Unfair dismissal; person may be employee and contractor

In certain circumstances, in this case the fitness industry, a person may legitimately be an employee of an employer and a contractor to that entity, the principal. Here is an example.

“CONSIDERATION

Relevant statutory provisions and authorities

[47] It is trite that the unfair dismissal provisions of the Act (Part 3-2) are predicated on a ‘person’ who is protected from unfair dismissal by an employer, being an employee, and employer as respectively defined.

[48] Section 380 of the Act relevantly uses the terminology ‘national system employee’ and a ‘national system employer’, which are defined in ss 13 and 14 respectively as:

‘13. Meaning of national system employee

A national system employee is an individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement.

  1. Meaning of national system employer

(1) A national system employer is:

(a) a constitutional corporation, so far as it employs, or usually employs, an individual; or

(b) the Commonwealth, so far as it employs, or usually employs, an individual; or

(c) a Commonwealth authority, so far as it employs, or usually employs, an individual; or

(d) a person so far as the person, in connection with constitutional trade or commerce, employs, or usually employs, an individual as:

(i) a flight crew officer; or

(ii) a maritime employee; or

(iii) a waterside worker; or

(e) a body corporate incorporated in a Territory, so far as the body employs, or usually employs, an individual; or

(f) a person who carries on an activity (whether of a commercial, governmental or other nature) in a Territory in Australia, so far as the person employs, or usually employs, an individual in connection with the activity carried on in the Territory…’

[49] It is common ground that Doxi Pty Ltd is, or was at the relevant time, a national system employer. However, the respondent’s objection was that the applicant was not a ‘national system employee’, as he was not employed by the respondent, but rather, was engaged as an independent contractor, as confirmed by the PT Agreement. The correct approach the Commission must adopt to determine whether a person had been engaged as an employee or a contractor is a mixture of both fact and law. Thus, the particular factual circumstances, sometimes, but not exclusively involving written contracts or employment instruments, may be useful in the context of the legal principles that have been established and applied by the Commission and the Courts, which have determined the proper characterisation of the relationship.

[50] In a recent seminal case concerning whether an Uber Eats delivery driver was an employee or contractor; see: Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats [2020] FWCFB 1698, a senior Full Bench of the Commission helpfully set out the principles developed by the Commission and the Courts to be applied in matters of this kind. The Full Bench (by majority Ross J and Hatcher VP (Colman DP not dissenting on these principles)), in firstly dealing with labour hire arrangements which are not relevant here, said at [55]-[59]:

‘[55] Having concluded that Ms Gupta performed her delivery work for Portier Pacific pursuant to the Service Agreement and the guidelines, it remains necessary for us to determine whether she did so as an employee or independent contractor. As earlier stated, a multi-factorial test has been adopted in the common law to answer this question. The application of this test in borderline cases such as the one before us is not without difficulty, since it requires the making of an evaluative judgment involving the weighing of various relevant considerations and, as such, may not produce any single clear answer. Notwithstanding this, where the existence of an employment relationship is a jurisdictional fact, as here, a decision determining that question is not to be treated as if it is a discretionary decision for the purposes of an appeal. In Sammartino v Foggo, a Full Court of the Federal Court said in relation to the proper approach to be taken by a Full Bench of the Australian Industrial Relations Commission in an appeal from a decision concerning whether a worker was an employee at law:

“[9] On an appeal from such a decision, if leave to appeal is given, the Commission is plainly not confined, in its consideration of the case, by principles that are found in cases such as House v The King (supra). In dealing with the appeal, the Commission is under a duty to consider all of the proven facts and those facts that have been admitted, and any inferences to be drawn from those facts, to arrive at its decision. It is also under a duty to determine the content of any point of law upon which its decision might depend. If, in undertaking any of these tasks, it finds that the Commissioner has made an error of law or an error of fact, it can exercise its powers under s 45(7).

[10] It will find an error of law or an error of fact if the Commission reaches a different conclusion on the facts or on the law than that arrived at by the primary decision-maker. Further, what must be shown in order to succeed on an appeal will plainly have a bearing on whether leave should be granted.”

[56] Full Benches of this Commission have accordingly proceeded in appeals of this type on the basis that it is necessary to determine whether the primary decision-maker’s conclusion concerning the existence or otherwise of an employment relationship was correct.

[57] It is only necessary to refer to two High Court authorities concerning the multi-factorial test to be applied. First, in Stevens v Brodribb Sawmilling Co Pty Ltd  (Brodribb) Mason J (as he then was) said:

“…A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it (Zuijs v. Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561, at p 571; Federal Commissioner of Taxation v. Barrett [1973] HCA 49; (1973) 129 CLR 395, at p 402; Humberstone v. Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389). In the last-mentioned case Dixon J. said (at p 404):

‘The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.’

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 (Queensland Stations Pty Ltd v. Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539, at p 552; Zuijs’ Case; Federal Commissioner of Taxation v. Barrett, at p 401; Marshall v. Whittaker’s Building Supply Co. [1963] HCA 26; (1963) 109 CLR 210, at p 218). 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.”

[58] The second is Hollis v Vabu,  in which the High Court (by majority) determined that a bicycle courier engaged by a courier company was employed by it such as to make the company vicariously liable for injury caused by the courier to a third person. In the context of a discussion about the doctrine of vicarious liability and its application to the acts of employees done in the course of their employment, but not to those of independent contractors, the majority (Gleeson CJ and Gaudron, Gummow, Kirby and Hayne JJ) attached significance to a passage in the judgment of Dixon J in Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd in which his Honour “fixed upon the absence of representation and of identification with the alleged employer as indicative of a relationship of principal and independent contractor”. In connection with this, the majority then referred with approval to the statement made by Windeyer J in Marshall v Whittaker’s Building Supply Co that the distinction between an employee and an independent contractor is “rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own”. However the context indicates that the reference to this statement was not intended to erect a substitute or proxy for the multi-factorial test referred to in Brodribb but rather to explain the fundamental import of the distinction between employees and independent contractors in the doctrine of vicarious liability. Thus the majority, after referring to Brodribb, said that in the case before the Court that “guidance for the outcome is provided by various matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” (underlining added).

[59] In determining that the courier company’s bicycle couriers were employees (contrary to the decision of the NSW Court of Appeal under appeal), the majority placed emphasis upon seven matters, which may be summarised as follows:

(1) The couriers did not provide skilled labour or labour which required special qualifications and could not independently operate as couriers or generate any goodwill.

(2) The couriers had little control over the manner of performing their work. They had a required start time, were assigned to a roster and were not able to refuse work. It was unlikely that they could delegate their work or be able to work for another courier operator.

(3) The couriers were presented to the public as emanations of the courier company: they had uniforms with a company logo, and were required in their attitude and appearance to act as the company’s representative. This partly reflected the company’s wish to advertise its business.

(4) The need for deterrence in respect of the known danger of bicycle couriers to pedestrians favoured a finding of employment.

(5) The courier company superintended the couriers’ finances in respect of remuneration, pay adjustments and deductions, and there was no scope for the couriers to bargain for the rate of their remuneration. The method of payment per delivery was a natural means to remunerate employees whose sole duty was to perform deliveries, for ease of calculation and to provide an incentive. The company also controlled absences from work for leave purposes.

(6) The situation with tools and equipment favoured, if anything, a finding that the couriers were employees. The capital outlay was relatively small and bicycles were not tools inherently capable of use only for courier work, but could also be used for personal transport or recreation. The majority said: “The fact that the couriers were responsible for their own bicycles reflects only that they were in a situation of employment more favourable than not to the employer; it does not indicate the existence of a relationship of independent contractor and principal”.

(7) There was considerable scope for the exercise of actual control by the courier company. It retained control of the allocation and direction of deliveries. The couriers had little latitude, their work was allocated by the fleet controller, and they had to deliver goods as directed.’ (endnotes omitted)

At [64] the Full Bench continued:

‘[64] In French Accent, a Full Bench of this Commission usefully summarised the considerations, derived from various court authorities, which may be relevant in the application of the multi-factorial test referred to in Brodribb. However as was stated by Winneke P in the Victorian Court of Appeal decision in The Roy Morgan Research Centre P/L v The Commissioner of State Revenue, the task in applying the test is not to be approached as a mechanical exercise of running through items on a checklist, but is rather “a matter of obtaining the overall picture from the accumulation of detail”. This 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”. (endnotes omitted)

and at [70] found:

‘[70] In summary, we do not consider that Ms Gupta’s relationship with Portier Pacific bore a number of the usual and essential hallmarks of an employment relationship, namely a requirement to perform work at particular times or in particular circumstances, exclusivity when work is being performed, and presentation to the public as serving in the business. For these reasons we conclude she was not an employee of Portier Pacific.’

[51] In Abdalla v Viewdaze Pty Ltd t/a Malta Travel PR927971; (2003) 122 IR 215, a Full Bench of the Australian Industrial Relations Commission (‘AIRC’) distilled the indicia which have guided the Courts and the Commission into 14 non-exclusive questions:

  • Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or 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.
  • Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.
  • 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.

‘(5) If the indicia point both ways and do not yield a clear result the determination should be guided primarily by whether it can be said that, viewed as a practical matter, the individual in question was or was not running his or her own business or enterprise with independence in the conduct of his or her operations as distinct from operating as a representative of another business with little or no independence in the conduct of his or her operations.

(6) If the result is still uncertain then the determination should be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu.’

[52] I intend to apply each of these indicia to the facts and circumstances of this case. Before doing so, I make the following two observations. Firstly, while the controversy over whether the applicant was appointed an Assistant Manager or Club Manager, may go partway to answering the question of whether he was an employer or contractor, it is not wholly determinative of the jurisdictional objection. It is the nature and characteristics of the relationship between the applicant and Doxi Pty Ltd which will be crucial to that question, not what the applicant was titled. I would add that Mr Dwyer did not produce any Manager’s agreement in respect to Mr Taylor, who he insisted was the Manager at the relevant time. Secondly, the question is not exclusively determined by the only documentary evidence said to be of relevance; namely the PT Agreement. The PT Agreement may be relevant not only for what it says about its agreed terms, but what it does not say about the true nature of the relationship. Mr Dwyer’s enthusiastic embrace of the PT Agreement being the only evidence, and the ‘killer’ evidence which proves the applicant was a contractor, is understandable, but misconceived and ignores the principles to be applied as set out in the authorities on the subject I highlighted above.

  1. Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.

[53] Clause 5 of the PT Agreement reads:

‘5. Additional Duties

(a) The Company may, from time to time, offer the Contractor additional duties, including but not limited to, office duties, reception work and any other duties the Company deems appropriate from time to time.

(b) The Contractor will be entitled to an additional fee for hours worked at a rate to be negotiated between the Company and the Contractor from time to time.

(c) The Contractor may be requested to provide a half hour introductory personal training session to new Clients for promotional purposes, at no cost to the new Clients and the Business.’

Given this express term and in consideration of the other evidence, I make the following observations and findings:

(a) It is plainly obvious that the additional duties in Cl 5, are distinct and separate to the applicant’s PT business. Fees for this additional work is that which was paid to the applicant based on $25 then $35 an hour.

(b) While not agreeing to all of the duties the applicant claimed he performed, Mr Dwyer agreed that some of these duties related to the Gym’s requirements, its functions and administration; see: [17] above.

(c) The applicant was required to work shifts and to perform this work separate to his PT business, according to a roster determined in advance; see: [16] above.

(d) Mr Dwyer acknowledged that in performing these shifts, the applicant (and all other PTs) were subject to direction from the Director of the respondent.

(e) Mr Dwyer said that all of the PTs were required to submit a daily work report after each shift, which demonstrated the hours worked to offset rent and hours worked in addition. The respondent maintained no record of this distinction and the applicant said he was never required to offset any of his shifts for rent. I accept this evidence.

(f) All additional hours were worked by PTs at the Gym, and not at any other place.

[54] From the foregoing, I am satisfied the respondent exercised the right to control the nature of the work and direct the manner in which the work was performed, the place of work, and the hours of work.

  1. Whether the worker performs work for others (or has a genuine and practical entitlement to do so)

[55] The applicant did not perform the work required of him by the respondent for any other gym.

  1. Whether the worker has a separate place of work and or advertises his or her services to the world at large.

[56] There was no evidence that the applicant had a separate place of work. On the contrary, the clients of the applicant’s PT business were required to become members of the Gym and retain membership of the Gym. This was a direct financial benefit to the respondent. Clause 5(c) of the PT Agreement expressly provides for a half hour promotional training session for new clients to the Gym. This is obviously intended to jointly encourage their Gym membership and the applicant’s business and income.

  1. Whether the worker provides and maintains significant tools or equipment.

[57] There was no evidence that the applicant provided his own gym equipment for the purposes of the PT sessions he conducted for clients at the Gym.

  1. Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.

[58] There was no evidence of any capital equipment investment of the applicant when working for the Gym and engaging in his PT business. Given the nature of PT, there is little or no equipment necessary to be provided by the PT. In any event, the clients of the applicant, as Gym members, would be entitled to use the Gym’s equipment, such as mats, weights, boxing bags etc.

  1. Whether the work can be delegated or subcontracted.

[59] The additional duties performed by the applicant were, at all times, required to be performed at the Management’s direction and according to Mr Dwyer’s expectations. The applicant could not delegate or subcontract the additional duties he was required to perform in the Gym.

  1. Whether the putative employer has the right to suspend or dismiss the person engaged.

[60] Clause 7 of the PT Agreement reads as follows:

‘7. Termination of this Agreement

7.1 Rights to terminate

(a) Either party may terminate this agreement, without reason, by providing four (4) weeks written notice to the other party.

(b) Notwithstanding the above, the Company may terminate this agreement immediately and without any notice if the Contractor:

(i) commits an act of dishonesty, or a criminal offence which in the reasonable opinion of the Company is likely to bring the Company into disrepute;

(ii) commits an act that the Company, in its absolute discretion, considers to be misconduct or a breach of this agreement;

(iii) refuses or neglects to comply with any lawful and reasonable order given to it by the Company and the Contractor fails to remedy such refusal or neglect within 30 days of receiving notice from the Company of such refusal or neglect; and

(iv) commits a breach of any statutory, legal or regulatory requirement of which the Company becomes aware and which, if appropriate, is not remedied within a reasonable time to the satisfaction of the Company.

7.2 Conduct on termination

On the termination of this agreement or at any other time notified by the Company, the Contractor must return to the Company:

(a) all material on which Confidential Information or Intellectual Property is recorded, copied or modified (whether in documentary, visual, oral, digital or electronic format, or in any other readable or reproducible format);

(b) any computer hardware and software, passwords, keys, security passes, mobile telephones and accessories, and equipment of the Company; and

(c) any other property and documents of the Company.

7.3 Amounts owing on termination

On the termination of this agreement or at any other time notified by the Company, the Contractor agrees that it will be obliged to pay, or at the Company’s election, the Company will be entitled to withhold or deduct from any amount it is otherwise required to pay the Contractor:

(a) any overpayment of fees or other amounts paid by mistake, or as a result of a breach of duty by the Contractor;

(b) any sum or debt owed by the Contractor to the Company; and

(c) any monies pre-paid by a Client to the Contractor for personal training sessions that have not yet been provided by the Contractor to that Client.’

[61] On any objective analysis, this clause is a typical termination of employment clause found in most Awards and agreements, including a common law right to terminate the Agreement for reasons of misconduct; notably, providing termination of the Agreement for a contractor’s refusal to comply with any lawful and reasonable order given by the Company.

  1. Whether the putative employer presents the worker to the world at large as an emanation of the business.

[62] There is no doubt that in order for PTs to conduct training sessions in the Gym, they must join up their clients to the Gym. In addition, by wearing a PT shirt when performing additional duties, the PT is representing themselves as an emanation of the business, as well as their own.

  1. Whether income tax is deducted from remuneration paid to the worker.

[63] It is unclear from the documentary material filed in the proceedings whether income tax was paid on the regular deposits into the applicant’s bank account. Certainly, there is no record produced as to the relevant tax payable in respect to any of the employees or PTs of the respondent. The applicant provided no details of his tax arrangements for the additional duties he performed, or for the fees paid by clients to his business. It is apparent, however, that the applicant invoiced the Gym for payments for additional work performed to his PT business, CBPT (ABN 91 959 371 292). I can take this matter no higher than to assume that all the parties’ relevant taxation obligations have been attended to, in accordance with the requirements of Commonwealth taxation laws.

  1. Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.

[64] There is no reason to doubt that the applicant was paid a periodic wage for the rostered shifts he worked as additional duties under Cl 5 of the PT Agreement. This work was not referable to a completion of tasks, but to numerous miscellaneous duties performed during a rostered shift.

  1. Whether the worker is provided with paid holidays or sick leave.

[65] This was a matter of some dispute. The evidence is that the applicant had requested time off and Mr Dwyer had paid him for this time ($1500 over 2 periods) totalling an amount of exactly $3,000. This amount does not appear to be based on any calculation of annual leave accrued on a fixed average week’s wage. Mr Dwyer described these payments in December 2018 and June/July 2019, as gestures of good will, to be paid back, because he wanted to retain the applicant’s services and because he was doing it tough. When the Gym closed, Mr Dwyer did not seek the $3,000 back and said he just ‘wrote it off’. On the other hand, Mr Dwyer strenuously denied these amounts were for annual leave, despite the applicant’s invoice dated 21 December 2018 describing the $1,500 as ‘LEAVE’. Of course, Mr Dwyer could not concede he paid the applicant annual leave, as this would tell strongly in favour of a proposition that the applicant was an employee. His attempts at explanation were weak and unpersuasive, particularly as it makes no logical or business sense why Mr Dwyer would make ‘significant gestures of good will’, when he claimed the Gym itself was in financial trouble; see: [28] above.

  1. Whether the work involves a profession, trade or distinct calling on the part of the person engaged.

[66] The additional duties expected to be undertaken were general administration duties as described in [17] above. It was not work of a profession, trade or distinct calling.

  1. Whether the worker creates goodwill or saleable assets in the course of his or her work.

[67] It would appear self-evident that a personable, friendly front desk person in a gym – a duty Mr Dwyer did not dispute the applicant undertook – promotes the business and encourages casual and trial customers to return, or take up Gym membership. There was no suggestion that the applicant did not fulfil this role and the additional duties he was directed to perform, in anything other than a professional and diligent manner.

  1. Whether the worker spends a significant portion of his remuneration on business expenses.

[68] There was no evidence that the applicant spent significant, or any portion of his remuneration from Doxi Pty Ltd on business expenses.

[69] From the above dissertation, it should come as no surprise that I am satisfied that when the applicant was performing additional rostered duties, according to Cl 5 of the PT Agreement, he was an employee in a practical, factual and legal sense. The employer of the applicant was Doxi Pty Ltd, owned by Mr Dwyer at the time.

[70] However, that is not the end of the matter. This case, as the authorities have made plain, demonstrates that ‘one size fits all’, is not the definitive answer to every employment/contractor relationship. There may be ‘grey’ cases where the factual circumstances are not entirely clear, or the weight of evidence tips a particular finding one way over another.

[71] That said, in my view, the relationship between Doxi Pty Ltd and the applicant was neither unusual nor unique. It is a typical relationship routinely found in the fitness industry, where PTs conducting their own business do so on gym premises, using the gyms’ equipment and resources. Real benefits for the gym include the clients of the PT’s business being an advertisement for the gym more widely and for the PT being available to perform duties associated with the administration, running and/or management of the gym at the owner’s discretion.

[72] In that sense, the relationship between the PT and the gym owner is dual faceted. It includes a PT’s personal business as a contractor, sitting comfortably alongside an ordinary employment relationship between the PT as an employee and the gym owner as the employer. The fact the PT Agreement recognises this dual arrangement demonstrates the two different relationships coexist together. This does not mean that one relationship exists to the exclusion of the other, a proposition for which Mr Dwyer contended. Mr Dwyer’s submission (which I accept), that all the PTs had the same arrangements, does not support Mr Dwyer’s objection; rather, it demonstrates that this is a commonly accepted arrangement in the fitness industry.

[73] For all aforementioned reasons, I conclude that the respondent’s jurisdictional objection must be dismissed. It follows the applicant’s s 394 application for an unfair dismissal remedy, is jurisdictionally sound and competently before the Commission for determination on its merits.”

Bond v Doxi Pty Ltd t/a Jetts Wanneroo (2020) FWC 2538 delivered 29 May 2020 per Sams DP