First IR What does the contract say?

02/03/2022

Once again, twice in fact, the High Court has come down on the side of the written word in determining the true relationship of contracting parties. 

Eschewing multifactorial tests or post-engagement behaviour as ways to resolve a dispute over the true character of a relationship, the Court said the focus is to be on the written terms of the contract.

The two cases centred on whether the relationship involved was one of employment or independent contractors. The first involved a company placing a worker with one of its clients, claiming it was merely ‘a finder of labour’. But the Court highlighted that the contract document between the company and the worker included numerous obligations on the worker. And without these the company wouldn’t have had a business, which was in reality, labour hire.

The second involved two truck drivers, previous employees of a company, who, with their spouses as legal partnerships, entered cartage contracts with the company. The company paid the partnerships for a variety of services.

When they later claimed to be employees, the Court disagreed, indicating there was ample evidence in the contracts, and, as it happened, the performance of the contracts subsequently, to hold that they were independent contractors.

The key point the High Court made in these two cases is this: “Where no party seeks to challenge the efficacy of the contract as the charter of the parties' rights and duties, on the basis that it is either a sham or otherwise ineffective under the general law or statute, there is no occasion to seek to deter-mine the character of the parties' relationship by a wide-ranging review of the entire history of the parties' dealings. Such a review is neither necessary nor appropriate because the task of the court is to enforce the parties' rights and obligations, not to form a view as to what a fair adjustment of the parties' rights might require."

In both these cases, the parties had entered into a written contract and then one or other of the parties decided at a later stage that the outcome of their contractual relationship was not to their liking. The Court found that to resolve the issue, the written contracts were clear enough and directly to point in deciding what to do about the dispute.

These decisions do not green-light ‘independent contractor’ status just because a contract uses that term. 

Labels don’t count; it is the essence of the contract that matters. But where the contract is entered freely and openly for a relationship which describes each’s rights and obligations, and a party gets buyer’s regret down the track, then it will be the written words which will matter most. And as these cases show, it cuts both ways.

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