FEDERAL COURT OF AUSTRALIA
EFEX Group Pty Ltd v Bennett [2023] FCA 508
File number: SAD 176 of 2020 Judgment of: BESANKO J Date of judgment: 24 May 2023 Catchwords: INDUSTRIAL LAW —– application under s 562 of the Fair Work Act 2009 (Cth) and s 23 of the Federal Court of Australia Act 1976 (Cth) for order in the nature of prohibition directed at the Fair Work Commission restraining it from continuing to hear an unfair dismissal claim under s 394 of the Fair Work Act —– ground of application is that the alleged employee is an independent contractor and not an employee —– issue of whether there was an employment relationship between the parties is a jurisdictional fact for this Court to determine
INDUSTRIAL LAW —– nature of employment relationship —– effect of recent decisions of the High Court of Australia in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 398 ALR 404 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; (2022) 398 ALR 603 —– no written contract between the parties who were friends —– informal arrangements between the alleged employer and the alleged employee —– matters relevant to whether employment relationship exists —– the common understanding of the parties as to the nature of their relationship —– the extent of the alleged employer’s right of control —– whether the alleged employee was held out as part of the alleged employer’s organisation —– whether the alleged employee had the ability to work for others —– whether the alleged employee had the ability to delegate any of his work for his alleged employer to others —– whether the alleged employee provided capital or assets towards or in relation to work for the alleged employer —– whether the alleged employee had the ability to generate goodwill or other saleable assets —– relevance of mode of remuneration, leave (annual and sick) and taxation arrangements —– other matters —– in all the circumstances an employment relationship existed —– application dismissed
Legislation: Fair Work Act 2009 (Cth) ss 394, 400, 562, 604
Federal Court of Australia Act 1976 (Cth) s 23
Cases cited: Ace Insurance v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146
Australian Postal Corporation v D’Rozario [2014] FCAFC 89; (2014) 222 FCR 303
Bennett v EFEX Group Pty Ltd [2020] FWC 2503
Connelly v Wells (1994) 55 IR 73
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 398 ALR 404
EFEX Group Pty Ltd v Bennett [2020] FWCFB 6112
Enfield City Corporation v Development Assessment Commission [2000] HCA 5; (2000) 199 CLR 135
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; (2015) 228 FCR 346
Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21
Roy Morgan Research v Federal Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448
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- AGLC
- Efex Group Pty Ltd v Bennett [2023] FCA 508
- Case
- [2023] FCA 508
- Decision Date
CaseChat Overview and Summary
The central legal issue before the Court was determining whether an employment relationship existed between Efex and Mr Bennett. This required consideration of various factors, including the common understanding of the parties, the extent of Efex’s control over Mr Bennett’s work, and whether Mr Bennett was held out as part of Efex’s organisation. Other relevant factors included Mr Bennett’s ability to work for others, delegate his work, and provide capital or assets towards his work. Additionally, the mode of remuneration, leave arrangements, and taxation implications were examined. The Court had to balance these factors to ascertain the true nature of their relationship, drawing on recent High Court decisions that underscored the importance of control and mutual understanding in defining employment.
The Court concluded that an employment relationship existed between Efex and Mr Bennett. Despite certain factors suggesting an independent contractor arrangement, such as the mode of payment involving invoicing and GST, the overall circumstances indicated a relationship of employment. Mr Bennett's fixed monthly remuneration, paid irrespective of his performance or leave, aligned more with the characteristics of an employee. The Court dismissed Efex’s application, finding that the Fair Work Commission had jurisdiction to proceed with the unfair dismissal claim.
The Court ordered that Efex Group Pty Ltd’s originating application be dismissed. The matter of costs was to be heard separately.
Orders
Orders of the court
1. The applicant’s Originating application be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
There is no suggestion that Mr Bennett was developing, by his work with EFEX, a saleable asset, such as goodwill. Relatedly, the mode of remuneration is important (Roy Morgan Research v Federal Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448 at [42]; and Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; (2015) 228 FCR 346 at [181]). As Mr Bennett’s counsel submitted, Mr Bennett was paid $10,000 plus GST per month. The amount paid to him was not linked in any way with his performance or with any result or with any product. Mr Bennett was not at risk, in terms of his remuneration, in the performance of his work and he had nothing to gain by performance. He simply received the same remuneration. He was paid when he was on leave or when he was sick. That is consistent with someone who is in a relationship of employment.8. What is the relevance of the mode of remuneration, leave (annual and sick) and taxation arrangements? Mr Bennett accepts that there are factors pointing in the other direction. The first amongst these are the arrangements as to payment. They are suggestive of a relationship of independent contractor in that the method of payment involves invoicing monthly, the charging of GST and the fact that PAYG taxation was not withheld. In response to EFEX’s reliance on these matters, Mr Bennett referred to the observations of Buchanan J in Trifunovski as follows (at [37]):It is also difficult, in my view, to give much independent weight to arrangements about taxation, or even matters such as insurance cover or superannuation. These are reflections of a view by one party (or both) that the relationship is, or is not, one of employment. For that reason, in my view, those matters are in the same category as declarations by the parties in their contract (from which they often proceed). They may be taken into account but are not conclusive. These matters are less important than the adoption by the parties (where this occurs) of rights and obligations which are fundamentally inconsistent with basic requirements of a contract of employment, such as the ability to delegate the discharge of obligations under a contract to another person, or where there is a lack of control over how work is done. For its part, EFEX relied on observations in ZG Operations about the tension between, on the one hand, a submission that the truck-driving partnerships were not conducting business of their own and, on the other, the income splitting advantages of the structures adopted (at [63] per Kiefel CJ, Keane and Edelman JJ). There is more direct support for EFEX’s submission as to the importance of the taxation arrangements in the following observation of Jessup J (with whom Allsop CJ and White J agreed) in Tattsbet Ltd v Morrow [2015] FCAFC 62; (2015) 233 FCR 46 at [70] as follows:Fifthly, in contemporary Australia, it is impossible to ignore, and difficult to depreciate, the taxation implications of the mode of operation which parties to a relationship have voluntarily adopted. In the past, the deduction of what are now called PAYG instalments was always treated, uncontroversially, as indicative of an intention that the relationship in question was one of employment. To any suggestion that the absence of such instalments tended to point to the relationship being one of principal and independent contractor, it was often rejoined that such an argument was circular, in the sense that a consequence of the relationship being one of employment was, under legislation, that such instalments had to be deducted. In contemporary times, however, there are legislative markers on both sides, as it were. It is no longer just the absence of PAYG deductions that may make it more difficult to characterise the relationship as one of employment, it is the presence of GST collections by the putative contractor, and his or her compliance with the regulatory requirements which apply to the provision of services by persons who are not employees, that point quite strongly against the relationship being characterised in this way. These observations are made, of course, in the context of the present case, where there is no suggestion that the respondent’s participation in the GST system did not reflect her own conscious, well-informed, intentions.