Damien Lennen v Hallmark Editions Pty Ltd T/A Hallmark Editions
[2012] FWA 3546
•30 APRIL 2012
[2012] FWA 3546 |
|
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Damien Lennen
v
Hallmark Editions Pty Ltd T/A Hallmark Editions
(U2012/4356)
COMMISSIONER BISSETT | MELBOURNE, 30 APRIL 2012 |
Application for unfair dismissal remedy - jurisdictional objection - minimum employment period.
Background
[1] This is an application for relief from unfair dismissal made by Mr Damien Lennen (the Applicant) under s.394 of the Fair Work Act 2009 (the Act).
[2] Mr Lennen was, at the time of the termination of his employment, employed by Hallmark Editions Pty Ltd T/A Hallmark Editions (Hallmark or the Respondent) as a Sales and Advertising Manager. Hallmark is a wholly owned subsidiary of CommStrat Limited.
[3] Mr Lennen’s employment was terminated on 19 January 2012 with immediate effect. Mr Lennen made his application on 25 January 2012.
[4] Hallmark disputes that Mr Lennen is protected from unfair dismissal. It says he was employed for less than six months at the time of the termination of his employment. Hallmark says that Mr Lennen signed an employment agreement on 4 November 2011, which specified that his employment would commence on 1 December 2011 (the employment agreement). Hallmark says that Mr Lennen had been previously engaged under a service agreement with Hallmark dated 13 March 2011 that described the arrangement as other than an employment contract (the service agreement).
[5] Mr Lennen says that he commenced working for Hallmark on 16 May 2011. He says that it is unambiguously clear that he was not engaged in May 2011 as a contractor but as an employee. As such he has the requisite period of employment so that he is protected from unfair dismissal.
Statutory provisions
[6] The Act relevantly provides:
382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
Note: High income threshold indexed to $118,100 from 1 July 2011
383 Meaning of minimum employment period
The minimum employment period is:
(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:
(i) the time when the person is given notice of the dismissal;
(ii) immediately before the dismissal; or
(b) if the employer is a small business employer—one year ending at that time.
[7] As is relevant to this matter, it is argued by the Respondent that the Applicant did not have six months employment at the time he was given notice of dismissal, as he was an employee of the Respondent only for the period from 1 December 2011 to 19 January 2012.
Relevant authorities
[8] The approach to be taken in determining if a person is a contractor or an employee was most recently considered in this jurisdiction in Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario 1 (French Accent). In that matter a Full Bench found:
The nature of the general law approach to distinguishing between employees and independent contractors is such that a summary of that approach that is faithful to the court authorities has a continuing utility in this jurisdiction. The apparent tension in the summary in Abdalla highlighted in this appeal, together with the emphasis on the proper approach to a consideration of the indicia provided by the decision of Full Court of the Federal Court in Roy Morgan, makes it desirable to recast the summary in Abdalla, albeit we do not see that summary as wrong.
The general law approach to distinguishing between employees and independent contractors may be summarised as follows:
(1) In determining whether a worker is an employee or an independent contractor the ultimate question is 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 of which the work in question forms part? This question is concerned with the objective character of the relationship. It is answered by considering the terms of the contract and 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. However, the 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: 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.
(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context...
(5) Where a consideration of the indicia (in the context of the nature of the work performed and the terms of the contract) points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. However, a consideration of the indicia is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship 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 the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. 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. The ultimate question remains as stated in (1) above. If, having approached the matter in that way, the relationship remains ambiguous, such that the ultimate question cannot be answered with satisfaction one way or the other, then the parties can remove that ambiguity a term that declares the relationship to have one character or the other.
(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. 2
[9] The indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd 3 as referred to in French Accent are:
● 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...
● 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. 4
(footnotes omitted)
[10] I have adopted the approach outlined in French Accent to the determination of this matter.
Evidence and submissions
The Respondent
[11] Mr Alexander McNab is the Acting Managing Director for the Respondent. He made submissions on the matter but did not call evidence. He stated that the Applicant had already left the employ of the Respondent when he took on the Acting Managing Director role so his submissions were based on documents and what he had been told. 5
[12] Mr McNab submits that the Applicant signed a services agreement that specified the Applicant could move to an employment contract after three months and this implies that the services agreement was not an employment contract. 6
[13] Mr McNab submits:
So we organise our business into teams. Some of the teams generate content. Some of the teams organise events. Then we have some sales people, some of whom work as employees of the business and some of whom work as independent contractors. Those who work with us as employees have a structure which has a relatively high base salary; anywhere between $80,000 and $200,000 a year, with much lower commissions. The people who work with us as contractors are on lower retainers and sometimes no retainer, with the ability to earn much higher commission. 7
[14] Mr McNab submits that the original contract - the services agreement - was entered into at the behest of Mr Lennen and that it was anticipated that an employment contract would be entered into within three months. Mr Lennen was not willing to enter into an employment contract until Christmas. 8
The Applicant
[15] Mr Lennen’s evidence is that in early 2011 he applied for a position advertised on SEEK. He went through the normal process of applying for a position and he met with Mr Blake Duggin (whom he subsequently reported to). He then met with the CEO (Mr Matt Johnson). He was offered the position on 13 May 2011 and started work on 16 May 2011.
[16] Mr Lennen says that:
● He was given specific areas of responsibility (job boards). 9
● He was required to be at work at 8.30 am and finished at 5.00 pm though sometimes he worked back if he needed to. The hours were ‘very strict.’ 10 He took lunch ‘as normal people take lunch.’11
● He worked under the control of Mr Duggin who was his manager. 12
● He did not consider his salary to be on the low side. His salary was $59,000 per annum plus considerable commission.
● He worked for the company, he was dependent on the company and he had business cards that said ‘Damien Lennen, Sales Executive’ for CommStrat. The company website had his name and classified him as a sales executive for the Respondent. 13
● Within two weeks of commencing work he was making presentations on behalf of the company as an employee of the Respondent. He was held out as an employee of the Respondent and was never classified as being anything else. 14
● He did provide an ABN and invoices for payment but was not running his own business. His income from the Respondent was his sole source of income. 15
● He invoiced the company because they said it was more convenient than having to worry about multiple timesheets. 16
● He did not receive paid sick leave or holidays. 17
● He took no commercial risk in his activities with the company. He could not make a loss. 18
● He was unable to delegate any of his activities. 19
● He did not provide any of his own tools or equipment. He used the Respondent’s facilities. 20
● He says that he was paid an annual rate of pay worked out on a daily basis. 21
● He has not paid any superannuation or taxation. 22
Consideration
[17] Aside from the matter of whether Mr Lennen requested to be put on the services agreement or delayed the making of an employment contract with the Respondent there is little disputed evidence or submissions put before me.
[18] I have considered all of the evidence and submissions. Based on this material I find as follows:
1. The Respondent controlled the work performed by Mr Lennen: the way in which he performed his work, where he worked, his hours of work and the work he performed. In this case the control exercised by the Respondent was akin to the control expected to be seen of an employee by an employer.
2. Mr Lennen did not perform work for anyone else.
3. Mr Lennen did have an ABN and invoiced the Respondent weekly.
4. The manner by which Mr Lennen was paid, save for the Commission payment, was by way of regular weekly payments. The amount paid regularly each invoice period did not vary, regardless of the work performed, save that Mr Lennen was not paid for absences due to illness or holidays.
5. Mr Lennen was paid a commission of 10% of all sales on receipt of client payments. That he received an incentive payment does not change that he was paid an annual salary, paid weekly.
6. Mr Lennen had no separate place of work, nor did he advertise his services as being available at large. Mr Lennen worked for the Respondent at its office from 8.30 am to 5.00 pm each day.
7. Mr Lennen did not provide his own equipment or tools of the trade. He was provided with an office by the Respondent and associated technologies.
8. Mr Lennen’s services agreement expressly prohibited him from assigning the work to any other person.
9. The Respondent retained the right to terminate the services of Mr Lennen.
10. Mr Lennen was presented to the world at large as ‘an emanation’ of the business. He was provided with business cards which indicated he was a Sales and Advertising Manager for CommStrat.
11. Income tax was not deducted from payments made to Mr Lennen.
12. Mr Lennen was not provided with paid holidays or sick leave.
13. Mr Lennen was not engaged in a profession, trade or distinct calling.
14. Any goodwill created by Mr Lennen accrued to the Respondent.
15. Mr Lennen spent none of his earnings on business expenses.
[19] I have carefully considered the arrangement entered into by the Respondent with Mr Lennen in March or May 2011. (There was a disagreement as to whether the Applicant started in March or May. The exact date has no bearing on this decision). There is nothing in this arrangement in intent or in fact that would suggest that it was anything but an employment relationship. That the Applicant was paid a commission and that no taxation was deducted from his earnings are factors that do not, on their own, indicate that he was a contractor.
[20] A consideration of the content of the services arrangement signed by the Applicant suggests that the arrangement was more a probation or trial arrangement. That it was intended to replace the services arrangement with an employment contract after three months further suggests that it was never seriously contemplated that the Applicant was a contractor, independent of the Respondent.
[21] The Respondent argues that the services agreement signed by Mr Lennen clearly indicates (at clause 2) that it is other than an employment contract. This argument can be quickly dispensed with. The Full Bench confirmed in French Accent that the true nature of the relationship cannot be hidden behind some different label. As has often been observed if it looks like a duck, walks like a duck and quacks like a duck regardless of what you call it, it is in all likelihood a duck. In this case the relationship has all of the characteristics of an employee/employer relationship. Calling it a services arrangement cannot change what it truly is.
[22] I conclude that Mr Lennen was not conducting his own business on his own behalf when he worked under the purported services agreement for the Respondent but was in fact working as an employee.
Conclusion
[23] I find, based on the evidence, that Mr Lennen was an employee of the Respondent from 16 May 2011 (when he says his employment commenced) until his employment was terminated on 19 January 2012.
[24] Mr Lennen had more than six month’s employment at the time his employment was terminated. Nothing else was put that would suggest Mr Lennen was not protected from unfair dismissal.
[25] I therefore find that Mr Lennen was protected from unfair dismissal. The jurisdictional objection by the Respondent to the application is therefore dismissed. An order to this effect will be issued.
[26] The file will be subject to further directions and programming for the hearing of the merits of the application.
COMMISSIONER
Appearances:
D Lennen on his own behalf.
A McNab of the Respondent.
Hearing details:
2011.
Melbourne:
April 19.
1 [2011] FWAFB 8307.
2 [2011] FWAFB 8307 [29]-[30].
3 (1986) 160 CLR 16.
4 [2011] FWAFB 8307 [30].
5 Transcript PN10-12.
6 Transcript PN18.
7 Transcript PN32.
8 Transcript PN36.
9 Transcript PN92.
10 Transcript PN92-94.
11 Transcript PN95.
12 Transcript PN94-5.
13 Transcript PN99; see also Applicant’s submission dated 27 March 2012.
14 Transcript PN95.
15 Transcript PN95.
16 Transcript PN103.
17 Transcript PN96.
18 Transcript PN99.
19 Transcript PN99; see also clause 2 of the services agreement attached to the submissions of the Respondent dated 21 March 2012.
20 Transcript PN99.
21 Transcript PN99.
22 Transcript PN119-121.
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