“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers' Union (AMWU) v Inghams Enterprises Pty Ltd

[2010] FWA 7925

Note: An appeal pursuant to s.604 (C2010/5293) was lodged against this decision - refer to Full Bench decision dated 5 January 2011 [[2011] FWAFB 33] for result of appeal.

[2010] FWA 7925

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.437—Protected action

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
v
Inghams Enterprises Pty Ltd
(B2010/102)

COMMISSIONER RYAN MELBOURNE, 13 OCTOBER 2010

Proposed protected action ballot by employees engaged by Inghams Enterprise Pty Ltd at the Somerville site in Victoria who are members of the Applicant.

[1] Application was made to by the AMWU for a protected action ballot order in relation to “those employees of Ingham Enterprises Pty Ltd (Ingham) who work in maintenance roles at Ingham’s Grant Road, Somerville plant and are members of the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and who would be subject to the proposed enterprise agreement, except an employee who is bound by an individual agreement-based transitional instrument that has not passed its nominal expiry date on the day this ballot order is made, unless such an employee has made a conditional termination of that instrument.” 1

[2] Ingham challenged the validity of the application on the grounds that the employees who were seeking to bargain for an enterprise agreement were not employees of Inghams. Ingham contended that it had 2 employees who were doing work in maintenance roles at its Somerville Plant but that both of these employees were covered by an individual agreement-based transitional instrument that has not passed its nominal expiry date.

[3] The critical issue for determination by the Tribunal was whether the maintenance workers at the Ingham Somerville Plant were employees of Ingham or in some other relationship other than being an employee of Ingham.

Background

[4] Ingham operate a large chicken processing plant at Somerville. The plant is currently in the process of being rebuilt after a major fire destroyed most of the plant. The plant is automated with machines doing most of the processing. Ingham employs a large number of machine Operators. Production work is carried out Monday to Friday and across 2 shifts. A number of maintenance workers are present on each shift and additional maintenance workers are used on weekends to do maintenance which cannot be done whilst production is in progress. Maintenance workers present whilst production is occurring carry out a range of functions relating to maintaining the operation of the machines necessary for the processing of chickens.

[5] Since the commencement of operations at the Somerville plant, Ingham has directly employed only a very small number of maintenance employees (currently 2). The greater majority of maintenance workers at the Somerville plant have been engaged through third parties.

[6] Mechanical maintenance tradespersons who work on shifts during the production process are currently engaged through Willing and Able P/L (Willing & Able). Electrical maintenance tradespersons who work on shifts during the production process are currently engaged through AEV Contracting P/L (AEV). Each of these two firms also supply additional maintenance workers for weekend maintenance work. Other businesses perform maintenance work when required. The evidence was clear that these other firms do not provide maintenance workers to perform the regular and ongoing daily maintenance that is undertaken whilst production occurs. The evidence was that these other firms provide specialist and irregular maintenance services to Ingham.

[7] Willing & Able has been the main provider of mechanical maintenance tradespersons at Ingham’s Somerville plant since its commencement. AEV has been the main supplier of electrical maintenance tradespersons since about 2005.

The Evidence

[8] In the current matter evidence was given by 2 of the maintenance workers, and by the Plant Engineer and the Maintenance Co-ordinator at the Somerville plant.

[9] As part of the proceedings, and at the request of Ingham, Orders to Produce were issued by Fair Work Australia to the 2 maintenance workers requiring them to produce records relating to their financial affairs, tax records and business affairs. At the request of the Applicant Orders to Produce were issued by Fair Work Australia to Ingham requiring the production of records relating to contracts between Ingham and 3 contractors and payments to named maintenance workers.

[10] The evidence of the 2 maintenance workers dealt with their relationship with the contractor and their relationship with Ingham. Each of the 2 maintenance workers also gave evidence in relation to their financial affairs and their tax records. The 2 direct employees of Ingham gave evidence in relation to the way in which Ingham contracts with third parties for the provision of maintenance workers and as to the allocation of maintenance work to the maintenance workers.

[11] From the evidence of all of the witnesses I have discerned that maintenance workers performing work at the Ingham Somerville plant fall into 3 clearly discrete and identifiable groups. Firstly there are those maintenance workers who perform maintenance work on a regular and continuing basis Monday to Friday whilst production is occurring. Secondly there are those maintenance workers who work on weekends to carry out maintenance tasks which either cannot be carried out during the period of Monday to Friday whilst production is occurring or which have could have been but have not been carried out during the Monday to Friday period. Thirdly there are those maintenance workers who may perform maintenance work at any time but who do so in relation to specific tasks arising.

[12] From the evidence it is clear that there is some crossover between the first and second groups but none between the second and third groups. Maintenance workers who work the regular shift patterns Monday to Friday will also do additional work on weekends. The evidence of the 2 maintenance workers was that they were offered the full time roles of maintenance worker on Monday to Friday shifts as a result of first working occasionally and then regularly on maintenance work on weekends. The crossover between the first and second groups reflects the fact that the 2 main contractors providing maintenance workers do so for both the regular Monday to Friday maintenance work and for much of the weekend work.

[13] The evidence shows that there are no written contracts in place between Ingham and the contractors. The evidence also shows that there were no written contracts in place between the maintenance workers and either the contractors or Ingham.

[14] The evidence shows that the maintenance workers who performed the regular shift maintenance work Monday to Friday at the Ingham Somerville plant were doing so on a full time basis, i.e. about 38 hours per week and that this pattern of work was both consistent and long term.

[15] The evidence shows that the maintenance workers received their remuneration from the contractor. The rate of remuneration was a matter agreed between the maintenance worker and the contractor. Ingham did not know the rate of remuneration paid by the contractor to the maintenance workers. However the evidence also shows that Ingham was not blind nor ignored the remuneration of maintenance workers. When approached by a maintenance worker who believed he deserved a higher rate of pay for undertaking supervisory work as part of the provision of the regular Monday to Friday maintenance work the Plant Engineer of Ingham raised the issue with the contractor.

The relevant case law

[16] In Abdallo v Viewdaze Pty Ltd 2 a Full Bench of the Australian Industrial Relations Commission set out in detail the common law approach to the determination of whether a person is an employee or independent contractor and provided a summary of the law as follows:

“Summary of the law on distinguishing employees from independent contractors

34 Following Hollis v Vabu, the state of the law governing the determination of whether an individual is an employee or an independent contractor may be summarised as follows:

(1) Whether a worker is an employee or an independent contractor turns on whether the relationship to which the contract between the worker and the putative employer gives rise is a relationship where the contract between the parties is to be characterised as a contract of service or a contract for the provision of services. The ultimate question will always be whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own. This question is answered by considering the totality of the relationship.

(2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant ‘indicia’ and the relative weight to be assigned to various ‘indicia’ and may often be relevant to the construction of ambiguous terms in the contract.

(3) The terms and terminology of the contract are always important and must be considered. However, in so doing, it should be borne in mind that parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: that is, the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract. If, after considering all other matters, the relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they make with one another.

(4) Consideration should then be given to the various ‘indicia’ identified in Brodribb and the other authorities bearing in mind that no list of indicia is to be regarded as comprehensive and the weight to be given to particular indicia will vary according to the circumstances. Where a consideration of the ‘indicia’ points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. For ease of reference we have collected the following list of ‘indicia’:

• 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.

Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of independent contract. While control of this sort is a significant factor is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where their work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weights significantly in favour of the worker being an employee.

"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." “[B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.

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

The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, if the individual also works for others (or the genuine and practical entitlement to do so) then this suggests independent contract.

• 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.

If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.

• 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.

Typically, this will arise because the worker is required to wear the livery of the putative employer.

• 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.

Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.

• 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.

Such persons tend to be engaged as independent contractors rather than as employees.

• 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.

This list is not exhaustive. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.

(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 (see above).”

[17] In adopting and applying the summary of the law as stated above I also have had regard to the caution given by a Full Bench of the Australian Industrial Relations Commission in the ACT Visiting Medical Officers Association case 3, where they said:

“16 The decision of the Full Commission in Abdalla v Viewdaze Pty Ltd did not establish any new law. On the face of the decision, the Full Bench considered it appropriate to review and summarise the law on distinguishing employees from independent contractors, that being the first occasion a Full Bench of the Commission had had to consider the issue following the decision of the High Court in Hollis v Vabu. The summary in Abdalla is extensively footnoted and it is clear that the Full Bench was at pains to formulate the summary in a way that attempted to be as faithful as possible to the language used in the authorities and, in particular, the relevant decisions of the High Court.”

Applying the law to the present matter

Are the maintenance workers carrying on a business on their own?

[18] As the summary in Abdalla v View Daze makes clear this question is to be answered by considering the totality of the relationship and when viewed as a practical matter.

[19] The Full Bench in the ACT Visiting Medical Officers Association case said:

“19. The ‘ultimate question’ specified in Abdalla was drawn from a statement by Windeyer J in Marshall v Whittaker's Building Supply Co, adopted by the majority in Hollis v Vabu, 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.” The majority in Hollis v Vabu made it clear that the determination of whether a putative employee could be said, in relation to the work in question, to be “conducting a business of his or her own”, is concerned with the practical reality.”

[20] I find it impossible to come to the conclusion that when viewed as a practical matter and in considering the totality of the relationship that the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham were carrying on a business of their own. The conclusion that has to be drawn from the totality of the relationship is that the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham were not carrying on a business of their own. They were not contractors they were employees. The maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham were serving Ingham in Ingham’s business.

The Contract?

[21] In the present matter there was no written contract between the maintenance workers and the contractor. A contract obviously existed as work was performed by the maintenance workers and payment was made for that work. In the absence of a written contract the terms of the contract which related to the performance of maintenance work at Ingham’s Somerville plant by the maintenance workers will need to be drawn from the evidence given.

[22] The very absence of a written contract is of itself a significant factor in any consideration of the totality of the relationship between the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham and either or both the contractor and Ingham.

[23] The evidence of the maintenance workers was that the contract was only in relation to them performing work for Ingham at Ingham’s Somerville plant. Even after the fire destroyed most of the Somerville plant the evidence was that the maintenance workers continued to perform work only for Ingham, albeit at a physical location different from the Somerville plant.

[24] The evidence also identified that when the electrical maintenance contractor was changed by Ingham from Top Gun to AEV that electrical maintenance workers were simply moved from contractor to contractor whilst maintaining their ongoing role performing the regular shift maintenance Monday to Friday for Ingham.

[25] The relationship between Ingham and the contractors appears to be somewhat informal. No written contracts between Ingham and the contractors were produced to the Tribunal in response to the Order to Produce. Given that Ingham consented to the terms of the Order to Produce the absence of any written contract having been produced permits me to draw the conclusion that no such written contracts exist. The evidence of the Plant Engineer on this point was inconclusive but highly suggestive of there being no written contract in existence between Ingham and the contractors.

[26] In the totality of the relationship the absence of written contracts at any level of the relationship tends to support a finding that the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham are employees of Ingham.

Considering the Several Indicia

[27] I now turn to each of the indicia identified in the summary of the case law as set out in Abdalla v View Daze.

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.

[28] Whilst the level of control is not determinative of the question as to the nature of the relationship it is nevertheless a powerful indicator in many cases as to the true nature of the relationship.

[29] The evidence in this matter is that Ingham exercised a very high level of control over the manner in which the maintenance workers performed their work, where they performed their work and the time they performed their work.

[30] It is always necessary to recall that in the case of specialised workers or tradespersons or professionals that the nature of control is very different from that exercised over labourers, not tradespersons and persons performing lower skilled work. Direction and supervision of lower skilled workers is often expressed as being direct supervision or close supervision whereas direction and supervision of tradespersons and professionals is often expressed as general supervision or oversight of work. In this sense significant control can be exercised over the work of a tradesperson without the need for the person exercising that control to have to direct the tradesperson in relation to every aspect of the performance of work, eg which nut to undo first, and which to undo second and so on.

[31] The evidence in this matter made clear that the maintenance workers were under a high level of control by Ingham. Ingham production supervisors and production operators did on occasions directly inform the maintenance workers what maintenance work needed to be performed. Whilst the evidence from the Plant Engineer was that he would prefer if the allocation of maintenance work to the maintenance workers was done through a more formal system it was never put in dispute that the maintenance workers undertook the tasks allocated to them by the production employees. In addition the evidence was clear that Ingham planned the weekend maintenance at a weekly meeting with the Contractor. The main purpose of that meeting was to ensure that the Contractor supplied enough maintenance workers to meet Ingham’s need. The evidence suggests that the Contractor had little influence over the control of the maintenance workers whilst they were performing maintenance work for Ingham.

[32] The effective control by Ingham of the manner of work, place of work and hours of work was highest in relation to the maintenance workers who worked on regular shifts Monday to Friday. It was these maintenance workers who directly and constantly interacted with the production employees of Ingham and did so in the context of the allocation of maintenance work.

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

[33] There was no evidence that any maintenance worker either worked for others or had a genuine and practical entitlement to do so.

[34] The evidence of the maintenance workers was they worked for Ingham at Ingham. There was evidence given that a maintenance worker was required by the Contractor who organised his relationship with Ingham that for 2 weeks in a year that the worker would fill in invoices to charge his work for another Contractor. Rather than support a finding that the maintenance workers had a genuine and practical entitlement to perform work for others the evidence is strongly supportive of the a situation where the maintenance worker was performing work exclusively for Ingham as a result of an arrangement between Ingham and the Contractor and where the Contractor was deliberately trying to hide the real nature of the relationship, including from the Australian Taxation Office.

[35] The evidence of the Plant Engineer was that Ingham required a permanent maintenance workforce in the factory undertaking (at the very least) the regular shift maintenance Monday to Friday 4.

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

[36] There was no evidence that such was the case in this matter nor was such even asserted by Ingham

Whether the worker provides and maintains significant tools or equipment.

[37] The evidence was that as maintenance tradespersons they provided and maintained their own tools. Evidence was also given that after the destruction of the Somerville plant by fire that Ingham made a payment to the maintenance workers who lost tools in the fire.

Whether the work can be delegated or subcontracted.

[38] The evidence of the maintenance workers was that they performed the work. There was no evidence that any maintenance worker had the capacity to delegate or subcontract the work they performed at the Somerville plant. Ingham made no assertion that any maintenance worker had the capacity to delegate or subcontract.

[39] The evidence as to the nature and level of control exercised by Ingham over entry into their premises weighs against the maintenance workers having any right to delegate or subcontract their work. In fact the evidence of the Plant Engineer as to the need for permanency in relation to the maintenance workers supports a finding that the maintenance workers could not delegate or subcontract their work.

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

[40] The evidence supports a conclusion that Ingham exercised effective suspension or dismissal rights in relation to each of the maintenance workers.

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

[41] The evidence was clear that maintenance workers whilst working on the Ingham site wear protective clothing supplied by Ingham. Whilst Ingham maintains that the maintenance workers are not employees the evidence was that the maintenance workers in this matter and the 2 directly employed maintenance workers would be indistinguishable to any average person observing them at work or even observing them leaving work.

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

[42] The evidence was clear that payments made to the maintenance workers was payment of a gross amount out of which the worker was expected to pay tax, make superannuation contributions and provide for paid leave. Evidence was also given that one of the workers had never paid tax or made allowance for superannuation or leave payments out of the monies received by him.

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

[43] The evidence was that maintenance workers were paid periodically for time worked and not by task. The evidence also made clear that while maintenance workers completed work records based upon tasks completed and location of tasks completed this was not used for the purpose of paying the maintenance workers for tasks completed but rather was a management tool used by Ingham to monitor the maintenance work undertaken across the plant and to allocate maintenance costs internally within Ingham to the relevant operational unit.

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

[44] The evidence was clear that maintenance workers could access periods of leave and that they did so by recording the periods that they would not be available to work. Maintenance workers were not paid for periods of leave.

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

[45] The maintenance workers were either mechanical or electrical tradespersons and so it would appear that this indicia or criteria suggests that in being tradespersons the relationship may tend to be that of a contract for services. However in the context of the present matter it is clear that the nature of the work performed by the maintenance workers was inextricably linked to the production process when performed by the maintenance workers during Monday to Friday. As the evidence made clear the maintenance workers could be given maintenance work to do from several sources; the coordinator for the contractor, the maintenance coordinator for Ingham, the production leading hands or production workers.

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

[46] Whilst the evidence did not directly address this criteria the evidence suggests that no maintenance worker had either goodwill or any other saleable asset which was directly linked to the performance of maintenance work at Ingham.

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

[47] The evidence was clear that little remuneration was spent on business expenses. The evidence suggests that the only business expense was the costs involved in preparation of tax returns. Whilst the 2 workers who gave evidence had obtained ABN’s as a requirement for continuing to work at Ingham the evidence was clear that the normal activities commonly associated with the conduct of a business were not undertaken by the workers on a regular basis. Both of the maintenance workers who gave evidence indicated that they had only recently attempted to clarify their status with the Australian Taxation Office.

Conclusion

[48] The several indicia considered above do not uniformly point in one clear direction. Some of the indicia support a finding that the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham are employees of Ingham. Some of the indicia support a finding that the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham are not employees of Ingham.

[49] However the purpose of considering each and every one of the indicia is not to draw a conclusion on the basis of which way the majority of the indicia point but rather to ensure that by examining each of the indicia the Tribunal has considered the totality of the relationship.

In the context of the current matter the “ultimate question” is who are the maintenance workers working for- themselves, the contractor or Ingham?

[50] The conclusion to be drawn in relation to the maintenance workers who were performing the regular shift maintenance Monday to Friday for Ingham is that those persons were working for Ingham in an employer/employee relationship.

[51] I am not prepared to find that on the evidence and materials before me that the maintenance workers who only perform maintenance work for Ingham on weekends are employees of Ingham. Whilst the evidence of the 2 maintenance workers would suggest that when they were only working on weekends performing maintenance work for Ingham that they may have been casual employees the evidence falls short of permitting me to come to any concluded view on this matter.

[52] The evidence does support a conclusion that maintenance workers performing maintenance work at Ingham on an irregular basis and in relation to specific tasks, i.e. not those engaged through Willing & Able or AEV, are not employees of Ingham.

[53] I am satisfied that an Order should be issued in this matter. The Order as sought by the Applicant will be issued separately to this decision.

COMMISSIONER

Appearances:

Mr Barry Terzic for the Applicant

Mr John Jones for the Respondent

Hearing details:

2010

Melbourne:

13 and 14 September

 1   Draft Order appended to the AMWU’s Application Form F34

 2 (2003) 121 IR 215.

 3   ASMOF v. ACT Health Care Service [PR958666]

 4   Transcript of proceedings at PN1295

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