Fair work tests; employee or contractor?

 

Here is an excellent extract from a decision of the Federal Circuit Court in a general protections claim which contains the essential elements of the tests which are applied in Australia when determining whether a person is an employee or an independent contractor.

“In Moffet v Dental Corporation Propriety Limited [2019] FCA 344 Justice Flick, when considering whether a person was an employee or independent contractor, said at [12];

“…There is no one defining factor which places a person into one category or the other.”

Previously emphasis had been placed upon the degree of control that may be exercised over a person engaged to do work by the person who engages them. However, that has now been replaced by considering “the totality of the relationship between the parties” (Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 29 (Brodribb).

In Brodribb Mason J said at [24];

“… but the existence of control whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment.  The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question… other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.”

In Brodribb at [37] Wilson and Dawson JJ regarded “the actual terms and terminology of the contract” to be of “considerable importance.”

As Flick J said in Moffat at [16];

“But where there is uncertainty as to the proper characterisation of the relationship, recourse may be had to the terms agreed between the parties as an aid to resolving that uncertainty: (Massey v Crown Life Insurance Co [1977] EWCA CIV12; [1978] 1 WLR 676 at 679). Lord Denning MR there observed:

The law, as I see it, is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it… on the other hand, if the parties relationship is ambiguous and is capable of being one or the other [i.e. the relationship of master and servant or employer and independent contractor], then the parties can remove that ambiguity, by the very agreement itself which they make with one another.  The agreement itself then becomes the best material from which to gather the true legal relationship between them.”

The agreement entered into between the applicant and the respondent is found at page 22 of volume 1 of the respondent’s index to trial bundle. Clause 1 refers to the obligations of the demonstrator and specifically refers to operating “my business as an authorised Tupperware Demonstrator.” Clause 12 sets out the nature of the relationship as follows:

12.1 My relationship with my Director and the Company is one of Independent Contractor.  I understand that I am not a partner, employee or agent of either and that I cannot bind, or attempt to bind, my director or the company in any way.

12.2 As an Independent Contractor, I set my own work hours.  If I commit to manning an event, such as a kiosk, I will of course honour that commitment.  However, the decision to work these hours is my own.

12.3 I will not incur, create or assume any contract, expense, debt, obligation, liability or responsibility on behalf of, or in the name of my director or the company.

12.4 As an independent authorised Tupperware demonstrator, I am solely responsible for operating my business.  Neither my director nor the company makes any representations to me in relation to the success or otherwise of my business as an authorised Tupperware demonstrator.

The applicant at [14] of the application says that if she was not an employee at the time she entered into the agreement then she became an employee of the respondent’s upon being promoted to manager.

There was no separate agreement entered into between the applicant and respondent at either time that she was elevated to manager status.  The applicant was provided with management materials that suggested procedures that if followed would increase a managers income through expansion of her business.  These materials however do not form the basis of any subsequent agreement.

Tab six of the respondent’s index to trial bundle sets out a sales journal for the applicant.  It is clear from a perusal of that document, which is dated from 5 January 2017 to 14 January 2018, that payment to the applicant was generated through the sales directly attributed to the applicant either from herself or her team.

Tab five of the respondent’s bundle is an invoice to the applicant from MIJA and shows that the account at that time has a negative balance of $797.72.

At tab nine of the respondents index to trial bundle is a copy of a journal from MIJA’s accounts showing payment to the applicant’s account representing credit amounts that were available from time to time.

The payments made to the applicant from time to time were generated through the Empower computer system and did not deduct tax.  The payments and indeed the journal reports identified do not show any characterisation of superannuation payments.  Furthermore, the journal entries note that GST is being deducted from any payment available to the applicant (see tab twelve of the respondent’s index to trial bundle).

The manner in which tax liability is dealt with was another matter that was considered important by their Honour’s in Brodribb.  In Tattsbet Limited v Morrow [2015] FCAFC 62, (2015) 233 FCR 46 at 63 to 64, Jessop J (with whom Alsop CJ and White J agreed) observed:

“…in contemporary Australia, it is impossible to ignore, and difficult to depreciate, the taxation implications of the mode of operation which parties to a relationship have voluntarily adopted.  In the past, the deduction of what are now called PAYG instalments was always treated, uncontroversially as indicative of an intention that the relationship in question was one of employment.  To any suggestion that the absence of such instalments tended to point to the relationship being one of principal and independent contractor, it was often rejoined that such an argument was circular, in the sense that a consequence of the relationship being one of employment was, under legislation, that such instalments had to be deducted.  In contemporary times, however, there are legislative markers on both sides, as it were.  It is no longer just the absence of PAYG deductions that may make it more difficult to characterise the relationship as one of employment, it is the presence of GST collections by the putative contractor, and his or her compliance with the regulatory requirements which apply to the provision of services by persons who are not employees, that point quite strongly against the relationship being characterised in this way.”

It follows that the deduction of GST does point quite strongly against the relationship in question being characterised as an employer and employee relationship.

The applicant sets out the material facts she relies upon to assert that she was an employee (see para 13 (I) to (XXXI) of the application).  It is important to note that the mere assertion by the applicant that certain things did or did not occur is not of itself proof that those things did or did not occur.

I had the benefit of watching the applicant cross-examined and provide answers to relevant questions put to her.  I formed the view that the applicant displayed, at times, a belligerent attitude to relevant questions and was in the main argumentative with Counsel cross-examining her.

Her belief that she was an employee marred her ability to make reasonable concessions based upon the evidence presented to her.  For example, the applicant asserts that she was engaged on the basis that she was not required to outlay any costs to commence her employment.  That is factually incorrect because she was well aware that the starter kit provided to her would be paid for from commissions resulting from the sales she made.  She was well aware that demonstrators that she introduced to the business also paid for their starter’s kit in a similar way.

The assertion that the respondent’s provided her with all of the equipment necessary to perform her duties is again not supported by the evidence available to her.  The applicant is well aware that she was required to pay for any items relevant to her occupation and indeed complains at [13] (VIII) that she had to purchase her business cards from “them.” Furthermore the applicant was well aware that Tupperware Australia provided her with a motor vehicle and compensation until a motor vehicle became available.

Overall I formed the view that the applicant’s allegation that she was an employee was disingenuous.  She knew full well that Tupperware Australia governed the actions of the respondents.  Proof of that fact is found at tab 18 of the respondent’s index to trial bundle.

That document is a copy of an email from the national sales director, Christopher Stuchlak, to the applicant in the following terms:

Subject: Unfair Termination

Dear Jodie

I am following up on your request as mentioned in my previous email.

We support the decision of closing your account with Tupperware/Coral Coast based on previous history and recent disruptive behaviour reported by Janet and Michael Hogan.

Tupperware and Coral Coast are within our rights as outlined in the consultant agreement to close accounts by giving a 30 day notice due to non-compliance with the consultant agreement.

Janet and Michael have a responsibility to the other managers and consultants and cannot overlook disruptive behaviour, for this reason I support the decision to close your account.

Tupperware thanks you for your years of service and respectfully asks that you honour the decision of parting ways.

Regards

Chris Stuchlak

Clearly the applicant believed that Tupperware Australia governed not only herself but the respondents.  At no time does the applicant suggest that she was employed by Tupperware Australia. The applicant clearly believed that Tupperware Australia could over rule the respondent’s decision and in those circumstances I am satisfied that she was attempting to enforce her entitlement to remain an independent contractor when she approached Tupperware Australia to complain about her unfair termination of her account.

The applicant sets out many matters that she considers prove that the respondents controlled her in the workplace.  Having read the agreement entered into by her and the management support tools that were also provided to her I am not satisfied that the respondents were not exercising control over her.

It is clear from the material provided and the evidence of the respondent’s anet and Michael Hogan and indeed at times from the applicant herself that the respondent’s supported an individual’s right to work hard and be compensated for it.

The applicant provided no evidence to support the repeated allegation that if she did not do as the respondent’s requested she would be terminated. The applicant called no other witnesses to support that allegation.

Witnesses were called by the respondent who provided direct evidence to the contrary.  Those witnesses, Ms Jasmine Baker, Ms Sharon Crosby and Ms Webb all specifically provide evidence that they were not aware of any consequences if they did not follow Tupperware Australia’s and/or MIJA’s guidelines.

Whilst being cross-examined by the applicant Ms Hogan said “if consultants or managers do not wish to adopt these approaches, they will elect not to pursue the Tupperware business, as apparently happens regularly in light of the acknowledged high turnover of consultants and managers.”

The evidence relating to the attendance at kiosks from time to time is also indicative of choice rather than mandatory involvement.  The evidence establishes that the respondents would invite demonstrators and/or managers to participate in a kiosk and provide the respondents with their available date and time.  It is a fact that simply making yourself available does not guarantee placement at a kiosk.

Indeed the kiosk on 14 December that the applicant complains she was removed from is an example of how kiosk manning is put in place.  The evidence establishes that the respondents sent out a request for persons to provide their availability and that upon being so notified the respondents thereafter placed those persons on a roster.

I am satisfied on the evidence that the applicant never appeared on any roster for that kiosk and as a result was not removed from such because she was too late in providing availability to the respondents.

Overall I am not satisfied that there was the level of control over the applicant such as to deem the relationship between the applicant and the respondent as one of employee and employer.

The applicant complains that she was prohibited from selling product from another direct selling company during the time that she was a demonstrator and subsequently upon termination for a period of six months.  This was indeed a condition that she signed her name to and can be found at clause 10 of the agreement.  The applicant gave evidence that when she first became a demonstrator she also worked for others.  She said that she was prohibited from working for others as a result of becoming a manager.

It is important to distinguish between what the applicant said and the reality.  It is of course true that if a manager wishes to increase their business and earn reasonable levels of income they will need to work harder in that business.  That is a matter of choice rather than an obligation.  There is no evidence to support the notion that the respondent’s required the applicant to work long and demanding hours.

The evidence supports the fact that at times, the applicant did work long and demanding hours however I am satisfied that she was not obliged to.  In doing so achieved more income and more bonuses from the company.  The fact that the applicant is now not satisfied with the remuneration she received is irrelevant in determining whether there was a prohibition or not in the applicant working for others.  I am not satisfied that the applicant was prohibited from working for others.

Whilst it is true that the applicant wore a polo shirt that had the name of the respondent’s trading entity on it the evidence does not support the allegation that the applicant was forced to purchase that specific polo shirt.  It was clearly made available to her and she purchased the shirt, it was not provided to her for free.  However other material used by the applicant to promote her business did not have the respondents trading entity emblazoned across it but rather referred to the applicant herself and as a result the inference being that she worked for herself selling Tupperware products.

Having assessed the totality of the evidence I am not satisfied that the respondent’s presented the applicant to the world at large as an emanation of their business.

There is no evidence that the respondent’s controlled the manner in which the work was to be performed or the place of work or the hours of work.  Indeed it was the applicant’s own evidence that she worked at various different places and at various times of the day and indeed days of the week.  The applicant said that she was on call 24/7 for the demonstrators under her; that may have been so, but I am satisfied on the evidence that this was not an obligation imposed upon her by the respondent’s but rather her eagerness to provide excellent managerial support to those under her.

Similarly the applicant complained that she was obliged to train others within the respondents overall group.  I accept that the respondent’s asked her to assist with the management of others however I do not accept that she was obliged to do so.  I do accept that the applicant agreed to provide additional training and cannot be satisfied on the evidence that had she not agreed her position would have been terminated.

There are many and varied indicia that can be considered in determining whether a person can be properly characterised as an employee.  Justice Flick in Moffat said this at [20]:

“The question of whether a person is properly characterised as an “employee” is thus not to be resolved by a mechanical reference or an application of a “checklist” of considerations. CF.Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944 (“Lorimer”). Mummery J there said:

“it is clear from the cases that there is no single satisfactory test governing the question whether a person is an employee or is self-employed… In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person’s work activity.  This is not a mechanical exercise of running through items on a checklist to see whether they are present in, or absent from, a given situation.  The object of the exercise is to paint a picture from the accumulation of detail.  The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole.  It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual detail.  Not all details are of equal weight or importance in any given situation.  The details may also vary in importance from one situation to another.”

In taking a step back after having considered the matters referred to above I am not satisfied that the applicant could be properly characterised as an employee of the respondent’s.

In those circumstances it is only the first claim as set out in the application that needs to be considered and a determination made. “

 

GRAVENER v MIJA PTY LTD & ORS [2020] FCCA 46 delivered 13 January 2020 per Middleton J