Employee or contractor in the fair work system?

These extracts from a recent appeal decision in the Fair Work Commission constitute a sound explanation of the current state of the law in Australia about the distinction between a relationship of employer and employee and that of principal and agent (or as sometimes expressed principal and contractor)

.“Applicable Principles – Employee or Contractor

[13]    At first instance (and on appeal) the Appellant argued that the multifactorial test was to be applied to determine whether he worked for the Respondent as an employee or independent contractor. The Deputy President did not proceed on that basis. Instead, the Deputy President referred to the High Court decisions in CFMMEU & Anor v Personnel Contracting Pty Ltd8 (Personnel) and ZG Operations Australia Pty Ltd & Anor v Jamsek and Ors9 and correctly observed that the legal relationship between the parties is to be determined by reference to the rights and obligations created by any contract that they have made, not by reference to their subsequent conduct.10 He then observed, again correctly, that those cases involved situations where there were comprehensive written contracts. The Deputy President concluded that in this case there was no written contract and, citing a recent decision of the Commission, said that his task in that event was to ascertain the terms of the contract by making factual findings from which oral terms, and terms implied by fact, could be ascertained………………………………………….

Consideration

[18]    The Appellant’s efforts to argue that the Deputy President erred by placing reliance on the decision in Personnel is misconceived. Whilst it is true to say that the Court in Personnel was concerned with the terms of a contract that had been comprehensively committed to writing, it is equally clear that the relevant exercise involves the ascertainment of the terms of the contract, whether those terms be wholly in writing or otherwise, and an assessment of the legal rights and obligations created by those terms to determine the true nature of the relationship.

 

[19]    In Secretary, Attorney General’s Department v. O’Dwyer16 the Federal Court addressed the point as follows:

 

‘29.  … the appeal turns on whether the approach to be taken to determining whether an employment relationship has been created as explained in Personnel Contracting and Jamsek is limited to written contracts or extends to oral contracts (as in the present case) or to contracts which are partly written and partly oral. In my view, the approach taken in Personnel Contracting and Jamsek also applies where there is no wholly written contract, for the following reasons.

 

  1. First, the foundational reasoning of the plurality in each of Personnel Contracting and Jamsek

(Kiefel CJ, Keane and Edelman JJ) is that the focus of the inquiry is upon the legal rights and obligations

 

 

 

 

created by the contractual relationship between the parties, rather than upon the history of the relationship between them (including the manner of performance of the contract).

 

  1. Secondly, in the context of that foundational reasoning, there is no reason to distinguish between wholly written contracts and other contracts. This is so despite there being greater scope in the case of oral contracts for subsequent events to be considered as part of the process of identification of the terms agreed between the parties (see Personnel Contracting at 130-131 [177], 132-133 [183], 134-135 [188]

and 135 [190] per Gordon J).

 

  1. Thirdly, in Personnel Contracting at 108 [57], the plurality noted that Hollis involved a contract that was partly oral and partly in writing and approved an observation that Hollis “does not alter or even challenge the orthodox principle that courts are not concerned with what has ‘actually occurred’ in a relationship, but rather with ‘the obligations by which the parties [are] bound'”. See also Gordon J at 135 [190]. Further, at 108 [59], the plurality stated that a reason why a wide-ranging review of the entire history of the parties’ dealings is unnecessary and inappropriate is that the task of the court is to enforce the parties’ rights and obligations, not to form a view as to what a fair adjustment of those rights might require. These observations apply with equal force to contracts which are not wholly in writing.

 

  1. Thus, the fundamental task – the ascertainment and construction of the terms of the legal rights and obligations of the parties, rather than an assessment of the history of the relationship between the parties throughout the life of the contract, including the manner of performance of the contract – remains the same regardless of the form of the contract in question.’17

 

[20]    The Commission has accepted this approach in circumstances where the terms of the contract are wholly oral. In Muller v Timbecon Pty Ltd18 the Full Bench endorsed the approach taken at first instance by the Commission to post-contractual conduct and said that such conduct may be relevant to the ascertainment of the terms of an oral contract but not for the purpose of adding to or subtracting from those terms. The Bench said the latter would amount to a reversion to the multi-factorial test focusing on indicia of employment as opposed to a consideration of the rights under the contract as it was formed.19

 

[21]    The contention that the contract in question was a ‘sham’ was not developed by the Appellant at the hearing of the appeal. A submission was made that the arrangement followed an employment model, save for the invoicing.20 We view the submission as being to the effect that the true legal nature of the relationship between the parties was that of employer and employee, not that the contractual arrangements were a sham in the sense discussed in Personnel. Gordon J in Personnel discussed the circumstances in which subsequent conduct might be used, including in the case of a sham arrangement which was described as a contract that ‘was brought into existence as “a mere piece of machinery” to serve some purpose other than that of constituting the whole of the arrangement’.21 The plurality referred to the decision in Neale v Atlas Products (Vic) Pty Ltd22 where the Court considered the circumstances in which a contract might be considered a sham and concluded that the terms of the written agreement should not be ignored unless ‘the evidence establishes quite clearly that the conduct of the parties was inconsistent with it as the basis of their relationship.’23 In this case the legal obligations created by the terms of the contract were not seriously challenged and the evidence does not support a conclusion that the validity of the contract itself was vitiated by the conduct of the parties such that the arrangement could be considered a ‘sham’ in the relevant sense. We find there was no error as alleged in the grounds summarised at points (i) to (iii) in paragraph

[14] above and we reject those grounds.

 

[22]    Ground (iv) does not provide a proper basis for an appeal ground. The ‘illegality’ of a contract on the basis that it did not provide for superannuation contributions was not the issue

 

 

 

that the Commission was required to determine. The mere assertion by the Appellant that superannuation should have been payable, even an assertion that is not challenged by the Respondent, does not provide a legal or factual basis for the Commission to conclude that the relationship is one of employment. Nor does the Appellant’s opinion about that matter, even where it is said to provide an explanation as to why the Appellant chose not to sign a contract. We reject ground (iv) of the appeal.

 

[23]    Ground (vi) asserts that the Commission failed to take into account evidence supporting the view that the Appellant was engaged as a sports performance analyst. Again, the question before the Commission was whether the Appellant was an employee or a contractor, not whether he was engaged in one particular role or another. In any event, to the extent that the role in which the Appellant was engaged was relevant to the question to be determined, the Deputy President did consider that evidence and concluded that he preferred the evidence of the Respondent. That was a conclusion that was open to him on the evidence. There is no substance to Ground (vi) of the appeal.

 

[24]    Ground (viii) is no more than a complaint that the Deputy President gave inappropriate weight to the failure of one party to challenge the evidence or submissions of the other. There are no examples cited. The argument was not developed on appeal. We are unable to discern any error under this heading and we reject this ground of appeal.

 

[25]    Ground (vii) contends that the Deputy President took into account irrelevant considerations including the fact that the Respondent engages casual employees amongst its workforce. It is correct, as the Appellant asserts, that the engagement of casual employees by the Respondent would ordinarily have no bearing on the Appellant’s own status as either an employer or independent contractor. However, the Deputy President’s reference to the evidence about casual employees must be viewed in context. The context was the discussion about the Respondent’s Deputy system. The Deputy President accepted the evidence about casual employees to support his conclusions about the nature of the Respondent’s operations, but that evidence did not bear directly on the conclusion regarding the Appellant’s status in the way asserted by the Appellant. We reject this ground of appeal.

 

[26]    The remaining grounds of appeal, (v), (ix) and (x) above, address the way in which the Commission dealt with the evidence regarding, respectively, the Appellant’s inability to unilaterally transfer shifts to others, the ‘requirement’ for the Appellant to carry a Respondent- branded camera case and the invoicing for work during 2022. Each of these matters relates to post-contractual conduct. The High Court in Personnel made clear that there is greater latitude for post-contractual conduct to be taken into account for the purpose of identifying the terms of a contract, and therefore the rights and obligations of the parties, in circumstances where the contract is oral. The parties accepted that the terms of the original contract between them were agreed orally, although the Respondent also maintained, and the Commission accepted, that the agreed terms included the particulars of the text of the email of 24 February 2022.

 

[27]    It appears however that the grounds of appeal dealing with the evidence relating to these matters is advanced not on the basis that the Commission erred by improperly assessing the evidence for the purpose of identifying contractual terms, but rather that the Commission did not accept the Appellant’s evidence on these issues and did not properly weigh that evidence in the balance for the purpose of applying the multifactorial test. The Deputy President noted that

 

 

 

inability to transfer shifts was not contested.24 Where the facts were contested and the Deputy President preferred the evidence of the Respondent on each of these matters, we think it was open to him to do so. Further, for the reasons discussed earlier, the multifactorial test is not the test to be applied. It would have been an error on the part of the Commission to consider the evidence in the way the Appellant has urged in these grounds of appeal.

 

[28]    The Deputy President heard evidence about the camera case and other equipment, but it did not ultimately appear necessary to refer to that evidence for the purpose of ascertaining what terms had been agreed to. We do not think it was necessary for the Deputy President to do so and we see no error in the approach that was adopted in this respect.

 

[29]    The Deputy President expressly considered the issue of the acceptance or rejection of shifts and invoicing by the Appellant. In neither case did the Deputy President come to the view that the evidence on those matters supported a conclusion that the terms of the contract that had been entered into were inconsistent with a relationship of principal and independent contractor.

 

[30]    In the case of the invoicing arrangements, the Deputy President came to the view that those arrangements positively reinforced that conclusion. He noted that the fees had been referred to in the 24 February email and he accepted that they were discussed by the parties during the conversation where the contract was entered into. He rejected the submission that that the rates provided for in the 2022 Fee Schedule were lower than those that had been discussed and agreed. He also noted that the Appellant had invoiced as an independent contractor throughout his period of engagement, that he had done so using rates that were at or above those contained in the 2022 Fee Schedule and later, the 2023 Fee Schedule. In our view the Deputy President correctly took these matters into account for the purpose of ascertaining and construing the terms of the oral contract that had been entered into. He was also correct to conclude as he did, that the evidence relating to the terms on which invoicing and payment for work performed was to be done was entirely consistent with the proposition that the parties had agreed to and created a relationship of principal and independent contractor. We reject grounds (v), (ix) and (x) of the appeal.

 

[31]    The Commission concluded that the original contract entered into by the parties was an oral contract. The Deputy President also had regard to written documents. He accepted that the particulars of email of 24 February 2022 were incorporated into the contract. In the case of the Fee Schedules, he concluded that these constituted written variations to the oral agreement. The Deputy President observed that the 2022 Agreement, received by the Appellant in May 2022, although unsigned by the Appellant, was never challenged by the Appellant who thereafter worked in a way that was not inconsistent with that Agreement or the 2023 Agreement which followed it. Mere receipt of a document and non-objection to its contents, by itself, may not be sufficient to constitute consent to a contractual variation.25 However, conduct, such as ongoing employment without objection, can be relied on to infer acceptance of a proposed variation. Whether such inference is available will depend on the terms and context of the offer, the conduct of the employee and all of the surrounding circumstances.26 By extension this inference can be drawn in relation to a contract for services. In this case we are satisfied that the Deputy President did not err in his consideration of these matters. In particular, it was open to him to conclude that the terms of the Fee Schedules had been incorporated into the terms of the contract by way of variation and that the terms of those Schedules, notably the variable rates of pay and

 

 

 

higher rates where the ‘gear’ was supplied by the contractor, support the view that the Appellant was undertaking work as an independent contractor.

 

[32]    We have considered the material filed by the parties in the appeal. We are not satisfied that the grounds of appeal disclose any instance of appealable error in the decision at first instance. We are of the view that the factual findings of the Deputy President were reasonably open to him on the evidence before him. The characterisation of a person as either an employee or independent contractor involves a legal conclusion that may or may not be affected by an error of law.27 In this case we agree with the ultimate conclusion reached by the Deputy President that the Appellant was an independent contractor and not an employee of the Respondent. There was no error of law.

 

Conclusion/Disposition

[33]    We are not satisfied that the Appellant has demonstrated an arguable case of appealable error. Nor do we think that it is in the public interest for permission to appeal to be granted.

 

[34]    Permission to appeal is refused and the appeal is dismissed.”

 

Meltser v Toppa Sports Pty Ltd – Re (2024) FWCFB 229 delivered 23 April 2024 per Asbury VP, Beaumont DP and Roberts DP