Who is an employee for fair work law?

This is a very useful summary of the current law which distinguishes between an employee and an independent contract in Australia.

 

“Consideration

 

[47]       Deputy President Roberts helpfully set out the relevant law which I will follow here.12 The Fair Work Act regulates many aspects of workplace relationships and interactions in great detail. It leaves the fundamental issue of who is an employee to the common law.13

 

[48]       The High Court has relatively recently considered that question in the decisions of

CFMMEU v. Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Pty Ltd and Jamsek [2022] HCA 2. The principles set out by the Court in those decisions have been conveniently distilled14 by Wigney J in the matter of JMC Pty Limited v Commissioner of Taxation [2022] FCA 750 as follows:

 

First, where the rights and duties of the parties are comprehensively committed to a written contract, the legal rights and obligations established by the contract are decisive of the character of the relationship provided that the validity of the contract has not been challenged as a sham, or that the terms of the contract have not been varied, waived or are subject to an estoppel: Personnel Contracting at [43], [44], [47], [59] (Kiefel CJ, Keane and Edelman JJ), [172] (Gordon J, Steward J relevantly agreeing at [203]). The task is to construe and characterise the contract made between the parties at the time it was entered into: Personnel Contracting at [174] (Gordon J).

 

Second, in order to ascertain the relevant legal rights and obligations, the contract of employment must be construed in accordance with the established principles of contractual interpretation: Personnel Contracting at [60] (Kiefel CJ, Keane and Edelman JJ), [124] (Gageler and Gleeson JJ), [173] (Gordon J). In that respect, regard may be had to the circumstances surrounding the making of the contract, as well as to events and circumstances external to the contract which are objective, known to the parties at the time of contracting and which assist in identifying the purpose or object of the contract: Personnel Contracting at [174]-[175] (Gordon J); Jamsek at [61] (Kiefel CJ, Keane and Edelman JJ), referring to Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352. The nature of the specific job that the putative employee applied for and the nature and extent of any tools or equipment they have to supply for that job may also be relevant: Personnel Contracting at [175] (Gordon J). It is, however, generally not legitimate to use in aid of the construction of a contract anything which the parties said or did after it was made: Personnel Contracting at [176] (Gordon J).

 

Third, and flowing from the first two principles, the characterisation of the relationship between the parties is not affected by circumstances, facts or occurrences arising between the parties that have no bearing on their legal rights: Personnel Contracting at [44] (Kiefel CJ, Keane and Edelman JJ), [173]-[178] (Gordon J); Jamsek at [109] (Gordon and Steward JJ). A “wideranging review of the entire history of the parties’ dealings” is neither necessary nor appropriate: Personnel Contracting at [59] (Kiefel CJ, Keane and Edelman JJ); see also [185]-

[189] (Gordon J). For a “matter to bear upon the ultimate characterisation of a relationship, it must be concerned with the rights and duties established by the parties’ contract, and not simply an aspect of how the parties’ relationship has come to play out in practice but bearing no necessary connection to the contractual obligations of the parties”: Personnel Contracting at [61] (Kiefel CJ, Keane and Edelman JJ) (emphasis added).

 

It follows that the fact that the parties’ subsequent conduct may not have precisely aligned with their contractual rights and obligations, or the fact that a particular contractual right may have never been exercised or utilised, will generally be irrelevant when it comes to characterising the relationship. That is so unless the manner in which the parties conducted themselves after entering into the contract was such as to establish that the contract was a sham, or that the contract had been varied, or that certain rights under the contract were subject to an estoppel.

 

Fourth, the contractual provisions that may be relevant in determining the nature of the relationship include, but are not limited to, those that deal with the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, the deduction of income tax, the delegation of work and the right to exercise direction and control: Personnel Contracting at [113] (Gageler and Gleeson JJ); [174] (Gordon J), referring to Brodribb at 24 (Mason J); see also 36-37 (Wilson and Dawson

JJ).

 

Fifth, the characterisation of the relationship as one of service or employment involving an employer and employee, as opposed to a relationship involving an independent contractor providing services to a principal, often hinges on two considerations. The first consideration is the extent to which the putative employer has the right to control how, where and when the putative employee performs the work: Personnel Contracting at [73]-[74] (Kiefel CJ, Keane and Edelman JJ); [113] (Gageler and Gleeson JJ); see also Brodribb at 24 (Mason J) and 3637 (Wilson and Dawson JJ). The second is the extent to which the putative employee can be seen to work in his or her own business, as distinct from the business of the putative employer – the so-called “own business/employer’s business” dichotomy: Personnel Contracting at [36]- [39] (Kiefel CJ, Keane and Edelman JJ); [113] (Gageler and Gleeson JJ); cf [180]-[183] (Gordon J). Neither of those considerations are determinative and both involve questions of degree.

 

Sixth, a “label” which the parties may have chosen to describe their relationship is not determinative of the nature of the relationship and will rarely assist the court in characterising the relationship by reference to the contractual rights and duties of the parties: Personnel Contracting at [63]- [66] (Kiefel CJ, Keane and Edelman JJ); [127] (Gageler and Gleeson JJ);

[184] (Gordon J). The parties’ “legitimate freedom to agree upon the rights and duties which constitute their relationship” does not “extend to attaching a ‘label’ to describe their relationship which is inconsistent with the rights and duties otherwise set forth” – to permit otherwise would elevate the freedom to “a power to alter the operation of statute law to suit … the interests of the party with the greater bargaining power”: Personnel Contracting at [58] (Kiefel CJ, Keane and Edelman JJ).

 

The characterisation of a relationship as being either one of employer and employee, or one involving the engagement of an independent contractor, is ultimately an evaluative judgment that takes into account the totality of the parties’ contractual rights and obligations. The exercise may not necessarily be straightforward because, in some cases at least, the parties’ contractual rights and obligations may point in different directions. The evaluative exercise also should not be approached on the basis that there is some checklist against which ticks and crosses may be placed so as to produce the right answer. Some degree of uncertainty is unavoidable, particularly in the case of many modern-day work or service contracts.

 

[49]       In this case the parties committed the terms of their relationship to writing. The terms were contained in the Services Agreement.15 There was some evidence about the nature of the relationship prior to the signing of the documents. In this respect I accept the evidence of the parties that there was no change in the day to day practicalities of the relationship other than to continue to perform the work in accordance with what was set out in the services agreement. This is consistent with submissions by the parties and as given in evidence during cross examination.

 

[50]       Whilst there are a number of instances where the Applicant protests that certain indicia are performed in a particular way, in each case upon closer examination it is my view that the indicia are in practical terms supportive of an independent contractor relationship.

 

Control

 

[51]       The capacity for the Respondent to direct and control the work of the Applicant was in my view central to the Respondent’s business of providing care services to its clients. In Personnel Keifel CJ, Keane and Edelman JJ concluded:

 

….In referring Mr McCourt to Hanssen, Construct was exercising, and commercialising, its right to control the work that Mr McCourt would do and how he would do it. The marketability of Construct’s services as a labour-hire agency turned on its ability to supply compliant labour; without that subservience, that labour would be of no use to Construct’s clients. That right of control was therefore the key asset of Construct’s business. Its significance was not diminished by the circumstance that the minutiae of Mr McCourt’s performance of daily tasks were at the direction of Hanssen. Indeed, the right of control held by Construct over Mr McCourt explains why there was no need for any contractual relationship between Mr McCourt and Hanssen in order to support Hanssen’s ability to issue day-to-day directions to Mr McCourt.16

 

[52]       In considering that example in Personnel, the Applicant submitted in her evidence that the Respondent held regular case management meetings in which the Applicant was told how to treat patients including when she needed to take a harder approach with them. I heard the evidence of the Respondent in this respect who described some patients having a number of professionals involved in their therapy eg exercise physiologists, psychotherapists and the like, and that the purpose of these case management meetings was to ensure all parties were working together in the best interests of the patient. Further, the Respondent gave evidence that she could not tell the Applicant how to treat a patient in closed doors. Like Personnel, the Respondent provided certain assurances to its clients and it was not unreasonable for the Respondent to exercise a high level of control to ensure that the assurances provided were honoured at a high level. For example, in terms of providing timely, high quality services.

 

[53]       It is clear though that minutiae of how that work was performed was in the hands of the Applicant. This is particularly the case where the risk and the insurance for the wellbeing of the patient lies with the Applicant. The Applicant gave her own evidence that she was required to have her own insurance and professional accreditation. In consideration of all of these factors I accept that the Applicant is responsible for the clinical treatment and outcomes of her patients and that there was no control over her in this respect Applicant concedes that on her own evidence she admits that “after care appointments were “pencilled into” my diary and I would change the appointment day/time according to both mine and client’s availability.”17 This in effect demonstrates that the Applicant did have control over when this work was done. I do not accept that After care work and residential care can be separated for the purposes of where and how that work was conducted as it pertains the Applicant’s control of her work. I accept simply that residential work does need to occur where the patient is in residence, this is a common sense outcome and the after-care work has more flexibility as to where it is conducted and in that sense the Applicant has had control as to where that occurred with some performed at her home by phone or video or some in her private offices at Chi Hub which are premises not in any way associated with the Respondent.

 

[54]       In this present matter the Applicant claimed she had little control over what work she accepted or performed,18 however when reading on into the Applicant’s submissions and further in cross examination the Applicant conceded that she had never been told verbally or in writing that she could not do so. She was unable to give an example where she was unable to do.

 

[55]       Other examples are:

 

  1. a) In respect of controlling when she worked, the Applicant made submissions that she advised the Respondent when she was available for work at 3 days a week,19 in cross examination the Applicant acknowledged that she had changed that to 2 days a work at the Respondent’s residential facility and 1 day a week from her home with the other two days of work a week being private work she performed for other clients.

 

  1. b) In respect of being able to delegate work to others, in cross examination the Respondent gave a number of examples naming two other contractors who were able to delegate work to other contractors when they would not be available.

 

  1. c) The Applicant accepted that income tax was not deducted from her pay and she charged her client for GST in invoices that were sometimes issued weekly and sometimes monthly at the Applicant’s discretion when she had time to attend to uploading the required reports that accompany the invoices. I accept she was paid for completing results which might be also linked to time. Given the Applicant had worked for the Respondent for such a significant time, I don’t accept that such a situation was not accepted by the Applicant as there were actions that could have been taken to dispute this situation if it were a sham arrangement.

 

  1. d) The Applicant gave evidence that she did not receive sick leave, annual leave, payment for public holidays etc She claimed she recently sought public holiday payments at Christmas 2023 however there was no evidence before the commission of this and the Respondent denied any knowledge or that any such payment had been made.

 

  1. e) The services contract contained a provision that the Applicant was responsible for providing her own equipment and tools.20 In the Applicant’s own evidence she acknowledges paying for any art material required for use in therapy she provided.21

 

  1. f) On the Applicant’s own evidence she performed work for others around 25% of her time,22 and this was further confirmed in cross examination.

 

  1. g) The Applicant gave evidence that her field was a specialist field of work requiring significant qualifications and experience. It required ongoing monitoring and training. The Respondent gave evidence in cross examination that it assisted all contractors with training to ensure they could provide the highest quality of services to their clients. It is my view that the work performed by the Applicant involves a profession with a distinct calling on her part.

 

 

Was the contract a Sham?

 

[56]       The Applicant submitted that the Respondent had misrepresented the true nature of the relationship and was engaging in a “sham arrangement.” I do not think the evidence in this matter goes so far as to show that the validity of the contract itself could be successfully challenged on that basis. Nor was it argued cogently, supported by any relevant evidence, that the legal effect of the written terms was affected by a variation, waiver or estoppel. I turn then to consider the nature of the legal rights and duties created by the written terms to determine the true character of the relationship between the parties.

 

[57]       I consider that the terms of the Service Agreement create the relevant rights and duties that bound both parties for the purpose of characterising the relationship between them. I have considered those terms in their totality.

 

[58]       The Services Agreement describe the Applicant as an independent contractor. On the basis of the submissions and evidence before me, there is no evidence to support or conclude that the arrangement which has been in place is a sham. I accept the evidence of the Respondent given in cross examination that in 2017, she sought advice from her accountant as to how she should be engaging staff in her business. She conducted a survey of her staff and then met with them one on one. The outcome was that some staff became employees and some continued as contractors but with the new contracts put in place for which the Applicant in this matter is presently bound by. This is a legitimate process for an employer to ensure that employees or contractors are engaged correctly in accordance with the law, and I accept that this was the purpose for which the Respondent offered the Services Agreement to the Applicant. The Applicant considered that Services Agreement and signed it. There is no evidence of a lack of capacity, and I accept that the Applicant is a well-educated and intelligent professional. She understood what she was signing, she had been working within its terms for some years prior and she continued to work within its terms up until the time it was terminated in early 2024.

 

“Own business/employer’s business” dichotomy

 

[59]       It was accepted by the plurality in Personnel that although not determinative, the question of whether someone is conducting their own independent business as opposed to serving in the business of another could be a useful framework to guide the characterisation of the relationship.23 The Applicant in this matter did demonstrate she conducts her own business ‘Make Sense’ which was as contemplated in Personnel. The Applicant gave evidence as to the nature of her business and that she was growing the business in the days she was not performing work for the Respondent. The services she provides in this business are around the same fields of expertise for which she performs work for the Respondent. I accept that to be the case.

 

[60]       The evidence before the Commission was that the Applicant’s business Make Sense did perform work for other parties and that she used her office at Chi Hub to deliver these services. There was no evidence before the Commission that the Respondent took any action to stop or minimise the Applicant’s efforts in this respect. This is further indicative of the independent contractor relationship pursuant to Personnel.

 

[61]       Clause 9.2 of the Agreement provides that the Contractor is responsible for providing any equipment, including safety equipment, tools and resources. Additionally, the Applicant is responsible for travel costs for which they would be reimbursed at a cost of 66 cents per km where clients were to be transported to appointments or events. These are factors which in the overall assessment, points to the relationship as being one of principal and independent contractor.

 

[62]       Clause 2.7 of the Services Agreement provides that it can only be varied by agreement in writing. There was no evidence put before the Commission that any such variation had occurred.

 

[63]       Clause 4.5 of the Services Agreement provides that the Applicant can delegate substitute or subcontract all or part of the services therein. Clause 8 of the Services Agreement makes it clear that taxes, superannuation, workers compensation and insurance premiums are the responsibility of the Applicant.

 

[64]       As to remuneration, the Services Agreement provides (at Item 10 of the Schedule) that the Applicant was to be paid a fee for completion of certain services, which appear to have been measured in time and paid upon completion and the uploading of a relevant report substantiating the work performed. The Services Agreement demonstrates that the fees are negotiated with the Respondent and the Applicant. I take this to mean that ultimately, the rates applying to the Applicant at the point of engagement set out in the Service Agreement were determined by the Respondent, presumably after some negotiation with third parties, and passed on to the Applicant.

 

[65]       The Services Agreement obliges the Applicant to submit weekly reports to the Respondent’s systems for processing. I note that at times the Applicant could only do this monthly and that she was then paid accordingly. This is an administrative requirement justified in such an arrangement.

 

[66]       Whilst the plurality in Personnel cautioned that not all contractors are entrepreneurs,24 the utility of the “own business/employer’s business” dichotomy was nonetheless accepted. I am of the view that the contractual arrangements taken as a whole leave plenty of scope for entrepreneurship on the part of the Applicant and this is supported by the Applicant’s own evidence of the business she is building through her business Make Sense which has included assignments overseas.

 

[67]       The determination as to whether a person is an employee or independent contractor is a question of law. I do not find that the Services Contract was a Sham contract for all of the reasons set out. Having taken into account the various rights and obligations that the parties created for themselves by their contractual arrangements, I am of the view that the relationship between the Applicant and Respondent in this case was one of Principal and independent contractor.

 

[68]       The Respondent’s jurisdictional objection is upheld. The Applicant’s unfair dismissal application is dismissed.”

 

Jeske v Noosa Confidential Pty Ltd  [2024] FWC 1572 delivered 17 June 2024 per Dobson DP