Labour hire workers: contractors or employees?

A Full Federal Court recently considered the current case authority to determine whether a worker is a contractor or employee in the context of labour hire arrangements. Chief Justice Allsop, in an apparent reluctant decision finding that the worker was an independent contractor, commented that it was not appropriate for an intermediate court of appeal to depart from the current approach, despite its limitations.


The case of CFMEU v Personnel Contracting  was an appeal by the CFMEU against a Federal Court decision that found the workers were independent contractors as set out in the service agreement signed by the parties. The case involved a 22-year-old backpacker who approached the company looking for work as a builder’s labourer. The worker had no tools and no busines of his own, the facts establishing that he was simply seeking to be paid in return for his labour. At the request of the company, the worker signed a standard contract provided to him and he thereafter was told where and when to work.


While the Full Federal Court ultimately dismissed the appeal, affirming the Federal Court decision that the worker was an independent contractor, Chief Justice Allsop stated that “unconstrained by authority I would favour an approach which viewed the relationship between [him] and Personnel as that of casual employment.”

The Court considered the current approach to characterisation of a working relationship to determine whether or not employment protections should apply. Justice Lee commented on the need to assess the “totality of the relationship”, and the inconsistent approach in undertaking that assessment that has resulted from the absence of any exhaustive list of factors to consider, meaning that “courts can apply the same legal test to similar facts, but reach a different conclusion”. Justice Lee further stated that “to approach the contractual characterisation as some type of ‘tie breaker’, distracts from standing back and engaging in a ‘considered, qualitative appreciation of the whole’”.

For now the Full Federal Court did not see a valid reason to depart from the current authority, which is that “at least two intermediate appellate courts have found that an unskilled worker can be validly categorised as an independent contractor under an Odco style arrangement.” The Judges agreed that the present case raised important questions about labour hire arrangements and suggested that this type of tripartite arrangement may not continue to provide companies with a method of outsourcing their labour force thereby avoiding the characterisation of an employment relationship.

Lessons for Employers

The case provides a “watch this space” alert for employers engagaing workers through labour hire arrangements. While currently the case has confirmed the labour hire agreement as a valid contract evidencing the independent contractor arrangement, the Full Federal Court has flagged that this is an issue that is appropriate for further consideration.

We will continue to monitor any developments in this area and provide further commentary should there be any changes to the law around labour hire arrangements.

If you require any assistance please get in contact with us on 02 9412 3077 or email [email protected]




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