Employee or Independent Contractor? Consequences for Superannuation
The High Court has recently addressed the approach for determining whether workers are employees or independent contractors,[1] while remitting an important question of whether the workers fall within the expanded definition of employee under the superannuation regime.
In ZG Operations v Jamsek, the High Court found that two truck drivers, each with a partnership and owning their own truck, were independent contractors of the company, and not employees.
Expanded definition of employees under super regime
The drivers, Mr Jamsek and Mr Whitby, raised a cross-appeal in which they contended they fell within the expanded definition of employee under the superannuation guarantee regime.
Section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) expands the common law definition of employee for the purposes of administering the regime and states that:
‘if a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.’
At first instance, the primary judge rejected the contention that Mr Jamsek and Mr Whitby fell within this expanded definition for two reasons:
- the relevant contracts were between the company and the partnerships, and not Mr Jamsek and Mr Whitby as individuals; and
- the contracts were not principally for the labour of the person, but rather were for the provision of substantial equipment as well as labour.
On appeal, the Federal Court determined that Mr Jamsek and Mr Whitby were employees, and as a result did not need to address whether they fell within this expanded definition.
Before the High Court, Mr Jamsek and Mr Whitby in response to the above reasons submitted that section 12(3) only required a person work ‘under’ a contract, not that the person was themselves a party to the contract.
They further contended that while one of the purposes of the contract was the provision of equipment, the contract remained one that was principally for the labour of Mr Jamsek and Mr Whitby.
What now for employers?
The High Court indicated these arguments were not insubstantial. The Court declined to deal with this question, however, noting it would be inappropriate to do so where the Commissioner of Taxation was not party to the proceedings. Accordingly, it remitted this question to the Full Court to answer (following joinder of the Commissioner as a party).
While the expanded definition of employee in section 12(3) has always encompassed the possibility that it could apply to independent contractors, the outcome of this decision may provide further insight for employers on this application. This is an important consideration, as workers engaged as contractors that fall within this definition will impact the employer’s liability for superannuation contributions.
For an analysis of the impact of these decisions on employers from an employment perspective, see our Employment Team’s article here.
For more information about the two cases, or for strategic advice about navigating superannuation liability in relation to contractor/employee issues, contact our team here.
[1] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 available here; ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 available here.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.
