ZG Operations Australia Pty Ltd v Jamsek

• Jurisdiction: Australia Federal only
• Judge: Gageler,Kiefel CJ,Edelman JJ,Gleeson JJ,Steward JJ,Keane,Gordon
• Judgment Date: 09 February 2022
• Neutral Citation: [2022] HCA 2
• Docket Number: S27/2021
• Year: 2022
• Court: High Court

ZG Operations Australia Pty Ltd & Anor

Appellants

and

Martin Jamsek & Ors

Respondents

[2022] HCA 2

Kiefel CJ, Gageler, Keane, Gordon, Edelman, Steward and Gleeson JJ

S27/2021

HIGH COURT OF AUSTRALIA

Industrial law (Cth) — Nature of employment relationship — Employee or independent contractor — Where respondents previously employed by company as truck drivers — Where respondents agreed to “become contractors” and purchase own trucks — Where each respondent set up partnership with spouse — Where partnerships executed contract with company for provision of delivery services — Where contract provided partnerships to purchase trucks — Where contract provided partnerships be paid by company for delivery services — Whether respondents employees of company.

Words and phrases — “contractual rights and obligations”, “control”, “disparity in bargaining power”, “employee”, “goodwill”, “independent contractor”, “partnership”, “provision of services”, “sham”, “substance and reality”, “totality of the relationship”, “worker”, “written contract”.

Fair Work Act 2009 (Cth), ss 13, 14.

Representation

S J Wood QC and D Ternovski for the appellants (instructed by Agnew Legal)

N C Hutley SC and R S Francois with A D Crossland for the respondents (instructed by Watson Law)

New South Wales Business Chamber Limited appearing as amicus curiae, limited to its written submissions

ORDER

• 1. Appeal allowed.

• 2. Set aside the orders of the Full Court of the Federal Court of Australia made on 16 July 2020.

• 3. The issues raised by the notice of cross-appeal be remitted to the Full Court of the Federal Court of Australia for determination, and the Full Court to otherwise make orders in accordance with the reasons of this Court.

1 Kiefel CJ, Keane and Edelman JJ. Between 1977 and 2017, Mr Jamsek and Mr Whitby 1 (“the respondents”) were engaged as truck drivers by the second appellant's predecessors in business and subsequently by the second appellant itself. That business has undergone several changes of ownership during the period of the respondents' engagements. From the respondents' commencement in 1977 until 1986, the business was owned by Associated Lighting Industries Pty Ltd. The business was transferred in 1986 to Thorn EMI Pty Ltd and again in 1993 to the first appellant, which was then named Thorn Lighting Pty Ltd. Finally, in 2015, there was a corporate restructure by which Thorn Lighting Pty Ltd was renamed ZG Operations Australia Pty Ltd (“ZG Operations”) and responsibility for the sales division of the business, which included the arrangements with the respondents' partnerships, was transferred to the second appellant, ZG Lighting Pty Ltd (“ZG Lighting”). ZG Lighting engaged the partnerships until the date of their termination on 20 January 2017 2. For convenience, the various entities which engaged the respondents and their partnerships will be referred to in these reasons compendiously as “the company”.

2 The respondents were initially engaged as employees of the company and drove trucks provided by the company. However, in late 1985 or early 1986, the company insisted that it would no longer employ the respondents, and would continue to use their services only if they purchased their trucks and entered into contracts to carry goods for the company. The respondents agreed to the new arrangement and each of Mr Jamsek and Mr Whitby set up a partnership with his wife. Those partnerships purchased trucks from the company and executed a written agreement with the company for the provision of delivery services. Thereafter, the respondents made deliveries as requested by the company. Each partnership invoiced the company for the delivery services provided, and was paid by it for those services. Part of the revenue earned was used to meet the partnerships' costs of operating the trucks. The net revenue earned was declared as partnership income and split between husband and wife for the purposes of income tax.

3 The agreement between the partnerships and the company was terminated in 2017. The respondents then commenced proceedings in the Federal Court of Australia seeking declarations in respect of statutory entitlements alleged to be owed to them as employees of the company pursuant to the Fair Work Act

2009 (Cth) (“the FW Act”), the Superannuation Guarantee ( Administration) Act 1992 (Cth) (“the SGA Act”) and the Long Service Leave Act 1955 (NSW) (“the LSL Act”). In the proceedings, a question arose as to whether the respondents were “employees” for the purposes of the FW Act and the SGA Act and/or “workers” for the purposes of the LSL Act

4 The FW Act variously deploys the terms “employee” and “national system employee”, depending on the context. Similarly, the SGA Act applies to an “employee”. The LSL Act relevantly applies to a “worker”, a term which is itself defined by reference to whether the person is “employed”. Subject to one exception, it was not suggested by any party that the meaning of “employee” or “worker” differed in any material respect across the three statutory contexts or that they reflected a departure from the ordinary meaning of employment at common law 3. The exception is s 12(2)-(11) of the SGA Act, which gives an expanded meaning to the terms “employee” and “employer” for the purposes of that Act. The sub-section relevant to the present appeal is s 12(3), to which reference will be made later in these reasons when considering the respondents' notice of cross-appeal.

5 The primary judge (Thawley J) concluded that the respondents were not employees of the company, and instead were independent contractors 4. The Full Court of the Federal Court of Australia (Perram, Wigney and Anderson JJ) allowed the respondents' appeal, holding that the respondents were employees of the company 5.

6 The reasons of the Full Court suffered from two errors of approach. The first was the significant attention devoted by that Court (and indeed the primary judge) to the manner in which the parties actually conducted themselves over the decades of their relationship. That was thought to be necessary because those courts took the view that a proper characterisation of the totality of the relationship required a consideration of how the parties' contract played out in practice. The second was the Full Court's reasoning that the disparity in bargaining power between the parties affected the contract pursuant to which the partnerships were

engaged, so that the “reality” of the relationship between the company and each respondent was one of employment

7 The reasoning of the Full Court cannot be sustained. The respondents were not employed by the company. They were members of partnerships which carried on the business of providing delivery services to the company. The appeal to this Court must be allowed.

8 This appeal was heard together with the appeal in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd6 (“ CFMMEU v Personnel Contracting”). In the present case, as in CFMMEU v Personnel Contracting, there was no suggestion that the contract between the parties was a sham or had been varied or otherwise displaced by conduct of the parties. There was no claim by the respondents to set aside the contract either under statute or pursuant to equitable doctrines such as those relating to unconscionable conduct. In these circumstances, and for the reasons given in CFMMEU v Personnel Contracting, the character of the relationship between the parties in this case was to be determined by reference to the rights and duties created by the written agreement which comprehensively regulated that relationship. The circumstance that entry into the contract between the company and the partnerships may have been brought about by the exercise of superior bargaining power by the company did not alter the meaning and effect of the contract.

9 In addition, as a practical matter of the due administration of justice, the task of raking over the day-to-day workings of a relationship spanning several decades is an exercise not to be undertaken without good reason having regard to the expense to the parties and drain on judicial time involved in such an exercise. The claims made by the respondents in this case did not give rise to an occasion for such an exercise, those claims involving no suggestion that any aspect of the day-to-day performance of the contract superseded the rights and duties established by the contract. That having been said, however, in order to aid an understanding of the reasons of the courts below and of the arguments in this Court, it is desirable to summarise the salient aspects of the history of the dealings between the parties.

The factual background

10 Mr Jamsek and Mr Whitby left high school at 14 and 15 years of age respectively. Neither has any formal qualifications, and both have only ever

worked in jobs requiring manual labour. Both Mr Jamsek and Mr Whitby began working for the company in 1977 and became delivery drivers in 1980. There is no dispute that, at least until late 1985 or early 1986, they were employees of the company 7. During this time, they drove trucks that were provided by the company 8

The 1986 contract

11 In late 1985, aware that the company was planning to move locations, Mr Jamsek and another truck driver approached the company to request a pay rise to compensate them for the additional travel time. The request was rejected. A few weeks later, the company informed all five of its drivers, including Mr Jamsek and Mr Whitby, that it would not offer a pay rise but instead would offer the opportunity for the drivers to “become contractors”, which would involve the drivers purchasing their own trucks. The drivers were told: “If you don't agree to become contractors, we can't guarantee you a job going forward” 9.

12 Each of the company's...