were encouraged to buy the company trucks they were using and become contractors in lieu of continued work and pay rises.

"Here, the court is demonstrating intolerance of employment relationships that masquerade as independent contract arrangements," Fisher says in a commentary with paralegal Josephine Renfrey.

"The judgment implies that a relatively substantial degree of control is present in true independent contracting relationships and that, without control, workers are employees and are owed entitlements.

"For those businesses engaging independent contractors, it will be critical to re-assess those arrangements and take note of any areas of uncertainty.

"Red flags include where contractors are unable to perform work for any other entity or have a lack of control over their work hours, leave, or their contract.

"In our view, these factors indicate a degree of control exercised by the company which removes any practical independence.

"Ultimately, these matters are highly dependent on the unique situation of each business and its contractors, and the history and ongoing nature of their working relationships."

Along with a lack of control over their working arrangements, the main issues the commentary identifies are:

  • an inability of the drivers to generate goodwill for themselves, with good work reflecting on the company rather than the drivers independently – something described as a "new standard"
  • the "take-it-or-leave-it" and "ultimatum-like" nature of the contract, with redundancy the upshot of rejecting it and drivers having little ability to dictate terms.

Not helping the company’s case is that "the initial contract in this case was not revisited as frequently as one would expect of an independent contracting arrangement, again better resembling an employment contract".



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