September is ‘cuddle’ month for unions, employers, and the Albanese government. The soirée for the 100-or-so ‘stakeholders’, also known as Labor’s job summit, will discuss matters of high importance. That is, the participants will decide a new fabric of labour laws in which to wrap Australian workers.

High on the discussion list is the vexed question (for some) of what to do with Australia’s 2.2 million self-employed people. These are those worrisome people who are both employer and employee bundled up in one. People who are their own bosses. 

The pressure is on to drag self-employed people into employment regulation. It’s a process that inevitably suppresses the right to be self-employed. It amounts to discrimination against self-employed people. 

Further, as the talkfest discusses the future of self-employed people, typically there won’t be a single self-employed person present. That’s pretty normal. The ‘be your own boss’ gang (17 per cent of the workforce) are not part of the business/union/government establishment and so will have no say in their right to be their own boss. 

However, on February 9 this year, the High Court of Australia threw a huge rock into this comfortable labour establishment pond. What have been assumed to be the settled rules for determining if someone is an employee or self-employed have been binned.

Put simply, the High Court has declared that if a written contract is clear and obvious, then a court should primarily rely on that written contract in deciding if a working relationship is one of employment or independent contracting. 

This simple declaration from Australia’s highest court has sent unions and labour law academics into a spin. They now want Albanese to overturn the High Court’s ruling through legislation. They want the old, complex rules back. The pressure is on.

Over the last 40–50 years, the courts, lawyers, and unions have done battle over employee versus self-employed status by using the ‘multifactorial’ test. This requires the courts to look at a wide variety of behaviours – for example, who has ‘control’, are uniforms required, must a person attend work, who provides equipment, and so on. The written contract is just one factor. The ‘totality’ of the relationship must form the basis of the decision. It’s a complex process. 

The High Court ruling in CFMMEU v Personnel Contracting is 99 pages long. The ruling reads like a tour de force through the Australian history of the last 50 years or so on the employee versus independent contractor issue. All seven judges agree that the written contract, if properly structured, clear, and comprehensive, is the basis upon which a decision must be made. 

The Court said:

‘… where the terms of the parties’ relationship are comprehensively committed to a written contract … there is no reason why the legal rights and obligations so established should not be decisive of the character of the relationship.’

In addition, the High Court declared that this has always been the situation and that lower courts (as well as lawyers and unions) have been operating on a misunderstanding for many decades. Wow! That’s a big statement. 

The High Court explained:

‘…courts have proceeded on an understanding that the approach stated in Chaplin and Narich [a 1983 Privy Council ruling] has been superseded by the adoption of a multifactorial test ….But no decision of this Court [High Court] has ever adopted or endorsed such a departure…’

Further, the High Court reasoned that it has a responsibility to create legal clarity for the community. The hitherto well-used multifactorial test fails because it creates uncertainty. Take these quotations from the judgment:

‘Such a test [the multifactorial] is apt to generate considerable uncertainty, both for parties and for the courts.’

 And

 ‘…It is the task of the courts to promote certainty with respect to a relationship of such fundamental importance.’

Some high-profile labour law academics have described the High Court’s decisions as ‘frightening’. University of Adelaide Professor Andrew Stewart has said, ‘What these judges have said today (February 9) in the clearest and most emphatic terms … when there are contractually agreed terms to establish that relationship, it’s only the terms that matter.’

This is where Labor’s September ‘cuddle session’ will be interesting for self-employed people.

The High Court has created certainty over how the difference between an employee and a self-employed person should be determined. It’s already had an impact, with several major and high-profile lower court decisions declaring workers to be self-employed. This includes a declaration that Deliveroo drivers are self-employed.

The Deliveroo case, in particular, cuts to the core of the unions’ and Labor’s commitment to pull gig workers into the employment net. But after the High Court ruling, drafting legislation will be tricky if Labor is to neuter the High Court declared certainty. But there are models that Labor can use.

In California, a 2020 law has outlawed the use of self-employed people. So you can be self-employed – for example, provide IT consulting services – but you’re effectively banned from having any clients. It’s a trashing of commercial law and contract rights.

The UK, too, is in a mess. It has an old 1980’s law that says that self-employed people must be treated as employees. That is, if you’re an IT contractor, your client cannot pay you your total invoice. They must deduct money from the invoice for holiday pay and sick leave. Then, presumably, they pay you this when you take holidays or are sick. Try this if you’re an IT contractor with, say, ten different clients in a year. What a shambles…

Albanese has a challenge. He can support certainty in the community as the High Court has done. Or he can manipulate legislation to create confusion, uncertainty, and a legal and administrative mess. 

Ken Phillips is Executive Director of Self Employed Australia

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