Marya v Matrix Freight Systems Pty Ltd

[2016] FCCA 3002

FEDERAL CIRCUIT COURT OF AUSTRALIA

MARYA v MATRIX FREIGHT SYSTEMS PTY LTD & ANOR [2016] FCCA 3002

Catchwords:
INDUSTRIAL LAW – Small claim – issue whether applicant an employee or independent contractor – issue of significance to first respondent – consideration of various relevant matters including parties’ own description of the relationship – taken overall, evidence leads to conclusion relationship properly characterised as employee/employer – matter to be further heard in light of this finding.

Legislation:

Fair Work Act 2009, ss.548, 542

Cases cited:
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Vabu Pty Ltd v Federal Commission of Taxation (1996) 33 ATR 537
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Roy Morgan Research Pty Ltd v Commissioner of Taxation [2010] FCAFC 52
Humberstone v Northern Timber Mills [1949] HCA 49;  (1949) 79 CLR 389
Wright v Attorney-General (Tas) [1954] HCA 26;  (1954) 94 CLR 409
Tattsbet Ltd v Morrow [2015] FCAFC 62

Applicant: DIVEK MARYA

First Respondent: MATRIX FREIGHT SYSTEMS PTY LTD

Second Respondent: FEDERAL EXPRESS (AUSTRALIA) PTY LTD

File Number: MLG 1418 of 2016

Judgment of: Judge Burchardt

Hearing date: 16 September 2016

Date of Last Submission: 16 September 2016

Delivered at: Melbourne

Delivered on: 24 November 2016

REPRESENTATION

Counsel for the Applicant: In person

Counsel for the First Respondent: Mr Anthony

Solicitors for the First Respondent:	Matthew Shaw & Associates
Counsel for the Second Respondent:	Mr Smith

ORDERS

1. The matter be adjourned to this Court for mention before Judge Burchardt on 20 December 2016 at 9.30 am.

2. The application against the second respondent is dismissed.

3. The Fair Work Ombudsman be joined as a party to the proceedings.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1418 of 2016

DIVEK MARYA

Applicant

And

MATRIX FREIGHT SYSTEMS PTY LTD

First Respondent

And

FEDERAL EXPRESS (AUSTRALIA) PTY LTD

Second Respondent

REASONS FOR JUDGMENT

Introductory

1. This matter commenced in the small claims list of the Fair Work Division of the Court.  It does not involve what, in the scheme of things, are very substantial amounts of money.  It raises, however, difficult questions which are of particular significance to the first respondent.  That is because the applicant Mr Marya asserts that he was at all times an employee and not an independent contractor.  The first respondent employs approximately 100 such persons and it is, therefore, a matter of considerable importance to it as to whether or not Mr Marya’s assertion is accepted. 

2. The applicant’s claims, as articulated in his amended statement of claim, encompass a number of areas in ways that are not always easy to understand, but essentially consist of claims for underpayment of wages, non-payment of annual leave and sick leave and superannuation.  As the first respondent has submitted, the force of these claims necessarily depends upon whether or not the applicant was indeed an employee. 

3. For the reasons that follow, I think Mr Marya’s engagement is properly characterised as that of an independent contractor in the period from 14 April 2015 until 9 June 2015 but thereafter he was, in truth, an employee. 

4. Further submissions will need to be made as to what flows from this conclusion. 

The evidence

1. It should be noted that the evidence in this case is, in many respects, unsatisfactory and incomplete. The Court has the widest powers as to how to inform itself in a small claim pursuant to s.548 of the Fair Work Act 2009 (“FW Act”) but even bearing that in mind, the forensic task is somewhat daunting.

2. It seems, however, common cause that the applicant commenced working with the first respondent on 14 April 2015.  On that date, he signed a contract with the first respondent upon which the first respondent places considerable emphasis. 

3. It is appropriate to have regard to the entirety of the contract, and I should make it clear that I have done so, but amongst the more important features of it for these purposes are: 

   a)The contractor (Mr Marya) was engaged to provide a motor vehicle/s and the services of his employee/s or subcontractor driver/s.  As the evidence emerged, it is clear that generally the first respondent required its contractors to operate through a company but this has not always been the case and was not so with Mr Marya.

   b)The contractor was obliged to ensure that “its drivers at all times observe a suitable standard of dress and that Company uniforms are worn where provided by the Company.” 

   c)The company retained, as it were, a right of veto over the vehicle to be used. 

   d)The contractor agreed to its vehicles carrying company signed writing if the company so required, at the company’s expense. 

   e)The contractor would ensure that its drivers made themselves available to provide services on Monday to Friday inclusive and during the advertised working hours of the company as required from time to time by the company. 

   f)The contractor’s drivers could take time off for personal reasons by the contractor giving 48 hours notice to the company’s operations manager (but not on a Friday or the last trading day of any calendar month without the company’s manager’s authorisation). 

   g)The contractor and drivers at all times must promote a favourable image of the company. 

   h)The contractor and drivers agree to accept direction by the company’s operations manager and/or fleet controllers at all times. 

4. The contract went on to detail a number of administrative arrangements, including, at paragraph 8, a number of potential penalties that the company could impose in the event of certain events occurring.  I use the word “penalties” advisedly.  Although the amounts to be withheld were said to arise from the “considerable” cost of advertising, recruiting and training new contractors. These payments, deductible under term 8 of the agreement, have all the appearance to my mind of being nothing like a genuine pre-estimate of loss but rather a simple penalty as known to the common law. I note, however, that this matter has not been the subject of any argument and these are not final conclusions. 

5. The contract also imposed costs covering communications and associated costs of $70 for each pay period and an administration fee of 2.2 per cent on gross earnings for each pay period.  Once again, these have all the appearances of not being genuine pre-estimates of loss.

6. The contract also contained a provision for the taking of leave provided four weeks in advance notice was given, but leave was not permitted in November and December prior to Christmas Day. 

7. It does not seem controversial that, as the amended statement of claim asserts at paragraph 2, the applicant’s main duties included the pickup and delivery of goods to and from addresses specified by the respondents.  A HUB Systems mobile app was installed on the applicant’s mobile phone by the respondent to provide work and get signatures at the completion of delivery. 

8. The applicant does not make any claim, as far as I can see (his claims were not put in any sequential or easy way to follow), for the period prior to 9 June 2015, on which date he executed a document headed “Contractor Retainer Program”. The predominant quality of this program was that it provided what was described as a “safety net” (a phrase used in the applicant’s claim but not consistently with how that term is used in the FW Act). If I understand the first respondent’s position correctly, the idea underpinning this contract was that the applicant was given a guaranteed base remuneration in exchange for making himself more definitely available for work.

9. The program has a number of important provisions.  It was initially valid from 9 June 2015 to 9 September 2015.  The document asserted in terms, “The Retainer is offered to provide a platform by which individual contractors can continue to earn a “base income”.” 

10. In this instance, the retainer amount was $170 per working day averaged over the respective contractor’s pay period. 

11. There were a number of conditions for retainer eligibility including the requirement that the contractor be a proprietary limited company, which was never the case here. 

12. Tellingly, however, “the contractor must be the owner of the vehicle and not a driver of someone else’s vehicle.” 

13. It was required that:

    ·Contractors sign on with the Fleet Controller each workday by 8.00 am at the latest. 

    ·Contractors are available to work a minimum of nine (9) hours or as required by a Fleet Controller during the advertised operational hours of the Company 7.00 am to 6.00 pm Monday to Friday. 

    ·The contractor must be available on Mondays and Fridays, failure to do so will result in two days forfeiture of safety net.

    ·Contractors wear approved company uniform, if provided, and maintain a neat and professional presentation, clean shaven where applicable and neatly groomed. 

    ·The contractor’s vehicle is to be insured, kept clean and sign written as required by the company. 

    ·Contractor is obliged to observe correct operational etiquette and present the Company to its clientele in a favourable manner.

14. The contractor was also, importantly, to comply with attendance criteria, i.e.:  no more than one (1) working day/late start/home early per pay period. 

15. A number of possible penalties were imposed in the event of various defaults. 

16. The retainer program was, it would seem, extended on 11 February 2016 at a rate of $150 per day. 

17. The applicant has annexed to his amended statement of claim a substantial number of invoices rendered to him by Matrix Freight Systems Pty Ltd (“Matrix”) from time to time.  These appear to record the number of jobs done on any different day and the amount of pay that would be generated by them, together with safety net adjustments of varying amounts from time to time.  It is noteworthy that there is no reference to the charging of GST, save from time to time on small additional goods and services apparently supplied by Matrix to Mr Marya.  There is no evidence as to who if anybody ever paid GST in respect of what Mr Marya did, although I note that the respondent has asserted without material challenge that no tax was ever deducted and/or forwarded to the Australian Taxation Office (“ATO”) in respect of the work that Mr Marya did. 

The evidence given at court

1. The applicant naturally gave evidence first.  Some of this evidence related to his claim against Federal Express (Australia) Pty Ltd (“FedEx”) and to several of his claims that are wholly dependent on his being an employee.  In his opening given from the bar table (later affirmed on oath), Mr Marya said that as an independent contractor, he would have a measure of freedom.  He could choose his hours of work and leave.  However, under the retainer program, he was not able to do so.  He could not take days off and had to work nine hours.  He was prohibited from working for anyone else. 

2. Under cross-examination by the first respondent’s solicitor, who appeared by leave, Mr Marya confirmed that he had worked as a courier for a firm described as Civic for some three years as an independent contractor.  He said he was treated like an independent contractor.  He filed individual tax returns.  He confirmed, however, he has not filed any tax returns for the last three years.  He also said he never had insurance for his van, which he sold about two weeks before trial.  He paid registration, fuel and servicing.  He did not claim for fuel or the like from the first respondent.  He had understood himself to be an independent contractor when he first signed with the respondent but this ceased in June 2015. 

3. He said he came to work after two weeks off and was told to sign the contract and refused.  He said that Mr Clark, the respondent’s officer to whom he spoke, told him to sign or he would not get work.  He said he kept asking Mr Clark why he had these various conditions when he was an employee. He confirmed that he had never asked for annual leave or sick leave.  He said he took in his run sheets once per day.  In respect to the five per cent fuel levy claim, he said most of the time it was five per cent and was only three per cent for four months in 2016.

4. In relation to the job at FedEx, he said he gave FedEx the run sheets, having done the work.  Mr Marya said that on 30 June 2016 he asked Mr Clark if he could return to his original contract but was told his services were no longer required.  He has an unfair dismissal claim on foot. 

5. The first respondent called Mr Miller, a director of Matrix.  He has been in the business for about nine years and employs approximately 100 contractors.  His business does employ a number of persons directly but they are employed by another entity.  He said that the contract had been vetted by the ATO and implicitly asserted that it was approved.  He said that a number of the contractors have several vehicles.

6. He said that the fuel levy is a fluid thing.  It changes according to the price of fuel.  It is generally three per cent.  The applicant was paid per job twice monthly.  The retainer program was designed to keep people on the road but was voluntary.  When questioned by Mr Marya, it emerged that the safety net program had not been approved by the ATO. 

7. The first respondent then called Mr Clark.  He is a fleet manager.  He said that the applicant was not forced to sign the retainer.  Not all employees did sign up to it.  With the 100 to 110 contractors employed at any time, about 65 per cent are not on the retainer program.

8. Training consists of basic instruction on run sheets and communications but does not progress further than that.  In June 2016, Mr Marya was simply not available enough.  They discussed the matter.  Mr Clark was prepared to put Mr Marya on the original contract but Mr Marya wanted the retainer program with conditions.  This was not acceptable.  So far as the dispute with FedEx was concerned, FedEx had contacted Matrix and refused to pay and for that reason Matrix refused to pay the applicant.  Cross-examination of Mr Clark by Mr Marya did not take the matter, in my opinion, further.

9. In submissions, Mr Antony for the first respondent referred to a substantial record of global position records of the applicant’s vehicle and put in issue the amount of work the applicant had actually done.  It was submitted that there was limited supervision;  the applicant owned his own truck.  He paid for its services and maintenance.  He provided an ABN.  No tax was deducted and no superannuation was paid.  The applicant had worked for Civic and knew the basis of his engagement.  There was a trade off in that the base level of earnings was given in the retention program.  It was submitted that all claims were only contractual and the applicant was not a National System Employee.  It was submitted that the applicant’s claims were refuted on the facts in any event.

10. In his final submission, Mr Marya said he was not an independent contractor.  He had to be available nine hours per day and was not allowed to get someone else to drive his vehicle.  He was supposed to wear the company uniform and there were stickers on the van.  He was presented as part of the respondent’s business.  There were strict hours of work.  He had to log in by 8.00 am.  He was not allowed more than one day off per pay period.  He otherwise complained of various charges made, a matter to which I shall return.

The law

1. The question whether a particular person is an employee or an independent contractor has given rise to a lot of law over the years.  Much of it has arisen in circumstances where vicarious liability to third parties is under consideration, which tends somewhat to skew the matter.  For these purposes, it is appropriate, in my view, to start with a decision of the High Court in Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

2. That case concerned bicycle couriers in circumstances where the Court of Appeal of New South Wales had dealt previously with Vabu’s courier drivers (Vabu Pty Ltd v Federal Commission of Taxation (1996) 33 ATR 537).

3. The plurality (Gleeson CJ, Gordon, Gummow, Kirby and Hayne JJ) noted that Vabu assumed all responsibility as to the direction, training, discipline and attire of its bicycle couriers and provided them with numerous items of equipment which remained Vabu’s property (at [5]).  The plurality also noted that the trial judge had observed that the bicycle couriers were pretty much in a take it or leave it situation (at [6]).  They noted, at [8], that the trial judge considered himself constrained by the decision of the New South Wales Court of Appeal, to which I have referred, to find that the bicycle couriers were independent contractors and not employees of Vabu (at [8]).

4. Having traversed, in some detail, the Court of Appeal decision at [13] – [22], noting at [22] that the Court of Appeal’s emphasis upon the expense of providing motor vehicles and motor cycles did not apply to bicycles (although the Court of Appeal had thought that it did), the plurality went on, at [43] – [57], to consider what the true characterisation of the relationship was.  At [43] –  [44], they dealt with the decision of the High Court in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 (“Brodribb”) and observed, at [44] to [45]:

   It was against that background that in Brodribb (90) Mason J said that, whilst these criticisms might readily be acknowledged:

   “the common law has been sufficiently flexible to adapt to changing social conditions by shifting the emphasis in the control test from the actual exercise of control to the right to exercise it, ‘so far as there is scope for it’, even if it be ‘only in incidental or collateral matters’:  Zuijs v Wirth Brothers Pty Ltd (91).  Furthermore, 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.”

   So it is that, in the present case, guidance for the outcome is provided by various matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability.  These include, but are not confined to, what is now considered “control”.

5. Having noted at [47] that the Court was dealing with bicycle couriers, not “where the investment in capital equipment was more significant, and greater skill and training were required to operate it”, the Court noted seven matters.  At [48], they noted that the couriers were not providing skilled labour or labour which requires special qualifications.  They noted:

   A bicycle courier is unable to make an independent career as a freelancer or to generate any “goodwill” as a bicycle courier.  The notion that the couriers somehow were running their own  enterprise is intuitively unsound, and denied by the facts disclosed in the record. 

   Secondly, the evidence shows that the couriers had little control over the manner of performing their work.  They were required to be at work by 9 am (92) and were assigned in a work roster according to the order in which they signed on…The evidence does not disclose whether the couriers were able to delegate any of their tasks or whether they could have worked for another courier operator in addition to Vabu during the day.  It may be thought unlikely that the couriers would have been permitted by Vabu to engage in either activity. 

   Thirdly, the facts show that couriers were presented to the public and to those using the courier services as emanations of Vabu…Certain attire … was not permitted … and Vabu required that all couriers “should be clean shaven unless that person is bearded”.

6. Relevantly, the plurality continued at [54]:

   Fifthly, Vabu superintended the couriers’ finances:  Vabu produced pay summaries and couriers were required to dispute errors by 6 pm Friday of the same week…There was no scope for the couriers to bargain for the rate of their remuneration.

1. At [55] – [57], the plurality continued:

   Moreover, Vabu stipulated in Document 590 that “[n]o annual leave will be considered for the period November to Christmas Eve…This suggests that their engagement by Vabu left the couriers with limited scope for the pursuit of any real business enterprise on their own account. 

   Sixthly, the situation in respect of tools and equipment also favours, if anything, a finding that the bicycle couriers were employees.  Apart from providing bicycles and being responsible for the cost of repairs, couriers were required to bear the cost of replacing or repairing any equipment of Vabu that was lost or damaged, including radios and uniforms.  Although a more beneficent employer might have provided bicycles for its employees and undertaken the cost of their repairs, there is nothing contrary to a relationship of employment in the fact that employees were here required to do so.  This is all the more so because the capital outlay was relatively small and because bicycles are not tools that are inherently capable of use only for courier work but provide a means of personal transport or even a means for recreation out of work time.  The fact that the couriers were responsible for their own bicycles reflects only that they were in a situation of employment more favourable than not to the employer; it does not indicate the existence of a relationship of independent contractor principal.

   Finally, and as a corollary to the second point mentioned above, this is not a case where there was only the right to exercise control in incidental or collateral matters.  Rather, there was considerable scope for the actual exercise of control (99).  Vabu’s whole business consisted of the delivery of documents and parcels by means of couriers.  Vabu retained control of the allocation and direction of the various deliveries.  The couriers had little latitude.  Their work was allocated by Vabu’s fleet controller.  They were to deliver goods in the manner in which Vabu directed.  In this way, Vabu’s business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu’s business.  It was not the case that the couriers supplemented or performed part of the work undertaken by Vabu or aided from time to time; rather, as the two documents relating to work practices suggest, to its customers they were Vabu and effectively performed all of Vabu’s operations in the outside world.

2. It should be noted that in a minority decision McHugh J, who came to the same ultimate conclusion but disagreed with the plurality as to how to get there, appeared to suggest that the provision of motor vehicles would stand against the conclusion that the relationship was one of employer and employee.

3. In Roy Morgan Research Pty Ltd v Commissioner of Taxation [2010] FCAFC 52 Buchanan J, who wrote the leading judgment, comprehensively reviewed the lengthy history of case law in relation to this issue. Relevantly for these purposes, Buchanan J said at [41]:

   Roy Morgan’s reliance on which McHugh J’s observations about the couriers’ motor vehicles in Hollis 207 CLR at [71] does not assist His Honour’s was a lone voice on this issue.  In any event, there is a distinct difference between a requirement that a courier have a motor vehicle in order to be able to carry goods from one place to another, which is the essence of a courier’s job, and a flexible requirement that an interviewer have a vehicle in which to keep documents secure while working in the field.  More relevant are the observations of the majority at [56].  Their Honours were of the view that bicycles are not tools that are inherently capable of use only for courier work, but provide a means of personal transport.  The same may be said of motor cars.  In the cases relied on by McHugh J at [71], the vehicles in question were specialised conveyances; trucks for carrying timber and gravel respectively in Humberstone v Northern Timber Mills [1949] HCA 49;(1949) 79 CLR 389 and Wright v Attorney-General (Tas) [1954] HCA 26; (1954) 94 CLR 409. 

4. Finally, I should note the observations of Jessup J in Tattsbet Ltd v Morrow [2015] FCAFC 62 at [70] – [71]. His Honour there recorded the significance of the taxation implications of the mode of operation which parities to a relationship voluntarily adopt. His Honour observed at [70]:

   In the past, the deduction of what are now called PAYG instalments was always treated, uncontroversially, as indicative of an intention that the relationship in question was one of employment. 

5. His Honour went on to say:

   It is no longer just the absence of PAYG deductions that may make it more difficult to characterise the relationship as one of employment, it is the presence of GST collections by the putative contractor, and his or her compliance with the regulatory requirements which apply to the provision of services by persons who are not employees, that point quite strongly against the relationship being characterised in this way.  These observations are made, of course, in the context of the present case, where there is no suggestion that the respondent’s participation in the GST system did not reflect her own conscious, well-informed intentions.

6. His Honour went on to note that there was nothing tokenistic about the respondent’s participation in the GST system, which took her a substantial amount of time.

Consideration

1. In this case, there is no question that documentation executed by the parties from time to time purported to describe the relationship between them as that of independent contractors.  That is the way in which the first respondent conducts its business more generally.  It goes to some trouble to buttress its position.  It generally seeks to have the contracting parties incorporated. 

2. It also acts in many ways consistently with this position.  It does not remit tax in relation to the moneys earned by the contractors to the ATO, apparently with ATO approval. 

3. Nonetheless, when looked at in substance it is clear that the relationship when properly considered is one of employment.  Critical matters in this regard, many of which were present in Hollis v Vabu Pty Ltd, include:

   (a)a guaranteed minimum wage;

   (b)the setting out of what in effect are set in compulsory hours of work;

   (c)prohibitions on leave during prescribed times of the year;

   (d)total control by the first respondent of the allocation of work;

   (e)requirement to wear the company’s uniform;

   (f)requirement to display the company’s logo on vehicles; and

   (g)the company having the capacity to veto any particular vehicle of which it did not approve.

4. There are of course indicia that go the other way including the

   
   

   non-deduction of PAYG or very possibly GST. I find there is no conclusive evidence as to quite what happened if anything in relation to GST – I note that Mr Marya has filed no tax returns for three years and I would infer that this includes no GST returns which are of course themselves a form of tax return. 

5. While control is no longer as Mason J observed in Brodribb the determinative consideration, it is still one of significance.  It is a matter of looking at all the indicia to see what the true relationship is.

6. In my opinion, it is clear that looking at the relevant matters, the relationship was, as I have said, one of employer and employee.  The fact that Mr Marya never complained about this while the relationships persisted is, in my view, of no moment.  There is an obvious and marked difference in bargaining power between the parties in this relationship and it is clear that he was in no position to complain.

Where does the matter go from here?

1. I should make it clear that I reject the applicant’s claim as against FedEx.  Whether Mr Marya was entitled to be paid for the days work he claims or not, the work was plainly done pursuant to the separate contract between FedEx and the first respondent.  If there is any liability for that day, it would lie with the first respondent.  I will dismiss the claim against FedEx accordingly.

2. I will go further.  FedEx refused to pay for reasons that it thought good at the time.  The applicant has not persuaded me that that refusal was inappropriate bearing in mind the GPS records.  That small part of the claim will be dismissed in any event. 

3. Having and determined that Mr Marya was an employee for the periods covered by his various claims, it follows that he must have been covered by an award.  Where this takes the matter was not a matter explored in any way by either party.  The claims were all put on a contractual basis, which as the first respondent correctly submitted were prima facie not pursuable if he was an independent contractor. 

4. In the circumstances, I propose to relist the matter for further hearing and to request the assistance of the Fair Work Ombudsman in isolating any award entitlements that Mr Marya might be found to have. Further consideration will also need to given to claims pressed if they are pressed pursuant to s.542 of the FW Act.

5. I am aware that this decision is likely to give rise to an appeal and it will be appropriate to hear the parties as to what the appropriate timetabling of the matter ought to be.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Date: 24 November 2016