By Kelly Godfrey

When no clearly worded written contract exists to confirm whether an arrangement is one of employer and employee or an independent contracting arrangement, then disputes can arise about the characterisation of the arrangement.

In 2022, in the decisions of CFMMEU & Anor v Personnel Contracting Pty Ltd (2022) and ZG Operations v Jamsek (2022), the High Court of Australia confirmed that when determining a dispute about the characterisation of an employment or independent contracting arrangement, the terms of the written contract are paramount. In the absence of a written contract, the conduct of the parties needs to be examined.

The Fair Work Commission (FWC) has had to recently examine this issue in the matters of Abdulai Salim v AFA Sheetmetal Components Pty Ltd, Daniel Paragalli (2023) (Salim) and Judith Tozer v The Trustee for the Downie Family Trust (2023) (Tozer), where no written contract existed to outline the agreed arrangements.

In Salim, the FWC, after assessing the available evidence, held that the relationship was one of employment. This was because of the level of control exerted over the work and the fact that Mr Salim was not operating his own business, instead working as part of AFA Sheetmetal Components’ business.

In Tozer, the FWC, after assessing the available evidence, held that the relationship was one of independent contracting. This was because Ms Tozer exercised control over how she undertook the work.

These decisions demonstrate the significant legal risks that arise when arrangements with independent contractors are not confirmed in a written contract. In the absence of a written contract that outlines the arrangement, the court or commission must engage in an expensive and time-consuming exercise of interpreting the relationship, from the available evidence. A clearly worded and comprehensive written contract can considerably reduce these risks.