Employment relationship v others

There are many forms of relationship which contain obligations, whether express or implied. However the relationship of employer and employee has characteristics which distinguish it from others, even if some of those contain some of the same elements, as this case which was heard by the Fair Work Commission explains.

“Consideration

[32] This matter is one of considerable complexity. There is a dearth of authority on the issue of whether a training arrangement which involves the performance of work on one side and the payment of money on the other may properly be characterised as involving an employment relationship. Case authorities concerning the characterisation of an employment relationship are overwhelmingly concerned with determining whether a given relationship pursuant to which work is performed is one of employment or an independent contracting relationship. They consequently focus on the distinguishing characteristics of these two mutually-exclusive categories of contractual arrangements such as the “own business/employer’s business dichotomy” and the “control test”. It is not easy to derive legal principles from these cases which provide a ready answer to the question which the Commissioner was required to determine. It is correct, as Dr Tracey submitted, that to characterise a contractual relationship as having the provision of training as its purpose does not exclude the possibility that it is also an employment relationship. It is also correct, as Dr Tracey submitted, that various provisions the FW Act (for example, ss 139(1)(a), 153(3)(c) and 284(3)(a)) contemplate that “training arrangements” 13 may apply to employees and, further, that the Commission’s awards make provision for trainees and apprentices (including apprentices who are undertaking a course of secondary education) on the basis that they are employees.14 However, no underlying legal principle can be derived from these propositions which serves to aid the task of characterising the nature of Dr Tracey’s relationship with the University in respect of the ECC Program and the Anaesthesia Program.

[33] Notwithstanding this difficulty, and noting that there was no dispute between the parties that their relationship was contractual in nature, three basal legal principles relevant to the determination of this appeal may be identified. First, as stated in Personnel Contracting, where the relationship is the subject of a comprehensive written contract, the characterisation of the relationship is to be undertaken solely by reference to the rights and obligations specified in that contract, and it is not permissible to examine or review the performance of the contract or the course of dealings between the parties other than to ascertain whether any of the contractual terms have been varied. 15 In his decision, as earlier stated, the Commissioner found that there was a comprehensive written contract in respect of each training program, consisting in each case of the letter of offer, the Conditions of Stipend document and the program description. This finding was not challenged in the appeal and we agree with it, subject to the caveat that there appears to have been two variations by conduct to the contract for the Anaesthesia Program, namely that Dr Tracey was required to undertake the Masters course in substitution for the Graduate Diploma course to which the contract referred and that his personal leave entitlement was increased from two to four weeks.

[34] Dr Tracey gave extensive evidence below as to his performance of clinical work, including as to the rostering of his hours of work, the number of hours of work which he performed, and the level of direction to which he was subject. Had this evidence concerning the performance of the contracts been taken into account, as it would have been under the approach favoured in decisions such as Stevens v Brodribb Sawmilling Co Pty Ltd 16 and Hollis v Vabu Pty Ltd17 which prevailed pre-Personnel Contracting, it may have favoured a conclusion that Dr Tracey was an employee of the University. However, the Commissioner did not have regard to this evidence, and he was clearly correct not to do so. Dr Tracey did not contend otherwise in his appeal.

[35] Second, the “irreducible minimum of mutual obligation” required for a contract to establish an employment relationship is that the putative employer must, under the contract, be obliged to pay remuneration to the putative employee as consideration for the services reasonably demanded under it, and the putative employee is obliged to perform such services. 18

[36] Third, the label or characterisation placed on the relationship by the contract is not relevant even as a “tie-breaker”, 19 or at least it is not determinative.20

[37] The terms of the contractual documents here make no reference whatsoever to the existence of an employment relationship, but this cannot by itself be a matter of significance since, in accordance with the third principle stated above, the characterisation of a contract cannot be determined by its contractual labelling (or the lack thereof). On one view, the Commissioner placed too much emphasis in paragraphs [76]-[82] of his decision on the fact that the contractual documents describe a training arrangement and make no reference to employment. However, the correctness standard applies to this appeal, so the question remains whether the Commissioner’s conclusion concerning the question posed for determination (which went both to the Commission’s jurisdiction in the matter as well as to the merits of the dispute) was correct.

[38] In our view, the application of the second principle above to the terms of the contractual documents is critical to the resolution of this appeal. The question which arises is whether the stipend for which the Conditions of Stipend document provides is, under the terms of the contractual document, payable as consideration for the performance of work by Dr Tracey such as to constitute a “work-wages” bargain.

[39] It may first be observed that the word “stipend” is one of broad meaning: although it encompasses payment in the nature of salary for work performed, it also encompasses payments that are not necessarily linked to the performance of work, with the key criterion being that the payments are of a fixed and regular nature. 21 Further colour is given to the use of the word by clause 5 of the Conditions of Stipend document, which refers to “similar awards”, being “another award, stipend, bursary or the like which provides benefits similar to those provided under the Award”. The reference to an award or bursary providing “similar benefits” to the stipend suggests that its purpose is not to remunerate for the performance of work but rather to provide financial incentivisation and support for undertaking studies. A “bursary” in particular is confined to that purpose.22 We note at this point that Dr Tracey submitted that the description of the $30,000 annual payment is merely an instance of mere contractual “labelling” which should be ignored. However, while accepting that it is not determinative, we do not consider that it is irrelevant: in the context of a contractual arrangement involving a university, the description of the payment as a “stipend” must be taken into account as indicative of its purpose.

[40] It is next necessary to identify the contractual obligations which the Conditions of Stipend document specifically relates to the payment of the stipend. These are as follows:

(1) Clause 1 requires, as a precondition, that the recipient be recommended by the specified academics after a competitive selection process. It is significant, we consider, that one of the two specified academics is the Dean of the Faculty of the School of Education, making it apparent that the stipend relates at least in part to the undertaking of studies in the field of education (not just veterinary medicine).

(2) Clause 2 requires, as a condition of the stipend, enrolment in a postgraduate degree at the University. Read with paragraph 3 of the program description, the relevant degree must be in the field of education. This expressly relates the stipend to the undertaking of postgraduate study in that field.

(3) It is implicit from clauses 8-14 that, apart from the specified periods of leave to which the recipient of the stipend is entitled, the stipend recipient is required to attend to the obligations under the overall arrangement for the remainder of the 12-month period.

(4) Clause 15 operates to limit the extent to which the recipient can undertake employment outside of the overall arrangement.

(5) It is implicit in clause 18 that the recipient must, in addition to meeting the requirements of clauses 1 and 2, “fulfil[] their obligations” and “mak[e] satisfactory progress”.

(6) Clause 20 requires the recipient to “agree to” the conditions of their training program as specified in the program description.

(7) The “General” obligations relate to diligent application to the successful completion of the required degree, compliance with relevant University rules during the course of the degree, and compliance with applicable safety and ethics rules.

[41] In addition, the Acceptance Advice for the Conditions of Stipend document incorporates two additional obligations (continuing the previous numbering):

(8) The recipient must devote themselves to their “studies” during all required working hours throughout the year.

(9) The recipient will not sign over any intellectual property without prior approval.

[42] In summary, none of the obligations on Dr Tracey in consideration for which the stipend is paid is expressed as concerning the performance of work as such. Further, obligations (2), (4) and (7) clearly relate to the requirement to undertake a postgraduate degree, and obligations (1), (5), (6) and (8) relate at least in part to undertaking that degree. Obligations (4) and (9) concern matters unrelated to any requirement to perform work for the University.

[43] As earlier outlined, Dr Tracey submits that the route to the establishment of a work-wages bargain is via obligation (6), which he says in effect incorporates by reference obligations contained in the program descriptions to perform specified “clinical duties” in the Hospital (pursuant to numbered paragraph 1 of the program description for the ECC Program and numbered paragraph 1 of the program description for the Anaesthesia Program). These “clinical duties”, Dr Tracey contends, constitute work that contributes to the provision of the services which the Hospital provides to its fee-paying clients.

[44] This submission has a significant degree of superficial attraction. However, that impression is coloured by the evidence before us concerning the employment-like way in which Dr Tracey was actually required in practice to discharge his obligation to undertake clinical duties in the Hospital. However, as earlier stated, we are not permitted to have regard to that evidence in undertaking the task of characterising the contractual arrangements between Dr Tracey and the University (noting that this evidence was admitted by the Commissioner, and thus appears in the appeal book, because the hearing before the Commissioner took place on 2 February 2022, a week before the High Court delivered the Personnel Contracting and Jamsek decisions). If attention is confined to the terms of the program descriptions, it is reasonably apparent that the requirement to perform clinical duties is but one component of an integrated training program which also requires the completion of a postgraduate course in education, participation in university teaching for training purposes, and undertaking research and other academic activities. In that context, the clinical duties specified are for the purpose of training – in the case of the ECC Program, to “obtain knowledge and practical skills in the field of small animal ECC” and, in the case of the Anaesthesia Program, to “obtain knowledge and practical skills in the field of anaesthesia and analgesia of all veterinary species particularly small animals and horses”.

[45] It may be accepted, as Dr Tracey submitted, that a person may be undergoing training and performing work in employment simultaneously, as happens with trainees, apprentices, interns and “on-the job” training generally. But the critical point here is that, on an overall analysis of the contractual terms, the annual stipend is paid as consideration for Dr Tracey undergoing an integrated program of study and training, not for the performance of work. On this basis, it cannot be said that the “irreducible minimum of mutual obligation” required for the existence of an employment relationship exists in this case. The contractual arrangements between Dr Tracey and the University in respect of the ECC Program and the Anaesthesia Program were not, in our view, “work-wages” bargains. They had a different character.

[46] There are, as Dr Tracey pointed out, certain employment-like provisions in the contractual arrangements — particularly the leave entitlements in the Conditions of Stipend document. But without the fundamental element of an employment relationship being present, these provisions cannot be determinative of the outcome.

[47] As to Dr Tracey’s contention that the Commissioner made an error of fact in describing the ECC Program and the Anaesthesia Program as “postgraduate degree programs”, we think this is largely a matter of semantics. It is clear, as earlier explained, that the completion of a postgraduate course was a fundamental requirement of each program, and this is sufficient to justify the Commissioner’s description of the programs. In any event, if there was any factual error as alleged, it did not lead to the Commissioner reaching the wrong conclusion.

[48] Because this appeal has raised issues of some novelty and complexity, we consider it is appropriate to grant permission to appeal. However, our conclusion is that the Commissioner’s decision is correct and, accordingly, the appeal must be dismissed.”

Extract from Tracey v Murdoch University (2022) FWCFB 220 delivered 30 November 2022 per Hatcher AP, Clancy DP and Young DP