Contractor v Employee Characterisation in Verbal Agreements

In EFEX Group Pty Ltd v Bennett [2024] FCAFC 35 a decision that a verbal contracting arrangement for a business development manager was held to be an employee/employer arrangement was overturned. As this was a verbal arrangement the terms of the contract had to be deduced as follows:

“in the absence of a written contract, the established principles of inferring a contract from the acts and conduct of parties (as well as in the absence of their words), come into play, and such conduct may be considered not only for the purpose of inferring whether a binding agreement had been reached at some point in time, but also for the purpose of identifying its necessary terms”

What followed was a review of the elements of the relationship and engagement to reach a conclusion as to its characterisation.

The court on appeal reached a different conclusion to the primary judge stating:

“the primary judge gave too much weight to factors emerging from the way the contract was performed that evidenced only a limited degree of exercise of control”

The court found that the combined effects of:

(a) the taxation and remuneration arrangements (monthly invoices to a Trust arrangement);

(b) the limited right of contractual control (the contractor had sales targets but could deliver them however he saw fit);

(c) the ability to work when and where the contractor chose (he worked very flexibly within the constraints of a full-time load);

(d) the use of his own car and telephone (crucial as tools for sales work);

(e) the absence of a prohibition on delegating; and

(f) the absence of leave provisions,

all pointed to the conclusion that the respondent was an independent contractor.

We note that the initial verbal agreement was for a contractor role. The respondent initially sought characterisation as an employee for the purposes of an unfair dismissal claim. The result on appeal was that the contractor was unable to pursue the unfair dismissal claim as he was not an employee and therefore lacked jurisdiction.

Takeaways: Always have a written agreement to avoid disputes – the High Court has held that the obligations established by a written contract are decisive in characterising the legal relationship.