Greatrex and Secretary, Department of Jobs and Small Business

Greatrex and Secretary, Department of Jobs and Small Business [2018] AATA 3850 (12 October 2018)
Division:GENERAL DIVISION
File Number: 2017/5221
Re:Darren Greatrex
APPLICANT

AndSecretary, Department of Jobs and Small Business
RESPONDENT

DECISION
Tribunal:Member K Millar
Date:12 October 2018
Place:Adelaide

The decision under review is affirmed.
...........................[Sgnd]..........................................
Member K Millar
CATCHWORDS
FAIR ENTITLEMENTS GUARANTEE – Claim for advance under Fair Entitlements Guarantee Act – Requirements for an effective claim – Whether person is an employee or independent contractor – Insolvency event – Decision under review affirmed
LEGISLATION
Fair Entitlement Guarantee Act 2012 (Cth)
CASES
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner for Taxation(No 3) (2011) 214 FCR 82
Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30
SECONDARY MATERIALS
Explanatory Memorandum, Fair Entitlements Guarantee Bill 2012 (Cth)
BACKGROUND

The Fair Entitlement Guarantee Act 2012 (the Act) provides for the Commonwealth to make payments owed to employees if their employer becomes insolvent or bankrupt. The Commonwealth advances the entitlements of employees to the employees, and seeks to recover these advances from the insolvent or bankrupt employer.
Mr Greatrex claims he was an employee of R.N.R. Nominees Pty Ltd (RNR), which had a liquidator appointed on 14 September 2016. Mr Greatrex applied for payments under the Act for unpaid wages, annual leave, payment in lieu of notice and redundancy totalling $86,620. The Secretary refused his application, finding that he was not an employee of RNR.
An internal review of this decision on 4 August 2017 affirmed the decision, with the decision maker again finding he was not an employee of the company. In addition, the decision maker found that even if he were an employee of RNR, he had not taken reasonable steps before the company was placed into liquidation to be paid any debts owed to him.
Under s 40 of the Act, a person can apply to this Tribunal for a review of a decision of the Secretary about the amount of an advance if that decision has been affirmed or varied on internal review. The decision was affirmed on internal review and Mr Greatrex was advised of the outcome on 4 August 2017.
In issue is whether Mr Greatrex is eligible for an advance under the Act. This turns on whether he was an employee or an independent contractor; and, if he was an employee, whether he took reasonable steps before the insolvency of RNR to be paid debts owed to him before an insolvency event happened in relation to RNR.
LEGISLATION
Section 14 of the Act sets out the criteria for making an effective claim. The requirements in s 14 relate to a claim for eligibility for an advance for a person’s employment by an employer.
Section 10 of the Act sets out the conditions of eligibility for an advance. These include s 10(1)(a) which requires that the person’s employment by a particular employer has ended; and s 10(1)(f) which requires that if a person was owed debt wholly or partly attributable to an employment entitlement, the person took reasonable steps before an insolvency event to be paid those debts.
These provisions require Mr Greatrex to be an employee of RNR.
WAS MR GREATREX AN EMPLOYEE OF RNR?
RNR operated as a print manufacturer, and Mr Greatrex commenced at RNR as a business development manager to look after RNR’s existing accounts and bring in new clients for signage and printing. Mr Greatrex asserts he was an employee of RNR, and the Secretary asserts he was an independent contractor.
The term “employee” is not defined in the Act. The explanatory memorandum to the Act states that the term “employee” refers to an employee at common law and does not include a contractor.
The usual starting point for distinguishing between an employee and an independent contractor is the control test in Stevens v Brodribb Sawmilling Co Pty Ltd.[1] This looks to the degree of control the putative employer can exercise over the person. Other tests have been set out, for example in Hollis v Vabu Pty Ltd[2] which states that the totality of the relationship needs to be considered, and On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3)[3] which discussed whether or not the person is operating his or her own business.
[1] (1986) 160 CLR 16.
[2] (2001) 207 CLR 21.
[3] (2011) 214 FCR 82.
Other cases have sets out lists of factors that may indicate that the relationship is one of employer and employee, or principal and independent contractor. These include the terms of the contract; the mode of remuneration and whether it is paid for hours worked or the completion of a job; whether tax is deducted; whether a business has been set up, including whether an Australian Business Number (ABN) and insurance have been obtained; the organisation of the work and the manner in which it is to be done, as well as the place and hours of work; whether the work can be delegated to others; the entitlement to work for others, advertising services to others, and any exclusive service obligations; whether the person is held out to others as representing an employer; whether the person accrues paid holidays, annual and sick leave, as well as the payment of superannuation; whether the person has a separate workplace; whether the person provides his or her own tools and equipment; and whether the person indemnifies the putative employer against any losses.[4]
[4] See, for example Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30.
The contract
The contract is expressed to be between RNR and Greatrex Marketing. The offer is from RNR to Greatrex Marketing for Darren Greatrex for the role of Business Development Manager. The offer is expressed as being accepted by Darren Greatrex on behalf of Greatrex Marketing.
The business name Greatrex Marketing Services is held by the Trustee for the Greatrex Trading Trust. The trustee for the trust is Nu-Fit Australia Pty Ltd (Nu-Fit).
The role of Mr Greatrex
The contract is expressed to be an agreement for Darren Greatrex to fulfil the role of the position of Business Development Manager. It states the positon to be filled by Greatrex Marketing is that of a Business Development Manager, and that the Nominated and agreed person is Darren Greatrex. This indicates the position is to be filled by Greatrex marketing, which is ultimately Nu-Fit. This has the effect that the work cannot be delegated by Mr Greatrex to others, as he is the nominated person.
Mr Greatrex argued that the personal service aspect of the contract distinguishes his position from that of labour hire. He was engaged with the prospect of the owners retiring so was being brought in to build the business and take it over. He was also specifically required for his experience, connections and talent in marketing. It was argued that if the arrangements were for labour hire an exclusive contract would not be required. That the contract specifies that Mr Greatrex must perform the work is a factor that favours an employment relationship.
Organisation of the work
Additional terms and conditions of employment are set out in the job description attached to the contract. This in turn states that the nominal hours are 0830 – 1700, staggered as required. It follows that RNR exercised some control over the hours in which Mr Greatrex worked, although this could vary.
The contract specifies that a basic sales target was prepared and agreed by both parties. The contract states this target forms part of the key performance indicators for the agreement. Mr Greatrex was generally given authority to achieve these targets, however if significant resources were required from RNR a director became involved. This entails a significant degree of independence in how he achieved these targets, although there are elements of control exercised by a director where significant resources from RNR were required.
Ability to work for others
The contract states that:
You will not engage in any other employment, provide services to anyone other than the company including the Group Divisions during your employment without the company’s prior written consent.
Exception – Branders – generally to be done out of hours but direction of Greatrex Employee, Samantha Bishop, or her replacement considered to be part of the daily task as long as it is of satisfactory level to RR&A.
This both restricts Mr Greatrex’s ability to work for others and entitles him to perform work for Branders himself out of hours and to direct Ms Bishop. This would allow him to build the goodwill of Nu-Fit. Mr Greatrex was not precluded from undertaking other work for Branders out of hours, and was permitted to direct Nu-Fit’s employee. This both indicates control over Mr Greatrex but also allows for Nu-Fit to continue to operate and undertake work for Branders.
Mr Greatrex argues that the sales targets imposed had the effect that he was precluded from undertaking other work.
Nu-Fit was not precluded from taking on other work, and could engage other employees to take on additional work, as it did with the employee who continued to perform the work Nu-Fit undertook for Branders.
While not forming part of the contract, Mr Greatrex said it was agreed that this employee would be employed by RNR when the work for Branders came to an end. The employment records of RNR show that Ms Bishop was employed by RNR, with her first pay period ending 2 August 2016.
Terms and conditions
The payment in the contract is expressed to be Agreed monthly retainer, paid in arrears, $8334.00 + GST – tax invoice to be rendered pro-rate for Oct 2014.
The contract states that sick leave, annual leave, long service leave and the superannuation guarantee are not applicable – to be covered by Greatrex Marketing. This is the same for workers compensation.
Nu-Fit, as the owner of the Greatrex Marketing trading name, was responsible for payment of income tax for Mr Greatrex as well as sick leave, annual leave and payment of the superannuation guarantee.
Mode of remuneration
Greatrex Marketing issued invoices which were paid by RNR to an account held by Nu-Fit. If additional expenses were incurred, these were included in the monthly invoices. The monthly fee was initially $8,334 and was increased to $12,500 plus GST.
The monthly invoices issued by Greatrex Marketing invoiced a fee described as a Contracting Fee for the relevant month.[5] Expenses such as couriers were added to the invoice.[6] Payments were made by RNR into a bank account held by Nu-Fit.[7] According to Mr Greatrex, Nu-Fit then made payments to his personal bank account.
[5] For example Exhibit T1 p 320, 324, 325, 346, 357,364,367, 368, 375.
[6] Exhibit T1 p 325.
[7] Exhibit T1 p 89-101.
Mr Greatrex said he could not recall if he completed a tax declaration for RNR. His tax returns show that the ABNs associated with his income are those held by Greatrex Trading Trust, The Promotions Factory Unit Trust and Balemar Pty Ltd.[8] RNR is not declared as a source of his income in his tax return, and Mr Greatrex was paid by Nu-Fit as trustee of the Greatrex Trading Trust.
[8] Exhibit T1 p 154.
The invoices and payments to Nu-Fit are recorded by RNR as consultancy fees.[9] The remuneration for the work was a fixed monthly fee, regardless of the hours worked, although minimum hours were specified.
[9] For example Exhibit T1 p 357.
Provision of equipment and place of work
The contract states that during the probation period Greatrex Marketing will provide mobile telephones and laptops, and will meet motor vehicle expenses. Office accommodation, furniture and general day to day office equipment will be met by RNR.
Mr Greatrex was provided with a business card stating he is the Business Development Manager for Rodney Robertson & Associates. Emails sent by Mr Greatrex included a signature block with his title as Business development manager for RNR.
The contract states Mr Greatrex is to use accommodation from RNR and is to be provided with office supplies. Mr Greatrex worked from offices owned by RNR at Edwardstown, but travelled frequently in the position.
Nu-Fit’s bank account shows that it met payments for the lease on a motor vehicle, LinkedIn and MYOB costs. After the probationary period, Mr Greatrex continued to use his computer, and was reimbursed for motor vehicles expenses and overseas travel.
Whether Mr Greatrex was operating his own business
Mr Greatrex said at all times when he was performing work for RNR he was developing the goodwill of RNR and not of his own business, and that this indicates he was an employee rather than an independent contractor.
The ABN of the Greatrex Trading Trust was registered on 1 July 2014 and while it existed prior to this date, it was not trading before this time. The business name Greatrex Marketing was registered on 17 August 2014. At this time Mr Greatrex was undertaking work for two other companies: Yellow Corp and Branders. He said the Greatrex Marketing structure was set up because he had an employee and his accountant suggested this structure.
Nu-Fit had an employee, Ms Bishop, whose role was to assist Mr Greatrex to undertake work for Branders. When he commenced at RNR, there was an agreement that Ms Bishop would work for Branders, and any work Mr Greatrex undertook for Branders would be outside normal business hours. It was agreed that when this work ceased, Ms Bishop would become an employee of RNR, and payments to Ms Bishop as an employee of RNR commenced on 2 August 2016.
Mr Greatrex does not appear in the payroll records of RNR as an employee.
The contracting entity is Nu-Fit, which met the employment expenses of Mr Greatrex, and is recorded as his employer in his tax return. Nu-Fit was undertaking other work for Branders in the course of the engagement of Mr Greatrex by RNR. This indicates Nu-Fit was operating a business, being the provision of the services of its employees to other businesses.
Other matters
Mr Greatrex said he started undertaking work for RNR as part of RNR’s succession plan, and that the intention was that he and Ms Bishop were to become full time employees of RNR. The contract specifies that there is a probationary period until 30 June 2015 during which either party can terminate the agreement with one weeks’ notice. The contract states that at an appropriate time prior to 30 June 2015 the parties will discuss and concur on a further agreement to continue an arrangement suitable to all parties. No other arrangement was made, and Mr Greatrex continued to perform work under the terms and conditions in contract with the exception that the monthly fee was increased.
Mr Greatrex acknowledged that he undertook the negotiations in entering the contract and that he understood the terms being proposed. Exceptions to the contract such as undertaking work for Branders were negotiated, and this differs from matters where a contract with standard terms is entered with no negotiation.
The cost invoiced to RNR by Greatrex Marketing was initially only second to the salary paid to the director, and when the amount was re-negotiated it exceeded the amount paid to the director. It was submitted that this price reflects the risk of taking on the work and is an indication that Mr Greatrex operated a separate business.
CONCLUSION
Mr Greatrex was provided a business card by RNR which allowed him to hold himself out as a representative of RNR. There were restrictions on him being employed by or providing services for another entity except with RNR’s written consent. Mr Greatrex’s hours were specified by RNR and he had specific sales targets to meet, which he says precluded him for undertaking work for other employers. He was obliged to comply with RNR policies, preserve RNR’s reputation and the work he undertook was to build RNR’s business. RNR provided the premises from which he worked. These are indicators which support him being an employee of RNR.
However in this case, the contract was between Greatrex Marketing, ultimately a corporate entity Nu-Fit, and RNR. Mr Greatrex negotiated the terms of the contract on behalf of Greatrex Marketing. The interposition of a company between RNR and Mr Greatrex, where the company was responsible for income tax, annual leave, sick leave, long service leave, superannuation, and workers compensation insurance for Mr Greatrex does not indicate an employment relationship. Nu-Fit met the lease repayments on the car used by Mr Greatrex. It operated the account into which payments were made, and it invoiced RNR for Mr Greatrex’s services through its trading name Greatrex Marketing. Nu-Fit is listed on Mr Greatrex’s tax return as the source of his income, and RNR is not listed as a source of income. The use of a company which has taken on these tasks and roles weighs against Mr Greatrex being an employee of RNR.
In terms of the development or operating a business, Mr Greatrex said that the sales target imposed by Nu-Fit effectively resulted in him being unable to do work for others. The contract did not preclude Mr Greatrex for performing work for Branders out of hours or directing the employee of Nu-Fit. It did not preclude Nu-Fit from engaging other employees and building its business.
A determination ultimately involves balancing factors weighing for and against an employment relationship. While there are features of an employment relationship, Mr Greatrex negotiated a contract on behalf of Nu-Fit and has taken the benefit of contracting out his services through Nu-Fit. The relationship between Mr Greatrex and RNR is therefore not an employment relationship.
As Mr Greatrex was not an employee of RNR he does not meet the requirements in s 10 of the Act to be eligible for an advance, and the decision under review is affirmed.
DECISION
The decision under review is affirmed.

I certify that the preceding 48 (forty eight) paragraphs are a true copy of the reasons for the decision herein of Member K Millar.

.....................[Sgnd]...............................
Administrative Assistant Legal
Dated: 12 October 2018

Date of hearing: 27 August 2018

Solicitors for the Applicant:

Mr K Luke

Thomson Geer

Solicitors for the Respondent:
Mr L Holcombe

HWL Ebsworth Lawyers

[2018] AATA 3850

12 October 2018

Key Legal Topics

Areas of Law

Employment Law

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Standing

Procedural Fairness