# LAW-0004 Response

## (a) Classification

Classification: employee

## (b) Controlling approach and leading case

The leading case is **CFMMEU v Personnel Contracting Pty Ltd** [2022] HCA 1 (decided together with **ZG Operations Australia Pty Ltd v Jamsek** [2022] HCA 2). The High Court unanimously abandoned the multi-factor "totality of the relationship" test (the Hollis v Vabu approach of examining the parties' conduct and surrounding circumstances) and replaced it with a **contractual text-first approach**: where the parties have reduced their relationship to a comprehensive, non-sham written contract, the characterisation of the relationship - employee or independent contractor - must be determined by construing the rights and obligations created by that contract alone. Only if the contract is incomplete, ambiguous, or later varied by conduct does it become appropriate to look beyond the four corners of the document. Post-contractual conduct is irrelevant to characterisation; the label the parties choose is not determinative but the contractual substance is.

Applying that approach to the facts in Personnel Contracting: the written contract gave the labour-hire company the right to direct the worker as to what work to do, when, and how; it did not permit the worker to subcontract or substitute; the worker supplied no significant equipment; and the worker had no independent business. Those contractual terms, read as a whole, established the company's right to control the manner of the work - the hallmark of employment - making the worker an employee in law despite the "contractor" label.

The same textual analysis on different contract facts in Jamsek (truck-owner drivers with capital investment and genuine business independence) produced the opposite result: contractors. The divergent outcomes confirm that the test is what the contract objectively establishes, not what the worker looks like in practice.

## (c) One practical consequence for the engaging business

The engaging business (here the labour-hire company) must pay **superannuation guarantee contributions** under the Superannuation Guarantee (Administration) Act 1992 (Cth) on the worker's ordinary time earnings. Superannuation is employer-funded, so misclassifying an employee as a contractor leaves the business exposed to the Superannuation Guarantee Charge (SGC) - the shortfall plus an administration charge plus interest - assessed by the ATO for every quarter in which contributions were not paid. For FY 2025-26, the mandatory SG rate is 11.5%, rising to 12% on 1 July 2025. Depending on the number of workers affected and the period of non-compliance, the aggregate SGC liability can be substantial, and the charge is not deductible (unlike compliant SG contributions).

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**Approach note:** This answer applies the High Court's 2022 text-first characterisation rule from Personnel Contracting and Jamsek to the described facts. The written contract is non-sham and comprehensive, so the analysis begins and ends with what the contract says: direction of work, control of manner, no right of delegation, no independent business, no significant equipment. Those contractual terms establish an employment relationship under Australian law. The consequence identified (SG obligations) is one of several possible correct answers; payroll tax, workers' compensation, annual leave and other NES entitlements under the Fair Work Act 2009 (Cth) would equally follow.