‘Ducks and roosters’ The High Court on the distinction between an employee and an independent contractor

WRITTEN BY John Wilson & Kieran Pender

“The parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.” Michael Black QC

What is meant by ‘employee’ and ‘contractor’ has changed over the years as the nature of work has evolved. John Wilson and Kieran Pender discuss the complexities of this distinction in light of two recent High Court cases.

For almost two centuries, the binary distinction between employees and independent contractors has been a central feature of employment law in Australia (and its predecessor colonial states). This longevity masks evolution and complexity — in that time, what is meant by employee and contractor has changed as the nature of work in the modern world evolved. Distinguishing between the two forms of contractual engagement was never straightforward, as consistent litigation over decades made clear.

In February, the High Court of Australia provided clarity in two cases decided in parallel. In Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd v Jamsek, the High Court revised the approach for determining whether a worker is an employee or independent contractor. These cases are the Court’s most significant employment law judgments in some time; their implications will reverberate in sectors across the country for years to come.

The plurality decisions, which reflect a conservative, black letter approach, are notably business-friendly. Despite the union winning on the facts in Personnel, the new jurisprudence will make it easier for organisations to engage labour as independent contractors, rather than employees, and thereby avoid employment entitlements. The decisions have therefore caused much furore; Labor has signalled its intent to consider legislative intervention if successful at the forthcoming federal election.

It is not our intent here to canvass those deeply-politicised debates. Instead, we will undertake a more limited task: a case note on the High Court’s decisions in Personnel and Jamsek, focusing on the plurality judgment of Kiefel CJ, Keane and Edelman JJ (with Gordon J and Steward J largely agreeing), and the alternative approach proposed by Gageler and Gleeson JJ. We will then offer some brief reflections on the ramifications of these judgments for those who engage labour (whether as employees or contractors).


In Personnel, the contractual relationship in dispute arose between Daniel McCourt and Construct, a labour hire company in Perth. McCourt was a 22-year-old British backpacker when he applied for a role with Construct in 2016. He was offered a position on the spot — to undertake unskilled manual labour at a construction site. McCourt was given an Administrative Services Agreement to sign, which described him as a ‘self-employed contractor’ (he did not have an ABN). He then worked, for several periods over the course of a year, for a client of Construct’s, under the supervision and direction of the client.

This triangular labour hire arrangement, known as the Odco model after an earlier case that upheld its validity, sought to avoid any direct control by Construct over McCourt. Without such control, under prior law it was difficult to establish that the relationship was one of employment, notwithstanding that it could not be said that a 22-year-old backpacker was engaged in their own business or enterprise. Nonetheless, McCourt and his union, the CFMMEU, sued Construct seeking employment entitlements.

They were unsuccessful at first instance, and on appeal, albeit the Full Federal Court expressed reservations about the soundness of existing law. The dispute went to the High Court. It was heard in parallel with Jamsek. In that case, two truck drivers had been employed by a company for nine years from 1977. In the mid-1980s, the company indicated to the employees that it would no longer employ them and only continue to engage their services ‘if they purchased their trucks and entered into contracts to carry goods for the company.’ They did so, and continued this contractor relationship with the company until 2017, when it was terminated. They then commenced proceedings in the Federal Court seeking employment and other entitlements. They failed at first instance, but succeeded on appeal.10 The putative employer then appealed to the High Court.

Both cases raised the question of the correct approach for determining whether an individual worker is
an employee or an independent contractor.

The extant methodology had been to apply a ‘multifactor test’, requiring courts ‘to weigh and balance a range of relevant factors’. These ranged from the abstract to the banal —did the worker generate individual goodwill, could they subcontract the services, were they required to wear a company uniform? The totality of the relationship was relevant — not just as it was described in the contract(hence the famous duck/rooster quip), but also how the relationship was carried out in reality. It was ultimately an evaluative judgment: ‘No one factor is determinative in every case’

Plurality approach

In Personnel and Jamsek, the plurality overhauled the relevant test. Preferencing an exclusive focus on the nature of the contractual arrangement between the parties, rather than the relationship in fact, they narrowed the scope of the permissible inquiry.

In Personnel, their Honours found that, on this new approach, McCout was in law an employee; in Jamsek, in contrast, they found that the two truck drivers were contractors. They reached both conclusions with an emphasis on the nature of the contract between the workers and the organisations engaging them, rather than the relationship that existed subsequent to the conclusion of the contractual arrangement.

Justifying this approach, Kiefel CJ, Keane and Edelman JJ observed:

In cases such as the present, where the terms of the parties’ relationship are comprehensively committed to a written contract … there is no reason why the legal rights and obligations so established should not be decisive of the character of the relationship. Not only is there no reason why, subject to statutory provisions or awards, established legal rights and obligations in a contract that is entirely in writing should not exclusively determine the relationship between the parties but there is every reason why they should. The “only kinds of rights with which courts of justice are concerned are legal rights”. The employment relationship with which the common law is concerned must be a legal relationship. It is not a social or psychological concept like friendship. There is nothing artificial about limiting the consideration of legal relationships to legal concepts such as rights and duties. By contrast, there is nothing of concern to the law that would require treating the relationship between the parties as affected by circumstances, facts, or occurrences that otherwise have no bearing upon legal rights.

Underscoring the importance of providing certainty and the freedom of parties to contract as they see
fit, they concluded that in cases involving an unchallenged written contract, ‘the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract.’ Indeed, their Honours added, a ‘wide-ranging review of the entire history of the parties’ dealings’ is ‘neither necessary nor appropriate’.

In Personnel, this contractual lens led to a focus on the control afforded to Construct under the services agreement over McCourt, notwithstanding that at a day to day level, he worked for a client of Construct’s, not Construct itself. ‘In these circumstances, it is impossible to conclude other than that Mr McCourt’s work was dependent upon, and subservient to, Construct’s business,’ their Honours concluded. As such, he was an employee.

In Jamsek, the plurality focused on the contract being between the company and partnerships set up by the truck drivers. Notwithstanding evidence that the partnerships were mere legal devices, and the actual service provision was undertaken by the individual drivers, the use of the partnership — and the fact that the contract was between the partnership and the contracting company — was determinative.

The partnerships contracted with the company and invoiced the company for delivery services provided by the operation of the trucks. The partnerships earned income from the company, incurred expenses associated with the ownership and operation of the trucks, and took advantage of tax benefits of the structure. It is not possible to square the contention that the respondents were not conducting a business of their own as partners with the circumstance that, for many years, they enjoyed the advantages of splitting the income generated by the business conducted by the partnerships with their fellow partners.

Alternative approach

Despite concurring as to the result in both cases, Gageler and Gleeson JJ in a joint judgment set out an alternative approach, with greater focus on the nature of the relationship in reality, in effect upholding the extant multi-factor approach. Although the plurality approach is ascendant, the forthcoming retirement of Kiefel CJ and Keane J means that the alternative approach deserves consideration; it is not impossible that future litigation, with two new members of the court, could see it adopted by a majority. The approach also highlights some of the limitations with the plurality approach. (We will for present purposes focus on their Honours’ reasons in Personnel).

Gageler and Gleeson JJ set out a three-phase analytical approach for their reasons.

The first stage involves examining the nature of a relationship of employment at common law — the critical point being that it is a relationship which exists in fact. The second stage involves identifying the scope of the inquiry to be undertaken to determine whether a relationship that exists in fact is a relationship of that nature – the critical point being that it involves looking beyond contractual terms to contractual performance. The final stage involves examining the relationship that existed in fact between Mr McCourt and Construct during the periods during which Construct made the labour of Mr McCourt available to Hanssen.

The repeated reference to what exists ‘in fact’, not only in law, represents the primary contrast with the plurality approach.

Rather than focus solely on the employment contract, Gageler and Gleeson JJ distinguished between the contract and the employment relationship — the latter being ‘established and maintained “within” the contractual relationship’ but not limited to it. Once that distinction is accepted — that the contractual relationship and the employment relationship are related but distinct — it followed for their Honours that the multi-factor assessment of the totality of the relationship was determinative. Responding to the criticism of this approach, they offered:

Undoubtedly, the approach the common law has up till now developed will admit of results that are contestable in a marginal case. That is in the nature of any legal criterion application of which turns on evaluative judgment. Here, it is a tolerable incident of the common law’s sensitivity to the diversity and vagaries of lived experience.

The relationship, established but not subsumed by the contract, was necessary to be considered — beyond solely the words of the contract — because ‘focusing exclusively on the terms of the contract loses sight of the purpose for which the characterisation is undertaken. That purpose is to characterise the relationship. ’Their Honours noted, pointedly, that this wider-ranging inquiry was particularly important in cases involving: a standard form written contract couched in language that might arguably have been chosen by the putative employer to dress up the relationship to be established and maintained as something somewhat different from what it might turn out to be.

Accordingly, in marked contrast to the plurality, Gageler and Gleeson JJ proceeded to consider the substance of the relationship between McCourt and Construct, and not just its legal form in the services agreement. They concluded, in agreement with the plurality, that it was a relationship of employment.


The primary consequence of these cases is that engagers of labour have greater certainty in using contractors rather than employees. While it is unlawful to directly move an employee to a contractor relationship — such that any change will not be an overnight phenomenon — we would expect to see further growth in the use of contractors in the years ahead.

With this will come diminution in employment entitlements for individuals who would, on the multifactor test, be considered employees, but will now be characterised at law as contractors. We would anticipate that, in the short-term, engagers of labour will seek to have contracts redrafted to reflect Personnel and Jamsek and ensure maximum possible certainty.

The focus of litigation will now shift from arguments over the multifactor test to the exceptions set out by the plurality in Personnel. Kiefel CJ, Keane and Edelman JJ noted:

In cases such as the present, where the terms of the parties’ relationship are comprehensively committed to a written contract, the validity of which is not challenged as a sham nor the terms of which otherwise varied, waived or the subject of an estoppel, there is no reason why the legal rights and obligations so established should not be decisive of the character of the relationship.

Accordingly, the focus will shift to arguments about whether the agreement is a sham or one of the other accepted categories in contract law, whereby courts can go behind the terms of the written agreement to consider the wider relationship.

Ultimately, the High Court has not quite repudiated Michael Black QC’s famous submission in Re Porter about ducks and roosters. It remains the case that the parties cannot insist, through the use of labels alone, that a rooster is a duck. Instead, the consequence of Personnel and Jamsek is that provided the nature of the relationship in the contract
is duck-like, it will not matter if the relationship starts crowing subsequently (unless it is a sham).

That is not quite as radical as some early critics of the decisions suggested. But it does raise fundamental questions about the protective purpose of Australian employment law and the power imbalance in most employment-like relationships.

We anticipate that ducks and roosters of Australian labour law, as reshaped by the High Court in February, will continue to be a matter for debate and litigation in the years ahead.

This article was written by John Wilson and Kieran Pender for Ethos, Law Society of the ACT Journal.

For all employment related queries or concerns, please contact our Employment Law & Investigations team at BAL Lawyers.

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