Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd
High Court of Australia · 2022
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165
The agreement called him a self-employed contractor. He was a 22-year-old backpacker labouring on someone else's building site. Which document decides what he was?
PARLIAMENT REVERSED THIS FOR FAIR WORK ACT PURPOSES, and the provision says so in terms. Section 15AA of the Fair Work Act 2009 (Cth), in force from 26 August 2024. Sub-section (1): whether an individual is an employee within the ordinary meaning "is to be determined by ascertaining the real substance, practical reality and true nature of the relationship". Sub-section (2)(b): in considering the totality of the relationship, "regard must be had not only to the terms of the contract governing the relationship, but also to other factors relating to the totality of the relationship including, but not limited to, how the contract is performed in practice". And the Note to the section: "This section was enacted as a response to the decisions of the High Court of Australia in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2." So performance in practice, which this case put beyond the inquiry where the contract is comprehensive, is put back in by statute.
TWO LIMITS ON THAT, both of which matter to how this case is used. First, s 15AA(3) excludes Divisions 2A and 2B of Part 1-3, and Part 3-1 to the extent it applies only because of s 30G or 30R -- so the provision does not reach every question under the Act. Second and more important here, s 15AA operates "[f]or the purposes of this Act". It does not touch characterisation at COMMON LAW, which is the question this proposition answers: whether a worker is an employee for the purposes of vicarious liability in tort is still answered by the reasoning in this case. Reading s 15AA as overruling Personnel Contracting generally mistakes its scope. In the other direction, CHECK WHETHER s 15AA APPLIES TO THIS RELATIONSHIP rather than assuming it does: ss 15AB and 15AC let a qualifying individual OPT OUT. Under s 15AB(5) the individual "may give an opt out notice to the person, stating that the individual elects that section 15AA is not to apply to the relationship", subject to an earnings condition -- the person may only invite one where it considers the individual's earnings "exceed the contractor high income threshold" (s 15AB(4)), and the notice must say the individual considers the same (s 15AB(7)). Only one notice may be given per relationship (s 15AB(6)), and s 15AC sets out the effect, including that s 15AA does not apply "unless the opt out notice is revoked".
What happened?
Mr McCourt was a 22-year-old British backpacker with limited work experience who wanted construction work. He signed an Administrative Services Agreement with Construct, a labour-hire company, which described him as a self-employed contractor and required him to co-operate with Construct and its client in all respects in the supply of his labour. Construct assigned him to a building site run by its client, Hanssen. There was no contract at all between Mr McCourt and Hanssen, and Construct paid him for the work he did there.
The question was whether Mr McCourt was Construct's employee, which decided whether the union and he could sue for breach of an award.
What did the Court decide?
The appeal was allowed with costs and the Full Court's order set aside, with a declaration that Mr McCourt was Construct's employee. Four sets of reasons, and six judges to one.
Proposition
What is the principle?
Where the parties have committed their relationship comprehensively to a written contract whose validity is not in dispute, the relationship is characterised by the rights and obligations that contract creates — not by a review of how the work was performed over the whole course of dealings.
Kiefel CJ, Keane and Edelman JJ at [59]: "Where the parties have comprehensively committed the terms of their relationship to a written contract the validity of which is not in dispute, the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract."
The conditions are stated at [43]: the case must be one where the terms "are comprehensively committed to a written contract, the validity of which is not challenged as a sham nor the terms of which otherwise varied, waived or the subject of an estoppel". They are not the whole of the picture. At [41] their Honours are explicit that an employment relationship "will not always be defined exclusively by a contract between the parties", and that it "may be affected by statutory provisions and by awards made under statutes".
And the contract governing does not mean the parties' own description governs. At [63], to say the character of a relationship is determined by the rights and obligations the contract establishes "is distinctly not to say that the 'label' which the parties may have chosen to describe their relationship is determinative of, or even relevant to, that characterisation". Mr McCourt's agreement called him "the Contractor"; the rights and duties it created meant he "was engaged by Construct to serve Construct in its business" ([79]).
What that excludes is the account of how the work unfolded afterwards, not everything outside the page. Gordon J at [175] states the limit: recourse may be had to circumstances "which are objective, which are known to the parties at the time of contracting and which assist in identifying the purpose or object of the contract".
Why does this case matter?
Because of the trap it sets for a familiar habit. What turns on characterisation is substantial — leave, superannuation, unfair dismissal, workers compensation all follow from it — and the instinct in these cases is to assemble everything about how the work was actually done and then argue the balance of it. A party who arrives with that material, and only that material, may find the argument never reaches the question the Court treats as determinative. Where the preparation has to begin is what the Proposition settles.
It is also a lesson in what "not overruled" means. Hollis v Vabu still states the law it stated, and their Honours say at [34] that neither it nor Stevens v Brodribb ever suggested the totality inquiry should "proceed as if the court is running down items on a checklist in order to determine a balance of ticks and crosses". What went was a practice that had grown up around those cases. A student who reads Hollis and stops will apply it the way this Court says it was never meant to be applied.
Exam and application relevance
Ask first whether there is a comprehensive written contract and whether anyone is attacking it. If the answer is yes and no, work from its terms. If the terms are partly oral, or varied, waived, the subject of an estoppel, or challenged as a sham, you are outside [43] — and saying which of those you are in is the first mark. Be careful what follows from being outside it: conduct comes in to establish or affect the contractual rights ([42], [54]), not as a licence to weigh how the job felt. Hollis itself was such a case, its relationship "partly oral and partly in writing" and not "committed comprehensively to a written agreement" ([57]). And check for a statute or award, which [41] says may affect the relationship whatever the contract provides.
Then use the indicia on the contract rather than on the worksite. Control still matters, and at [73] it matters because it "serves to sensitise one to the subservient and dependent nature of the work of the employee" — so ask what right of control the contract gave, not what supervision happened to occur. The "own business/employer's business" dichotomy is useful for the same reason, and their Honours warn at [39] that it "may not be perfect so as to be of universal application for the reason that not all contractors are entrepreneurs".
Never argue from the label. It is not merely non-determinative: at [63] it is not even relevant to the characterisation, because "the opinion of the parties on a matter of law is irrelevant" ([66]). What [66] leaves open is narrower and worth keeping straight — that there may be cases where the parties' descriptive language sheds light on what the contract's rights and duties objectively are. That is using the words to read the contract, not to characterise the relationship.
Check your understanding
A written agreement calls the worker an independent contractor, and on site the company directs every detail of the work. Neither of those facts answers the question. What would you need to know about the agreement before you could?