CFMMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122 - Employee or Independent Contractor?

Thursday 6 August 2020 @ 11.23 a.m. | Industrial Law | Legal Research

A recent case (CFMMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122) heard by the Full Court of the Federal Court of Australia has led two of the justices to criticise the practice of allowing unskilled workers to be paid as contractors at less than industry minimum wages.  However, their Honours concluded they were bound by previous judgments to find the arrangements valid.

The case was an appeal from the Federal Court's decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2019] FCA 1806 to determine whether Daniel McCourt (a 22-year-old from Britain, who came to Australia on a working holiday visa) was an employee of Personnel Contracting (“Personnel”) or an independent contractor retained by Personnel and supplied to Hanssen Pty Ltd.   

Background

The Sydney Morning Herald reports the CFMMEU brought the case on behalf of Mr McCourt who  worked on two construction sites in Perth as a general labourer under the supervision and control of workers of a builder, Hanssen Pty Ltd (“Hanssen”), during 2016 and 2017.

Mr McCourt had eight months experience as a part-time brick-layer whilst in his teens. He obtained a “white card” which enabled him work on construction sites. Looking for work, he contacted a labour hire company, Personnel Contracting ("Personnel") and successfully gained work with Hanssen.

According to the Sydney Morning Herald:

But as a contractor, Mr McCourt was paid at a rate that worked out as being about 25 per cent less than the award, which is the minimum for workers in the construction industry.

That is because Mr McCourt was neither an employee of Hanssen, the building company, or Personnel Contracting, the labour hire company that found him work. Instead, he worked as an "independent contractor", a status that has historically mostly applied to professionals, but is also now often used for labour hire workers and drivers at gig economy companies like Uber."

The Decision

In handing down the decision, Justice Allsop commented at [para 28]:

“The notion that Mr McCourt was an independent contractor when working on the building site and that Hanssen was not liable for his negligence would defy any rational legal principle and common sense. The liability of Hanssen as such cannot turn upon the intricacies of the documentation that Personnel place before people such as Mr McCourt for signing.”

The court, however, concluded it was bound by past rulings which had held independent contracts were valid because companies had relied on their legality.

Comment and Reaction from the Union

The CFFMEU's West Australian Construction State Secretary, Mick Buchan, said Australia's award system was supposed to provide workers with a base level of pay that was fair and dignified. He commented:

“What kind of future are we creating for our kids if our laws are not sufficient to make sure employers are actually required to pay these minimum wages and conditions?”

Odco Contracting

In the judgment, their Honours made reference to the "Odco-style of contracting" [para 30]:

“The particular circumstances of parties involved in disputes over so-called Odco contracts may lead to different conclusions about the characterisation of the relationship between the labour hire company and the would-be worker. The model has entrenched itself into modern industrial relations and employment.”

And further at [para 118]:

“Whatever else may be unclear, what is pellucid is that Construct sought to replicate an ‘Odco’ style arrangement; bifurcating the relationship between the person who supplies their labour from the ultimate end user of that labour, by way of an intermediary labour-hire agency.”

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Sources:

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 (17 July 2020)

'Defy common sense': Court slams below award wage contractor arrangement (Nick Bonyhady, Sydney Morning Herald, 20 July 2020)

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