Fair Work Ombudsman v Avert Logistics Pty Ltd
[2021] FedCFamC2G 153
•14 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Avert Logistics Pty Ltd [2021] FedCFamC2G 153
File number(s): BRG 1094 of 2019 Judgment of: JUDGE JARRETT Date of judgment: 14 October 2021 Catchwords: INDUSTRIAL LAW – Alleged contraventions of the Fair Work Act 2009 (Cth) – whether applicant an employee or a subcontractor. Legislation: Fair Work Act 2009 (Cth):ss11, 44(1), 45, 335, 545, 546(1), 547(2), 559
Work Health and Safety Act 2011 (Qld)
Transport Operations (Road Use Management – Fatigue Management) Regulation 2008 (Qld)
Cases cited: ACE Insurance Ltd v Trifunovski & Ors (2011) 84 ATR 561
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119
R v Foster; Ex parte Commonwealth Life (Amalgamated) Assurances Ltd (1952) 85 CLR 138
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Sweeney v Boylan Nominees Pty Ltd (2006) 227 ALR 46
Division: Division 2 General Federal Law Number of paragraphs: 67 Date of last submission/s: 28 September 2020 Date of hearing: 28 September 2020 Place: Brisbane Counsel for the Applicant: Mr McKenchnie Solicitor for the Applicant: Norton Rose Fulbright Counsel for the Respondent: Mr Spence Solicitor for the Respondent: Workdynamic ORDERS
BRG 1094 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: AVERT LOGISTICS PTY LTD ACN 139 205 244
Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
14 OCTOBER 2021
THE COURT ORDERS THAT:
1.The application filed on 18 December, 2019 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE JARRETT
The applicant alleges that the respondent contravened the Fair Work Act 2009 (Cth) (“the Fair Work Act”) by not paying four delivery drivers various entitlements that were due to them as employees. The respondent purports to have engaged the drivers as independent contractors but the applicant’s case is that, when assessed holistically, the relationship between the drivers and the respondent was one of employment.
The applicant submits that the evidence in this case reveals, inter alia, that the drivers:
(a)were obliged to perform work during hours, and in a manner dictated by and controlled by the respondent;
(b)could not take any leave (including sick leave) without seeking and obtaining the permission of the respondent;
(c)drove trucks owned by and branded with the livery of the respondent;
(d)wore clothing branded with the livery of the respondent; and
(e)could not perform work for third parties unless they obtained the written permission of the respondent.
The applicant contends that these matters, when taken with others referred to later in these reasons, lead to the conclusion that the drivers were employees of the respondent.
The respondent’s case is that the evidence demonstrates that:
(a)the drivers entered into contracts with the respondent in circumstances where they wanted to work as independent contractors and such a relationship was freely entered into and made clear in negotiations;
(b)the level of control exercised by the respondent over the drivers was minimal because:
(i)the only direction, and/or communication the drivers received from the respondent was an SMS text message to ascertain the driver’s availability, which included the start time for the work in question. The drivers then had the option for each proposed engagement to either accept or decline the work;
(ii)the drivers worked under the control, direction and supervision of the customer and not the respondent;
(iii)the drivers started and completed their working day at the customer’s site and they were provided with the work and parameters of the work directly from the customer;
(iv)as outlined above at (b)(i) above, the drivers had the ability to accept or decline work on each proposed engagement;
(v)the hours of work were dictated by the respondent’s customers;
(vi)while the drivers displayed the livery of the respondent on the vehicles they used, this was an agreed term of the contract between the respondent and the driver;
(vii)drivers were required to provide their own personal protective equipment, including steel cap boots and high visibility vests;
(viii)it was not compulsory for the drivers to wear the respondent’s uniforms;
(ix)the drivers were free to perform work for third parties during the period of their engagement with the respondent; and
(x)the drivers were free to subcontract the performance of their obligations to other entities.
Consequently, the respondent argues, there is no occasion to conclude that the drivers were employees rather than independent contractors.
If the court accepts that the drivers were employees, then the applicant alleges that they were underpaid a combined amount of $63,803.26. The respondent argues that by reason of the drivers being independent contractors, the respondent has not contravened the Fair Work Act and the drivers were not covered by a modern award and are not due any unpaid entitlements.
The Law
Those parts of the Fair Work Act relevant to these proceedings import the common law understanding of employment: ss.11, 335 of the Act; ACE Insurance Ltd v Trifunovski & Ors (2011) 84 ATR 561, at [24] and [26]; Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119 at [175] – [176].
If there can be said to be a single tenet for determining whether a person is an employee or an independent contractor, it is that each case must be considered on its own facts. There is no single standard for whether an employment relationship exists: ACE Insurance Ltd v Trifunovski [2013] FCAFC 3 at [102]; Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119 at [179]. It is necessary to look at the totality of the relationship to determine whether a person was effectively employed under a contract of service: Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 29; Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 33, 39, 41 and 45. That requires an overall assessment which itself requires first, the identification of the factors bearing on the issues in the case at hand and second the consideration and synthesis of those matters: Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346 at [176]; Jamsek at [179] and the authorities there collected.
Notwithstanding the very broad nature of the approach to the question in issue, a few matters are, however, clear. First, any attempt by the parties to label their relationship in one way or another is far from determinative: Sweeney v Boylan Nominees Pty Ltd (2006) 227 ALR 46 at 50; and indeed “a clause designed to prevent the relation receiving the legal complexion which it truly wears would be ineffectual”: R v Foster; Ex parte Commonwealth Life (Amalgamated) Assurances Ltd (1952) 85 CLR 138 at 151.
In Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119, a Full Court of the Federal Court reiterated the settled principles which apply to a question of whether an employment relationship exists. At [179-182] Anderson J (with Perram and Wigney JJ agreed) summarised the current state of the law as follows:
The multi-factor test
It is not possible to exhaustively list all relevant factors for consideration: Stevens at 37 per Wilson and Dawson JJ. However, for illustration, the following series of central considerations were identified by Perram J in ACE Insurance Ltd v Trifunovski [2011] FCA 1204; 200 FCR 532 at [29]:
[T]he terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party “represents” the other; for the benefit of whom does the goodwill in the business inure; how “business-like” is the alleged business of the putative employee — are there systems, manuals and invoices; and so on …
…
After examining all relevant considerations, the broad fundamental distinction, as traditionally framed, is between a person employed under a contract of service, who serves the employer’s business, and a contractor engaged under a contract for services, who conducts a trade or business of his or her own: Marshall v Whittaker’s Building Supply Co [1963] HCA 26; 109 CLR 210 at 217 per Windeyer J, quoted in Vabu at [40]; see also ACE Insurance (FC) at [24], Quest at [177]–[178] and Eastern Van Services at [29].
…
Substance and reality
Where a court is required to characterise a relationship as that of employment or not, the court should focus on the substance and reality of the relationship, rather than its mere legal form: Quest at [142] per North and Bromberg JJ; WorkPac Pty Ltd v Skene [2018] FCAFC 131; 264 FCR 536 at [180] per Tracey, Bromberg and Rangiah JJ; Eastern Van Services at [36]. An express statement by the contracting parties as to the nature of the relationship will be relevant, but not determinative: ACE Insurance (FC) at [102]. For instance, by labelling their relationship an independent contract, the parties cannot alter what is in reality an employment contract: Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 (AMP) at 409 per Lord Fraser for the Privy Council (otherwise reported as Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389); Re Porter; Re Transport drivers Union of Australia (1989) 34 IR 179 (Re Porter) at 184 per Gray J; WorkPac Pty Ltd v Rossato [2020] FCAFC 84 at [590] per White J.
The respondent directs my attention to the Full Federal Court decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122. In that case, Lee J, with whom Allsop CJ and Jagot J agreed, set out the following principles at [61] to [64]:
Courts have long been tasked with characterising a relationship between human actors and determining whether or not one of those actors is to be afforded the protections that accompany employment classification. The approach to such an assessment is deep-rooted in the common law and requires courts to draw a binary divide between two distinct types of a worker: an employee and an independent contractor: Hollis v Vabu (at 38 [36] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ); Sweeney v Boylan Nominees Pty Limited [2006] HCA 19; (2006) 226 CLR 161 (at 173 [33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ); Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; (2015) 228 FCR 346 (at 389–9 [173]–[176] per North and Bromberg JJ); On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 (at 199 [188] per Bromberg J). It is fair to say that the evolution of this dichotomy has produced ambiguity, inconsistency and contradiction. As Freeland has stated, the “accumulation of case law has added weight rather than wisdom” to how this dichotomy works in a practical sense: Freeland M, The Personal Employment Contract (Oxford University Press, 2003) (at 20).
It is unnecessary to canvass in any depth the historical development of, and justification for, this dichotomy. However, it is worth noting that the “modern” employment contract can be seen as a synthesis of liberal contract theory’s conception of the law of obligations created by consensual bargains and the older vestiges of the status based relationship of master and servant: Owens R, Riley J and Murray J, The Law of Work (2nd ed, Oxford The modern distinction between employee and independent contractor is, however, primarily drawn from the development of the common law doctrine of vicarious liability. The concept of vicarious liability derives from the notion that the master of the house was legally responsible for its subservient members, in which the law ascribed liability to him for the conduct of those under his charge: Scott v Davis [2000] HCA 52; (2000) 204 CLR 333 (at 409–10 [230] per Gummow J); Hollis v Vabu (at 37 [33] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ); see also Holmes O W, ‘Agency’ (1891) 4 Harvard Law Review 345 (at 364); Wigmore J H, ‘Responsibility for Tortious Acts: Its History’ (1894) 7 Harvard Law Review 315 (Pt 1), 383 (Pt 2). This ascription of responsibility came to be adopted in agency and employment contexts, with the concept of vicarious liability now principally invoked to hold an employer liable for the wrongs of an employee, acting in the “course of employment”: Stevens v Brodribb Sawmilling Company Proprietary Limited [1986] HCA 1; (1986) 160 CLR 16 (at 43 per Wilson and Dawson JJ); see Prince Alfred College Incorporated v ADC [2016] HCA 37; (2016) 258 CLR 134 (at 150 [46]–[47] per French CJ, Kiefel, Bell, Keane and Nettle JJ).
Today, the common law distinction between an employee and independent contractor remains essential to determining tortious liability as well as a range of relationships between parties under statute. It is presently determinative of the question of the applicability of the provisions of the FWA upon which the appellants rely: see C v Commonwealth [2015] FCAFC 113; (2015) 234 FCR 81 (at 87 [34] and [36] per Tracey, Buchanan and Katzmann JJ).
Lee J went on to outline the approach taken when considering trilateral relationships at [65] to [72]:
…A prevalent trilateral work arrangement is that involving a labour hire firm or agency, where workers who are “on the books” of the agency are offered work placements with the agency’s business clients. In this arrangement, the agency usually maintains an ongoing role in the work relationship. It is common for the business client to pay the agency an amount that covers the cost of the work performed by the worker placed with it, and of the service provided by the agency, with the worker in turn paid by the agency, which may also be responsible for various other matters, as in this case, such as the payment of superannuation and withholding of tax. As the primary judge outlined (at J[120]), these arrangements generally take the following contractual structure:
(1) a contract exists between a worker and a labour hire company;
(2) a contract exists between the labour hire company and a third party, whereby the labour hire company agrees to provide the worker to perform the work and the third party agrees to pay the labour hire company for the worker’s services; and
(3) no contract exist (sic) between the worker and the builder.
This type of trilateral arrangement and its interaction with employee classification was first considered at length in Odco Pty Ltd v Building drivers’ Industrial Union of Australia [1989] FCA 483 (Odco Trial). In that case, Odco Pty Ltd, trading as “Troubleshooters Available” (Troubleshooters), provided workers to its builder clients. Each of the workers signed a document entitled “Agreement to Contract”, which contained the following terms (as outlined at J[121]):
(1) an acknowledgment that there was no relationship of employer-employee;
(2) an acknowledgment that the worker was self-employed and not bound to accept work;
(3) an acknowledgment that the worker had no claims on [Troubleshooters] in respect of holiday pay, sick pay, superannuation, long service leave or the like, (sic)
(4) an agreement that the worker would supply his or her own plant and equipment, safety gear, boots and gloves; and
(5) an agreement that the worker agreed to carry out all work that they agreed to do “in a workmanlike manner” and that [Troubleshooters] was “hereby guaranteed against faulty workmanship”.
The builder client was in turn required to pay Troubleshooters for the work of the self- employed contractors, which was then on paid to those contractors. The rates paid to the workers varied unilaterally each year without the workers being consulted.
In examining the relationship, Woodward J found that the workers were independent contractors, reasoning (at 121–2) that:
… it is clear that the arrangements which Troubleshooters makes with its workers are very different form (sic) those made by other labour hire agencies. It makes it clear that it does not intend its workers to be its employees. They are not paid a weekly wage nor do they receive any of the normal benefits of a wages employee, particularly annual leave and sick leave. There is no obligation upon any man registered with Troubleshooters to work at any particular time. Equally there is no obligation on Troubleshooters to find work for the man on any particular day.
So far as payment is concerned, what Troubleshooters does, in practice, is to pay to the worker his share of the amount which will in due course be received from the builder; Troubleshooters’ share represents its outgoings, including its superannuation and public liability insurance payments on behalf of the worker, and its profits. It is true that Troubleshooters normally pays the worker before it has received anything from the builder and, furthermore, it makes the payment even though it may never receive payment from the particular builder. But Troubleshooters only pays its men for work which they claim actually to have done for a builder, and it does so in the confident expectation that it will soon be reimbursed.
So far as control is concerned, the workers are free to work when they please. The only requirement is that they keep Troubleshooters informed of their availability if they want work, or if they are ceasing to work at a site where Troubleshooters labour is still required. The elements of stability and continuity, which are such a central part of every contract of service extending over a period of time, are not present.
Troubleshooters exercises absolutely no control over the way in which work is carried out. It merely passes on to the worker the time and place at which a builder wishes him to report. If the worker does not like the sound of the particular job - perhaps because of its location - he is under no obligation to accept that engagement.
I have no doubt that, in acting as an agency finding work for persons in the building trade, Troubleshooters creates a relationship, between it and the men who use its services, of principal contracting parties and not of employer and employee.
The decision of Woodward J was confirmed on appeal: see Building drivers’ Industrial Union of Australia v Odco Pty Ltd [1991] FCA 96; (1991) 29 FCR 104 (per Wilcox, Burchett and Ryan JJ) (Odco Appeal).
Given its commercial attraction to those seeking labour without assuming the responsibility for engaging employees, the “Odco” type of trilateral arrangement has been widely replicated by those looking to fashion the same characterisation result, albeit with varying degrees of success: see, for example, Swift Placements Pty Limited v WorkCover Authority of New South Wales [2000] NSWIRComm 9; (2000) 96 IR 69; Staff Aid Services v Bianchi (2000) 133 IR 29; Drake Personnel Ltd v Commissioner of State Revenue [2000] VSCA 112; (2000) 2 VR 635; Country Metropolitan Agency Contracting Services Pty Ltd v Slater [2003] SAWCT 57; (2003) 124 IR 293; Damevski v Giudice [2003] FCAFC 252; (2003) 133 FCR 438; Forstaff Pty Ltd v Chief Commissioner of State Revenue [2004] NSWSC 573; (2004) 144 IR 1; Personnel Contracting Pty Ltd t/as Tricord Personnel v Construction, Forestry, Mining and Energy Union of drivers [2004] WASCA 312; (2004) 141 IR 31 (Personnel Contracting v CFMEU); Young v Tasmanian Contracting Services Pty Ltd [2012] TASFC 1; Johnson v MNG Investments t/as Australian Temporary Fencing [2011] ACTSC 124; Fair Work Ombudsman v Contracting Solutions Australia Pty Ltd [2013] FCA 7; Fair Work Ombudsman v Quest. The significance of the decision in Personnel Contracting v CFMEU is a matter to which I will return.
Lee J went on to observe at [72]:
It may be thought that the prevalence of trilateral relationships, the evolution of digital platforms and the increasing diversity in worker relationships has evolved in a way that the traditional dichotomy may not necessarily comprehend or easily accommodate. Indeed, Freedland’s thesis that the binary divide between employee and independent contractor represents both a false unity (in that all employment relationships share common unifying characteristics) and a false duality (in that work relationships fall into one of two monolithic categories, when there are in fact many and various complex relationships under which work is performed in contemporary industrial societies) might be thought to have much to commend it: The Personal Employment Contract (at 15–22). But these considerations (which in part have led to statutory reform in the United Kingdom, where an additional third category of labour, known as a “worker”, has been introduced by virtue of s 230(3) of the Employment Rights Act 1996 (UK)) are beyond the scope of these reasons. This is because, as Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ noted in Sweeney v Boylan Nominees (at 173 [33]), the employee-independent contractor distinction is “too deeply rooted to be pulled out”. The distinction therefore remains binary (contrary to an alternative submission put by Mr Blackburn SC on this appeal that the relationship in issue was sui generis). A worker must be placed (or perhaps shoehorned) into either the employee or the independent contractor classification.(emphasis added)
In Personnel Contracting (Supra), Lee J (at [73] – [75]) said the following regarding the multi-factorial test to be applied by the Court:
Courts traditionally viewed “control” as the determinative factor, however the current approach, is multi-factorial, requiring an assessment of the “totality of the relationship;
There is no exhaustive list of relevant factors; indicia have accreted over time in the authorities which are thought to throw light on the outcome without being determinative;
The relevant factors are well known and will vary from case to case, as will the weight to be afforded to them;
Since there is no universally accepted understanding of how many indicia, or what combination of indicia must point towards a contract of service, the balancing exercise is necessarily impressionistic.
In Personnel Contracting, Lee J, citing various authorities with approval at [74], said:
It has been held that “such an approach inevitably involves what has been described as a “smell test”, or a “level of intuition”13… The task was, with respect, aptly summarised by Mummery J (as his Lordship then was) in Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 (at 944):
…[the multi-factorial approach] 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 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 making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation 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.
Thus, the modern approach to determining whether an employment relationship exists:
(a)involves a multifactorial comparison or matching of characteristics of standard employment relationships with the facts of the present case;
(b)is based on a holistic consideration of the totality of the relationship; and
(c)requires a focus on the substance or reality of the relationship rather than its mere legal form.
The respondent submits that the principles applied in Personnel Contracting are apposite to the facts in this matter regarding the way in which the respondent engaged the drivers to perform deliveries for their customers, with their customers setting the start and finish times and controlling the work performed of the driver.
Consideration
The respondent is a national system employer. Its business provides road transport, distribution, logistics, heavy vehicle operations, warehousing, import, retail and airfreight services.
The work performed by the drivers under the contracts between them and the respondent was work that the respondent was obliged to perform according to its contractual relationships with its customers such as Toll Priority, StarTrack, and UPS.
The drivers were engaged by the respondent to drive vans, picking up packages and delivering packages to homes and businesses. The drivers’ duties were performed pursuant to the following written agreements:
(a)written agreement with Ms Emily Keable dated 10 October, 2017;
(b)written agreement with M+K Ready Solutions, a partnership between K Kailea & Sela Mahe, dated 23 October, 2017;
(c)written agreements with Mr Michael Rickards as a partner of the partnership known as M Rickards & L Lockyer, dated 23 November, 2016 and 29 March, 2017; and
(d)written agreements with Rodmarda Pty Ltd, a company owned by Mr Rodney Smith, dated 15 March, 2016 and 17 March, 2017.
Ms Sela Mahe signed the contract for M+K Ready Solutions. She worked as a driver for the purposes of providing the services to the respondent specified in the contract. Similarly, Mr Michael Rickards worked as a driver for the purposes of providing the services to the respondent specified in the contract with M Rickards & L Lockyer. Mr Rodney Smith worked as a driver for the purposes of providing the services to the respondent specified in the contract with Rodmarda Pty Ltd.
The contracts (and the latest versions of those contracts signed by Mr Rickards and Mr Smith) were in the same terms. They were all prepared on behalf of the respondent and provided by the respondent to the drivers for acceptance and signature.
The contracts in the present case are not suggested to be a sham. That is a significant matter in my view. The terms of the engagements use the language of contracting and strongly suggest, in my view, that the drivers were contracting their services to the respondent.
Relevantly, the contracts each provided as follows:
by clause 6(g):
it was the responsibility of the Contractor/Supplier to ensure a replacement driver was available to cover time off for extended periods such as annual leave, days-off, sick leave etc. if possible.
by clause 6(j):
The Contractor/Supplier will allow the Principals signage to be displayed on the Contractors vehicle. Signage to be at the Principals cost.
By clause 7:
Payment
In consideration for the Contractor/Supplier providing the Services to the Principal, the Principal will make the payment to the Contractor/Supplier in accordance with the provisions of this clause. Payments will be paid to the Contractor 14 days of the receipt of a GST-compliant invoice detailing the deliverables in arrears and following verification by the Principal of the successful completion of those deliverables.
…
Contractor/Supplier Invoice to be sent to the Principal no later than 5.00pm on the Saturday following the weekending closure, if received after cut-off will result in delayed payment by an additional 7 days. Payments will be subject to the Principal receiving payments from the Client.
by clause 8:
the contract may be terminated by either party, if the Agreement shall expire or be terminated for any reason, by the giving of “21 days (15 Working Days) written notice by the Contractor/Supplier”.
by clause 11:
11. Freedom to Contract: The Contractor/Supplier will be free to enter into contracts with third parties for the provision of services by the Contractor/Supplier to the third party while this Agreement is in force, subject to the Contractors/Suppliers not being placed in a conflict of interest, or in a possible conflict of interest, as between the Contractor’s/Supplier’s obligations to the Principal under this Agreement upon written permission by the Principal, the Principal retains the right to withdraw permission whenever warranted.
clause 13:
13. Insurances:
The Contractor/Supplier must indemnify Company for all loss or damage to the goods in transit and must have in place their own insurance policies as per specified.
The Contractor/Supplier must provide evidence of these insurance policies, including copies of certificates of currency. Certificates of currency renewals must be provided to Company each time an insurance policy expires.
The Contractor/Supplier agrees to perform and observe all obligations and requirements of it by law in relation to the Contractor, including but not limited to, paying all necessary taxes, duties and imposts and taking out and continuing all necessary insurances, including public liability, professional indemnity and compliance with workers’ compensation obligations.
by clause 20:
20. Nature of the Relationship: The Contractor/Supplier and the Principal agree that the Contractor/Supplier will provide the Services to the Principal as a Contractor/Supplier and will not be in the partnership with the Principal or an employee, servant or agent of the Principal for any purposes whatsoever.
by clause 22:
Assignment: The Contractor/Supplier can not assign its rights and obligations under this Agreement to any other party. There is to be no assignment of the agreement, as it is considered personal between both parties, and as such no assignment is permitted. Under no circumstances can the Agreement be sold with a goodwill component or as a business.
Further, the following clauses required the drivers to comply with statutory obligations in accordance with, inter alia, the Work Health and Safety Act 2011 (Qld) and the Transport Operations (Road Use Management – Fatigue Management) Regulation 2008 (Qld):
Clause 12 “Occupational, Health & Safety and Fatigue Management”;
Clause 16 “General Appearance”;
Clause 17 “Personal Protective Equipment (PPE)”;
Clause 25 “Mandatory Rest / Break”.
The drivers were required, pursuant to their employment contracts, to perform their duties in accordance with the provisions of a document entitled the Boske Road Transport Induction and Safety Handbook. The respondent says that the practical reality of how the Services were provided and any direction or instruction by the respondent in relation to the provision of the Services (arising either from the Services Contracts or the Boske Handbook) was operational in nature, having regard to the terms and conditions associated with the delivery of ad hoc driver services, as stipulated in the respondent’s services contracts with its clients and the respondent’s other legal or contractual requirements, including but not limited to its workplace health and safety and Chain of Responsibility obligations.
The drivers were paid by the respondent on a time basis, not based on results or outcomes. They were paid $24.50 per hour (aside from Mr Smith’s first engagement where he was paid $250.00 per day).
I accept the respondent’s submission that the respondent’s evidence demonstrates that the drivers wanted to work as independent contractors.
Emily Keable gave evidence that indicated that she knew the difference between a contractor and an employee. She knew of the respondent’s work practices. She had worked for a previous contractor. Ms Keable contracted as a sole trader under an ABN which was registered on 4 July, 2015. This was an ABN that Ms Keable had used when working as a mail sorter for Australia Post.
Michael Rickards signed two contracts as a Contractor/Supplier with the respondent, the first on 23 November, 2016 and the other on 29 March, 2017. Mr Richards listed “L.N Lockyer & M Rickards” as the company name of contractor/supplier. This entity was the registered on 2 July, 2013 as a Family Partnership.
Rodney Smith met with Rick Boske the managing director of the respondent and the respondent’s Fleet Manager, Leandro Pedroso in March, 2016 where a negotiation occurred regarding rates. An agreement was reached regarding the rate, which was reflected in the Contractor Agreement. Mr Smith contracted through Rodmarda Pty Ltd which was a company registered on 7 March, 2013.
Sela Mahe advised that she preferred to be a contractor and not an employee and signed the contract on 23 October, 2017 listing M+K Ready Solutions in the company details.
The evidence of each of the witnesses to which I have just referred demonstrates that these were not unsophisticated, unskilled employees. Each had an entity through which he or she contracted and which existed prior to their engagement with the respondent. There is no suggestion that the respondents were required to establish a particular entity for the purposes of undertaking work for the respondent.
Against the clear intention of the contracts entered into by the drivers with the respondent, the applicant says that there are a number of indicia which suggest that the drivers were in fact employees. It is the case that the respondent had and exercised a right to exert control over the drivers’ hours and duties on a day to day basis. So much is provided for in the contracts. There was a requirement on the drivers to comply with directions and instructions from the respondent and there is no restriction on the nature of the directional instruction that might be provided. Failure to comply with a direction or instruction may result in “instant dismissal” if the failure to comply with that direction or instruction can be seen as insubordination. This level of control is consistent with the drivers being employees. It is also consistent, however, with the respondent requiring a particular standard from those that it engages to represent it.
The evidence of Mr Boske for the respondent establish that the respondent had both employees and independent contractors. It preferred independent contractors in respect of work that was to be performed and over which the respondent had no direct control. The respondent would received requests from its customers for drivers to cover the customer’s workload. According to Mr Boske’s evidence a customer would often specify start and finish times and would request particular drivers with whom they had developed a relationship. The respondent would then cause allocation messages to be sent via text to drivers.
The applicant argues that this method of work allocation demonstrates that the respondent’s right of control was exercised as a matter of practice. What ordinarily happened was that the drivers would receive a text message allocating them a role and a start time and were asked to “please confirm back understanding.” The respondent’s evidence was that a driver was not allocated work unless they sent a confirmation message in return.
Each of the drivers gives evidence about this process and the text messages they received from representatives of the respondent. However, there evidence does not bare scrutiny. Each swears that they could only confirm the allocation given to them by a particular person from within the respondent’s organisation. They could, however, refuse the application if they wish to do so. The evidence of Ms Keable demonstrates that to be so. Amongst her text messages is a response from her declining an offer of work because she was unwell. But it would be surprising to see text messages from her declining the work offered to her by the respondent in circumstances where Ms Keeble was actively pursuing earning an income as a driver. None of the witnesses called by the applicant gave evidence about what happened if they ever refused a particular request for work. The contract gave them the ability to decline work.
The applicant submits that the totality of the evidence weighs heavily against any inference that the drivers had a choice. I do not accept that submission because given that each of the drivers wished to pursue income earning activities and work it is hardly surprising to see that there was no refusal by them to take up any offers of work on any particular occasion. I do not accept the submission that the evidence demonstrates that what was happening was more akin to a superior giving orders to a subordinate and then asking “do you understand?”
The evidence shows that the respondent did not control the start times for delivery drivers. Those times were dictated by the respondent’s customers. So too were the finish times depending upon the amount of work that needed to be undertaken by the drivers. The drivers were directed by the respondent’s customers in relation to the deliveries that were to be made during each engagement and they reported to the respondent’s customers depots. Some customers had a requirement for the drivers to fill in timesheets others did not. Whilst the drivers were generally not able to deal directly with the respondent’s customers about start and finish times, the fact that the drivers needed to refer to the respondent for these was not so much and exercising control over the drivers as it was recordkeeping.
My assessment of the evidence called by the applicant and the respondent is that generally speaking the drivers had the opportunity to refuse work if they wish to do so, but given that they were in the business to earn money it was unlikely that they would refuse work offered to them. The work that they were to do rather than who they were to do it for (which of the respondent’s customers they were to do it full) was dictated by the respondent customers as were the start and finish times relayed through the respondent. Some of those customers have their own processes with which the drivers needed to comply such as the completion of timesheets.
The evidence shows that whenever a customer of the respondent had an issue they did not raise it directly with the drivers but rather raised it with the respondent who then addressed the matter directly with the drivers. The applicant emphasises the text messages exchanged between Rick Boske and Ms Mahe on 2 August is an example of such a process.
The applicant argues that the level of control possessed and exercised by the respondent weighs heavily in favour of the drivers being employees. The respondent suggests that really what was in play was a trilateral arrangement where it was respondent’s customer who determined the hours of work and allocated the deliveries that were to be made. The respondent’s role was to allocate drivers to particular customers. I think the respondent’s submission that the respondent did not dictate how the work was performed, did not determine delivery routes or allocate the work subsequent to a driver confirming their acceptance of each engagement is made out on the evidence.
The level of control demonstrated in the evidence is, in my view ambivalent as to whether the drivers were employees or contractors.
The applicant points to the control exercised by the respondent over the drivers leave requests. There is no term in the written agreements which governed leave but the Boske Handbook required leave to be notified. The applicant argues that the evidence reveals that in practice, the drivers could not take leave unless it had been approved by the respondent. Further, when leave was required for medical reasons, the respondent demanded the provision of medical certificates.
The respondent established a request process for leave in 2018. Prior to that time the respondent required drivers to use the same leave form that was used for people who were admittedly employees of the respondent. After August, 2018 the respondent adopted a different practice which required a driver to complete an “unavailability notice for contractors” form.
Three of the drivers called by the applicant gave evidence that their understanding was that they could never just “take a day off” and always had to explain or justify their absences.
The control exercised by the respondent over the drivers’ ability to take leave is perhaps best emphasised by its own correspondence. On 24 November 2017, Brooke Boske sent an email to persons including the drivers regarding leave requests. It is useful to set out the text of the email for the purposes of these submissions. The email provided:
All,
It has come to my attention that some people think they can take time off whenever they can without following the correct process. So let me make the below process very clear. This must be followed and is not up for negotiation. I will not tolerate instructions/processes not being followed.
When you want time off please ensure to submit a Request for Leave Form (attached) one per leave e.g. If a week off is required only 1 form needs to be submitted however if you need 1, 2 or 3 etc days off over different months then 1 form per day is required.
The Request for Leave Form must be signed and dated by yourself.
Send the form through to myself at [email protected] or [email protected]
Either Leandro (trucks) or Myself (Vans) will review the requested dates and approve or reject accordingly. If the request is approved either myself or Leandro will sign and date accordingly and send you a copy of the approval for your records. However if rejected we will still suggest another date that may work better and send you back the rejected form.
If you have any questions regarding this I am happy to discuss but this must be followed and is not up for negotiation.
Thanks
Kind Regards Brooke Boske
I accept the applicant’s argument that this email is entirely consistent with the proposition that the drivers were required to have any time off approved by the respondent’s officers. I accept the applicant submission that in the context of this email, the respondent’s contention that leave was managed through a process of mere notification and not permission is difficult to accept.
Nonetheless, it is important to record that by the terms of the contract between each of the drivers in the respondent it remained the drivers’ responsibility to find a replacement driver in the event that a driver was absent from work in accordance cl.6(g). That obligation is incompatible with the drivers being employees.
It is uncontentious that the respondent provided vehicles to drivers. It was notwithstanding that the engagement contracts between the drivers and respondent required them to display the livery of the respondent on their vehicles. The fact that the vehicles belonged to the respondent is consistent with the relationship being one of employment rather than an independent contractor arrangement. The argument that, the fact that the trucks bore the livery and contact details by way of advertisement of the respondent in those matters served as a clear representation to the public generally that the drivers of those vehicles were representatives of the respondent. I also accept the applicant submission that the respondent’s ownership of the vehicles was inconsistent with an independent contractor relationship.
The evidence of the drivers is that they were required by the respondent to wear and did wear, the respondent’s uniform at all times whilst performing work for the respondent. The respondent’s case is that the wearing of uniforms was optional in compliance with a requirement to wear appropriate personal protective equipment. Notwithstanding this, the evidence of the drivers is that they understood that there was a rule that you had to wear the uniform whilst working. The uniform was provided to them by the respondent and the cost of it deducted from the drivers’ pay. The respondent required the drivers to get ID cards and stipulated by email that when having the photograph for the ID card taken, the persons “must be in uniform.” In those circumstances, I think that the applicant submission that such circumstances are inconsistent with the wearing of uniforms being genuinely optional has force. I accept and I find that it was likely that there was an expectation generally that the drivers would wear the respondent’s uniforms.
The respondent paid for comprehensive insurance through its business, however the drivers were responsible for Marine Transit and Public Liability insurance. The reason for is that they as contractors, were in control of, and handle the freight, not the respondent. The drivers were required to comply with their obligations in accordance with cl.13 of the contracts regarding insurance. This is consistent with the relationship being one of principal and independent contractor.
The applicant submits that because the respondent prevented or imposed restrictions on using its vehicles for the drivers’ personal use, the freedom to contract provisions in the contracts with the drivers were ineffective. However, given the vehicles belonged to the respondent, such a restriction is reasonable. It is not inconsistent with the existence of a genuine freedom on the part of the drivers to perform work for other persons it is just that if they wish to do so, they needed to use their own vehicle.
As the applicant submits, the practical reality of the drivers’ duties and time spent performing them means that there was little (if any) time left in any day during which the drivers could perform work for other parties. That indicates, that the respondent could provide sufficient work to the drivers to keep them busy and they did not need to look for other work. Hence, the requirement for them to exercise their entitlements under the freedom of contract clauses in the driver’s agreements probably never arose. There is no suggestion in any of the evidence that it did.
It is significant that cl.22 of the contracts provides that a driver could not assign its rights and obligations under this agreement to any other party. I accept the applicant’s submission that the drivers could not generate goodwill in a business of their own through use of these particular contracts.
Whilst the applicant argues that the manner in which the drivers generated “invoices” and were paid is more consistent with them being employees than independent contractors I cannot accept that submission
The evidence shows that when drivers commenced an engagement with the respondent, an invoice template was provided to them, along with instructions on how to correctly use the template. This was done to ensure consistency with invoicing across the Board. Each of the drivers would submit invoices to the respondent’s accounts emails address following a week of work completed.
The invoices submitted were altered on some occasions and this was done in line with the timecards provided to the respondent by the respondent’s customer. The frequency of these changes was dependent on how often the driver would put times down on their invoice that differed to the customer timesheet they filled out. The respondent was only paid based on the customer records and timesheets that the contractor filled out.
It is common ground that the respondent did not withhold income tax on behalf of the drivers, nor were superannuation payments made on behalf of the drivers. The drivers were responsible for their own tax affairs, and had they been registered for GST, this would have been paid on every invoice received. The way in which the drivers were paid was consistent with the cl.7 of contract.
It is telling against the relationship of principal and independent contractor that that the drivers were paid on a time basis rather than any other basis.
Conclusions
The terms of the contract between the drivers and the respondent are couched in terms of the relationship being one of principal and independent contractor. The contracts are not sham and are not suggested to be so. They form a significant matter them to be taken into account.
In Personnel Contracting (Supra), Lee J summarised the primary judge’s consideration of the relevant contract in the following way at [144] to [145]:
Seventhly, and of critical importance, was the weight placed by the primary judge on the written terms of the agreement between the parties. In concluding (at J[170]) that “there are significant matters that point in opposite directions on the critical question of whether Mr McCourt was an employee”, the primary judge noted (at J[172]) that “it is always important to pay close regard to the way in which the parties have characterised their relationship”. On this basis, and relying on a number of authorities (see J[173]–[176]), his Honour came to the following conclusion (at J[177]–[179]):
In those circumstances, where the question might be seen to be reasonably evenly balanced, and where any suggestion of sham or pretence is disavowed, it seems to me that there is no sufficient reason not to find that the parties’ agreement that Mr McCourt was self-employed means, and was intended to mean, what it says. The terms of the ASA clearly indicated that the relationship between Construct and McCourt was to be one of principal and self-employed contractor, including as follows:
Mr McCourt was defined and referred to throughout the document as the “Contractor”, not an employee;
“Construct is an administrative services agency ... liaising between builders … and self-employed contractors for the provision of labour by self- employed contractors to builders and supplying to the self-employed contractors financial administrative services” (Recital A);
“The Contractor warrants that: ... he is self-employed” (clause 3(b)); and
“The Contractor shall ... not represent himself as being an employee of Construct at any time” (Clause 4(h)).
Each of these statements is a clear statement of intent that the relationship between Construct and Mr McCourt was not to be one of employment, but one of principal and self-employed contractor.
Mr McCourt acknowledged that he read all the documents he was given, including the ASA. So, absent some other reason (none is advanced) he is taken to have read and approved them. And that must be so, because otherwise serious and obvious mischief might result.
(citations omitted)
Stated simply, the primary judge, in weighing the various indicia and coming to the conclusion that, as is often the case, there were matters which pointed in different directions, resorted to the express terms of the agreement between the parties seeking to characterise the relationship as the “tie-break” factor.”
In this matter, in accordance with principles set out above, it is “important to pay close regard to the way in which the parties have characterised their relationship.”70 These are circumstances where it is “perfectly legitimate to give significant weight to its negotiated terms”.71
As outlined above, all of the drivers had pre-existing entities through which they contracted with the respondent, excepting Ms Keable, who was a sole trader, using the ABN that she used for her business as a mail sorter with Australia Post.72
The applicant has failed to provide any evidence that demonstrates the terms of the written contracts were not followed or that the contracts were not freely entered into.
In Personnel Contracting, Lee J said the following (at [117]) about the driver being considered:
“…it is difficult to reconcile the central conception of a multi-factorial inquiry with the notion that the legal construct reflected in a contract of adhesion presented to an eager a 22-year-old backpacker, can assume decisive importance as a “default” or as a “tie-break”.
Despite this, his Honour determined to dismiss the appeal, and in doing so, said the following [185]:
“There exists tensions in the application of the multi-factorial approach to new and novel labour arrangements and there is force in the criticisms advanced by the CFMMEU of the current state of the law. While the above reasoning demonstrates that if approached tabula rasa, I would have concluded the notion of Mr McCourt being an independent contractor is somewhat less than intuitively sound, the current circumstances demand more. The reality is that the arrangement the subject of this appeal is materially identical to that considered by the WAIAC in 2004. The importance of certainty means this Court ought not to depart from a decision in relevantly indistinguishable circumstances (being an evaluative decision that was open on the circumstances common to both cases). On the current state of the law, the judgment and orders made by the primary judge have not been demonstrated to be erroneous and, as a consequence, the appeal must be dismissed.” (emphasis added)
I accept the respondent’s submissions that in this matter it is appropriate to give significant weight to the terms of the contracts and the trilateral arrangement that is similar to the facts in Personnel Contracting (Supra).
Nonetheless, when looked at holistically there are many matters that point to the conclusion that the drivers were employees of the respondent. The measure of control exerted by the respondent over the work to be done by the drivers, the use of the respondent’s vehicles, the wearing of the respondent’s uniforms at the respondent’s insistence, the inability to generate any goodwill on their own behalf and the leave approval arrangements are significant matters. There is considerable merit in the applicant’s submissions.
However, ultimately the terms of the written agreements between the drivers and the respondent and more importantly the way in which they were entered into by the individual drivers satisfies me that the relationship is really one of independent contractor and principal and that was what was intended by the parties. The contracting parties were not the individuals themselves in most cases but were entities set up by the drivers for their own purposes. There is no suggestion that the respondent required the drivers to enter into the contracts in any particular way although it is clear that the respondents were offering engagement as a contractor. There is no suggestion that the contracts are a sham.
I find that at all relevant times the drivers the subject of these proceedings were independent contractors of the respondent rather than employees.
In those circumstances the application must be dismissed.
I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 14 October 2021 Dated: 14 October 2021
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