Fair Work Ombudsman v Avert Logistics Pty Ltd
[2022] FCA 841
•4 July 2022
FEDERAL COURT OF AUSTRALIA
Fair Work Ombudsman v Avert Logistics Pty Ltd [2022] FCA 841
Appeal from: Fair Work Ombudsman v Avert Logistics Pty Ltd [2021] FedCFamC2G 153 File number: QUD 370 of 2021 Judgment of: LOGAN J Date of judgment: 4 July 2022 Catchwords: INDUSTRIAL LAW – nature of employment relationship – employee or independent contractor – whether delivery drivers employees of delivery company – where contract contemplated drivers offering services through companies – where contract provided for control of drivers by delivery company – where obligation on drivers to provide replacement drivers if unavailable – where invoicing subject to delivery company receiving payment from its client and included provision for GST – where drivers provided with circumscribed freedom to obtain other work – where driver is provided with vehicle which the driver is obliged to keep insured – held: drivers are independent contractors and not employees of the delivery company Legislation: Fair Work Act 2009 (Cth) Cases cited: Australian Mutual Provident Society v Allan (1978) 52 ALJR 407
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89
Narich Pty Ltd v Commissioner of Pay-roll Tax (1984) 58 ALJR 30
ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144
Division: General Division Registry: Queensland National Practice Area: Employment and Industrial Relations Number of paragraphs: 39 Date of hearing: 4 July 2022 Counsel for the Appellant: Mr CJ Murdoch QC with Mr MD McKechnie Solicitor for the Appellant: Norton Rose Fulbright Counsel for the Respondent: Mr AW Duffy QC with Mr TA Spence Solicitor for the Respondent: DWF Australia ORDERS
QUD 370 of 2021 BETWEEN: FAIR WORK OMBUDSMAN
Appellant
AND: AVERT LOGISTICS PTY LTD ACN 139 205 244
Respondent
ORDER MADE BY:
LOGAN J
DATE OF ORDER:
4 JULY 2022
THE COURT ORDERS THAT:
1.The appeal be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)LOGAN J:
The Fair Work Ombudsman (Ombudsman) has alleged that Avert Logistics Pty Ltd (Avert) contravened the Fair Work Act 2009 (Cth) (Fair Work Act) by a failure to pay four persons undertaking driving duties, each of whom is alleged by the Ombudsman to be an employee. It is common ground between the parties that the question as to whether there was any contravention grounded in a failure to pay various entitlements to the four persons concerned is determined by whether each was, in law, an employee, having regard to the common law understanding of what constitutes an employment relationship. In other words, it is common ground that the Fair Work Act does not materially introduce some expansion of the common law understanding as to whether there is an employment relationship.
In the Federal Family and Circuit Court of Australia (Division 2) (Circuit Court), the question as to whether the four persons were employees was resolved against the Ombudsman. That had the consequence that the Circuit Court dismissed the application. The Ombudsman has now appealed against that order of dismissal. Although the grounds of appeal put the issue in various ways, in essence, there is but one issue which is, on the facts as found, was each of the four persons an employee?
It is not necessary to detail the reasons why the learned primary judge concluded that each of the four persons was not an employee. That is because, jurisprudentially, his Honour’s reasons for judgment have been overtaken by two cases at ultimate appellate level, each decided after his Honour made the orders under appeal. Those two cases are the determinations by the High Court of appeals in construction in ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144 (Jamsek) and Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89 (Personnel Contracting). It will be necessary later in these reasons for judgment to consider in a little more detail the judgments delivered by the High Court in those two appeals.
For the present, it is sufficient to note that each of those cases instructs that where the terms of a party’s relationship have been committed comprehensively to a written contract, the validity of which is not challenged as a sham, and where the terms of that contract have not been varied, waived or the subject of an estoppel, the legal rights and obligations established by that contract are decisive of the character of the relationship. Further, those cases confirm that a description in a written contract by the parties, of the nature of their relationship, is not decisive as to the nature of that relationship if, properly construed, the terms of the contract tell otherwise.
There is no novelty in either of these propositions, notwithstanding that judgments of a Full Court of this Court were overturned in each of those High Court appeals. That is so, as those two High Court cases confirm, by regard to the advice of the Judicial Committee, in an Australian appeal, Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 (AMP v Allan). In that case, at 409, the Judicial Committee stated:
In the present case, where there is no reason to think that the clause is a sham or that it is not a genuine statement of the parties’ intentions, it must be given its proper weight in relation to other clauses in the agreement.
That statement was made with reference to a clause which described the nature of the relationship as one of principal and independent contractor. Later, at 410, the Judicial Committee stated “a further important indication against this being a contract of service is the right of the respondent to incorporate himself”. It may not be impossible for a body corporate to be a servant, but the concept is certainly unfamiliar.
It is necessary, having regard both to Personnel Contracting and Jamsek and, for that matter, AMP v Allan, to consider in detail the terms of the relevant contract. That contract is in a standard form. It was adopted in relation to each of the subject cases. As in Personnel Contracting, Jamsek and AMP v Allan, there was no issue between the parties in the Circuit Court that the contract concerned was a sham. That may not, in itself, be a complete answer in this case. It is still necessary to consider exactly the import of the terms of the contract. Further, even though there is in the contract a statement as to the nature of the relationship, namely cl 20, that statement is not decisive. Clause 20 provides 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.
Even though not a sham and as held in Narich Pty Ltd v Commissioner of Pay-roll Tax (1984) 58 ALJR 30, if, on the true construction of the contract, it is one of employment and even though the contract was entered into in good faith between the parties without any intention that it be a sham, if the contract on its terms creates a relationship of employment then all that means vis-à-vis cl 20 is that it is non-effective.
Turning then to the contract, one sees in cl 2 after provision for contractor/supplier details this:
The Contractor/Supplier agrees an ACN will be registered no later than one (1) month of joining Boske Road Transport. Failure to comply in registering an ACN after the one (1) month of joining, The [sic] Contractor understands Boske Road Transport Management retain the right to terminate the agreement effective immediately without penalty to Boske Road Transport.
[emphasis in original]
Now, the reference in this clause to an ACN is, inferentially, to an Australian Company Number and, in turn, means that it is contemplated that the “Contractor/Supplier” if not already a corporation will be incorporated. In other words, on its face, cl 2 contemplates that it is possible that the contract is a pre-incorporation contract, the benefit of which in relation to the “Contractor/Supplier” will be enjoyed by a company to be incorporated. The clause also does not provide for automatic termination upon the expiry of one month after the making of the contract in the event that no incorporated “Contractor/Supplier” comes into existence. Rather, it provides for an ability for the respondent if, so disposed, to terminate the contract.
In relation to three of the contracts, it is evident that the respondent waived the benefit of that clause. That is because, in relation to Ms Emily Keable, no company ever came into existence. In relation to two others, only partnerships were parties to the contract with Avert. Only in one instance was there a corporate contractor with Avert.
Regard to the statement to which I have referred in AMP v Allan would suggest that this ability for the “Contractor/Supplier” to incorporate tells against the notion that the contract, in each instance, is one of employment.
There are, however, particular rights and obligations created between the parties which make that first blush impression flowing from cl 2 not as certain. Considering the terms, then, in greater detail requires that cl 6:
6 Services & Vehicle Maintenance:
The Contractor/Supplier will provide to the Principal Services as set out in the Schedule of this Agreement (‘the Services’), subject to the terms and conditions of this Agreement.
a)The Contractor/Supplier must provide the Services to the Principal in accordance with the requirements of the schedule. The Contractor must comply with any direction or instruction by the Principal.
b)The Contractor/Supplier will report to the Principal, or the authorised representative of the Principal, as and when requested to do so, in respect of the performance of the Services. The Contractor will comply with all reasonable requests of the Principal to provide information or access required to comply with the Principal's obligations.
c)The Principal will supply a vehicle suitable to adequately undertake the various tasks at hand at no cost to the Contractor/Supplier, although if the Contractor/Supplier is at fault then the Contractor/Supplier is to supply a vehicle suitable to adequately undertake the various tasks at hand at no cost to the Principal.
d)Servicing / general repair and maintenance will be the responsibility of the Principal, however it is the Contractor’s/Supplier’s responsibility to advise the Principal when required services and/or maintenance is required. It is the responsibility of the Principal to ensure the supplied vehicle is in a road worthy manner at all times.
e)The Contractor/Supplier will ensure the supplied vehicle is washed & in a clean presentable manner at all times or as directed by the Principal.
f)In the event of vehicle break-down greater than 4 hours the Pricipal [sic] will rent / hire / temporary replace with a replacement vehicle equivalent to the current vehicle where physically possible pending vehicle availability & time of day to ensure continuity of work at no cost to the Contractor/Supplier.
g)It is the responsibility of the Contractor/Supplier to ensure a replacement driver is available to cover time off for extended periods such as annual leave, days-off, sick leave etc.
h)It is the responsibility of the Contractor/Supplier to maintain Full Comprehensive Insurance and Queensland Registration of the vehicle at all times.
i)All Queensland Motorway Toll charges are the responsibility of the Contractor/Supplier. In most cases these charges are rechargeable to the Principal who in-turns recharges the customer. Tolls will no be paid if the Principal has not given permission to utilize Toll roads.
j)The Contractor/Supplier will allow the Principals signage to be displayed on the Contractors vehicle. Signage to be at the Principals cost.
k)It is the responsibility of the Contractor/Supplier to ensure a replacement driver is available to cover time off for extended periods such as annual leave, days-off, sick leave etc.
Working through those, the services are apparently driving services. Clause 6(a) provides that in the provision of these services the contractor must comply with any direction or instruction by the principal. That was said to be an indicator of an employment relationship.
Control is, of course, a hallmark of an employment relationship. But an ability to give direction to a person is not necessarily decisive of the question of whether the relationship is indeed one of employer and employee. See as to this a statement by Kiefel CJ and Keane and Edelman J in Jamsek, at [69]:
[69]As to cl 2.1(a) of the contract, the obligation to undertake carriage “as reasonably directed” was not, as counsel for the respondents submitted, akin to a power of the company to “micromanage” the conduct of the deliveries. That clause is to be understood in the context of provisions that highlight that it was the partnerships which had responsibility for the conduct of the deliveries. With that context, the better view of the clause, as a matter of the ordinary meaning of the text, is that it created an obligation as to what carriage was to be undertaken rather than how it was to be carried out. In this sense, as the primary judge observed, such an obligation would be at the core of any engagement of an external courier to deliver goods. The qualification of the obligation to undertake carriage “as reasonably directed” served to ensure that the company could not over-stretch the partnerships’ capacity by requiring them to deliver goods in such volumes as might put them in breach of their obligations.
[footnote references omitted]
Clause 6(a) does not expressly state any reasonable direction or instruction but so much would necessarily follow, in any event, as a matter of construction to give business efficacy to the contract.
Clause 6(b) in its reference to reporting to the principal as and when requested to do so is, at first blush, suggestive of a relationship of employment, but not necessarily so.
A more powerful consideration telling towards the relationship being one of employment is in cl 6(c) the prescription that it will be the principal who supplies a vehicle suitable to adequately undertake the various tasks. In other cases, in the transport industry, and as Jamsek attests, the provision by the contractor of both driving services and a vehicle has told powerfully in favour of the relationship being one of principal and independent contractor.
Related to cl 6(c) is the repair and maintenance obligation found in cl 6(d) falling on the principal and the responsibility in the event of a breakdown greater than four hours of the principal to rent or hire or temporarily replace the vehicle. As against that, it is the responsibility of the “Contractor/Supplier” to maintain full comprehensive insurance and Queensland registration of the vehicle supplied: see cl 6(h).
Clauses 6(g) and 6(k) also tell against the relationship being one of employment in their provision for the “Contractor/Supplier” to provide replacement drivers.
Clause 7 provides for the rendering of GST-compliant, inferentially, GST-inclusive, invoices for deliveries in arrears. Importantly, the last sentence of that clause, which states, “Payments will be subject to the principal receiving payments from the client,” in conjunction with the provision in cl 7 for GST-compliant invoices tells in favour of the relationship being one of principal and independent contractor.
There are indications in cl 8, which provides for termination, which suggest that the relationship may be one of employment. I refer in particular to the ability of Avert to terminate if “the “Contractor/Supplier” is found to be insubordinate in respect to the principal and/or the Principal’s Customer/s”, but the language is not language of lawyers but that chosen by laypersons. It is not necessarily decisive that insubordination has been used as a basis for termination on the initiative of Avert.
Clause 11 is as follows:
11.Freedom to Contract: The Contractor/Supplier will be free to enter into contracts with third 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.
[emphasis in original]
That clause is an indicator that the relationship is one of principal and independent contractor in its contemplation that the “Contractor/Supplier” may render services to others. That right is qualified by a requirement for written permission by Avert. Nonetheless, that freedom to contract in that way is provided for at all is inconsistent with the relationship being one of employer and employee.
Clause 12, in its prescription for operational health and safety and fatigue management, is, in itself, neutral.
The provision in cl 13 for the “Contractor/Supplier” to indemnify Avert “for all loss or damage to the goods in transit and must have in place their own insurance policies as per specified” points to the relationship being one of principal and independent contractor.
So too does cl 14 in its prescription for the “Contractor/Supplier” to be responsible for any costs associated with training, licence, subscription or accreditations.
Perhaps tending the other way, although also perhaps neutral, is the prescription in cl 16 with respect to an expectation of attendance at work in a neat and tidy fashion.
Indemnification is the subject of repeated reference in cl 21 whereby the “Contractor/Supplier” indemnifies and agrees to keep indemnified Avert and its respective officers, servants, employees and agents against all losses, liabilities, claims and expenses which arise from, amongst other things, any act or omission of the “Contractor/Supplier” in connection with the services.
Clause 22 is a prohibition in respect of assignment by the “Contractor/Supplier” of its rights and obligations. That is not necessarily decisive of the relationship being one of employer and employee. It just means what it says in terms of the particular absence of an ability to assign.
Clause 25 of the contract contains the following statements:
We are proud to deliver a service ensuring the safety of our people, the public, property and the environment.
…
To ensure we maintain compliance and deliver a safe and professional service, we are committed [to various subjects].
…
Under the Transport Operations (Road Use Management – Fatigue Management) regulation 2008, we ensure our drivers take sufficient breaks …
[emphasis added]
Where thus far one might regard this as indicative of the relationship being one of employer and employee; however, reading further, one see this: “if you require a driver to work more than 12 hours in one shift, we can ensure staff undergo either basic or advanced fatigue management training under NHVAS”.
That particular statement is consistent with the ability found in cl 6(g) and cl 6(h) for the “Contractor/Supplier” to engage replacement drivers.
The particular provisions to which I have referred as indicating the contract was one of employment were provisions which were, with respect, understandably pressed by the Ombudsman as indicating that the conclusion reached in the original jurisdiction was erroneous.
The case is, in my view, a much harder one than – at least with the wisdom of hindsight – Jamsek appears to be. That is because, as I have already mentioned, the vehicle here is not provided by the putative “Contractor/Supplier”. On closer analysis, however, what the “Contractor/Supplier” does do is take a vehicle owned by Avert into its own business. That is because the registered ownership of the vehicle, as the contract contemplates, becomes that of the “Contractor/Supplier”.
Further, and related to that, the comprehensive insurance of that vehicle and other insurances relating to the use of that vehicle fall contractually on the “Contractor/Supplier”, not Avert.
Oddly, with respect, the contract is silent as to who pays for the fuel in respect of the vehicle, but the absence of any express provision is, at best, neutral. I say “at best” because one might have expected if Avert was responsive for fuelling the vehicle, for that to have been stated in the contract.
Reading the terms of the contract as a whole, the provision for replacement drivers to be found by the “Contractor/Supplier” for vehicle registration and insurance and other insurance and the contemplation that it will not necessarily be a particular individual who undertakes the driving services are all consistent with cl 2, which in turn contemplates that a service will be rendered or may be rendered by an incorporated body. And as the Judicial Committee observed in the passage from AMP v Allan quoted, it is a little odd to make provision for incorporation and conclude that the relationship is one of employer and employee.
A factor, as has been recently emphasised by the High Court, which can tell, decisively, is in whose business is the service rendered? Avert contracts with others to provide logistics or transport services to those others such as Toll and the like. So the argument for the Ombudsman goes that these driving services that are performed by the four individuals is service performed in Avert’s business, but if one steps back and looks at the terms of the contract, the four individuals concerned are rendering driving services via vehicles for which they pay registration to Avert.
It therefore only comes to this: considering the rights and obligations created by the contract, those rights and obligations, in my view, are consistent with cl 2 which contemplates that the services will or may be performed by a corporation. The point is certainly a nice one on the facts – much harder, I repeat, than Jamsek – much harder. But on the whole of the terms of the contract, the conclusion that I have reached is that the relationship created is one of principal and independent contractor. It follows, albeit for reasons which, in light of later authority in the High Court, necessarily differ from those given by the learned primary judge, I agree with the conclusion reached by his Honour. Necessarily, therefore, the appeal must be dismissed.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan. Associate:
Dated: 19 July 2022
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