Cropper v Energy Action (Australia) Pty Ltd (No 2) [2025] FCA 663 found that a contractor working for Energy Action, has actually been an employee for over 14 years.

Background

Mr Cropper, after many years working as an analyst, commenced freelance work and set up an ABN and commenced work for various clients. Cropper had a chance encounter with a former colleague, who mentioned that Energy Action might be in need of Cropper’s services. When discussing the terms of engagement for Cropper with Energy Action, conditions included Cropper would be paid an hourly rate and be known as a contractor and provide invoices occasionally. Cropper was also to sign a confidentiality agreement.

Cropper commenced work and kept time records of the time he spent working on these issues. The Court found that the initial months of his engagement with Energy Action were that of a contractor. Cropper engaged in a discussion with Ms Torville, the assistant of the CEO. Cropper asked Ms Torville if it “would be feasible – and simpler for everybody – if he could be added to EAAPL’s payroll”.

Even though no further conversation occurred in relation to adding Cropper to the payroll, Energy Action began providing him with pay advices, which “recorded the withholding of income tax and superannuation contributions”. The advices also listed Cropper’s payment as wages, which appeared to be his invoiced amount less the deductions for tax and super. From February to July 2006, Cropper continued “to request and receive payment for his work in this way”.

Cropper stopped issuing invoices for his work, but continued to keep time records. In December 2006, Cropper had a further meeting to discuss remuneration. Cropper alleged that by this time, he was working approximately 35 hours per week for Energy Action on a fairly consistent basis. Cropper asked that his hourly rate be increased from $50 to $60. The parties agreed that the hourly rate would be increased to $55 from the beginning of 2007, and would increase to $60 per hour on 1 July 2007.

In 2008, Cropper assumed the responsibility for Energy Action’s IT, and he was given the title of Data Management and IT Manager. Energy Action employed an “assistant developer” to work with Cropper and his hourly rate was later raised.

Cropper received performance review documents, which included the start date of employment as 20 January 2006 as well as an “Employee ID”, which Energy Action had at some point assigned to Cropper. On various occasions throughout the engagement, Cropper took both personal and annual leave, however, Cropper was not paid for any of these leave periods. In 2011, Cropper was offered the chance to participate in a public offering of shares in the company.

In 2017, Cropper was asked to provide the dates he began to be “on the payroll” for Energy Action. Later in 2017, Cropper was invited to be a participant in a share plan of Energy Action. After expressing his interest, he was then informed he was not an eligible employee. When Cropper asked why, he was advised that he was not eligible because he was a contractor.

Outcome

The Court stated that there is “no finite test, nor any single factor or combination of factors that is determinative” to deciding if a worker is an employee or a contractor.

There was no dispute that when Cropper first commenced work for Energy Action, the relationship between the parties was one of an independent contractor and principal. The question was whether this relationship “was varied or superseded by other terms at some later point”.

The Court found that in 2006 the relationship changed, however, the evidence of the changes was lacking. Further, “by proposing that his name be added to EAAPL’s “Payroll”, there can be no doubt that Mr Cropper must be understood to have been proposing that he be added to the ranks of EAAPL’s wage – or salary – earning staff and thereby, to alter the basis upon which he had hither to been retained”. Cropper needed to prove that this proposal was accepted. With the employees who could likely provide evidence in this regard not giving evidence, the Court needed to identify whether it could “properly infer that EAAPL agreed to vary or replace the terms upon which Mr Cropper had initially been engaged”.

It was found that someone at Energy Action accepted that Cropper should be placed on the payroll, thereby varying or substituting the contractual basis under which Cropper was retained. The parties entered in a new, or changed the existing, contract in 2006 and the relationship was “one of employer and employee”.

The court made determinations in relation to notice to be afforded to Cropper, finding that although no express written term existed, the reasonable notice would have been 3 months. Since this was not provided, the Court ordered that Energy Action pay Cropper damages.

Lessons:

• A worker’s status can change from independent contractor to employee through a change in an original contract. These factors include a worker being on the payroll, cessation of providing invoices and the ability to participate in incentive programs.
• A number of factors contribute to determining if a worker is a contractor or an employee.

If you would like to discuss these or other workplace issues, please contact Andrew Bland or call 02 9412 3077.