Recent developments have shaken the employer/employee relationship
by Steven Amendola, Partner, employer law firm Kingston Reid
The work contract is back. The recent High Court decision handed down in the Jamsek case and its Workpac decision last year provide a refreshing reset on how to assess whether a person is a contractor or employee – in the process giving companies far greater certainty.
What the two decisions (Jamsek stated when a contractor is a contractor and Workpac defined when a casual employee is a causal employee) did was to confirm the primacy of a valid, enforceable contract and restated the unexceptional proposition that the only legal basis of an employment relationship is the contract. The majority in Jamsek went on to say that an employment relationship is not a psychological or social construct, like friendship, and that the legal basis of the employment relationship was the contract.
Contrary to what many have said in the wake of the Jamsek decision, historically this was the orthodoxy before the High Court’s decision in Byrne & Frew v Australian Airlines in 1995 involving baggage handlers when it said that there was something called an employment relationship that was separate from the contract of employment.
In retrospect, what that 1995 decision did by decoupling the employment relationship from the contract of employment was to result in the contract being diminished as a basis for determining the status of whether someone was an employee or contractor.
In my opinion, it also led to the retrospective determination of the relationship. By this I mean that after the relationship ended, an employee or contractor looked back to claim a different work relationship. That approach, which had been adopted by the courts, was quaintly described as “obscurantism” by the High Court in Workpac.
It could have gone further because the result was to encourage cases, where what was sought was, in effect, double dipping – where the employee or contractor accepts the circumstances and whatever advantages are involved and then, like Oliver in Oliver Twist, holds out their bowl and says, “Please Sir, can I have some more”. Workpac and Jamsek are examples of attempts to double dip which, with all due respect, are hardly fair.
That obscurantism gave rise to great uncertainty and for employers it was like playing hopscotch in a minefield. It meant they could never be certain that an employment contract, no matter its legal validity, would be upheld.
As a result of Workpac and Jamsek, greater certainty has been returned because the contract is the primary thing to which you look. Those decisions have led to criticism, particularly by labour law academics, asserting that the High Court was saying you only look at the contract and ignore the reality. That is a misrepresentation of what the High Court said. The majority in Jamsek said:
“Where parties have comprehensively committed the terms of their relationship to a written contract, the efficiency of which is not challenged on the basis that it is a sham….The characterisation of that relationship as one of employment or otherwise must proceed by reference to the rights and obligations of the parties under that contract… a wide ranging review of the parties subsequent conduct is unnecessary and inappropriate.”
In other words where the efficacy of the contract is not challenged as a sham and sets out the terms of the relationship, then the contract is the reality, and the reality is that contract.
The other reaction to Workpac and Jamsek is that legislative intervention is required to prescribe statutory minima for workers to provide job security. How doing that provides job security mystifies me. Setting out minimum standards in legislation does not provide job security. It may provide many things, but job security is not one of them.
The only type of legislative provisions that provide job security are provisions that say an employer can never terminate a contract of employment once entered into, or a contract for the provision of services cannot be brought to an end by a principal once it is entered into. Any such provisions would be completely untenable.
The only situation that is likely to bring about a level of job security is one of economic prosperity, where companies are prepared to invest in people and businesses, and, as a result, everyone is a winner. Otherwise beware the delusion of the term “job security”. Job security is not enhanced by making a complicated system more complicated and job security is not diminished by the existence of comprehensive terms and conditions in a written contract, whose efficacy is not impugned. Those who assert otherwise need to get over it.
