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In what is thought to be the first substantive judgment under the Independent Contractors Act, the Federal Magistrates Court has today found that it was unfair for a principal to require that three independent contractor owner-drivers substantially upgrade the truck they were obliged to provide.
Riteway Transport Pty Ltd in early 2007 told the three owner-drivers, who were the “core” of the company’s Sydney to Melbourne line-haul operations, that they would have to replace their single trailers with new B-doubles.
If they declined, Riteway said their last journeys would depart on August 23 last year.
It offered them a little more than $200 extra per trip for the additional costs associated with the new trailers, an amount the drivers believed was less than the increased costs.
The drivers – who operated as Keldote Pty Ltd, L&D Lowe Transport Pty Ltd and Tambo Waters Pty Ltd and had up to 24 years as contactors to Riteway – tried to negotiate on the demand, but were unsuccessful, so the drivers initiated action under the Independent Contractors Act, alleging their contracts were harsh and unfair under s12.
Portions of the 1998 Riteway-TWU agreement operated as the contract between the parties, along with other unwritten contractual terms that covered availability for regular work, payments for each run, fuel subsidies, accommodation and start and finish times.
Federal Magistrate Robert Cameron accepted that the court had the power to deal with the applications even though the contracts were no longer “on foot”.
He found that the company was intransigent on price and that this showed the contracts permitted it to act unilaterally. This wasn’t fair and didn’t provide a proper balance of “advantage and disadvantage” between the parties, he said.
The terms of the contract allowed Riteway to “manipulate” the [drivers] into severing their relationship with it.
“It could require the acquisition of expensive vehicles reasonably required for its business, but fail to raise contract rates commensurately and thereby put the [drivers] in a position where they had no alternative but to find other work”, he said.
He concluded that the contracts were unfair “because they permitted Riteway to require the [drivers] to renew their vehicles with replacements where were materially different from the vehicles which had previously been acceptable, and did not require Riteway to make a commensurate increase in payments to the [drivers] such that the necessary additional expenses would be offset by such increased payments”.
In his order, Federal Magistrate Cameron amended the contract to limit the principals’ power to require the subcontractors to provide new vehicles. Under the amended contract, the company can only require new vehicles “having specifications reasonably equivalent to the vehicle to be replaced”.
He will now re-list the case to determine damages and other remedies.
Turner Freeman Lawyers’ David Taylor, who represented the drivers, told Workplace Express that the court had tried to deal with the difficult independent contractors' legislation and had managed to utilise it to provide a beneficial outcome for the drivers, who had been treated poorly by Riteway.
Keldote Pty Ltd & Ors v Riteway Transport Pty Ltd [2008] FMCA 1167 (22 August 2008) 
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Source: Workplace Express bulletin 22 August 2008
In the first prosecution under the unfair contracts provisions of the Independent Contractors Act, Federal Magistrate Cameron found the contract at the centre of the Riteway judgement unfair on the basis that it did not provide a proper balance of advantage and disadvantage. In a follow-up decision however, Cameron stated that he had denied Riteway natural justice in making the order on the basis that while the drivers had sought orders compensating them for the cost of new equipment, the order made was to vary the contract to limit Riteway's power to require upgrades. Cameron accepted Riteway's argument that they may have made different submissions had they known the nature of the order being considered by Cameron.
On 5 May 2009 FM Cameron issued revised orders. The Riteway-TWU agreement will be reworded as follows: "Where the requirement to update a vehicle results in, or is likely to result in, an increase in the Contract Driver’s operating expenses, that requirement will be subject to, and unenforceable in the absence of, agreement between the Company and the Contract Driver on a trip rate to be applicable to the use of the new vehicle."
The variation will take effect "as from the time when the contract was made" confirming that the Court can make such orders with retrospectivity. It also confirms that the Court has jurisdiction to review contracts which are not on foot at the time the application for review is filed, and establishes the principle that contract variations should not go beyond what is necessary to remedy the unfairness identified. The claim for severance payments in the NSW IR Court will remain on hold until the Federal Magistrates Court decides on damages.
http://www.austlii.edu.au/au/cases/cth/FMCA/2009/319.html.