The contract in place between parties identifying a contractual relationship of service (rather than an employment contract ‘of service’) will usually be sufficient subject to the parties’ relationship being consistent, in practice, with the contractual terms.
There is no doubt the High Court rulings earlier this year provided clarity for many about delineating between the employment and independent contractor relationships (ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 and Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1).
A recent case in the Federal Circuit and Family Court has illustrated how those decisions have practical impact.
In Pruessner v Caelli Constructions Pty Ltd [2022] FedCFamC2G 206, Justice McNab found that a relationship between a construction company and a worker, contracting through a company run by his wife and him, was not that of employer/employee but that of principal and contractor.
Mr Pruessner established that he had provided services to Caelli Constructions for many years, both from 2005 to 2008 and then again from 2012 to 2020.
Mr Pruessner argued that notwithstanding that his company invoiced Caelli for the services (at least since 2012), he was in fact an employee of Caelli. Caelli disputed that, claiming that Mr Pruessner was at all times a contractor to the business.
The Court found in favour of Caelli Construction.
There was no written contract in place and therefore the High Court’s guidance did not have direct application in that regard. However, the Court was able to identify what terms were part of the contract that was effectively in place between the parties, and looked at the ‘post-contractual’ conduct to ascertain those terms (citing case law support to enable review of that post-contractual conduct because there was no written contract).
Key factors guiding the Court’s decision in favour of Caelli included that:
- Mr Pruessner invoiced for services provided and sometimes supplies/materials.
- The invoices weren’t always for the same hours each pay period. Rather, in some periods, no payment was invoiced (presumably because services were not provided).
- At times, Mr Pruessner’s son provided some labour for which Mr Pruessner invoiced Caelli. That suggested that personal service of Mr Pruessner was not required and that he could subcontract or resource the work as required.
- Mr Pruessner’s ‘company’ had financial statements and tax arrangements supportive of a business including that expenses were offset against revenue.
- Mr Pruessner was paid through his company (eg. salary) and have superannuation contributed by his company.
- The evidence established that Caelli and Mr Pruessner agreed to the contractual arrangement and did not intend it to be an employment relationship.
Although the case was decided in a construction context, it has broader application to many organisations, including those obtaining consulting services from independent contractors and other service arrangements.
The better protection for an organisation is to ensure that a written contract is in place to clarify the relationship basis and its terms. Failing that, it may be up to the Courts to determine.
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