Legal basis of the ODCO™ Agency Contracting System
High Court/Federal Court
Independent contracting as a system of performing work was tested and upheld by the Federal Court of Australia in the case Odco Pty Ltd v BWIU and Others. The decision was handed down by his honour Justice Woodward on the 24th August 1989. The Building Workers Industrial Union appealed the decision to the High Court of Australia which declined to vary his Honour's decision in 1991.
Federal Commission
In 1999, the Australian Education Union attempted to again litigate the system before the Australian Industrial Relations Commission in a case known as the Kangan - Batman case. The Full Bench of the Australian Commission comprising the President of the Commission, the Vice-president of the Commission and a senior Commissioner unanimously upheld independent contracting as a proper and legal system of performing work.

NSW Commission
(Sheehan and Australian Contracting Solutions. IRC of NSW. 16 July 2001)
Riverina Agency Contracting Services Pty Ltd, trading as Australian Contracting Solutions, (RACS) had an unfair dismissal application made against it in April 2000 by a contractor who was off hired.
The application has been dismissed by the NSW IRC on the grounds that the applicant was not an employee and consequently the IRC had no jurisdiction to hear the case.

The case involved an Odco contractor who had been an employee at a new client of RACS and had chosen to become a contractor. The contractor claimed that he had always believed he was an employee and consequently the IRC had jurisdiction to hear the case.

The commissioner made repeated reference to the Odco judgements and compared the operational practice of RACS to indicia set out in the judgements. The commissioner said,
"There was an "intention" between the parties to create a legal relationship, the terms of which were enforceable; An offer was made by the respondent and after consultation and deliberation, there was an acceptance by the applicant, the consideration being that he calculated that he would be a lot better off financially. In return, his services would enable the respondent to carry on its business as a labour hire agency; The parties were legally capable of making a contract and had genuinely consented to the terms of the contract; and the purpose of the contract was not illegal."
The successful outcome of this case proved again the strong legal standing of Odco.


QLD Industrial Relations Commission
(AWU of employees QLD v Hammonds Pty Ltd & Others)
In a decision dated 15/11/2000 in the Queensland Commission, a Full Bench of that Court comprising President Hall, Commissioner Bloomfield and Commissioner Blades unanimously rejected an application by the QLD Australian Workers Union to have shearers working under the Agency Contracting system deemed to be employees. The key issues looked at by that Full Bench were:

  • Shearers working under the Agency Contracting system were found to be independent contractors.
  • Evidence was that contractors were not worse off.
  • Contractors exercised free choice as to whether they worked under the independent contracting system or as employees.
  • Usage of the Agency Contracting system had a beneficial effect on the industry in terms of quality, flexibility and productivity.
Australian Taxation Office
The Australian Taxation Office has also reviewed the Odco system of contracting and has accommodated it as a legitimate form of performing work. Their recently published booklet "A Guide to PAYG Taxation" issued to every taxpayer last year refers to the system on pages 32 & 33 of the publication. Further, the ATO has approved a class variation, creating a flat taxation rate of 20% for contractors of Odco licensees.

Vicarious Liability
(Deutz Australia Pty Ltd v Skilled Engineering Ltd)
In this case the judge interestingly made references to Odco as a possible but unused defence by the respondent.

The case involved an action for damages by a client of Skilled Engineering against Skilled Engineering for harm done by an employee of Skilled working at a site of the client.
$313,650 was awarded against Skilled.

Skilled had provided forklift drivers under labour hire (employment) arrangements to their client. One forklift driver had been driving through the warehouse with the forklift at full height when the forklift struck overhead beams. A "catastrophic" collapse of shelving followed in which expensive machinery stored on the shelves was extensively damaged. The court found that Skilled had not directly contributed to the accident which had been 85% caused by the negligence of the driver. Skilled accepted that it was the "employer" and consequently was responsible for the actions of the employee.

The court noted that, "Neither in its defence… nor argument… did Skilled contend that… it was not vicariously liable…" Further the court noted an example of a possible defence being "BWIU v Odco, Accident Compensation Commission V Odco Pty Ltd". In effect the court indicated that if Skilled had been operating an Odco style operation they would have had a line of defence against being held vicariously liable for the actions of the worker.

This case again highlights the strengths of the Odco arrangements in that parties are held liable for their actions. Transference of liability does not occur under Odco. However the use of Odco as a defence is only possible if licensees comply with strict operational practice.

Further information can be found on the Odco website at www.odco.com.au

[Home] [Client] [Contractors] [Accountants] [Legal Info] [Company] [Contact] [Links]