Contractors and Principals beware- do you know the implications of the Independent Contractors Act (2006)?
The first substantive judgement to be handed down under the Independent Contractors Act (2006) (Cth) (The Act) has indicated that contracts between principals and independent contractors will be subject to tighter regulation.
In Keldote Pty Ltd & Ors v Riteway Transport Pty Ltd [2008] FMCA 1167, three truck drivers brought an application under section 12 of the Act on the basis that their contracts were unfair.
The contracts between the truck drivers and their principal, Riteway, included a clause that “the Contract Driver shall supply and keep fully maintained and serviceable a vehicle approved by the Company and subject to the requirements of the Company from time to time.”
In 2007 Riteway advised the truck drivers that they would need to upgrade their trucks, and if they refused then “the last journey they would be required to take would depart on August 23.” Although a slight pay increase was offered, it wasn’t commensurate with the costs the drivers would incur in upgrading their trucks.
Amongst other grounds, the contractors argued that their contracts were unfair because of Riteway’s contractual ability to require them to replace their vehicles without a corresponding requirement that it compensate them for the expense of such an acquisition. They sought to have their contracts re-written, an injunction to stop Riteway from breaching the new terms of the contracts and damages.
Federal Magistrate Cameron concluded that the contractual clause dealing with upgrades was unfair because it could be manipulated to disadvantage the contractors.
He ordered that the contracts be amended to limit Riteway’s power to require the contractors to provide new vehicles. The matter has been re-listed to determine whether the contractors are also entitled to damages.
Interestingly, the contractors also argued that their contracts were unfair because there was no clause that provided for mediation and their remuneration was less than that of an employee performing similar work. These arguments were rejected by the Court.
This case has implications for both independent contractors and principals. Under the Act, independent contractors are able to vary the terms of a contract which are harsh or unfair. This means that principals will have to ensure that the terms of the contract they enter into are fair or they risk having the terms varied by a court.
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