Three rulings said he was an employee. The Full Court said contractor

What happened

Mr Bennett was a close friend of the man who ran the Adelaide branch of EFEX, a technology services company. That branch manager was engaged as a contractor and paid $10,000 a month after sending an invoice. Around January 2018 the company's chief executive met Mr Bennett at Rundle Mall and asked whether he would come on board on the same terms. Mr Bennett replied: "Yes, I am happy with that arrangement."

There was never a written contract. On the advice of an accountant, Mr Bennett set up the Bennett Enterprises Trust and obtained an ABN, and from February 2018 the trust invoiced EFEX each month for $10,000 plus GST. He worked as EFEX's South Australian business development manager, with a company business card, laptop and email address, and used EFEX's sales templates. The trust then paid him $7,000 a month, recorded as "wages".

Nobody tracked his hours, he studied at university and went to the gym during business hours without asking, and he used his own car and phone at his own expense. On three occasions, though, he followed directions from the chief executive, including an instruction to stop working so closely with the branch manager.

In November 2019 EFEX offered him a full-time job on new terms. He said this meant a base salary of $60,000 plus commission, half what he had been receiving. While he was still considering it, the chief executive texted that he was "finishing your current contract arrangement up, effective today".

The claim and three early wins

Mr Bennett applied to the Fair Work Commission for an unfair dismissal remedy. EFEX objected that the Commission had no power to hear the claim because protection from unfair dismissal is only given to employees (s 382 of the Fair Work Act 2009 (Cth)).

Commissioner Hampton found Mr Bennett was an employee, and a Full Bench of the Commission refused EFEX permission to appeal. EFEX then asked the Federal Court to stop the Commission hearing the case. Justice Besanko also found that Mr Bennett was an employee between 1 February 2018 and 8 November 2019. He pointed to the fixed monthly amount paid regardless of sales, the control EFEX exercised, and Mr Bennett's limited ability to work for others or delegate.

The legal test changed mid-case

The Federal Court trial was run under the old "multi-factor" approach, which weighed how the relationship worked in practice. The High Court then decided two cases, Personnel Contracting and Jamsek, just over three months after the trial.

Those decisions say the answer turns on the parties' contract. Where the terms are in a comprehensive written contract that is not a sham, the contract decides the question. Here the contract was wholly oral, so the Court had to work out what had been agreed. It then asked two main questions: how far EFEX had the right to control how, when and where Mr Bennett worked, and whether he was working in his own business or in EFEX's business.

What the Full Court decided

The Full Court allowed EFEX's appeal. It said the earlier judge gave too much weight to occasional exercises of control, such as the required meetings, rather than asking whether EFEX had a contractual right of control. At the same time, he gave too little weight to Mr Bennett's "almost complete freedom" under the arrangement.

The Court said the business cards, email address and job title said little, because a contractor may still present as a representative of the organisation in that way. That he had no time to work for anyone else was also largely neutral.

The most important factor was how he was paid. The payment arrangements were part of the earliest discussions, and he set up the trust before starting work. The Court called them "a design feature of that contract as a core term or condition, albeit not reduced to writing". It concluded that the payment and tax arrangements "alone were a significant basis for displacing the indicia of an employment contract". Mr Bennett was an independent contractor, and the Court ordered that the Commission be prohibited from continuing to hear his claim. There was no order for costs.

Justice Lee agreed. He added that the conduct of the parties after an oral contract is made can still be used to work out what its terms were, and that saying a court must ignore it is "a significant oversimplification".

The law has changed since

This case applied the law as it stood before 26 August 2024. From that date, s 15AA of the Fair Work Act says employee status is decided by the real substance, practical reality and true nature of the relationship, looking at the whole relationship, including how the contract is actually performed. It responds to Personnel Contracting and Jamsek. How Mr Bennett actually worked would now count for more, so a similar case could be argued differently today.

What this means for you

If you are paid by invoice but work like a staff member, the label on the arrangement is not the end of the story. But agreeing from the start to invoice through a trust or company, charge GST and pay your own costs can count heavily against you. It is worth getting advice before agreeing to such a set-up, and quickly if the arrangement ends, because an unfair dismissal application must be lodged within 21 days of the dismissal.

For businesses, the lesson is that contractor arrangements carry risk: EFEX won only after three rulings the other way, and the law has since moved.