Australia: Independent Contractions: The legal Obligation Of A Principal Towards An Independent Contractor

Last Updated: 23 May 2007
Article by Wilson Yap

This article examines the legal obligation of a principal towards an independent contractor the circumstances in which such obligations are said to arise and their extent.

In October 1996, Benjamin Van der Sluice was affixing Christmas decorations to the Pitt Street entrance of Imperial Arcade in Sydney. He had a contract with Display Craft Pty Ltd to install and remove Christmas decorations at various locations in Sydney and had performed this work for Display Craft in previous years - the work was seasonal and particularly busy in the few months leading up to Christmas and thereafter. Display Craft was obviously satisfied with Mr Van der Sluice’s work for the previous two Christmases at the Imperial Arcade and had gone to some considerable trouble to secure his services for 1996 - he was an "expert" in his field. He had a team of workers assisting him with the work. He climbed up a twelve foot ladder belonging to Display Craft, placed his feet on the second rung from the top of the ladder, reached up full stretch with one arm and leant forward to clip a hook into the awning. Unfortunately he fell, sustaining injuries including blindness and brain damage (Van der Sluice v Display Craft Pty Ltd, unreported, NSW CA, 9 July 2002).

The work arrangements described above between Display Craft and Mr Van der Sluice are commonplace. For various legal and commercial reasons, businesses prefer to outsource to independent contractors to carry out specific tasks or to assist with their general operations rather than to employ new employees. Tasks that were once done by their employees are now performed by independent contractors.

Who are Independent Contractors?

Independent contractors, like Mr Van der Sluice, are contracted by the principal and would usually display these characteristics (Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16):

  • they are normally involved in a profession, trade or a distinct calling;
  • they have control over the manner in which they carry out their tasks and how the tasks are carried out;
  • they are free to delegate their tasks;
  • they are free to seek work elsewhere;
  • they set their own hours of work;
  • they provide and maintain their own equipment;
  • they receive remuneration not in the form of fixed salary or wages but in amounts determined by reference to the volume of their tasks without deduction for income tax.

The common law imposes an onerous obligation on an employer to ensure that reasonable care is taken for the safety of its employees (Kondis v State Transport Authority (1984) 154 CLR 672). Such a duty is said to be non-delegable. However, the principal–independent contractor relationship is not one of employer–employee and thus a principal is not under such a onerous duty to persons that are not its employees. Windeyer J in Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 at 217 describes an independent contractor as "a person who carries on a trade or business of his own" and once the manner in which the tasks are carried out is passed to him, the way in which he chooses to deal with any problem is a matter for him and not the principal.

In most cases of "mere hiring" – ie. a principal who does no more than merely outsource the task to the independent contractor – a principal does not owe a duty of care to the independent contractor. However, businesses today are more likely to engage independent contractors to work along side their employees and perhaps other contractors – they no longer fall within strict "mere hiring" cases. It is this matrix of employee and independent contractors on a work site that give rise to a duty of care owed to an independent contractor by his principal.

So I Have an Independent Contractor in the House. What Now?

Whether or not a person owes a duty of care to another and whether or not there is a breach of the duty hinges on the notion of proximity and reasonable foreseeability. Each set of facts giving rise to a principal’s duty of care to his independent contractor will differ from another. Each needs to be examined separately from the others to determine the extent of the duty.

The following are some of the factors that Courts look at to gauge the existence and extent of a principal’s obligations towards its independent contractor:

  • It is not uncommon to find a principal’s operations which involve various activities that are interdependent of each other and so the need to co-ordinate the various activities of the parties concerned will arise. It is quite conceivable that the principal may expose them to the risk of injury if reasonable care is not taken in their organisation. The principal may also be required to give directions to its independent contractor as to when and where the tasks are to be carried out.

In these cases, the principal is obligated to prescribe a safe system of work (Stevens’ case). What is a safe system of work will depend on the facts of each case. This will invariably involve making an assessment of the various activities involved and their risks and devising a safe method to carry out those activities. Industrial consultants and OH&S consultants are mostly engaged today to provide these assessments and advice.

Designing a safe system of work is only the first half of the principal’s obligations. Enforcing and policing the system is usually the practical hurdle that confronts many businesses. At the end of the day, one asks: what good is a system if you do not use it? This is sometimes a demanding obligation for the principal which nevertheless,

  • Certain work may seem risky for the ordinary person, but the risk will be far from obvious for persons experienced in that type of work. A principal does not put an independent contractor who is experienced in his trade in a risky position if the risk is one which the independent contractor will ordinarily encounter in his trade and is accustomed to meeting and safeguarding themselves against.

In these cases, the principal is not obligated to warn the independent contractor of those risks, unless the principal has created a new hazard or increased the risk. The High Court in Papatonakis v Australian Telecommunications Commission (1985) 156 CLR 7 said:

"It is one thing to leave it to an independent contractor to decide for himself how to do his work; it is another thing to leave him in ignorance of a fact that is material to his decision if he, using reasonable care, might not discover that fact

Papatonakis was a case where the occupier had actually created the "hidden" hazard and was therefore obligated to warn the tradesman of the hidden hazard. What if the occupier did not create the hazard himself but was aware that the character of the very thing to be worked on was altered to make it a hazard? And what if the occupier was aware of the alteration but did not know it had become a hazard? The occupier in the first hypothetical is obligated to warn the tradesman if he suspects the existence of the hazard, whereas in the second hypothetical such an obligation arguably arises only if he ought to have known of the hazard.

  • If the hazard could have been easily eliminated or minimised by a simple and effective measure by the principal, then the principal is obligated to undertake that measure, even if the independent contractor is aware of that hazard. In Bus v Sydney County Council (1989) 167 CLR 78 an electrical contractor was electrocuted when he inadvertently came into contact with live electrical equipment owned by the Council. A Council employee had earlier been working on the equipment and had left it uncovered, and only he could replace the cover. The electrical contractor was also working on the same equipment. In finding that the Council employee was obligated to cover the live equipment, Mason CJ, Deane, Dawson and Toohey JJ recited a passage from McLean v Tedman (1984) 155 CLR 306:

"It is not an acceptable answer to assert that an employer has no control over an employee’s negligence or inadvertence. The standard of care of the reasonable man requires him to take account of the possibility of inadvertent and negligent conduct on the part of others. … The possibility that the employee will act inadvertently or without taking reasonable care may give rise to a foreseeable risk of injury."

Although McLean v Tedman was a case between an employee and employer, the Court in Bus did not hesitate to extend the duty to prevent a foreseeable risk of injury by inadvertence or negligence act to the contractor.

  • Where the principal places upon the independent contractor the pressure for work to be done "at great speed", "in a hurry and for extended hours", the principal may be obliged to co-ordinate the activities between the various contractors or employees (Wilke v Astra Pharmaceuticals Pty Ltd [2001] NSWCA 135). It is understandable that undue pressure in unreasonable circumstances would pose a risk to the various activities performed and common sense will dictate the extent of supervision required of those activities.
  • Contractors are invariably engaged to carry out tasks at the principal’s workplace. In these cases, the principal takes on the additional role as an occupier of the workplace and thus owes a duty of care to persons that enter upon the workplace to ensure that they are not harmed by reason of the state of the workplace. Mason J in Kondis’ case noted in passing that the duty of care owed by an occupier to a person coming onto his premises is non-delegable.
  • Where the task required of the independent contractor to perform is simple and uncomplicated, it will be more difficult to see why anyone would employ extraordinary procedures to carry out the task. If the independent contractor is injured by reason of such extraordinary procedures, the principal may escape liability as it would not have reasonably foreseen that the independent contractor might employ such a procedure. In Smith v BHP (1957) 97 CLR 337, a worker was injured when he and a co-worker threw a 100lb wooden case from a roof, and a protruding nail on the case caught his glove and dragged him off the roof. Taylor J said at 343:

"with full knowledge that there were nails protruding from the surface of the box, the [worker and his co-worker] proceeded to launch the case into space after preliminaries that were quite unnecessary but which were calculated to give the case considerable impetus and, at the same time, to introduce some degree of risk. … There was not the slightest reason for employing the extraordinary procedure which was employed nor, it should be said, why the employer should for a moment have contemplated that it would be employed"

Smith’s case is an example of where the task to be performed was a "perfectly simple task" and the principal there escaped liability. Conversely, where the task to be performed is fraught with complexities involving other persons, the principal is arguable obligated to provide the requisite instruction and supervision and perhaps to design a safe system of work.

  • Where the independent contractor has previously performed the very task for the principal successfully and without incident, it can be argued that a principal could not have reasonably foreseen that the independent contractor would be injured by performing the very same task over and over again (Van der Sluice case). It is arguable that the principal may probably escape liability only when the independent contractor is skilled and experienced in the type of work which is repetitive in nature.
  • In the Van der Sluice case, it was held that:

"the fact that the higher up a ladder one moves the more care one must take for one’s own safety is one of those simple facts affecting human existence in the physical world which adults in industrialised societies have learned by the time, or indeed well before the time, they have become adults. It is a fact as fundamental, as elementary, as clear and as well known as, for example, the fact that it is dangerous to behave boisterously near pots cooking on stoves, the fact that broken glass needs to be carefully handled when picked up, the facts that rocks along the seashore can be slippery, the fact that shells in the sand of beaches can be sharp, and the fact that when moving about rubbish dumps one must bear in mind the possibility that rubbish may be lying there. These are matters which no adults need to be told about and which any adult can be trusted to guard against the dangers of because it is part of the equipment of all normal adult human beings. … The assessment of risks in those areas is for the judgment of each normal adult in the light of the particular adult’s capacity".

  • There may be industry-specific obligations that are imposed upon the principal in certain circumstances. These take the form of Acts of Parliament, Regulations, Codes, industry guidelines and Standards. Some are mandatory while the others are voluntary. Some common examples are the Dangerous Goods Act 1985, Road Transport (Dangerous goods) Act 1995, Regulations made under the Occupational Health and Safety Act 1985, Code of Practice for Demolition, Code of Practice for Electrical Installations on Construction Sites, Code of Practice for Manual Handling and Code of Practice for Plant.

In the Van der Sluice case, the independent contractor was unsuccessful in his action against Display Craft mainly because he was an experienced tradesman who had performed the tasks numerous times in the past without any mishaps. It was held that Display Craft could not have reasonably foreseen that he would place himself in such a precarious position on the ladder.

An Afterthought

With the current spotlight over increasing public liability insurance premiums and the inability of some businesses to secure liability insurance, the need has come for businesses to be more aware of their legal obligations towards and the risk management of independent contractors. A safe workplace (for both employees and independent contractors alike) is likely to lead to reduced workplace accidents, and thus reduced claims on insurance policies.

What is clear is that businesses can no longer simply take comfort in the general principle that they not owe a duty of care to its independent contractors. There are exceptions to this general principle. Businesses are certainly entitled to "leave it to the contractors" as the title of this article suggests, but it would be prudent to examine the totality of the work activities at the workplace before doing so.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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