Janice Cook v Blue Hygiene Pty Ltd T/A Blue Hygiene & Cleaning

[2013] FWC 1641

[2013] FWC 1641

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Janice Cook
v
Blue Hygiene Pty Ltd T/A Blue Hygiene & Cleaning
(U2012/9887)

SENIOR DEPUTY PRESIDENT O’CALLAGHAN ADELAIDE, 18 MARCH 2013

Termination of employment - initial issues - employee or contractor - small business fair dismissal code.

[1] On 4 October 2012 Ms Cook lodged an application through which she sought relief pursuant to s.394 of the Fair Work Act 2009 (the FW Act) with respect to what she alleged was the termination of her employment with Asia Pacific Cleaning Services Pty Ltd on 20 September 2012. In this application, Ms Cook asserted that she was an employee of Asia Pacific Services Pty Ltd from 1 June 2012 to 20 September 2012 and that, prior to this, she was an employee of Blue Hygiene Pty Ltd from 4 February 2011 to 31 May 2012.

[2] In the employer's response to the application, Mr James advised that he was the Managing Director of Asia Pacific Cleaning Services Pty Ltd trading as Blue Hygiene and Cleaning (Asia Pacific) and asserted that Ms Cook was a contractor and not an employee.

[3] The application was not resolved through the conciliation process and was referred to me for arbitration. It was the subject of hearings in Adelaide on 27 January 2013 and 1 March 2013 with a video-link to Sydney. Ms Cook represented herself. Mr James did not attend the first hearing and later advised that he was unwell. He appeared at the second hearing. Because Ms Cook provided a significant amount of additional material at this second hearing, Mr James was given the opportunity to provide a written response to this material. The determination of this matter was delayed accordingly. Mr James utilised this opportunity and I have taken his advice of 8 March 2013 into account.

[4] Ms Cook's application requires that a number of jurisdictional and preliminary issues are addressed. Both parties have been cautioned that the potential exists for the evidence and submissions to be self-incriminating given the disputed nature of their relationship and the issues to be determined.

[5] Asia-Pacific does not concede that it has assumed all of the responsibilities and obligations of Blue Hygiene Pty Ltd which it advises, ceased trading on 30 July 2011. Mr James advised that he was the manager of Blue Hygiene Pty Ltd, that he did not own that particular company, but does own Asia Pacific. Mr James recognises that, subsequent to June 2012, Ms Cook was permitted to operate on the basis that she was a representative of Asia Pacific Pty Ltd trading as Blue Hygiene.

[6] An initial issue thus goes to the standing of the application. Mr James did not argue that Asia Pacific had some form of relationship with Ms Cook. There was no argument put to me that the application was invalid because of a reference to a different corporate entity. I have taken it that despite the reference to Blue Hygiene Pty Ltd the application is validly made against Asia Pacific. Later in this decision I detail the effect of Ms Cook's earlier service with Blue Hygiene Pty Ltd.

[7] Asia Pacific asserts that Ms Cook worked as an independent contractor through a business entity known as Sapphire Enterprises ABN 24022848547. Asia Pacific asserts that it does not engage employees.

[8] I have considered whether Ms Cook was a contractor or an employee. If she was engaged as a contractor, she cannot be a person protected from unfair dismissal for the purposes of s.382 of the FW Act. If Ms Cook was an employee at the time of the termination of her contract, s.382 requires that I consider whether she had completed the minimum period of employment as part of my consideration of whether she was protected from unfair dismissal.

[9] Thirdly, s.396 requires that, before the merits of Ms Cook's application can be considered, I must be satisfied about whether any dismissal was consistent with the Small Business Fair Dismissal Code or whether it was a case of genuine redundancy. I note that there is no issue between the parties that the application was lodged within time.

[10] Ms Cook's sworn evidence is that she worked for Blue Hygiene Pty Ltd and then Asia Pacific from 4 February 2011 to 20 September 2012. She asserts that she was initially engaged under a contract dated 4 February 2011 which was signed by Mr James, to undertake an Executive Sales function whereby she promoted the Blue Hygiene and Cleaning business on the basis that she assisted in the procurement of cleaning contracts which were then undertaken by franchise operators. Ms Cook asserts that this contract was later replaced by an "Agreement for Manager and Shareholder" dated 1 June 2012 1 which required her to source new cleaning work and then introduce and supervise the work undertaken by franchise operators. Ms Cook provided a signed copy of this contract which referred to her as Sapphire Enterprises (ABN 24022848547). This contract also provided for commission payments and sales targets. Additionally it provided for her to receive a 20% share in Asia Pacific upon the sale of that company. This contract specified that superannuation, and leave entitlements were not applicable. It allowed for deductions from payments to Ms Cook for a day or part of a day during which she could not be usefully engaged to work.

[11] Ms Cook asserted that she was required to recruit and supervise telemarketers to promote the business and to regularly work weekends to supervise and act on complaints about, or issues affecting work undertaken by franchise holders whom she supervised. Ms Cook asserts that she generally acted on Mr James’ instructions.

[12] Ms Cook asserts that she was provided with an Asia Pacific telephone and computer. She worked from home. She invoiced Asia Pacific on a monthly basis. These invoices were for generally consistent amounts of $4000 per month plus petrol reimbursements. Ms Cook asserts that she worked 60 to 70 hours per week and that she was on call for 24 hours a day. Her evidence was that Mr James would commonly telephone her to request that she act on issues impacting on clients. She asserted that she presented herself to clients as the representative of Asia Pacific.

[13] Mr James declined to give sworn evidence. He asserted that the 1 June 2012 agreement 2 was fraudulent in that his signature had been forged and that he had not been in Adelaide on the day when his signature was recorded.

[14] Mr James asserted that Ms Cook operated as an independent contractor under an unsigned consultancy agreement dated 1 September 2011. 3 Mr James advised that this contract formed the basis of the entirety of the work undertaken by Ms Cook. This contract did not reference a 20% shareholding or the supervision of work undertaken by franchise holders. Otherwise, it is reasonably similar to the contract provided by Ms Cook. Again, the contract confirms Ms Cook's position as "Sales Executive for South Australia". It specifies her duties as the obtaining of new work with Ms Cook only required to “walk through” the clients premises for a site introduction and induction. Mr James advised that he had later agreed for Ms Cook to undertake some debt collection duties.

[15] Ms James advised that Ms Cook had no fixed working hours and that she was able to work for other businesses and that her performance was assessed on the basis of the monthly reports which were supposed to be provided to him.

Findings - Contractor or Employee?

[16] In Kitchen Designs Ltd 4 a Full Bench of the Australian Industrial Relations Commission addressed the authorities relevant to a consideration of contracting and employment arrangements in the following terms:

“[51] We have considered the nature of the relationship between Ms Moran and Freedom Kitchens in the context of the High Court decision in Stevens v Brodribb Sawmilling Co Pty Ltd as applied by the Full Bench in Abdulla v Viewdaze Pty Ltd t/a Malta Travel 15 and stated in the following terms:

“[18] The traditional approach to characterisation was to apply a control test. In Brodribb Mason J, with whom Brennan J and Deane J relevantly agreed, addressed the factor of control, and issue of characterisation generally, in the following way:

‘A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it: Zuijs v Wirth Bros. Pty. Ltd [(1955) 93 CLR 561, at p 571]; Federal Commissioner of Taxation v Barrett [(1973) 129 CLR 395, at p 402]; Humberstone v Northern Timber Mills [(1949) 79 CLR 389, at p 404]. In the last-mentioned case Dixon J said (at p. 404):

“The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions.”

But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty. Ltd v Federal Commissioner of Taxation [(1945) 70 CLR 539, at p. 552]; Zuijs' Case; Federal Commissioner of Taxation v Barrett [(1973) 129 CLR 395, at p. 401]; Marshall v Whittaker's Building Supply Co [(1963) 109 CLR 210, at p. 218]. Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.

[19] Mason J returned to the issue to state:

. . . control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.”””

[17] I have adopted this approach. It is somewhat complicated in this matter in that I found neither Ms Cook nor Mr James to be credible witnesses. Ms Cook's evidence and the advice of Mr James were both selective and characterised by such substantial personal animosity to the extent that neither was particularly believable.

[18] I have concluded that, at the time of the cessation of her work arrangement, Ms Cook worked under a contract dated and signed 15 June 2012. I do not believe Mr James’ assertion that his signature was forged and I am not satisfied that, despite his written advice of 8 March 2013 that Mr James’ own travel records establish that he was not in Adelaide on that day. I have noted that Ms Cook has provided evidence of a substantial number of inspections conducted of clients’ premises consistent with this contract. 5 I have noted that, with the exception of petrol reimbursements, Ms Cook was generally paid the same amount each month.

[19] I have concluded that Mr James had, and exercised, substantial control over the work done by Ms Cook. The e-mails produced by Ms Cook 6 confirm this. I have recited two examples. Firstly, Ms Cook asserts that Mr James also uses the alias of Damon Peters and provided an e-mail of 4 September 2012 in the following terms:

“From: Damon Peters

Sent: Tuesday, 4 September 2012 20122 4:54 PM

To: xxxxxxxxxx

Subject: Asia Pacific Cleaning Services

I will ask Janice our Manager to show you through this week.

Can I please have you’re phone number, I will have her call you asap and arrange a time.

Kind regards Damon”

[20] I note that Mr James did not dispute his use of the name Damon Peters.

[21] Secondly, Ms Cook provided an e-mail of 30 August 2012 in the following terms:

“From: Darryl James

Sent: Thursday, 30 August 2012 7:08 PM

To: Janice Cook

Subject: Re: Hi,nick Cleaning maintenance. Please let Janice know about this thank you.send her this photos

You will need to keep contact with clients even if you tell them you have had to defer your leave due to high demands currently.

Kind regards Darryl”

[22] Other e-mailed instructions 7 from Mr James indicate that he exercised control characteristics normally associated with employment arrangements. Additionally, the cleaning inspection reports8 are indicative of an operational management supervisory function.

[23] I have noted that, irrespective of the form of contract which applied to Ms Cook, she was described as a contractor and no leave provisions or superannuation payments were made. Additionally, Ms Cook invoiced Asia Pacific on a monthly basis using her ABN number. In his 8 March 2013 advice, Mr James asserts:

“Ms Cook was provided a consultancy agreement allowing her to contract services to my company. The unsigned agreement was very similar to her previous signed agreement with Blue Hygiene Pty Ltd and formed the basis of her business services to be provided to Asia Pacific Cleaning Services. Ms Cook had already registered her business ‘Sapphire Enterprises’ with an ABN to facilitate this mutually agreed arrangement. To register such an entity you must logon to the Fair work web site and answer a series of questions (attached). This is a clear indication that Ms Cook was completely aware of her actions as a business owner not as the alleged employee.”

[24] I have taken it that Mr James is referring to an ABN registration site but do not consider that the reference to Sapphire Enterprises in whichever agreement applied, or to Ms Cook’s ABN determine that she was, in reality, a contractor. I have noted that no PAYG tax was deducted from the amounts paid to Ms Cook. These factors by themselves do not define Ms Cook as a contractor, as it is the characterisation of the actual relationship which is relevant.

[25] I have noted an e-mail of 13 June 2012 9 which Ms Cook sent to a person who appeared to be a subcontractor. Whilst Ms Cook described herself in this e-mail as the "National Sales and Marketing Manager Adelaide/Sydney for Blue Hygiene and Cleaning", the fact that this email could be read as evidence of her capacity to further contract out work, may indicate a contracting rather than any employment arrangement. I have however, been given very limited information about this e-mail such that I am unable to reach a definite conclusion about it. Subsequent to the hearing of this matter Ms Cook has provided a copy of correspondence allegedly from this person, advising that she was an employee of Asia Pacific and was paid by Mr James. Because this correspondence was provided to me after the hearing so that Mr James could not challenge it, I have not relied on it in reaching a conclusion.

[26] Ms Cook appears to have been involved, to at least to some extent, in selling franchise arrangements which might be best described as a pyramid selling arrangements removed from normally accepted employment standards. 10 Again, however, I have been given very limited information in this respect and have not taken this issue into account.

[27] The evidence is that Ms Cook was provided with a mobile phone and computer, that she worked for Asia Pacific on a substantial daily basis and undertook a job normally associated with employment. For example a client e-mail of 4 September 2012 to Ms Cook reads as follows:

“From: xxxxxxxxxxx

Sent: Tuesday, 4 September 2012 2:21 PM

To: Janice Cook

Subject: xxxxxx xxxxxxx

Hi Janice,

Can you please call me as soon as you get this email on xxxx xxx xxx as I wish to discuss the current contract. I have concerns about our service and have had irate cleaners in my office complaining they are not being paid. It also appears your 1800 number has been cut off so I can’t get hold of anyone.

I appreciate your immediate attention to this matter.”

[28] I have considered all of these factors, with particular emphasis on the control able to be exercised by Mr James. I have concluded that the relationship is most appropriately described as an employment relationship.

Was Ms Cook a person protected from unfair dismissal?

[29] Sections 382 and 383 state:

“382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.

Note: High income threshold indexed to $123,300 from 1 July 2012

383 Meaning of minimum employment period

The minimum employment period is:

(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(ii) immediately before the dismissal; or

(b) if the employer is a small business employer—one year ending at that time.”

[30] Ms Cook asserts that she commenced employment with Blue Hygiene Pty Ltd on 4 February 2011. It appears that, at some point the employer changed to Asia Pacific. I think this most likely occurred around July 2011. 11 To the extent that Mr James can be believed and there is an ownership difference between Asia Pacific and Blue Hygiene, I have concluded that there was a transmission of business around that time. Ms Cook's employment appears to have continued to operate and it is patently clear that Blue Hygiene continued to be used as a trading name.

[31] I have concluded that Ms Cook's employment transferred from Blue Hygiene Pty Ltd to Asia Pacific pursuant to s.22 of the FW Act. On the material before me I have concluded that this was effectively a seamless transfer and that there was no break in the employment. Accordingly, I consider that, at the time of the termination of employment, Ms Cook met the minimum employment period requirements.

[32] I consider it most likely that Ms Cook was covered by the terms of the Commercial Sales Award 2010 but, in any event, her salary was below the high income threshold.

[33] As a consequence, I have concluded that Ms Cook was an employee who was protected from unfair dismissal.

[34] There is no question that Ms Cook was dismissed. One form of correspondence from Mr James’ to her of 20 September 2012 is attached to Ms Cook's application and a second advice of the same date is attached to the Employers Response. I have considered both these advices.

[35] These advices refer to Mr James’ concerns about continuing to pay Ms Cook in light of what he described as performance failings and correspondence which Ms Cook sent to Mr James’ partner asserting that Mr James had a mental illness, had had multiple wives and children and that Ms Cook had been sleeping with Mr James. Ms Cook apparently attached a video showing that activity. A copy of that video has not been provided to me and I have not drawn any conclusions about it at this stage. The advices of 20 September 2012 make it clear that the contractual relationship, amongst possible other relationships, was ended. Given my earlier findings I have taken this to be a termination of the employment relationship.

Small Business Fair Dismissal Code

[36] Mr James asserts that he is a small business and that he does not engage employees. Mr James did not comply with my directions to provide evidence of his small business employment status. However, in the hearing on 1 March 2013 he advised that at the time of the termination of Ms Cook's services he had six franchise operators and no employees. Notwithstanding whether these franchise arrangements are properly characterised as such, I have accepted this advice and have concluded that, on Mr James’ own advice, Asia Pacific was a small business because it employed fewer than 15 employees at the time of the termination of Ms Cook’s employment.

[37] The Small Business Fair Dismissal Code (the Code) relevantly states:

“The Code

The Fair Dismissal Code provides a simple explanation of when a dismissal will be deemed to be fair by the Fair Work Commission. The Code applies to businesses that employ less than 15 employees.

Summary dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal.

Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

Other dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

The employee must be warned beforehand. This warning can be given verbally or preferably in writing. It must be clear when giving the warning that the employee risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning. The employer must also give the employee a reasonable chance to fix the problem. Fixing the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

Employers must be able to prove they followed the Code

A small business employer will be required to provide evidence that they followed the Fair Dismissal Code if the employee makes a claim for unfair dismissal to the Fair Work Commission. This includes evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

Employee can have someone present at meetings

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.”

[38] I have considered the application of this Code in the circumstances of this matter. If the Code was complied with, the termination of Ms Cook’s employment cannot be unfair.

[39] Ms Cook was dismissed without notice or warning. Accordingly, for the requirements of the Code to be met, Asia Pacific must have had reasonable grounds upon which to believe that her conduct was sufficiently serious to justify immediate dismissal. Ms Cook's position is that she had not been paid for some weeks and sought payment from Mr James. Ms Cook does not dispute that she sent correspondence to Mr James’ partner which included a video.

[40] Mr James’ position is that Ms Cook did not meet her sales performance objectives. Further, that the correspondence which Ms Cook sent to his partner warranted the immediate termination of the contractual relationship.

[41] I am unable to conclude that there is any evidence which justifies immediate dismissal on the basis of a failure to meet specified sales targets. Further, it is difficult to conceive how any such failing should not be addressed through the provision of performance warnings. Evidence to support Mr James’ position in either respect has not been provided to me.

[42] In terms of the correspondence sent to Mr James’ partner, I have concluded that this appears to reflect a breakdown in a personal relationship. Evidence which allows me to conclude that this conduct was sufficiently serious to justify immediate dismissal would require consideration of the circumstances which led to this correspondence. Neither party have assisted me in this respect so as to permit a conclusion to be reached.

[43] I note that the termination of Ms Cook's contract was effected by e-mail and that accordingly Ms Cook did not have the opportunity to have another person present to assist her. Further I also note that there is no evidence which indicates that Asia Pacific completed the checklist attached to the Code.

[44] Accordingly, I have concluded that the termination of Ms Cook’s employment was not consistent with the Small Business Fair Dismissal Code. I have adopted the position that this does not then require a conclusion that this dismissal was unfair, but rather, requires that I proceed to determine that issue in the context of s.387 of the FW Act. Consideration of these factors could result in a conclusion that there was a valid reason for the termination of Ms Cook’s employment and that the dismissal was fair. An alternative conclusion could also be reached. This will depend on the evidence presented at a future hearing.

[45] This means that, unless the matter is settled or discontinued, it will need to be the subject of a further hearing. A Notice of Listing to this effect will be issued shortly.

[46] In the hearing on 1 March 2013 I strongly recommended that both parties consider the possibility of an agreed settlement. In the event that both parties agreed that there was a possibility of an agreed settlement I will arrange for another member of the Commission to endeavour to assist them in this respect. That assistance would need to be provided prior to the final arbitration of this application.

SENIOR DEPUTY PRESIDENT

Appearances:

J Cook on her own behalf

D James for the Respondent.

Hearing details:

2013.

Adelaide (and Video-link to Sydney):

January 29

March 1.

 1   Exhibit C2

 2   ibid

 3   Exhibit B2

 4   [2007] AIRCFB 403

 5   See Exhibit C6 for examples

 6   Exhibit C6

 7   ibid

 8   see Exhibit C6 for examples

 9   Exhibit B2

 10   see e-mail of 27 June 2012 Exhibit C6

 11   see correspondence of 4 October 2012 attached to the Employers Response (Form F3)

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