Mr George Rozanitis v Quadrifoflio Verde Pty Ltd T/A East Melbourne IGA & Liquor

[2013] FWC 9247

[2013] FWC 9247

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr George Rozanitis
v
Quadrifoflio Verde Pty Ltd T/A East Melbourne IGA & Liquor
(U2013/10712)

COMMISSIONER ROE MELBOURNE, 25 NOVEMBER 2013

Unfair dismissal - jurisdictional objection - whether worker was an independent contractor or employee.

[1] This is an application for an unfair dismissal remedy pursuant to Section 394 of the Fair Work Act 2009 (the Act). The Application for unfair dismissal remedy was dated 13 June 2013 and received by the Commission on 18 June 2013. The Application is made by Mr George Rozanitis (the Applicant) in respect of his dismissal by Quadrifofilo Verde Pty Ltd T/A East Melbourne IGA & Liquor (the Respondent).

[2] On 1 November 2013 I dealt with a jurisdictional objection concerning whether or not the Application was made in time. I issued a decision in transcript that the Application had been made in time. There was inadequate time on 1 November 2013 to consider the jurisdictional objection that the Applicant was not an employee and that matter was heard on 18 November 2013. This decision resolves that objection.

[3] The Applicant was employed as a manager at an IGA store. The ownership of the business changed in January 2011. The Applicant was employed before and after the change of business. The Applicant was employed full time generally from 7am to 3pm on Sunday to Thursday each week. The Applicant was provided with the usage of a company maintained car. The Applicant gave evidence that his hours of work did not vary significantly from week to week. The Respondent says that the Applicant’s status changed from employee to independent contractor in January 2013. The Applicant denies that he ceased to be an employee during this period. Any employment relationship was terminated at the initiative of the Respondent from 31 May 2013.

[4] I considered the evidence of the Applicant, Mr Innes who was another manager at the store and Mr Kunkel who is an owner of the business. I also considered the submissions of the parties.

[5] Mr Kunkel gave evidence that the Applicant was store manager during 2011 and the first part of 2012 in charge of two assistant managers, an evening manager and a liquor manager. From mid-2012 until the end of the relationship he was manager of the liquor side of the business only. It is accepted that generally the Applicant worked alone in the liquor department and he was also responsible for a small number of other employees who worked in the liquor department from time to time.

[6] It is not in contention that the Applicant was an employee and that Mr Kunkel determined the pay and conditions by reference to the relevant award during the period until early 2013. Mr Kunkel gave evidence that in early 2013 the Applicant and Mr Innes agreed to become contractors. The other manager declined to become a contractor.

[7] The Applicant strongly denies that he ever became a contractor. The Applicant accepts that there were discussions about the possibility of him becoming a contractor. Mr Kunkel says that such discussions were initiated by the Applicant whereas the Applicant says that they were initiated by Mr Kunkel. Mr Innes says that it was Mr Kunkel who proposed that Mr Innes become a contractor.

[8] At the end of 2012 the Applicant’s pay slips show an annual salary of $78,112, an hourly rate of $39.5304, gross fortnightly pay $3004.31 and a net fortnightly pay of $2306.30 and superannuation contribution of $270.39. The Applicant continued to receive pay slips showing the same rates until 20 March 2013 long after the date when Mr Kunkel says he became a contractor. Mr Kunkel says this was because it took time to get the bookkeeping in order. After 20 March 2013 the pay slips showed the same “annual salary” and “hourly rate” but showed a superannuation contribution of $257.67 and no net pay. The Respondent paid $2865 into the Applicant’s bank account each fortnight between March and May 2013. The amount was described on the bank transfer by the Respondent as “IGA wages” or “George wage”. 1 I agree with the submission of the Respondent that it is strange that the Applicant did not query the change in the net payments he received into his bank account. However, I do not consider that this factor is sufficient to establish that the Applicant had agreed to be an independent contractor and had entered into such a relationship. If he had done so it is curious that there was no evidence that the Applicant had made arrangements to pay GST. There is evidence that the Applicant did not provide or obtain invoices and did not take other steps to protect himself from substantial taxation and other liabilities.

[9] The Respondent produced employer generated invoices for the payments made to the Applicant during the period from January to May 2013. However, the Applicant did not receive these documents during the period. Around the time of the termination Mr Kunkel asked the Applicant to sign an invoice for the payments made during the period and for the outstanding amount the Respondent believed was owed to the Applicant at the time of termination. The Applicant refused to sign the invoice. The Applicant says that he refused to sign the invoice because he was not a contractor. Mr Kunkel says that he told the Applicant that if he didn’t sign the invoice there might be tax implications for the Respondent and for the Applicant.

[10] Mr Kunkel says that the reason why the gross payments during 2013 were approximately $130 less than in 2012 was because he was deducting an amount for the private use of the company car. He said that amount had not been deducted in 2012 but he believed that it should have been. There was no evidence to support a conclusion that the Applicant and the Respondent had agreed that there should be a deduction for the private use of the company car.

[11] Mr Peter Innes gave evidence that he had two conversations with the Applicant about the Applicant considering becoming an independent contractor. Mr Innes said that in the second conversation the Applicant told him that he had become an independent contractor. The Applicant denied that such a conversation took place. In cross-examination Mr Innes agreed that there were no changes to his terms and conditions of employment and that he was unsure of what he was actually receiving as an independent contractor.

[12] I prefer the evidence of the Applicant on the matter of the conversations with Mr Innes and Mr Kunkel about the issue of contractor status. The evidence of the Applicant is more consistent with what actually occurred. There was no written contract entered into. There was no substantial change in duties or responsibilities. The payments to the Applicant actually decreased. There was no obvious advantage to the Applicant or Mr Innes to enter into a contract arrangement whereby they gave up their employment security and entitlements. I am satisfied that the Applicant did not agree to become a contractor. I am satisfied that there were discussions about the possibility of becoming a contractor.

[13] I am satisfied that the Applicant did provide the Respondent with his existing ABN details in preparation for this possibility. I accept that the Applicant provided the ABN because he was asked to do so. He said it was to help the business and when asked how it would help the business he said that Mr Kunkel had said that there may be taxation advantages for the business but the Applicant could not explain what they might be. I did not find this aspect of the Applicant’s evidence to be convincing. The Applicant also suggested that the provision of the ABN might have been preparatory to becoming a contractor, a matter which he accepted was under discussion. I consider this to be a more probable explanation. However, the provision of the ABN details did not mean that the Applicant had accepted that he was a contractor.

[14] Mr Kunkel says that when the Applicant became a contractor in January 2013 there was a change in status in that he became responsible for the profitability of the liquor department and could make decisions about working hours and staffing required. Mr Kunkel says that the Applicant was told that he was at liberty to contract for other businesses. Mr Kunkel said that the Applicant had the choice whether or not to wear the uniform but he conceded that the Applicant generally wore the uniform. Mr Kunkel said that if the Applicant took time off for illness or vacation he would continue to be paid. Mr Kunkel said that the Applicant was being paid for the performance of an objective which he described as “producing an overall profit for the liquor department.”

[15] The Applicant says that nothing changed between 2012 and 2013 in respect to his practice of wearing a uniform. I accept this evidence which was not contradicted. The Applicant did arrange to be covered by other staff members when he was away sick or had other commitments. This change in rostering is not indicative of a delegation of contractual obligations, but rather is consistent with an employee, particularly a manager, directing change in rosters. I am not satisfied that anything changed significantly in this respect between 2012 and 2013. As the manager of the liquor part of the business I am satisfied that the Applicant was responsible for trying to make that part of the business profitable. I am not satisfied that there was any change between 2012 and 2013 in this respect. The Applicant denies that Mr Kunkel told him that he was at liberty to contract for other businesses. Mr Kunkel was not clear about the details of when and how this was communicated. I prefer the evidence of the Applicant in this respect.

[16] Mr Kunkel says that he sought to get the Applicant to provide a draft written contract on more than one occasion during the period leading up to the termination. The Applicant says that he never agreed to become a contractor. Mr Innes gave evidence that he did not have a written contract. Mr Innes in his written statement says that Mr Kunkel made it clear that they would need to draft a written contract but he did not suggest that anything at all had happened to progress this. It is possible that Mr Kunkel did press the Applicant to formalise the matter but I am not satisfied that there was ever an independent contractual agreement verbal or written.

[17] The Applicant was provided with a phone by the employer and this situation did not change between 2012 and 2013. The Applicant continued to have the use of the company car. The Applicant continued to use the company computing facilities although he did make some use of his home computer. There is no evidence that there was a change in this situation between 2012 and 2013.

[18] It is not in contention that the Applicant continued to get paid during 2013 even if he had time off because of illness. Mr Kunkel says that he would have continued to be paid if the Applicant took time off for vacation. The pay slips continued to show a holiday pay entitlement. Mr Kunkel argued that the Applicant submitted leave forms before becoming a contractor but not after. However, there was no evidence to contradict the evidence of the Applicant that he did not take any vacation during the first five months of 2013. I am not satisfied that there is evidence of any change in arrangements between 2012 and 2013 in respect to leave.

[19] There was no change between 2012 and 2013 in respect to insurance and superannuation. These continued to be the responsibility of the Respondent. I accept that there may be circumstances where contractors have their superannuation paid however the absence of any change is relevant.

[20] I am satisfied from the evidence that the Applicant worked solely for the Respondent during the period of the employment. The Applicant did not represent himself as an independent business to the outside world. The Applicant did not delegate or sub-contract the work given to him by the Respondent except in the sense that he managed other employees. The evidence produced by the Respondent that the Applicant was considering other career and work options due to dissatisfaction with his job with the Respondent does not undermine this. That evidence is consistent with the Applicant’s dissatisfaction with Mr Kunkel and with concern about his employment security.

[21] I am satisfied that the Applicant worked reasonably consistent and regular hours and that he was paid an hourly rate. There is uncontested evidence that during 2013 the Respondent suggested that the Applicant alter his working hours and days but the Applicant did not agree to do this. I consider that this is more consistent with the Applicant asserting rights as an employee than with a contractor relationship. I am not satisfied that he was paid for a particular output. The evidence produced by the Respondent may demonstrate concerns about the Applicant’s performance and reliability but it does not demonstrate that there was any substantial change in the expectations of his hours and duties between 2012 and 2013. Given that the Applicant was the manager of part of the business, the fact that the Applicant may have organised the work of other employees without referring to Mr Kunkel may be a performance issue but it does not suggest that the Applicant was an independent contractor. The fact that the Applicant did on occasion come into the store outside of normal hours is not inconsistent with his role as a manager of that part of the business.

[22] Mr Kunkel relied on a text message exchange between the Applicant and ex-employee Mr Nipen on 9 May 2013. 2 In that text message exchange the Applicant discussed how the business was in trouble and how he is likely to be forced out. His message to Mr Nipen is: “Best thing 4u- got out just in time- all 3 of us would be out. You know call me suspicious but trying to put us on as contractors easy to terminate. This has been on the plans for a while - there is no way he realised this just happening overnight. I am sure this has been on the cards for a while.” Mr Niven responded: “I know that is why I didnt go on as abn.” The Respondent submits that this conversation is evidence that the Applicant had agreed to become a contractor unlike Mr Niven. I am satisfied that the exchange is primarily about the Applicant’s dissatisfaction with the employer. The use of the expression “trying to put us on as contractors” is consistent with the evidence of the Applicant that Mr Kunkel was trying to put him on as a contractor but that it had not been finalised.

Consideration of the factors which distinguish an employee from an independent contractor

[23] I adopt the approach summarised by Commissioner Jones in Chee v Renown Business Systems Pty Ltd: 3

“[14] A succinct summary of the approach of the common law to the determination of whether an individual is an employee or an independent contractor provided in ACE Insurance Ltd v Trifunovski [2011] FCA 1204 by Flick J:

‘... first, the distinction between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’ (Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the ‘totality’ of the relationship (Hollis at 33 [24]); thirdly, a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.’

[15] In Abdalla v Viewdaze Pty Ltd, a distillation of the ‘indicia’ which have guided courts in relation to this issue was set out as follows (footnotes excluded):

‘Following Hollis v Vabu, the state of the law governing the determination of whether an individual is an employee or an independent contractor may be summarised as follows:

• Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.




Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of independent contract. While control of this sort is a significant factor is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where their work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weights significantly in favour of the worker being an employee.

“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.” “[B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.”

• Whether the worker performs work for others (or has a genuine and practical entitlement to do so)




The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, if the individual also works for others (or the genuine and practical entitlement to do so) then this suggests independent contract.

• Whether the worker has a separate place of work and or advertises his or her services to the world at large.



• Whether the worker provides and maintains significant tools or equipment.




Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.

• Whether the work can be delegated or subcontracted.




If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.

• Whether the putative employer has the right to suspend or dismiss the person engaged.



• Whether the putative employer presents the worker to the world at large as an emanation of the business.




Typically, this will arise because the worker is required to wear the livery of the putative employer.

• Whether income tax is deducted from remuneration paid to the worker.



• Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.




Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.

• Whether the worker is provided with paid holidays or sick leave.



• Whether the work involves a profession, trade or distinct calling on the part of the person engaged.




Such persons tend to be engaged as independent contractors rather than as employees.

• Whether the worker creates goodwill or saleable assets in the course of his or her work.



• Whether the worker spends a significant portion of his remuneration on business expenses.




This list is not exhaustive. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.

[16] In relation to these indicia the Full Bench observed:

‘(5) If the indicia point both ways and do not yield a clear result the determination should be guided primarily by whether it can be said that, viewed as a practical matter, the individual in question was or was not running his or her own business or enterprise with independence in the conduct of his or her operations as distinct from operating as a representative of another business with little or no independence in the conduct of his or her operations.

(6) If the result is still uncertain then the determination should be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu.’”

[24] In this case I have no doubt based on these considerations that the Applicant was an employee not a contractor during the relevant period.

[1] In particular I have regard for:

1. The job title which did not change when the relationship allegedly changed from employee to independent contractor.

2. The exclusivity of the relationship throughout the period.

3. The regularity and full time nature of the employment and the substantial consistency of the job requirements throughout the period.

4. The direct control consistent with an employee/employer relationship.

5. The employment and the payments were not task based and the job was not a specialist role. There was no increase in pay rate. The company continued to pay superannuation (it is accepted that this legitimately occurs in the case of some contractors). Payments continued on a fortnightly basis and were not in response to any invoice from the Applicant. The Respondent described the payments on the bank transfer as “wages”.

6. The public expressions of the company through the wearing of a uniform and the absence of any of the trappings of an independent business.

7. The absence of any written contract whose terms suggest a contractor relationship and the existence of documents such as pay slips which suggest the contrary intention. The refusal of the Applicant to sign the employer generated invoice and the failure of the Applicant to provide any invoices also support this conclusion.

8. The Applicant did not provide his own tools or equipment generally. He was provided with facilities by the company including a car, a phone and computer access.

9. There is no evidence that the Applicant conducted business with others or had any practical opportunity to do so.

[2] In this case the factors which may suggest a contractual arrangement are the provision of an ABN and the failure by the employer to deduct taxation during the period leading up to the termination. These factors are not decisive and in my view are not illustrative of the totality of the nature of the relationship. Many other factors point to an employment relationship. Viewed as a practical matter, the Applicant was not running his own business with independence in the conduct of his operations. He was operating as a representative of another business with little or no independence in the conduct of his operations.

[3] I am satisfied that the Applicant was an employee of the Respondent at the time of the termination.

[4] The Respondent in final submissions raised a number of matters which are relevant to the question of whether or not the termination was fair but which are not relevant to the jurisdictional question. The Respondent seeks an order that the Applicant pay the outstanding tax liability of the Respondent in the event that I find that he was an employee. This is a matter for others and is not something open to me under the Fair Work Act 2009.

Conclusion

[5] The jurisdictional objection is dismissed and the matter will now be allocated for a hearing concerning the merits of the Application.

COMMISSIONER

Appearances:

Mr C King appeared for the Applicant.

Mr B Kunkel appeared for the Respondent.

Hearing details:

2013

Melbourne

November 1 & 18

 1   Exhibit R5.

 2   Respondent’s submissions, Attachment E5.

 3   [PR525246] at paragraphs 14 - 16.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR544941>