Fair Work Ombudsman v Contracting Solutions Australia Pty Ltd - [2013] FCA 7

FEDERAL COURT OF AUSTRALIA
Fair Work Ombudsman v Contracting Solutions Australia Pty Ltd
[2013] FCA 7

Citation: Fair Work Ombudsman v Contracting Solutions Australia Pty Ltd [2013] FCA 7

Parties: FAIR WORK OMBUDSMAN v CONTRACTING SOLUTIONS AUSTRALIA PTY LTD (ACN 099 340 566), LABOUR CONTRACT SOLUTIONS PTY LTD (ACN 123 533 111), BLUE STEEL CORPORATION PTY LTD (ACN 099 725 372), MICHAEL WRIGHT and DARYL LENKIC

File number: SAD 154 of 2010

Judge: LANDER J

Date of judgment: 15 January 2013

Catchwords: INDUSTRIAL LAW – admitted contraventions of s 900 of Workplace Relations Act 1996 (Cth) – representations made that contracts, which were employing school aged children in a food retail outlet, were contracts of services under which work was to be performed as independent contractor, in circumstances where contracts were contracts of employment – admitted accessorial liability pursuant to s 728 of Workplace Relations Act 1996 (Cth) of involvement in primary contraventions – discussion of circumstances in which respondents admit involvement in contravention of first respondent, when first respondent in liquidation and proceeding had not proceeded against first respondent – agreement that pecuniary penalties should be ordered – penalties and penalty ranges proposed – discussion of relevant factors to be considered when determining, and determination of, appropriate pecuniary penalty

Legislation:
Corporations Act 2001 (Cth), s 471B
Crimes Act 1914 (Cth), s 4AA
Fair Work Act 2009 (Cth), ss 696, 701
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Schedule 2 part 3 s 11(1), Schedule 18 part 3 s 13(1)
Federal Court of Australia Act 1976 (Cth), s 23
Workplace Relations Act 1996 (Cth), ss 4, 719, 727, 728, 826, 841, 900, 904

Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (Cth), Schedule 1

Cases cited:
           Australian Competition and Consumer Commission v Black on White Pty Ltd and Others (2001) 110 FCR 1

           Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) (1999) 94 IR 231

           Country Metropolitan Agency Contracting Services Pty Ltd v Slater and WorkCover/CGU Workers Compensation Insurance (SA) Pty Ltd [2003] SAWCT 57

           Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471

           Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557

           Furlong v Australian Workers Union & Ors [2007] FMCA 443

           Hills v Sutton [2007] FCA 2033

           Matheson Engineers Pty Limited and Another v El Raghy and Others (1992) 37 FCR 6

           NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285

           Ponzio v B & P Caelli Constructions Pty Ltd and Others (2007) 158 FCR 543

Richardson & Wrench (Holdings) Pty Ltd and Another v Ligon No 174 Pty Ltd and Others (1994) 123 ALR 681

Date of hearing: 10 October 2012

Date of last submissions: 12 October 2012

Place: Adelaide

Division: FAIR WORK DIVISION

Category: Catchwords

Number of paragraphs: 121

Counsel for the Applicant: Mr R Dalton

Solicitor for the Applicant: Piper Alderman

Counsel for the First, Second and Fourth Respondents: Mr L Smith

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] FCA 7
Decision Date: 15 January 2013

CaseChat Overview and Summary

The Fair Work Ombudsman initiated proceedings against Contracting Solutions Australia Pty Ltd and several other respondents for contraventions of section 900 of the Workplace Relations Act 1996 (Cth). The primary issue was whether the respondents had made representations that contracts, which were actually contracts of employment for school-aged children working in a food retail outlet, were contracts of service under which work was to be performed as an independent contractor. The court had to determine whether the contracts were indeed contracts of employment and if the respondents had contravened section 900 by misrepresenting them as contracts of service. Additionally, the court had to decide the appropriate penalties for the contraventions under section 904 of the Act.

The court examined the agreed facts and the nature of the Odco contracting system used by the respondents. It was established that the respondents knew the Odco system was not foolproof and had to be assessed on its circumstances to determine if it led to workers being deemed contractors or employees. The court found that the contracts in question were indeed contracts of employment, not contracts of service. The respondents admitted to accessorial liability under section 728 of the Act for their involvement in the primary contraventions. The court then considered the appropriate penalties, taking into account various relevant factors such as the gravity of the offence, the degree of culpability, and the deterrent and rehabilitative effects of the penalty.

The Fair Work Ombudsman was successful in establishing the contraventions and the accessorial liability of the respondents. The court ordered the second respondent to pay a penalty of $14,850, and the third, fourth, and fifth respondents to pay aggregate penalties of $13,200, $5,940, and $2,640 respectively. The penalties were to be paid to the Consolidated Revenue Fund of the Commonwealth within specified timeframes. The proceeding was dismissed in all other respects.

Orders

Orders of the court

1. Pursuant to s 904(1) of the Act, the Second Respondent pay a penalty of $14,850 in respect of the declared contravention of s 900 of the Act.

2. Pursuant to s 904(1) of the Act, the Third Respondent pay an aggregate penalty of $13,200 in respect of the declared contraventions of s 900 of the Act.

3. Pursuant to s 904(1) of the Act, the Fourth Respondent pay an aggregate penalty of $5,940 in respect of the declared contraventions of s 900 of the Act.

4. Pursuant to s 904(1) of the Act, the Fifth Respondent pay an aggregate penalty of $2,640 in respect of the declared contraventions of s 900 of the Act.

5. Pursuant to s 841(a) of the Act, the second and fourth respondents pay the penalties referred to in orders 1 and 3 above to the Consolidated Revenue Fund of the Commonwealth within three months of the date of this order.

6. Pursuant to s 841(a) of the Act, the third and fifth respondents pay the penalties referred to in orders 2 and 4 above to the Consolidated Revenue Fund of the Commonwealth within six months of the date of this order.

7. The proceeding otherwise be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

A contravention of s 900(1) will be established if a respondent is a party to a contract with a person and the respondent makes the representation referred to in s 900(1)(b) and, in fact, the contract is a contract of employment rather than a contract for services.The agreed facts An agreed statement of facts as between the Ombudsman, LCS and Mr Wright was filed 26 September 2012. Contracting Solutions was not, of course, a party to the agreed statement of facts. An amended agreed statement of facts as between the Ombudsman, Blue Steel and Mr Lenkic was filed 2 October 2012. A summary of the agreed facts is as follows. From around 2002 until 7 April 2008, Blue Steel conducted a retail fast food business selling pretzels, drinks and other items. Pursuant to a franchise agreement, the business traded at different times under the name “Wetzels Pretzels” and under the name “The Pretzel Bakehouse”, at a shop within the Tea Tree Plaza Shopping Centre at 976 North East Road, Modbury, in South Australia (the shop). Blue Steel employed staff in the shop who performed duties including making pretzels, serving customers, and cleaning.Contracting Solutions and LCS From 2001 to 2002, Mr Wright was employed by Australia Contracting Solutions Pty Ltd (ACS) as its operations manager. ACS supplied contract labour and contractors to commerce and industry under a form of labour contracting known as the “Odco contracting model” (Odco model). ACS was licensed by a company that owned the rights to the intellectual property of the Odco model processes and forms used to implement and apply the Odco model. In February 2002, Mr Wright decided to establish his own Odco contracting company, Contracting Solutions. On 21 March 2002, Contracting Solutions entered into an Odco Licence Agreement with the then licensor, Labour Force Australia Pty Ltd (LFA), and Contracting Solutions conducted business as an Odco contracting company, supplying contract labour and personnel to commerce and industry in South Australia until November 2007. On or around 26 November 2007, LCS entered into an Odco Licence Agreement with the then licensor, Odco Contract Systems Australia Pty Ltd. The agreement was in substantially the same terms as the 2002 Odco Licence Agreement between Contracting Solutions and LFA. After November 2007, LCS conducted business as an Odco contracting company in a similar fashion to the way that Contracting Solutions had done. Mr Wright and his Odco contracting companies (Contracting Solutions and later LCS) knew, by virtue of the initial training materials and subsequent updates and conferences, several relevant matters. First, that the Odco system was designed not to exploit workers, but was designed to operate so that the contractor would be paid above award rates, and designed for contractors who were business people with a business attitude to work who did not want to be constrained by the award wages system. Secondly, the Odco system of labour contracting was not fool-proof and the legality of each implementation of the Odco system of contracting, and whether the arrangement in any situation led to the worker being deemed a contractor or employee, had to be assessed on its circumstances. Thirdly, Contracting Solutions and subsequently LCS were required under their licences to adhere strictly to the Odco system. Fourthly, the licensors required all licensees to adhere strictly to the principle that contractors supplied should receive remuneration equal to or more than the total benefits received by an employee working in similar circumstances. Fifthly, the licensors required all licensees not to use the Odco system as a cheap labour system.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Citation:		Fair Work Ombudsman v Contracting Solutions Australia Pty Ltd [2013] FCA 7
Parties:		FAIR WORK OMBUDSMAN v CONTRACTING SOLUTIONS AUSTRALIA PTY LTD (ACN 099 340 566), LABOUR CONTRACT SOLUTIONS PTY LTD (ACN 123 533 111), BLUE STEEL CORPORATION PTY LTD (ACN 099 725 372), MICHAEL WRIGHT and DARYL LENKIC
File number:		SAD 154 of 2010
Judge:		LANDER J
Date of judgment:		15 January 2013
Catchwords:		INDUSTRIAL LAW – admitted contraventions of s 900 of Workplace Relations Act 1996 (Cth) – representations made that contracts, which were employing school aged children in a food retail outlet, were contracts of services under which work was to be performed as independent contractor, in circumstances where contracts were contracts of employment – admitted accessorial liability pursuant to s 728 of Workplace Relations Act 1996 (Cth) of involvement in primary contraventions – discussion of circumstances in which respondents admit involvement in contravention of first respondent, when first respondent in liquidation and proceeding had not proceeded against first respondent – agreement that pecuniary penalties should be ordered – penalties and penalty ranges proposed – discussion of relevant factors to be considered when determining, and determination of, appropriate pecuniary penalty
Legislation:		Corporations Act 2001 (Cth), s 471B Crimes Act 1914 (Cth), s 4AA Fair Work Act 2009 (Cth), ss 696, 701 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Schedule 2 part 3 s 11(1), Schedule 18 part 3 s 13(1) Federal Court of Australia Act 1976 (Cth), s 23 Workplace Relations Act 1996 (Cth), ss 4, 719, 727, 728, 826, 841, 900, 904 Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (Cth), Schedule 1
Cases cited:		Australian Competition and Consumer Commission v Black on White Pty Ltd and Others (2001) 110 FCR 1 Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) (1999) 94 IR 231 Country Metropolitan Agency Contracting Services Pty Ltd v Slater and WorkCover/CGU Workers Compensation Insurance (SA) Pty Ltd [2003] SAWCT 57 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 Furlong v Australian Workers Union & Ors [2007] FMCA 443 Hills v Sutton [2007] FCA 2033 Matheson Engineers Pty Limited and Another v El Raghy and Others (1992) 37 FCR 6 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Ponzio v B & P Caelli Constructions Pty Ltd and Others (2007) 158 FCR 543 Richardson & Wrench (Holdings) Pty Ltd and Another v Ligon No 174 Pty Ltd and Others (1994) 123 ALR 681
Date of hearing:	10 October 2012
Date of last submissions:	12 October 2012
Place:	Adelaide
Division:	FAIR WORK DIVISION
Category:	Catchwords
Number of paragraphs:	121
Counsel for the Applicant:	Mr R Dalton
Solicitor for the Applicant:	Piper Alderman
Counsel for the First, Second and Fourth Respondents:	Mr L Smith