KEY POINTS

• On 9 February 2022, the High Court of Australia (the ‘High Court’) released two judgments that redefine how an employee and contractor are determined under Australian law
• In the past, the court took a ‘multi-factorial’ approach to determining whether a person was an employee or contractor
• Now, the focus is exclusively on the rights and obligations within the written contract
• These changes will have a significant impact on employers and workers in Australia, especially those in the medical industry where ‘handshake’ agreements are often preferred

How is a contractor defined under new law?

Last year, the High Court dealt with the issue of common law employment in detail for the first time in 20 years. In the cases of CFMEU & Anor v Personnel Contracting Pty Ltd [2022] HCA1  Personnel Contracting) and ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors [2022] HCA2 (Jamsek), it was decisively held that the rights and obligations agreed to under written contract determined whether a worker was a contractor or an employee.

Before these rulings, a ‘multi factorial’ approach was adopted by the courts to determine employment or contractor relationships. This approach focused on how both parties conducted their relationship over time, including whether the principal controlled how the work was performed, if the worker had their own equipment and whether the worker was integrated into the business of the principal, or conducted their own.

Contract is king

According to the High Court, the terms of a written agreement between both parties is now the primary consideration. The agreement in question must be a valid and enforceable written contract that comprehensively details the rights and duties of both parties. The conduct of either party should not be considered once the contract is agreed to.

In the absence of such an agreement, the ‘multi-factorial’ approach will be applied.

What does this mean for healthcare practices?

In the medical industry, it is fairly common practice for healthcare practices to form ‘handshake’ agreements in lieu of detailed written contracts. Before the recent High Court rulings, the ‘multi-factorial’ approach went some way to protecting these kinds of agreements, as the actual conduct of the parties over time was the determining test.

Now that written contracts hold precedent over conduct, it is more important than ever for medical practices to have their agreements in writing. If you don’t have one, we recommend speaking with a legal professional to have a contract drawn up. If you do, it may be worth taking time to review the contract to ensure it is sufficiently detailed.

Tips for practice owners

• It’s important for doctors to know if they are an employee or contractor, so they can determine if they require medical indemnity insurance. (Doctors working as independent contractors need medical indemnity cover.)
• Doctors who are employees should still consider whether they need medical indemnity insurance
• Many medical practices prefer contract agreements with doctors to limit liability for super and payroll tax. Practices should consider reviewing existing contracts to ensure they sufficiently characterise their doctors as contractors
• Medical practices should consider being extra concise when engaging doctors on a temporary basis in order to avoid confusion as to their employee or contractor status
• If the contract is between the doctor’s practice entity rather than the doctor personally, the courts are less likely to say they are an employee

Need medical practice insurance?

If you’re looking to secure comprehensive medical practice insurance, we can support you. Our brokers have more than 15 years of experience developing custom medical insurance solutions. We have worked with more than 1,500 medical professionals across Australia and understand how to tailor an insurance solution that matches your unique requirements.

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Disclaimer: This article is for information purposes only and should not be relied on as legal advice.