Employee or contractor; the principles

The High Court and the Federal Court are currently determining various appeals which involve profoundly important reviews of the legal principles which distinguish the relationship of employer and employee with that of principal and contractor. However here is an extract from a recent unfair dismissal case where a practical  explanation of the issues is explained well.

“The Law

[68] The most recent Full Bench authority on this issue is found in Amita Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats 20. In that matter, the Full Bench made their determination on the Applicant’s employment status decision primarily on the basis of three authorities.

[69] Firstly, Stevens v Brodribb Sawmilling Co Pty Ltd 21 establishes the importance of a multi-factorial test to establish the nature of the relationship and that control, whilst significant, is not the sole criterion.  Other relevant matters include the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, provision for holidays, the deduction of income tax and the delegation of work by the putative employee.

[70] Secondly, Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario 22 provides a summary of the considerations which may be relevant in the application of the multi-factorial test:

  • Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place of work, hours of work and the like.
  • Whether the worker performs work for others (or has a genuine and practical entitlement to do so).
  • Whether the worker has a separate place of work and/or advertises his or her services to the world at large.
  • Whether the worker provides and maintains significant tools or equipment.
  • Whether the work can be delegated or subcontracted.
  • Whether the putative employer has the right to suspend or dismiss the person engaged.
  • Whether the putative employer presents the worker to the world at large as an emanation of the business.
  • Whether income tax is deducted from remuneration paid to the worker.
  • Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.
  • Whether the worker is provided with paid holidays or sick leave.
  • Whether the work involves a profession, trade or distinct calling on the part of the person engaged.
  • Whether the worker creates goodwill or saleable assets in the course of his or her work.
  • Whether the worker spends a significant portion of his remuneration on business expenses.

[71] Finally, in Roy Morgan Research Centre P/L v The Commissioner of State Revenue 23, the Court determined that the exercise of determining whether a person is an employee or a contractor is not a “mechanical one”, but:

“… is a matter of obtaining the overall picture from the accumulation of detail…and involves an assessment and evaluation of evidence for the purpose of identification and isolating factors or indicia which are capable of pointing in one direction or the other, and then weighing or balancing those factors in accordance with established principles, none of which is conclusive, in order to reach a conclusion.”

[72] The following table contained in the Commission’s Unfair Dismissal Benchbook is adapted from the summary of indicia originally provided in Abdalla v Viewdaze Pty Ltd t/a Malta Travel 24 and updated in Jiang Shen Cai trading as French Accent v Do Rozario:25

To be generally considered an employee To be generally considered an independent contractor
Employer exercises, or has the right to exercise, control over the manner in which work is performed, the location and the hours of work etc. Worker controls how work is performed
Employee works solely for the employer. * Worker performs work for others or is genuinely entitled to do so.
Employer advertises the goods or services of its business. Worker has a separate place of work and or advertises his or her services to the world at large.
Employer provides and maintains significant tools or equipment. Workers provides and maintains significant tools or equipment.
Employer can determine what work can be delegated or sub-contracted out and to whom. Worker can delegate or sub-contract any work to other persons to complete.
Employer has the right to suspend or dismiss the worker. Contract may be terminated for breach.
Employer provides a uniform or business cards. Worker wears their own uniform or other clothing of their choice. Worker has own business cards.
Employer deducts income tax from remuneration paid. Worker responsible for own tax affairs.
Employer paid by periodic wage or salary. Worker produces invoices after the completion of tasks.
Employer provides paid holiday or sick leave to employees. Worker does not receive paid holidays or sick leave.
The work does not involve a profession, trade or distinct calling on the part of the employee. The work involves a profession, trade or distinct calling on the part of the worker.
The work of the employee creates goodwill or saleable assets for the employer’s business. The worker creates goodwill or saleable assets for their own business.
The employee does not spend a significant portion of their pay on business expenses. The worker spends a significant portion of their remuneration on business expenses.

*Generally referring to full-time employment – some employees may choose to work additional jobs.

[73] In this matter, Bananablue issued a number of directions throughout its relationship with Mr Hall in respect of the performance of work. Mr Hall contends that these are examples of control.

[74] It is necessary for me to consider whether the requirements of Drivers contained in the “New Driver information” and given in evidence (for example to deliver goods at certain times, or to collect empty boxes) is inherent in the role of a delivery driver and therefore the weight that should be placed on those requirements in terms of the “control” exercised by Bananablue.

[75] In Queensland Stations Pty Lt v Commissioner of Taxation, 26 Dixon J stated:

“….in considering the facts it is a mistake to treat as decisive a reservation of control over the manner in which the droving is performed and the cattle are handled. For instance, in the present case the circumstance that the drover agrees to obey and carry out all lawful instructions cannot outweigh the countervailing considerations which are found in the employment by him of servants of his own, the provision of horses, equipment, plant, rations, and a remuneration at a rate per head delivered… a reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.”

[76] In Jensen v Cultural Infusion (Int) Pty Ltd, 27 which concerned actors who were hired as “contractors” to work in a theatrical production, it was held that:

“The indicium of a principal or employer’s control over an independent contractor or employee is not an absolute measure. There are degrees of control, and control can manifest in various ways, and may take on different complexions…the weight to be placed on the indicium of control must be attenuated in circumstances where control, in the sense of strict adherence to a prescribed manner of work, is inherent in the nature of the work.”

[77] Further, in Jensen 28 Wheelahan J observed:

“They were performing together in a theatrical production. They could hardly choose their own times at which to commence work. Actors in scripted performances are, as a general rule, required to stick to the script. That will be true whether those actors are independent contractors or employees, on the basis of the overall multi-factorial assessment.”

[78] A reasonable direction from the principal will not outweigh the other indicia if those indicia point to an independent contractor relationship.

[79] In my view the facts determined above, when considered against the indicia for an employment versus a contractor relationship, may be apportioned as in the table below.

Indicators of an employment relationship Indicators of a Contractor relationship Comments
  The “contract” was between a company of which Mr Hall and Ms Ling were directors and had other income sources. This is a strong indicator.
  At the time of engagement Mr Hall intended the relationship to be one of principal and contractor. This is a strong indicator.
  Mr Hall supplied and maintained his own vehicle. This is a strong indicator.
  The company issued tax invoices to Bananablue which were based on tasks performed as opposed to hours worked. This is a strong indicator.
Ms Davis (on behalf of Bananablue) approved the van which was purchased.   This approval appears to relate to the vehicle being fit for purpose.
  Mr Hall appears to have spent a significant portion of the income received on business expenses.  
The “contract” required Drivers to wear uniforms and exhibit signage.   This provision was not enforced, and it was Mr Hall that sought these items so as to identify to customers who was entering upon their premises to deliver goods.
Drivers were given directions as contained in the ‘New Driver information’ document and provided with suggested routes and required to advise Bananablue if a time slot would be missed.   This is an inherent requirement of the role of a delivery driver and the weight of the control is accordingly reduced.
  Mr Hall was able to change his working hours and negotiate as to how many runs were undertaken.  
  Ms Ling assisted Mr Hall complete the work and was paid by the Halling Family Legacy Pty Ltd. This is a strong indicator.
  Mr Hall indicated a desire to source work from other than Bananablue, and was not prevented from doing so by Bananablue  
  No deductions for taxation were made from amounts paid to Mr Hall’s company.  
No goodwill was created for Mr Hall’s company by the performance of the work.    
The work performed by Mr Hall did not involve a profession, trade or distinct calling.    

[80] In my view, the bulk of the instructions given to Mr Hall, as the Driver, fall within the type of instruction described in Queensland Stations Pty Lt v Commissioner of Taxation, in that they are inherent in the requirements of the role, and do not constitute a form of “control” which should weigh heavily in favour of a finding of an employment relationship.

[81] The fact that Mr Hall may have struck a poor bargain with Bananablue does not change the characterisation of the arrangement.

Conclusion

[82] Considering the facts in light of the law, I have concluded on balance that Mr Hall’s relationship with the Respondent was as a contractor and not as an employee. I am not persuaded that Mr Hall’s engagement changed during the period between March 2020 and the cessation of the arrangement.

[83] As Mr Hall is not an employee, he is not protected from unfair dismissal pursuant to s.382 of the Act and accordingly his s.394 application must fail. An Order 29 dismissing the application will be issued concurrently with this Decision.”

Hall v The Trustee for THE BANANABLUE UNIT TRUST T/A “bananablue.com.au” (2021) FWC 5508 delivered 30 September 2021 per Platt C