Employment contracts; what formality is required?

An application for an unfair dismissal remedy was brought by an applicant who did cleaning work at the respondent’s hostel in exchange for free accommodation for a period of two years. The respondent submitted that the applicant was not an employee and made a jurisdictional objection to the application.

The Commission found that the legal requirements of contract formation were satisfied, and as a result a contract at law was made between the parties. The Commission held that the contract was not informal nor ‘a mere domestic arrangement or voluntary work’. The Commission found that the contract was for employment, not for services, and that there had been a termination of employment within the meaning of s.386 of Fair Work Act.

As Deputy President Anderson wrote

“As foreshadowed in the Statement, I have considered further whether there was, in an objective sense, an intention to create legal relations on agreed and enforceable terms.

[14] I conclude that there was.

[15] The agreement between Perth Backpackers and Mr McCrae was not a mere domestic arrangement or voluntary work. The following facts are sufficient to establish, in an objective sense, the requisite intention:

  1. The length of the arrangement in which work was performed in exchange for free accommodation was for a prolonged period (two years);
  2. It was not an informal arrangement between friends or family members to lend a hand or occupy time productively;
  3. In 2017 Mr McCrae had arrived at the hostel unknown to Mr and Mrs Hon and in the initial weeks had paid commercial board. That only changed upon the arrangement to perform cleaning work commencing; and
  4. The context in which work was performed and its regularity resulted in the business expecting the labour services to be delivered to an acceptable standard and in Mr McCrae expecting (and receiving) free accommodation day in and day out over this period.

[16] I take into account that Mr McCrae was free to leave at any time to secure a job, referred to himself as a “guest” in some of his emails to Mr Hon and was told by other guests and the owners not to hold himself out as a staff member (let alone an ‘assistant accommodation manager’).

[17] However, these are not decisive considerations, individually or cumulatively. Employees are generally free to leave their employment on giving required notice (if any). Mr McCrae held dual roles, as both guest and as a provider of cleaning services. The fact that he was a guest does not mean that he was not also employed to clean. Being told by guests and the owners not to hold himself out as an employee was said in the context of Mr McCrae being counselled not to use the self-declared titles of ‘Assistant Accommodation Manager’ or ‘Security Manager’. He was not told to not describe himself as a cleaner. Patently he did that work.

[18] The formality of the manner in which the arrangement concluded also points in favour of the position advanced by Mr McCrae. I make allowance for Mr Hon’s poor English and use of terms in his email of 9 August 2019 that he did not intend to be taken as a “sacking” or “termination” from “staff”. However, the subjective intention of a party is not a proper basis to determine this matter. Objectively, even without the dismissal-type language used by Mr Hon that brought the arrangement to an end, it was an arrangement on which both parties placed a degree of reliance. That reliance was consistent with an intention to regard each other as bound to a deal that had been made, for however long it lasted.

[19] For these reasons I conclude there was an intention to create legal relations on agreed and enforceable terms.

[20] The arrangement was a contract at law.

For these reasons I conclude there was an intention to create legal relations on agreed and enforceable terms.

The arrangement was a contract at law.”

The respondent’s jurisdictional objection was rejected, with the matter to be determined on the merits.

 

McCrae v Perth 178 Backpackers and Convenience Store (2020) FWCC 424 per Anderson DP