Don’t Get Caught Out: The High Court's Warning on "Contractor" Labels

How a young backpacker exposed a major flaw in business employment practices

(2 min reading)

In a landmark 2022 decision, the High Court of Australia issued a wake-up call to all employers: calling someone an "independent contractor" does not make it true - and if you get it wrong, it could cost you dearly.

The case of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 began with a British backpacker named Mr McCourt, who was hired by a labour-hire company called Construct to perform basic construction work. He wore a high-vis vest, took out bins, cleaned sites, and followed the instructions of site supervisors. The work was straightforward and manual.

Construct had him sign a contract labelling him a "self-employed contractor". But in reality, he worked under direction, had no say in his tasks, and was paid hourly. He had no separate business, no clients of his own, and no entrepreneurial role.

At first, lower courts sided with Construct, pointing to the contract label. But the High Court saw through it.

They ruled that Mr McCourt was, in fact, an employee.

Why? Because employment isn't about the label - it’s about substance. What mattered was who controlled the work, who paid him, and whether he was truly operating his own business. He wasn’t. Construct directed where he went and how he worked. The company paid him. He was serving their business, not his own.

The Big Lesson for Business

If you're hiring staff, even casually or via a third-party arrangement, ask yourself: do they truly run their own business, or are they part of yours? If they’re under your control, using your systems, and not taking commercial risks, they are likely employees in the eyes of the law.

Misclassifying workers can lead to serious legal and financial consequences, unpaid wages, superannuation, leave entitlements, and even penalties.

The High Court has now made it clear: the courts will look past contract wording and examine the reality of the working relationship.

Stay in control. Stay compliant. Avoid getting yourself into legal trouble by making sure your staffing arrangements reflect the true nature of the work and the relationship.

Full judgment available at: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2022/1.html

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.