Michael Franklin v The Trustee for World Gym Melbourne Investment Unit Trust
[2024] FWC 3045
•4 NOVEMBER 2024
| [2024] FWC 3045 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Michael Franklin
v
The Trustee For World Gym Melbourne Investment Unit Trust
(U2024/4591)
| DEPUTY PRESIDENT WRIGHT | SYDNEY, 4 NOVEMBER 2024 |
Application for an unfair dismissal remedy – jurisdictional objection - whether employee or independent contractor – applicant found to be employee
This decision is in relation to an application made by Mr Michael Franklin under s.394 of the Fair Work Act 2009 (Cth) (FW Act) alleging that he had been unfairly dismissed from his employment with The Trustee For World Gym Melbourne Investment Unit Trust trading as World Gym Prospect (WGP).
WGP contends that Mr Franklin is not eligible to make such an application because he performed work as an independent contractor rather than an employee. Mr Franklin contends that he was an employee.
For the reasons set out below I have found that Mr Franklin was employed by WGP at the time he ceased working for WGP.
Determinative conference
The matter was listed for directions on 8 July 2024. On 21 July 2024, Mr Franklin filed submissions and evidence. On 5 August 2024, WGP filed submissions and evidence.
The matter was listed for a determinative conference on 14 August 2024. Mr Franklin represented himself at the determinative conference and Mr Matthew White, General Manager, represented WGP. Mr Franklin and Mr White both gave evidence at the determinative conference.
Background facts
The background facts are largely agreed between the parties. Mr Franklin started working for WGP as a Group Fitness Instructor on 24 August 2020. Mr Franklin was offered and accepted the role after submitting an expression of interest in response to an advertisement by WGP. Mr Franklin explained that he performs work as a fitness instructor in multiple gyms. which is commonplace among people working in the fitness industry. At the time that Mr Franklin started working for WGP, he was working at one other gym, delivering one class per week. Mr Franklin said that during the four-year period that he worked for WPG, he worked for four other gyms.
There was no written contract or other documentation in relation to the engagement of Mr Franklin by WGP. Mr Franklin said that he already had an Australian Business Number (ABN) when he was engaged by WGP and that the manager at the time either verbally advised him or via text message that he should submit invoices to receive payment. WGP said that many of its fitness instructors choose to conduct classes on a regular basis, working to a short-term permanent timetable. These instructors are loosely referred to as ‘permanent instructors’ by WGP. There are other instructors who conduct infrequent classes.
Throughout the time that Mr Franklin worked for WGP, he regularly delivered three classes comprising of a one-hour class on Mondays usually from 5:30pm, a 45-minute class on Wednesdays usually from 6:15pm and a one-hour class on Saturdays usually from 9:30 or 10:00am. The work that Mr Franklin undertook for other gyms would usually be carried out on Tuesdays and Thursdays. Mr Franklin worked for four other gyms during the time he worked for WGP.
Mr Franklin said that it is common for gyms to change timetables and for instructors’ availabilities to change, so instructors and classes change frequently.
Mr Matthew White commenced working at WGP as the new General Manager in February 2023.
People access group fitness classes by becoming members of WGP. They pay membership fees on a weekly, fortnightly or monthly basis and can attend as many group fitness classes as they wish to. Non-members can access individual classes by paying a one-off casual fee to attend the class. Group fitness timetables produced during the hearing show that classes may be scheduled between 6:00am-11:30am and 5:30pm-8:00pm during the week and between 6:00am-11:30am on weekends. There are some timeslots where classes appear to be scheduled most days during the week, such as 6:00am-7:00am, 9:30am-10:30am and 7:00pm-8:00pm and other timeslots during the week where classes are not scheduled such as between 7:00am and 9:30am.
Mr White explained that the timetable is developed based on attendance numbers and the needs of the business. The timetable sets the type of class, for example ‘Les Mills Body Combat’, “Boxfit’, ‘Les Mills Body Balance’ as well as the timeslot for the class. Once the timetable has been finalised, instructors are then consulted about their availability and allocated timeslots. The timetable is then advertised to the public. Instructors are paid a flat rate for each class they deliver regardless of the number of people who attend the class. Mr Franklin said that in his experience, the timetable was changed three to four times a year, often to coincide with the change in seasons. Mr Franklin consistently delivered three classes a week during the time he worked for WGP, but these classes could be increased or reduced when a new timetable was introduced. Mr Franklin said that once the timetable was set, he was expected to deliver the class in accordance with the timetable until the next occasion the timetable was revised.
In the material filed by WGP, it claimed that fitness instructors can accept or decline any class and that every week WGP posts a timetable which changes according to instructor availability. WGP said that fitness instructors are running their own business, and WGP does not ‘dictate what or where they offer their services’. WGP said that it pays invoices submitted by fitness instructors on a set date along with all supplier invoices, however invoices can be submitted at any time. WGP sends out reminders for invoices to be submitted as its bookkeepers make supplier payments on set days of the week. WGP said that fitness instructors will use the larger gym equipment and weights supplied by WGP, however, they will generally supply their own smaller, transportable equipment and music specific to their teaching needs.
WGP said that in contrast to fitness instructors who are engaged as independent contractors, it employs staff in a variety of roles including receptionist and sales consultants. These employees are engaged under the Fitness Industry Award 2020 and paid at hourly award rates attracting income tax. They wear company uniform and must complete employee inductions and comply with all WGP procedures and policies. Permanent part time employee contracts prohibit employees from working for a competitor without prior written consent from WGP. Employees perform the work that WGP prescribes in rostered shifts to suit the business.
Mr White explained that the group fitness classes at WGP are either based on the ‘Les Mills’ program or are classes where the instructor develops their own choreography based on a rough guideline set by WGP. Mr White said that Mr Franklin delivered Les Mills classes only. WGP pays a subscription to use Les Mills programs, which are choreographed programs. Mr Franklin said that there is a small amount of flexibility in how the Les Mills programs are delivered but that instructors must follow the choreography developed by Les Mills. Further, Mr Franklin can only deliver the programs that he is qualified for.
Mr Franklin said that if he was unable to deliver a class because he was unwell or on holidays, he was required to notify his line manager and was expected by WGP to find a replacement instructor. The replacement instructor would usually be from the pool of instructors engaged by WGP but if none of these instructors was available, a qualified instructor from outside WGP could be engaged. In these circumstances, WGP paid the replacement instructor directly and there were no subcontracting arrangements.
In recent times, a new automated system was introduced so that if an instructor was unavailable, all instructors automatically received a message which gave them the ability to accept the class. Mr Franklin said that during his last period of holiday leave, he was away over the Christmas period and there were reduced classes during the public holidays. During that period, Mr Franklin said that his manager offered to make arrangements to fill his classes as she intended to temporarily change the timetable.
Mr Franklin said that he was responsible for paying his own tax. Mr Franklin was required to take out his own public liability insurance. Mr Franklin used WGP’s premises and equipment to deliver the classes. He wore his own clothes and was not required to wear a uniform. He supplied his own music but used WGP’s speakers and microphone.
Mr White explained that fitness instructors are paid for each class they facilitate. Instructors do not get paid if they do not deliver a scheduled class. The independent contractor class rates were:
$40 for a 30-minute class
$55 for a 45-minute class
$60 for a 60-minute class
plus 11% superannuation.
Mr Franklin said the rates of pay were set by WGP and not able to be negotiated between him and WGP. In the material filed, WGP claimed that there is a standard class rate, which the contractor can accept or decline. This, however, is negotiable.
At the hearing, Mr White gave evidence that the same rates were usually paid to all instructors but sometimes WGP might have to increase the rate it paid an external instructor to deliver a class on a one-off basis if the regular instructor was not available. Mr White said that the rates that WGP paid to independent contractors are much higher than the rates paid to employees under the Fitness Industry Award 2020 in recognition of matters such as the requirement of independent contractors to pay for their own public liability insurance.
In around March 2024, Mr Franklin was contacted by management of a new gym and offered back-to-back double classes on Wednesdays and Saturdays which Mr Franklin accepted. At that time, Mr Franklin was delivering three classes on Monday evenings from 5:30pm to 8pm and single classes on Wednesdays and Saturdays.
Mr Franklin gave three weeks notice via text message to Ms Flood on 13 March 2024, advising that he would be unavailable to continue his classes on Wednesdays and Saturdays but that he was still available and intended to continue to deliver the three Monday classes at WGP.
Mr White said that Ms Flood responded to Mr Franklin stating she would take the opportunity to change the timetable, which she had been already working on, and it would be better for Mr Franklin to drop his remaining classes due to WGP needing instructors who could commit to the timetable. Mr Franklin delivered his last class on 6 April 2024.
Submissions
Mr Franklin
Mr Franklin acknowledged that he was a contractor by title, required to have an ABN and that he was paid on submission of an invoice. However, Mr Franklin submitted that his engagement was more like an employment relationship than a contract for services.
Mr Franklin submitted that the following matters supported his contention that he was in an employment relationship with WGP:
Days, times and duration, and the type of work were prescribed by WGP.
The work was required to be conducted on site at WGP’s premises.
The rate of pay was prescribed by WGP.
Payment was based on time duration, not task completion.
The work must be performed personally and could not be sub-contracted or delegated to another person.
The equipment used by instructors (and gym members, the customers of the gym) was provided by WGP.
The frequency and schedule of submission of invoices was prescribed by WGP (fortnightly on a Sunday), with periodic payment on the same fortnightly basis.
With exceptions for illness, holidays and seasonal variation, the timetable was the same each week, with the same classes performed by the same instructors, being predictable,
consistent, and reasonably expected to continue the same for the foreseeable future.
The fitness classes were advertised by the gym to the public and instructors provided the fitness class to the gym’s customers, furthering the gym’s customer base and goodwill.
Mr Franklin had no formal or informal contractual engagement arrangement which expressed a period of engagement for a task, season or timeframe.
Mr Franklin’s engagement was ongoing and uninterrupted (with exceptions for times he went on holidays or was unable to work due to injury and illness), since August 2020, until termination on 6 April 2024.
WGP
WGP contended that Mr Franklin was not employed by it as a PAYG employee. WGP claimed that Mr Franklin was an independent contractor, who ran his own business, supplied his services to anyone he elected to, and invoiced through his business, for each class performed.
WGP claimed that it does not dictate to its independent contractors how or who they supply their services to. Independent contractors are paid at a premium contract rate to teach a set class (generally within the ‘Les Mills’ framework), which is on a rotating and flexible timetable. WGP pays the contractor whether a class has multiple attendees or none.
WGP monitors class timetables for attendance and interest in the class and timetables are changed accordingly. WGP said that it tries to keep regular independent contractors to create an environment of consistency with its members however it understands that they are running their own businesses and will take on contracts elsewhere.
WGP submitted that Mr Franklin accepted and understood the nature of the group fitness contract, knowing class timetables can be adjusted according to participation and viable continuation of a particular class and there is never a guarantee of any timetable or contractor being a permanent fixture. Mr Franklin also knew he could, and would, take other contracted work if it suited him. There were many occasions where timetables were adjusted to accommodate Mr Franklin’s other contract obligations and/or the need for additional classes.
WGP submitted that instructors run their own businesses, they are paid well above the industry award rate per class, and they can accept or decline as many classes as they wish. Instructors work to their own schedules across different businesses and can work to their own requirements.
WGP submitted that it offers classes, and it is up to the instructor if they wish to conduct a class. Instructors can decline a class at any time or discontinue at any time. This has always been a mutual understanding as a business supplying a service to a business.
Legislation
Section 396 of the FW Act requires the Commission to decide a number of matters relating to an application for an order under Division 4 before considering the merits of the application including whether the person is protected from unfair dismissal.
Section 382 of the FW Act provides:
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.
There is no dispute between the parties that there was a valid verbal contract between Mr Franklin and WGP which provided that Mr Franklin would perform work for WGP in return for payment. The issue between the parties is whether Mr Franklin is an ‘employee’ as required by s.382(a) of the FW Act as contended by Mr Franklin. Section 380 states that an employee means a national system employee as defined by s.14 of the FW Act.
Consideration
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (CFMMEU)[1] and ZG Operations Australia Pty Ltd v Jamsek (ZG Operations)[2] are the most recent High Court authorities in relation to the employment relationship.
These cases held that where the parties’ relationship was comprehensively committed to a written contract, the validity of which was not challenged as a sham, and the terms of which were not varied, waived or the subject of an estoppel - the question of whether a person was an employee or an independent contractor is to be resolved solely by a consideration of the terms of the contract and not by reference to performance of the contract.[3]
Where the terms of the relationship between the parties has not been committed comprehensively to a written agreement, the characterisation of a relationship as being either one of employment or one of principal and independent contractor is to be determined by reference to ‘the totality of the relationship between the parties’.[4] In examining the totality of the relationship between the parties, relevant matters include whether the putative employee’s work was so subordinate to the employer’s business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise[5] and the existence of a right of control by a putative employer over the activities of the putative employee.[6]
Other matters which may be relevant in determining the nature of the relationship include the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, the deduction of income tax and the delegation of work.[7]
In the current matter, there is no written agreement between the parties about the relationship between them. I am therefore required to examine the totality of the relationship between WGP and Mr Franklin for the purpose of determining whether Mr Franklin was an employee.
Payment arrangements
The issuing of invoices by Mr Franklin and Mr Franklin paying his own tax are matters which tend to suggest that he was not in an employment relationship with WGP. Mr Franklin was not provided with paid annual leave or personal leave which also points towards him being an independent contractor, however these are also features of casual employment. A further matter which is relevant to whether the relationship was one of employment or one of principal and independent contractor is the method of setting pay. WGP claimed in its written material that the rate of pay was open to negotiation, however, this was not supported by the evidence. Mr White conceded during the hearing that the same rates were usually paid to all instructors. I accept Mr Franklin’s evidence that the rates of pay were not open to negotiation, and I accept Mr Franklin’s submission that this is indicative of an employment relationship, as is the payment of superannuation.
Right of control
The evidence establishes that Mr Franklin was not involved in setting or advertising the timetable and that once Mr Franklin was assigned to classes based on his availability, Mr Franklin had little discretion in the performance of his work. Mr Franklin was required to deliver the specific classes he was allocated at the time(s) stipulated in the timetable. Mr Franklin had no authority to change the time that the classes were delivered or to change the type of class delivered. Mr Franklin was required to follow the choreography of the specific class he was delivering. Mr Franklin was required to advise his manager at WGP if he was not available to deliver a class. All of this points to the existence of a right of control by WGP over the activities of Mr Franklin which is indicative of an employment relationship.
Whether Mr Franklin was working in his own business or WGP’s business
The matters which may show that Mr Franklin was working in his own business were the issuing of invoices by Mr Franklin and Mr Franklin paying his own tax and insurance.
WGP’s contention that Mr Franklin ‘supplied his services to anyone he elected to’ was correct in the sense that there was no barrier to Mr Franklin working for another gym. However, Mr Franklin was not free to choose which members of WGP to deliver classes to. Rather, Mr Franklin was required by the terms of his verbal contract with WGP to deliver specific classes at specific times to any members who attended those classes, once the timetable was set.
The matters which may show that Mr Franklin was working in WGP’s business are that he had no involvement in promoting or advertising the classes, he received a set pay rate which he could not negotiate, he was expected to deliver classes in accordance with the timetable once it was set, participants in the classes were customers of WGP rather than of Mr Franklin, he was required to advise his manager if he was unavailable to deliver a class and that he used WGP’s premises and equipment to perform the work. I accept Mr Franklin’s evidence in this regard. I note that WGP claimed that fitness instructors will generally supply their own smaller, transportable equipment. Although Mr Franklin agrees that he supplied his own music, there is no evidence which established that he provided any other equipment in performing his work for WGP.
WGP may be correct in submitting that Mr Franklin could ‘accept or decline as many classes as [he] wish(ed) and that ‘instructors work to their own schedules across different businesses and are able to work to their own requirements’. However, it is clear on the evidence that Mr Franklin only had the option of accepting or declining classes during the period when the timetable was being developed. I accept Mr Franklin’s evidence that once the timetable was confirmed, he was expected to deliver the classes allocated to him unless he was unwell, injured or on holidays.
While Mr Franklin was initially responsible for identifying a replacement instructor if he was not available, this responsibility appeared to be taken over by an automated system which allowed other instructors to indicate that they were available once Mr Franklin notified his absence. Mr Franklin may have had a limited ability to delegate his work before the automated system was introduced, however the evidence establishes that this was confined to periods of leave only and after WGP was notified. There is no suggestion that Mr Franklin was free to delegate his class to whoever he wanted to, whenever he wanted. Further, Mr Franklin’s evidence was that when he was absent, he did not receive payment to pass on to the replacement instructor. Rather, the replacement instructor was paid directly by WGP. If Mr Franklin was running his own business, it is likely that WGP would have directed payments to him in respect of each completed class, regardless of who was delivering the class.
Taking all of these matters into account, I find that Mr Franklin was working in WGP’s business and not his own business, when performing work for WGP.
Conclusion
I have considered the totality of the relationship between the parties, including whether Mr Franklin was working in his own business or WGP’s business, the degree of control, the mode of remuneration, the provision and maintenance of equipment, the obligation to work and the hours of work. The matters which potentially indicate a relationship of principal and independent contractor are Mr Franklin having an ABN, issuing an invoice for payment and paying his own tax and for his insurance. However, these matters are outweighed by the degree of control exercised by WGP while Mr Franklin was performing work, and that Mr Franklin was working in WGP’s business not his own. These matters are indicative of an employment relationship. In my view, my findings about all of the relevant considerations demonstrate that Mr Franklin was an employee of WGP during the period from 24 August 2020 until 6 April 2024 for the purpose of the FW Act.
The jurisdictional objection raised by WGP is dismissed and I order accordingly.
The matter will shortly be listed for Directions so that it can be programmed for further conciliation and/or hearing.
DEPUTY PRESIDENT
Appearances:
Mr M. Franklin, Applicant
Mr M. White, General Manager of WGP, Appearing for the Respondent
Hearing details:
2024
14 August
In person, Sydney
[1] [2022] HCA 1
[2] [2022] HCA 2
[3] CFMMEU [2022] HCA 1, [43]; ZG Operations [2022] HCA 2, [8]
[4] CFMMEU [2022] HCA 1, [34]; Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, 29; Hollis v Vabu Pty Ltd (2001) 207 CLR 21, 33 [24].
[5] CFMMEU [2022] HCA 1, [39].
[6] CFMMEU [2022] HCA 1, [42]; Hollis v Vabu Pty Ltd (2001) 207 CLR 21, 41-45 [47]-[57].
[7] Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, 24.
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