Delivering a fairer Fair Work Act

The High Court has once again struck out another court’s judgement on interpreting industrial relations law. Morry Bailes argues it’s time for clear, commonsense legislation.

Feb 17, 2022, updated Feb 17, 2022
Photo: AAP/Dan Himbrechts

Photo: AAP/Dan Himbrechts

The High Court of Australia is gradually clarifying the at times opaque provisions of the Fair Work Act, most recently in an important decision last week.

In so doing it has set up a pre-election battlefield which will reveal a good deal about federal Labor and its intended approach to industrial relations, and for that matter the Coalition who whilst ‘talking the talk’ has not yet satisfied industry by ‘walking the walk’. Industrial relations ought to be a big ticket item in the coming electoral contest.

The case was ZG Operations Australia Pty Ltd v Jamsek, and involved two former employees of ZG Operations, or one of its predecessor companies. In the 1980s, the delivery drivers were told that their company employment wouldn’t continue but they were invited to acquire the trucks they drove and become private contractors.

They both formed partnerships with their respective spouses and did just that; the partnerships bought the trucks and continued to deliver goods pretty much as before. During the decades that this agreement continued, the partnership of Mr Jamsek bought others delivery vehicles, filed tax returns as a partnership, and was, the court found, able to do delivery work for other companies. Yet when the arrangement with ZG Operations was terminated in 2017, Mr Jamsek argued he was an employee all along – and the Full Court of the Federal Court agreed with him. It set the stage, on appeal, for a significant interpretation of industrial law by the High Court.

Photo supplied

This is not the first time the current High Court has ruled on a seminal principle of industrial and workplace law. In 2020 in the case of WorkPac Pty Ltd v Rossato, the High Court also dealt with the critical question of whether the Full Court of the Federal Court was correct in finding that Mr Rossato could enjoy the uplift in wages he had received throughout his employment with WorkPac as a casual employee, yet simultaneously be found to be a permanent employee and receive all of the benefits of permanency.

I wrote at the time of that judgment as to how troubling the original Federal Full Court decision was to employers and industry across Australia, and how puzzling the interpretation of the Fair Work Act by the Federal Court had seemed. It was, on the face of it, ‘double dipping’.

The High Court unanimously overruled the Federal Court, and pronounced a very important principle of law in this area, that parties are bound to what they had contracted and agreed to in the beginning. The decision underscored the fundamental importance of contract in our law.

Employers breathed a sigh of relief. However, federal Labor immediately indicated that if elected it will revisit this issue with a view to redefining what it means to be a casual worker. Along with that is an intention to seek to introduce rights that presently don’t exist for casual workers. It will be interesting to gauge the response of industry if and when it is confronted by such a proposal, given a general desire across the board in the workplace for increased, not decreased, flexibility.

Given the present high cost of labour in Australia, which more than anything else caused our manufacturing industry in many areas to become unsustainable, this is not a small development and creates a clear policy question which both major parties must be called upon to address.

The importance of the Jamsek decision was in a similar vein. The provisions of the contract entered into by Mr Jamsek were clear. There was no suggestion here of a sham arrangement, quite the opposite. So was he after all an employee, as the Federal Court had found?

A central consideration of whether a person is or is not an employee is that of control. In other words, what the company or entity with whom they have contracted can tell a person how to do the job. The more control, the more likely it is a person is employed because they may be directed to do their job at a particular time, in a particular way and so forth. In the Jamsek case the two delivery contractors worked with relative autonomy and to an extent determined when and how they would deliver goods. They designed their own routes. They had leave provisions but were unpaid during those periods of leave. On extended periods of leave other contractors fulfilled their contractual duties. They reinvested in their businesses over the years.

Once again the High Court overruled the Federal Court and albeit in a number of separate judgements, again did so unanimously. It again found the approach of the Federal Court to take into account all manner of matters outside the terms of the contract itself, and adopt a ‘multifactorial’ approach was in error. The High Court put it like this:

‘For the reasons stated in WorkPac Pty Ltd v Rossato and in CFMMEU v Personnel Contracting, this expansive approach involves an unjustified departure from orthodox contractual analysis.’

Yet again what was in the contract was ultimately what mattered, and once more contract won the day.

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The conundrum for the federal ALP is obvious. There has existed for some time a concerted attempt by some in the trade union movement to increase membership by championing the perceived plight of casual and gig labour. It is also opposed to expanding both ‘casualisation’ and the gig economy, which certain unions see as against their interests and that of their members even though many engaged as gig workers are very happy with the flexibility it affords. The world put simply is a changed place, but some in the trade union movement wish to move back the hands of time to an earlier industrial relations era. And their party is the Labor Party.

They will be expecting Labor to legislate not only to make casual labour lest attractive, but to make it harder for companies to enter into independent contractual relationships – even if the contractor wishes it to be that way. As to the Coalition, its constituents will expect that it will push ahead with industrial reforms that they regard as well overdue, to bring about greater flexibility and productivity.

The gig economy is not a genie that is easily put back in the bottle. Indeed why would we? Uber, Freelancer, AirBnB, are offering people ways in which to work that are quite novel by comparison to the rigidity of the past.

Photo: EPA/Will Oliver

In the US it is estimated to represent nearly 40 per cent of the workforce. In Australia the numbers are similarly rising sharply. Not everything about the gig economy is rosy. Exploitation of labour must be called out and avoided. There should be no place for sham contracts where workers are in fact employees but are dressed up as something else. Trade unions, lawyers and the courts are all aware of these things and the courts will call it out where there is unlawful conduct.

When we look however at the strength that the gig economy has contributed to overall economic conditions in this country and indeed the US, it is unclear to many why anyone would want to put the brakes on it. But it is plainly not in the interests of some in the trade union movement to allow the gig economy to flourish unchecked, as with casual labour, because quite simply it undermines the relevance of the trade union movement that even now has little above 10 per cent membership in the Australian private sector.

That is why the decision first in Rossato and now Jamsek are so important to the coming election. There will be a valiant attempt to bury these issues, but Australian industry is speaking with one voice, and it is a voice that is most assuredly not calling for putting our industrial relations system into reverse. Indeed it is the complete opposite. It is pleading for further flexibility in a hopelessly inflexible industrial relations system caused primarily by the botched passage of the Fair Work Act. Little wonder companies seek to arrive at arrangements outside of that Act, given its shortcomings.

I have remarked before that at the outset of the Covid pandemic it was not even lawful under the Fair Work Act to direct an employee to work from home! It is an Act out of touch with where Australia is going as an economy and any attempt by any parliamentarian to legislate around the recent decisions of the High Court should be viewed as a direct attack on our prosperity as a people and as a nation.

Mr Jamsek, it was found, was always a contractor. He and his partnership enjoyed the benefits and the challenges of self employment. As a self employed person myself of nearly 30 years I would have it no other way. It has its ups and it’s downs, but it is quite wrong to prevent those who wish to be self employed to be in any way encumbered from doing so at the whim of a politicians or because of the interests of a trade union.

As a footnote, to demonstrate the complete fairness and independence of the High Court, on the same day that the Jamsek decision was handed down, the court also handed down the decision of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd. This case concerned a 22 year old backpacker who was hired by a labour hire company called Construct. He signed an agreement that meant he could be controlled and directed as to his duties by Construct. His duties were described in this way:

‘For a period of months, he engages in basic labouring tasks; he takes out the bins, cleans workspaces and moves materials. He is not an entrepreneur nor a skilled artisan; he is paid by the hour, and when at work, is told what to do and how to do it.’

Construct said it was merely a seeker of labour and that it supplied these independent contractors to Hanssen, a construction company. The High Court found otherwise. Construct could hire, fire, and direct this man as to exactly what it was that he had to do, and Construct controlled the payroll. He was found to be an employee, principally for the reason that former Justice of the High Court Windeyer said many years ago, ‘that the distinction between an employee and an independent contractor is: “rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own.” ‘.

Australia is a fair country and we disapprove of agreements that say one thing but are called another. Equally however we should be acutely aware that there exist influential  people in our society who seek to turn back time on our already creaking industrial relations system, not as they would suggest for the benefit of Australians, but for self interest.

These decisions by the High Court have brought back some much called for commonsense to an  industrial relations system that on occasion Australians look at and struggle to believe. Don’t let those who would seek to set us back even further have that chance. It would be a travesty for all Australians.

Morry Bailes is Senior Lawyer and Business Advisor to Tindall Gask Bentley Lawyers, past president of the Law Council of Australia, a past president of the Law Society of South Australia and a past office-holder of the state Liberal Party.

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