Mr Gregory Wood v Direct Enterprise Pty Ltd

[2015] FWC 5677

[2015] FWC 5677  [Note: An appeal pursuant to s.604 (C2015/6000) was lodged against this decision.]

FAIR WORK COMMISSION

DECISION

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

Mr Gregory Wood
v
Direct Enterprise Pty Ltd
(U2014/15619)

COMMISSIONER BOOTH BRISBANE, 18 AUGUST 2015

Application for relief from unfair dismissal – jurisdiction: not an employee, genuine redundancy.

[1] Mr Gregory Wood applied for relief from unfair dismissal under the Fair Work Act 2009 (Cth) (the Act).  1His engagement as Group Accountant to Direct Enterprises Pty Limited (Direct) had been terminated on 10 November 2014. At that date, Mr Wood was engaged to provide services to Direct and associated entities through his own company, National Transaction Corporation Pty Ltd (NTC) by contract dated 13 September 2014.

[2] Mr Wood was first contracted personally to provide services by a contract dated 21 March 2013 (first contract) with another company, OneLife Direct Pty Ltd. A second contract was entered into between Direct and Mr Wood in person on 22 July 2014. Direct had been formed in the interim in April 2014. Services were performed for a range of entities and individuals referred to here for convenience as the “Direct Group”. The contract of 13 September is the third contract.

[3] Mr Wood brought his application within the prescribed time limit. He did not seek reinstatement.²

[4] Direct objected to the Fair Work Commission’s (the Commission) jurisdiction on two grounds:³

(a) Mr Wood was not employed by Direct, but by NTC, which in turn provided services to Direct and he was not therefore an employee for the purposes of the relief sought;
(b) Alternatively if Mr Wood was an employee of Direct on 10 November 2014, the termination was a genuine redundancy.

[5] Mr Wood represented himself before the Commission. Direct was represented by Mr Tony Saunders of Counsel.

Evidence

[6] The matter was heard over 4 days, including both the jurisdictional and substantive claims.

[7] Mr Wood’s written evidence was given in the form of submissions by him. Affidavit evidence was given by Patricia Wood, Mr Wood’s wife. Both gave oral evidence and were cross-examined.

[8] Mr Wood also called individuals associated with the Direct Group: Tamara Cassidy, Li Pi Song, George Polak, and Yuan Tian. Their evidence was given orally.

[9] Evidence for Direct was given by way of two statements and oral evidence of Mr Roy McDonald, who was also cross-examined at length by Mr Wood.

[10] Both parties presented a considerable amount of documentary evidence and audio-visual material.

[11] Mrs Wood’s evidence was that during telephone conversations between her husband and Mr McDonald and others, she was listening on speakerphone. She said that Mr Wood commonly said that she was with him listening, but that she did not participate in the conversations.⁴ She gave evidence as to the content of the conversations she overheard.

[12] Ms Cassidy, a senior manager of the Direct Group, gave evidence about her duties once Mr Wood left, including accounting related duties, and the work of others encompassing work previously performed by Mr Wood. She also gave evidence of the morning meditation sessions at 8.30am each work day, reduction in her working hours, and the working hours of colleagues, and steps to reduce business costs.

[13] Ms Song gave evidence about the accounting work she performed for the Direct Group, including the distribution of work after Mr Wood’s departure, changes in her working hours, and changes in colleagues’ working arrangements.

[14] Mr Polak was engaged to undertake accounting duties. He gave evidence of particular work undertaken by Mr Wood, himself, and others, and a reduction in his work hours of about 50% due to changed business circumstances including the sale of some properties for which he had accounting responsibility. He was an independent contractor, for whom OneLife was another client.⁵ Evidence was also led as to his hearing one side of a conversation between Mr Wood, with whom he shared an office, and Mr McDonald. The conversation itself was recorded and in evidence by way of transcript.

[15] Ms Tian, an accountant with the Direct Group, also gave evidence as to the work she performed, and her attendance and occasional absence from morning meditation sessions.

[16] Mr Wood’s extensive written and oral evidence was directed first at demonstrating he was an employee as a matter of practical reality, and second that Direct failed to redeploy him to other duties for which he was suitable.

[17] He submitted that he was covered by an award,⁶ citing the Clerk’s Award and the Hospitality Award. He was cross-examined on this matter.⁷ This is relevant for any obligation to consult in the event of a genuine redundancy. Direct submits that he was not so covered, but if he was, Direct had consulted Mr Wood consistently with the consultation requirements of modern awards.⁸

[18] Mr McDonald’s statements and oral evidence went to issues of the formation of the third contract, Mr Wood’s performance of his responsibilities, the decision process leading to the restructure of the Direct Group’s accounting support, and the state of the business at the time the arrangements with Mr Wood ceased.

Jurisdiction

[19] Before proceeding to the substantive question, it is necessary to deal with Direct’s jurisdictional objections:⁹ that Mr Wood was not an employee of Direct at the time of the dismissal, or alternatively that the termination was a genuine redundancy.

Employee or independent contractor?

[20] A person is not protected from unfair dismissal if, at the time of the termination, the person was not an employee, including for example, being an independent contractor instead.¹⁰ Direct asserts that Mr Wood was an independent contractor.

[21] Direct is part of a conglomerate of entities including Hunter Valley Retreat Pty Ltd (HVR), and entities referred to by Direct as the “OneLife entities”, namely OneLife Direct Pty Ltd, OneLife Group Pty Ltd. The OneLife entities and HVR provide a range of business and personal development services. HVR provides accommodation and conference facilities South of Cessnock.

[22] HVR and the OneLife entities (among others) are under the effective control of Mr McDonald and his wife, Katrina McGilchrist. Mr McDonald is described on the OneLife website¹¹ as the “Master of Cashflow – Founder of OneLife, Self-made Multi-millionaire and Entrepreneur”. He is director of the OneLife corporate entities and HVR. His wife is also a director of some entities in the overall business group.

[23] Mr Wood provided services and advice (in whichever capacity) as group accountant to HVR, the OneLife entities, Mr McDonald and his wife personally and other associated interests under their control, including a self-managed superannuation fund. Mr Wood stated that he provided service to some seventy entities as group accountant.

[24] Direct is a service company. It was formed in April 2014 as a vehicle to separate engagement of independent contractors to the OneLife entities from employees who were to be engaged by a separate entity.¹² Mr McDonald is the sole director and shareholder of Direct.

[25] Counsel for Direct argued that the Commission must find that the third contract is a “sham” before it could consider the character of Mr Wood’s engagement.

[26] It is important to note that this is not an application relevant to the sham arrangements provisions of the Act,¹³ and I can make no finding that any contract was a sham arrangement in those terms: that is a matter for a Court. However to arbitrate the matter before me, it is necessary to determine, as a matter of fact and law, whether Mr Wood was, at the time the arrangement was terminated, employed by Direct or engaged (whether through NTC or otherwise) as an independent contractor. I return to the “sham” question later.

[27] The first issue to be addressed is Mr Wood’s relationship with Direct. Counsel for Direct argued that only NTC was in a contractual relationship with Direct to provide services and Mr Wood had no connection to Direct.

[28] The third contract was exhibited to both Mr Wood’s application and Mr McDonald’s statement. It includes the following:

(a) specification of the parties, being Direct and NTC, the latter referred to as “contractor”;
(b) the purpose of the contract is stated as to outline “the principles and guidelines under which [Direct] and the contractor will work together”;
(c) reference to the contractor as “an ambassador of” OneLife Group Pty Ltd, and requires of the contractor to perform duties “in a most diligent, timely and professional manner while carrying out those duties lawfully, peacefully and harmoniously”;
(d) provision that the “contractor shall not behave in a manner which may bring disgrace, disrepute or adverse attention from any source”;
(e) encouragement of the contractor to “grow their own five forms of income and to develop their own business and client base”, noting that the “ACN, WorldVentures & Isagenix businesses are available to the contractor as opportunities to be developed both inside and outside of the contractor’s services to the group”;
(f) provision for rectification of unsatisfactory work at the contractor’s cost, and for restitution by the contractor or unsatisfactory work that created a “commercial risk or loss”;
(g) a “zero tolerance” for the contractor selling any product, service or application to OneLife clients without written approval;
(h) the contractor “is responsible to provide the highest level of integrity, accuracy and quality of work to” the various entities and Mr McDonald and Ms McGilchrist;
(i) a requirement to use the systems and documentation of the various entities, to “use the planner and complete a daily action plan … to be handed in at the completion of the day to the contractor’s chain of command”;
(j) the contractor “is responsible for their own superannuation and taxes”;
(k) a requirement that the contractor provide certain equipment, but that Direct (or its associated entities) would provide office space, furniture, cleaning, electricity and so on;
(l) a strict business hours limit on the contractor accessing accounting files, banking and other online facilities;

(m) a requirement to:

“adhere to the [OneLife] corporate dress code. The contractor shall always be immaculately groomed and presented with a smart business shirt and trousers for the men and a business style dress or shirt with a skirt or trousers for the women. Immaculately clean and polished business style shoes shall be worn. All casual clothing including jeans and sports shoes are not permitted unless otherwise advised by the Management Team”;

(n) confidentiality requirements for commercial matters, including the following statement: “social media is not to be accessed by the contractor unless it is to their role to monitor or update the company’s social media outlets”;
(o) a schedule headed “contract for services” providing, among other things for:

(i) “Remuneration - $382.13 per day plus GST”;
(ii) a monthly “review period”
(iii) fortnightly “invoice frequency”;
(iv) a “contract chain of command” listed, apparently in order, George Polak then “Roy McDonald & Katrina McGilchrist”;
(v) “Hours of Duty – The contractor works on their own initiative to achieve agreed results with flexibility of how work is completed – Standard 5 day eight hours. These days will be flexible to allow for personal appointment times as agreed with George in advance. Office hours 8.30am-5.30pm with an hour of breaks throughout the day. This role required dedication and commitment to completion.”
(vi) reference to a “schedule of responsibilities”

(p) a page, separately signed and dated by Mr Wood, headed “Ground Rules to live by” (extracted below);
(q) a Schedule of Responsibilities of 4 pages (each initialled and dated by Mr Wood) listing various entities or purposes and the responsibilities in regard to each and an obligation to attend meetings and training.

[29] The entities or purposes in the Schedule of Responsibilities included:

● Hunter Valley Retreat and related entities;
● Property Portfolio Management including Praedium;
● Ballina Rental Report;
● Roy’s Personal Reporting (listing 11 “income sources”);
● Macroy SMSF;
● Taxes;
● Meeting and Training: “1. Attend OL and HVR Team meetings and training as required. 2. Attend meetings with owners and leadership team as required”;
● Katrina McGilchrist Personal Tax and Superannuation (listing 6 income sources);
● If You Dare Pty Ltd and OneWorld Global Events.

[30] Item 6 under “Taxes” includes this note: “I can as discussed become certified to lodge BAS, if you would like I will do this”.

[31] The “ground rules to live by” are stated on a separate page in the third contract as follows, verbatim:

● Guided by Spirit – caring, nurturing, flexibility
● Be impeccable in keeping your word
● Take full ownership of the role
● Customer Care – remembering what’s highest and best for the client is what’s highest and best for us
● Communicating is a way that serves the highest good of all – no gossiping
● Honouring our workplace – Keep it – clear and clean with only harmonious scents and sounds
● Impeccable business attire
● Punctuality
● Integrity
● Operate in the highest good of all – taking ownership of your role
● Not working for any other company that is in a similar field unless OL has expressly authorised you to do so.
● Be the change you want to see in the world and in OL and HVR
● Attend Morning Relaxation at 8.30am
● Proactive approach to communicate in advance what are the deliverables from other team members and timings for the contractor to be able to complete the responsibilities listed in the schedule of responsibilities

I commit to honouring all of the ground rules as I know it serves both myself and the OL Group and HVR team and community

[32] This page is signed and dated at its foot by Mr Wood, and hand numbered as “7/11” and initialled “GW”.

[33] The contract includes several other clauses relevant to the characterisation of the relationship:

(a) a clause under the heading “Costs” reads:

The contractor is to provide their own equipment laptops, mobile broadband, mobile phone, personal stationery and any other equipment they require to carry out their contracts.¹⁴

(b) Under “Usage of Information Technology & Confidentiality”:

All contractors will have access to a company email and all company activities must be channelled through this account, not through personal email accounts.
…
The contractor may be provided with internet and/or email access and/or other IT services via OL. The contractor agrees that such provision shall only and solely be used for the purposes of delivering the Contracted Services to OL. The use of OL provided IT services for personal reasons is not permitted and considered a breach of this Agreement.

[34] The second contract, between Mr Wood personally and Direct was not materially different from the third contract.

[35] The precise relationship between Mr Wood (or NTC) and Direct is not as simple to determine as it might first seem. There is no doubt that there is a document apparently made by Direct and NTC evidencing the third contract. The document requires close attention to determine what it purports to do, in light of the actual conduct of the parties.

Pre-incorporation contract

[36] Mr Wood’s evidence is that the third contract was executed on 13 September 2014, and the document in evidence has the same date. However, the Australian Securities and Investments Commission (ASIC) record shows NTC was registered on 15 September 2014. The schedule to the contract nominates 15 September as the date of commencement of the contract.

[37] That is, it appears that the third contract was executed by Mr Wood purportedly “on behalf of” NTC before that entity was registered with ASIC.¹⁵

[38] However, it may be open on the evidence to conclude that the contract was impliedly ratified by NTC by the parties’ conduct and in particular, Mr Wood’s conduct in issuing invoices in the company’s name for services provided by him.

[39] As discussed below, even if this is the case, it is the character of the relationship between Direct and Mr Wood that will determine whether he was an employee or an independent contractor.

Relationship between Direct and Mr Wood

[40] Mr Wood submits that that the Commission must determine the “true relationship” between Direct and Mr Wood.

[41] Direct argued that the interposition of NTC by way of the third contract is decisive, citing authoritative academic opinion:¹⁶

There can also be no employment relationship, at least on orthodox principles, where a separate legal entity is interposed between the worker and the ultimate recipient of their services. For instance, a firm may insist that a worker establish a personal company, that is, a small company which the worker may be the sole director and shareholder, or perhaps share those roles with their spouse or partner, or a business or legal adviser.

The firm can then contract with a person or company to obtain the worker’s services. For what is worth in practise, the worker may well be an employee of their own company. There is nothing to prevent a person being a director, major shareholder and employee of the same company, but they cannot be an employee of the firm that receives the benefit of their services in the absence of any direct contractual relationship with that firm.

It does not matter that the worker controls the personal company or, indeed, that they will ultimately benefit from a payment made to their company. The firm is contracting with the personal company, not the worker, and it is conventionally assumed that a legal entity other than a natural individual cannot be an employee.

[42] Mr Saunders also drew the Commission’s attention to Richtsteiger v Century Geophysical Corporation¹⁷ and Sharrment Pty Ltd and Others v Official Trustee in Bankruptcy.¹⁸

Independent contractors

[43] Australian law makes a clear distinction between contracts of employment and contracts for services, even if it is sometimes difficult to characterise properly a particular relationship.¹⁹ Neil and Chin note that the High Court in Hollis v Vabu:

supplied an authoritative description of employee and independent contractor. The former is ‘‘a person who serves the employer in his, the employer’s business” whereas the latter is “a person who carries on a trade or business of his own”. That description provides “a focal point around which relevant indicia can be examined”.²⁰

[44] The mere existence of NTC and its interposition are, of themselves not definitive that the relationship was (or became) one of an independent contractor. As noted in The Contract of Employment:²¹

Almost all [employment contracts] are between a natural person and an employer. The notion that an employee may be a corporation ‘may not be impossible, but it is certainly unfamiliar’. An employee can agree that wages or other benefits will be paid to a third party, such as a trust, corporation or partnership. Such arrangements do not affect the nature of the relationship between the employer and employee. (references omitted)

[45] Mr Saunders argued that I could not inquire into the nature of the relationship without first finding that the third contract was a sham.²² But that is not correct. The issue to be determined is the proper character of the relationship between Direct and Mr Wood as a question of law and fact, at the time of the termination.

[46] In Hollis v Vabu the High Court said at paragraph 24:

“It should be added that the relationship between the parties, for the purposes of this litigation, is to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed by Vabu go to establishing ‘the totality of the relationship’ between the parties; it is this which is to be considered.”

[47] A Full Bench in Jiang Shen Cai trading as French Accent v Do Rozario (“French Accent”) [2011] FWAFB 8307 (footnotes omitted) commented as follows.

[18] We endorse the proposition in sub-paragraph (1) of the Abdalla summary, based on the High Court authorities, that:

“... the ultimate question will always be whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own. This question is answered by considering the terms of the contract and the totality of the relationship.” (the ultimate question)

[19] Sub-paragraph (5) of the summary in Abdalla should be read as nothing more than a restatement of the ultimate question, designed to bring the focus of consideration back to the ultimate question.

[20] A consideration of the nature of the work performed, the terms of the contract, and the so-called indicia must always be directed to the ultimate question. The leading case in this area is the decision of the High Court in Hollis v Vabu Pty Ltd.The most significant case since Hollis v Vabu is the decision of the Full Court of the Federal Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation (Roy Morgan). That case concerned an appeal against a decision of the Administrative Appeals Tribunal that interviewers engaged by Roy Morgan were “employees” either within the ordinary meaning of that word in s.12(1) of the Superannuation Guarantee Charge Act 1992 (SGC Act) or because they worked under a contract that was wholly or principally for their labour as specified in s.12(3) of that Act. The Full Court endorsed a passage from the leading judgment in the decision of the Victorian Court of Appeal in Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue, which in turn had endorsed a passage from the judgment of Mummery J in Hall (Inspector of Taxes) v Lorimer which makes it clear that a consideration of the indicia:

“...is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.”

[48] Thus the “ultimate question” does not turn on a finding that the third contract was, or was not, a sham, but on properly characterising the relationship Mr Wood had with Direct. The content of the third contract is clearly relevant, and may be, but is not necessarily determinative, because the contract with NTC (assuming one existed) may have properly been to facilitate the employment relationship through arrangements made genuinely, or in practice, between the parties.

[49] French Accent also sets out the assessment to be made against indicia in distinguishing employees from independent contractors, set out at paragraph [30] as follows (footnotes omitted):²³

“(1) In determining whether a worker is an employee or an independent contractor the ultimate question is whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own of which the work in question forms part? This question is concerned with the objective character of the relationship. It is answered by considering the terms of the contract and the totality of the relationship.

(2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant indicia and the relative weight to be assigned to various indicia and may often be relevant to the construction of ambiguous terms in the contract.

(3) The terms and terminology of the contract are always important. However, the parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract.

(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context. For ease of reference the following is a list of indicia identified in the authorities:

● 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 an independent contract. While control of this sort is a significant factor it 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 the 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 weighs 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, working for others (or the genuine and practical entitlement to do so) suggests an 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.

It should be borne in mind that no list of indicia is to be regarded as comprehensive or exhaustive and the weight to be given to particular indicia will vary according to the circumstances. 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.

(5) Where a consideration of the indicia (in the context of the nature of the work performed and the terms of the contract) points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. However, a consideration of the indicia is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The ultimate question remains as stated in (1) above. If, having approached the matter in that way, the relationship remains ambiguous, such that the ultimate question cannot be answered with satisfaction one way or the other, then the parties can remove that ambiguity a term that declares the relationship to have one character or the other.

(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.

[50] Mr Saunders’ position on the sham question opened the way to a great deal of evidence as to the conduct of the parties in the formation of the third contract, evidence that ordinarily would not be taken, being extrinsic evidence as to the interpretation of the contract.²⁴ One of the exceptions to the general rule of inadmissibility is an inquiry as to the validity of the document.²⁵ Mr Saunders of course sought this evidence to show the contract was not a sham: he relied on the contract’s validity in support of the jurisdictional objection.

[51] As discussed above, I do not agree that a finding that the contract is a sham is prerequisite to any inquiry of Mr Wood’s status. Accordingly I give little weight to the extrinsic evidence.

[52] Mr Wood says the role of group accountant was advertised on seek.com as a position with OneLife, and he submitted an application by email dated 2 November 2012 in his own name listing his qualifications, experience and employment history. Mr McDonald interviewed Mr Wood on or about mid-March 2013. There were three interviews in all before he was engaged, some including other personnel.

[53] He was engaged in March 2013 to provide group accountant services. Over the period from his initial engagement until termination of the arrangement, remuneration (or fee for services) was calculated on the basis of annual remuneration of $80,000 plus various employment related adjustments (leave, superannuation etc), that was a daily rate of $382.14. This was calculated, Mr Wood says, on the basis of the day rate arising from salary of $80,000 p.a. plus 9.25% superannuation and 8% leave loading on four weeks, allowing for 46 five-day working weeks (allowing for two weeks annual closure and leave).²⁶

[54] Mr Wood’s evidence is that the first contract with OneLife Direct Pty Ltd ended on 22 July 2014 when the second contract, this time with Direct, was entered into. Mr Wood’s evidence was that he was required to enter into the second contract and was told he would not be paid until he did so.²⁷

[55] Working relationships were not entirely satisfactory. Mr Wood made a claim with WorkCover Queensland arising from alleged bullying and harassment on 22 August 2014. He took a period of stress leave and shortly after return to duties, executed the third contract.

[56] Whether an individual is an employee or independent contractor depends on the general law. The term “employee” is not defined in the Act: the terms employer and employee take their ordinary meanings for the purposes of unfair dismissal relief matters. That is, the common law governs whether Mr Wood is an employee, working under a contract of service, or an independent contractor under a contract for services.

[57] Direct submitted that “the terms of the Contract are clear, comprehensive and are not ambiguous”.²⁸ However, that is not correct. The third contract is a mixture of obligations that are clearly personal to Mr Wood and others that might be the province of an independent contractor.

[58] The following matters are in my view personal to Mr Wood and not delivered by a corporation:

● being “an ambassador” of Direct and its group entities;
● expectations of personal behavioural and appearance;
● expectations of integrity;
● dress code requirements;
● limits on social media use;
● the “Ground Rules to live by”, especially: attendance at morning relaxation sessions at 8.30am; personal appearance; attendance requirements (punctuality), and the first person statement of commitment to the ground rules.

[59] For the purpose of assessing whether Mr Wood was an employee or independent contractor, I adopt the indicia stated in the above quote from French Accent.

(a) Control

[60] Direct submitted that Mr Wood had the right to delegate his duties to third parties, submitting it was a strong indicator of the engagement being as an independent contractor.²⁹ Cross-examination on this point was premised that the third contract did not exclude delegation,³⁰ rather than an express power to delegate. Direct pointed to a request from Mr Wood that his wife might assist with clerical tasks as evidence of power to delegate.³¹ The response to that request was disputed by Mr Wood.³²

[61] Mr Wood’s evidence was that he could not delegate his professional responsibilities, he had specifically inquired and was instructed to the contrary.³³ He submitted that certain duties, such as attendance at meetings and supervision of other staff were clearly not delegable and could only be performed in person

[62] The level of control exerted by Direct (or its related entities) over Mr Wood’s work was considerable. Mr Wood was required under the terms of the third contract to complete a daily action plan, to be handed in each day;³⁴ and complete time logs on a daily basis, handed to accounts weekly. There is an element of prudent management control in such tools, and Direct argued this factor should be treated as neutral.³⁵

[63] Mr Wood submitted³⁶ that Direct maintained a high degree of control over his work, including set hours and lunch breaks, mandated attendance at various work functions, supervision, and frequent reprioritisation of work.

[64] I conclude that Mr Wood had little discretion or control³⁷ over:

● the work to be performed and the prioritisation of the work;
● where that work took place;
● the hours of work;
● attendance at work related rituals and training etc.

[65] Further, the third contract specifically dealt with several such matters in a way inconsistent with Mr Wood having control over them, or conditioning control by requiring approval.³⁸

[66] The level of control exerted by Mr McDonald was evident in the video of the “trust training” that was in evidence, the subject of cross-examination by Mr Saunders,³⁹ and evidenced in documents exhibited by Mr Wood.⁴⁰ Mr McDonald explicitly referred to Mr Woods as the person he least trusts, and used a finger click ritual to have colleagues support that assertion collectively.

[67] While Mr McDonald presents as somewhat controlling in the video, I place little weight on this as showing control, other than to note it is consistent with Mr Wood’s submissions and complaints about Mr McDonald. I place similar weight on the “ground rules to live by” in terms of the control factor.

[68] I conclude that Mr Wood was not possessed of the ultimate authority over the performance of the work,⁴¹ either contractually or in practice. This factor weights in favour of employment.

(b) Work for others

[69] The third contract on its face encouraged Mr Wood to “grow [his] own five forms of income and to develop [his] own business and client base”. Mr Wood did not perform work for others: his sole source of income was the remuneration under the third contract and its predecessors. He saw the clause as irrelevant⁴² and gave evidence that he was not (in his view) authorised to work for others “during company hours”.⁴³

[70] Whether Mr Wood had a “genuine and practical entitlement” to perform work for others (as opposed to the contractual right, which is clear) is a point of divergence between the parties. Direct submits the content of the clause reveals the legal capacity to perform such other work.⁴⁴ Mr Wood’s evidence is that he was committed full time and practically unable to perform other work (or take a second job).⁴⁵

[71] On balance, this factor leans towards independent contractor status. NTC is clearly able to undertake other work. Mr Wood is, contractually, permitted to build other business, even if his evidence of practical improbability is accepted.

(c) Separate place of work/services to the world at large

[72] While Mr Wood maintained a home office he worked almost exclusively from the premises provided by Direct. Mr McDonald asserted the work could take place from anywhere, subject to “a discussion and a negotiation”.⁴⁶ This factor weighs in favour of employment.

(d) Significant tools or equipment

[73] As a matter of practical reality, the Direct Group provided Mr Wood with the bulk of the tools and equipment and other resources necessary to perform his duties. He gave evidence that he never owned a laptop, for example,⁴⁷ even though the third contract contemplated he would provide his own. He did maintain a home office with computer and printer and mobile telephone.⁴⁸

[74] I conclude that Mr Wood was not required to provide his own tools of trade, and that Direct provided most that he required in the workplace. The fact that he established a home office and claimed business related expenses is not unusual and not inconsistent with an employment relationship.⁴⁹

[75] Mr Wood used Direct’s plant, equipment etc with the exception of a mobile telephone and home office printer and computer). This was not “significant” and this factor is neutral.

(e) Delegation and subcontracting

[76] Direct argued that Mr Wood was not prohibited from delegating or sub-contracting. The third contract did not expressly permit such, but it seems Mr Wood did inquire of his wife possibly assisting him with clerical duties on his return from stress leave. Mr Wood was consistent in his view that he could not delegate his core responsibilities either under the contract or in practice.

[77] The suggestion Mrs Wood might perform clerical tasks needs to be seen in context of Mr Wood’s return from stress leave and the relative importance of clerical duties, a matter Direct relied on itself in rebuttal of Mr Wood’s case to be covered by the Clerk’s Award.⁵⁰

[78] The third contract’s schedule notes a requirement for “dedication and commitment”. A range of responsibilities and contracted terms are necessarily personal. On balance, I am satisfied that Mr Wood could not discharge the contracted responsibilities (particularly accounting functions and organisational management responsibilities) except in person, whether or not on the premises. Further, the conduct of the parties appears to be consistent with an expectation of personal performance. This factor weighs in favour of employment.

(f) Direct’s right to suspend or dismiss

[79] This factor is neutral.

(g) The contractor role – Ambassador?

[80] The third contract’ appropriation of the role of “ambassador” to the contractor was argued by Mr Saunders to mean the contract was to be performed diligently but not necessarily by Mr Wood.⁵¹ Obligations to conform to corporate dress and conduct standards might similarly be characterised.

[81] In my view, these contractual requirements draw Mr Wood⁵² into the arms of Direct and OneLife. However they do not make his work a part of the business the same way a corporate logo on a uniform or mention of an individual in a corporate document might. This factor is neutral.

(h) Tax treatment

[82] This factor weights in favour of independent contracting: Mr Wood added GST to NCT’s invoice and it seems income tax was not deducted by Direct. I note Mr Wood’s evidence included an email chain of 3 July 2014 suggesting that GST was not to be paid, and suggesting that he (Mr Wood) was in fact an employee.

(i) Remuneration structure

[83] Remuneration was determined on the basis of days worked, not by reference to completion of tasks or work quality. Time-based costing is common among independent contractors, including accountants. In this case, the distinction is fine. On balance, I consider the remuneration structure was more akin to a wage or salary than a fee for performance of services. Mr Wood, through NTC, would be paid for his attendance. On the other side, the contract provided for rectification of unsatisfactory work at the contractor’s cost. There was no evidence of how satisfaction might be assessed by Direct, or that any work was required to be rectified. This factor is neutral.

(j) Paid holidays or sick leave

[84] The amount paid was calculated by reference to an annual package, adjusted to provide for recreation and sick leave, whether it was taken or not. Direct submitted that the remuneration, regardless of how it might have been calculated did not include leave.⁵³ Clearly, parties to an independent contracting arrangement are entitled to use any calculation method for fees they choose. There is insufficient evidence to conclude that the calculation was undertaken with employment in mind.⁵⁴ This factor is neutral.

(k) Profession, trade or distinct calling

[85] Mr Wood is qualified in accounting, is not certified or chartered, did not hold professional indemnity insurance⁵⁵ and was not authorised to lodge documents with the Australian Tax Office.⁵⁶ In the circumstances, I consider this factor tends to show employment.

(l) Goodwill and saleable assets

[86] The third contract expressly reserved all intellectual property to OneLife. Mr Wood generated no goodwill or saleable assets to himself or NTC in performing under the contract. This factor weighs in favour of employment.

(m) Business expenses

[87] Direct cross-examined Mr Wood on expense claims. However these were limited in character, and arguably, in appropriate circumstances, would be claimable as tax deductions by an employee. This factor is neutral.

Conclusion on third contract

[88] I conclude that for Mr Wood to discharge his obligations under the third contract he was required to do so personally. Even if he might delegate, because that was not prohibited by the third contract, as a matter of practical reality, he could not.

[89] He was subjected to considerable amount of control in his performance of his responsibilities (other than his professional independence as an accountant), prioritisation of work, and supervision of work.

[90] He was obliged to account for attendance and hours of work that, while said to be flexible were in practice a normal working day with some flexibility around starting and finishing. Variations required authorisation of a superior. The performance expectations included attendance at daily meditation and other workplace training and meetings, including the “trust training”. Even if attendance was not mandatory, it was clearly expected.

[91] I conclude that on balance, taking into account the entirety of the working relationship, Mr Wood was not an independent contractor, but an employee.

[92] The first jurisdictional objection is dismissed.

Redundancy

[93] Direct’s second jurisdictional objection is that, if Mr Wood was employed, he was terminated as a result of a genuine redundancy. The Act excludes cases of genuine redundancy from the meaning of unfair dismissal.⁵⁷

[94] If there is a genuine redundancy – that is, if the requirements of s.389 of the Act are met, then the Commission will have no jurisdiction to hear an unfair dismissal claim.

[95] Section 389 defines genuine redundancy as follows:

389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.

[96] Direct submits⁵⁸ that changed operating requirements, including the sale of some property and a business downturn,⁵⁹ resulted in a restructure that caused it to distribute Mr Wood’s duties to other employees or contractors.

[97] Mr Wood submits the work he performed was still required to be done. Further, he says that an alternative position was available at the Hunter Valley Resort and that he was willing to relocate to take up that role.

[98] Before turning to the redundancy question, it is appropriate to dispose of the award coverage question raised by Mr Wood. If he is covered, that might affect questions of consultation and calculation of entitlement if any.

[99] Mr Wood pointed the Commission to two modern awards relevant to clerks and the hospitality industry. I find Mr Wood was not covered by either award. He was neither a clerk nor hospitality worker. His duties were those of a professional accountant. Coverage of accountants was expressly excluded by a Full Bench decision in Award Modernisation - Decision - re Stage 4 modern awards.⁶⁰

[100] The clear preponderance of the evidence is that the business and operational circumstances of Direct precipitated a restructure. Mr Wood’s duties, in reduced form, were allocated among other staff. That is consistent with his being made redundant.⁶¹

[101] As to redeployment, the Hunter Valley position was largely clerical. On Mr McDonald’s evidence it was largely bookkeeping, not accounting, and required physical presence at the Hunter Valley premises.⁶² In any event the position was not proceeded with.⁶³

[102] I am satisfied that redeployment to that and any other position in Direct and its associated entities was not practical or possible.

[103] Accordingly I find that the dismissal was the result of a genuine redundancy.

[104] Direct’s second jurisdictional objection is upheld.

[105] Redundancy entitlement was not the subject of evidence and I leave it to the parties to determine what entitlement Mr Wood has, if any, in accordance with s.119 of the Act.

[106] Direct’s second jurisdictional objection is upheld. This Commission has no power to entertain Mr Wood’s Application.

Decision

[107] The Application is dismissed.

COMMISSIONER

Appearances:

Mr G Wood appeared on his own behalf.

Mr T Saunders of Counsel appeared on behalf of Direct Enterprise Pty Ltd.

Hearing details:

2015.

Brisbane:

June 23, 24, 25 and 26.

1  Transcript dated 23 June 2015 at PN145.

² a third ground was withdrawn.

³ Transcript dated 23 June 2015 at PN295 and following.

⁴ Transcript dated 23 June 2015 at PN808.

⁵ eg Transcript dated 25 June 2015 at PN3280 and transcript dated 26 June 2015 at PN4451 and following.

⁶ Transcript dated 24 June 2015 at PN2137 and following.

7 Direct’s Outline of Submissions dated 10 March 2015 at paragraphs 36. and 37.; Direct’s Outline of Submissions dated 30 March 2015 at paragraph 10.; transcript dated 26 June 2015 at PN4515 and following.

8 s.396

⁹   s.382

¹⁰ Email dated 29 April 2014 from Mr McDonald to Mr Wood – Applicant’s bundle of emails.

¹² Div.6 of Pt.3-1, ss.357-359

¹³ the identically worded clause was crossed out in the exhibited second contract.

¹⁴ The formulation of executing “on behalf of” the non-existent entity was also used by the signatories in a leading pre-incorporation contract case Kelner v Baxter (1866) LR 2 CP 174.

¹⁵ Creighton and Stewart Labour Law, Federation Press at [7.51].

¹⁶ [1996] IRCA 500

¹⁷ [1988] FCA 179

18 Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ in Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21; 75 ALJR 1356; 106 IR 80; 181 ALR 263, at paragraph 39.

¹⁹ Neil & Chin The modern contract of employment, 2012, [1.30] (footnotes omitted).

²⁰ Irving, M. The Contract of Employment, LexisNexis Butterworths, 2012, at 2.3.

²¹ Mr Wood submitted the contract was a sham, but did not seek relief before this Commission.

²² drawing principally on the multi-factor test stated in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16.

²³ eg Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347.

²⁴ see eg Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 5) [2014] FCA 976 in which Foster J found certain transactions to be sham, and discussed at some length the cases relevant to sham contracts: at paragraph 116 and following.

25 Mr Wood’s Submissions dated 30 March 2015.

²⁶ Transcript dated 23 June 2015 at PN1153, PN1157, PN1415; Applicant’s Submissions dated 30 March 2015.

²⁷ Form F3 – Employer Response at Question 2.2 – 3. (e).

²⁸ Direct’s Outline of Submissions dated 10 March 2015 at 23. (b); Oral submissions given in Transcript dated 26 June 2015 at PN4795 and following.

²⁹ eg Transcript dated 24 June 2015 at PN1431.

30 Direct’s closing oral submission in transcript dated 26 June 2015 at PN4727 and following.

31 Transcript dated 24 June 2015 at PN1483 and following.

32 Transcript dated 24 June 2015 at PN1429 to PN1606, Transcript dated 24 June 2015 at PN1976 and Mr Wood’s closing oral submissions in transcript dated 26 June 2015 at PN4827-PN4828.

³³ Mr Wood claimed that payment was contingent on these plans (transcript dated 24 June 2015 at PN2254 and following), but Mr McDonald did not agree with that proposition (transcript dated 25 June 2015 at PN3119 and following).

³⁴ Direct’s Outline of Submissions dated 10 March 2015 at paragraph 24.

35 Mr Wood’s Submissions dated 30 March 2015 at paragraph 12. (e).

³⁶ in the sense relevant to this issue, including the inevitable independence required of a professional accountant supervised by non-accountants: see Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561.

³⁷ see paragraph [28] above.

³⁸ Mrs Wood in transcript dated 23 June 2015 at PN309; Mr Wood in transcript dated 24 June 2015 at PN2273 and following.

³⁹ eg Dr Richardson’s report dated 28 April 2015.

40 Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389 at p. 404 per Dixon J.

⁴¹ Transcript dated 24 June 2015 at PN1802.

⁴² Transcript dated 23 June 2015 at PN1258.

43 Direct’s Outline of Submissions dated 10 March 2015 at paragraph 22.

⁴⁴ Transcript dated 24 June 2015 at PN2536; and transcript dated 23 June 2015 at PN1258.

45 Transcript dated 26 June 2015 at PN4195.

⁴⁶ Transcript dated 23 June 2015 at PN1159 and PN1417.

⁴⁷ see cross-examination on his BAS return in transcript dated 24 June 2015 at PN2104 and following.

48 see eg eg Direct’s Outline of Submissions dated 10 March 2015 at paragraph 36. (b); Transcript dated 24 June 2015 at PN2144.

⁵⁰ Transcript dated 26 June 2015 at PN4757 and following.

⁵¹ they cannot be obligations on a corporation.

⁵² Direct’s Outline of Submissions dated 10 March 2015 at paragraph 23.

⁵³ Mr Wood: Transcript dated 24 June 2015 at PN2548-PB2560; Direct’s closing submissions in transcript dated 26 June 2015 at PN4821-PN4822.

54 Transcript dated 24 June 2015 at PN1381.

⁵⁵ Transcript dated 24 June 2015 at PN1903.

56 s.385(d)

⁵⁷ Direct’s Outline of Submissions dated 30 March 2015.

⁵⁸ Transcript dated 25 June 2015 at PN3854.

59 [2009] AIRCFB 945 (the Miscellaneous Award decision) at paragraphs [9]-[10], [152].

⁶⁰ Dibb v Commissioner of Taxation (2004) 136 FCR 388 at pages 404 and 405.

⁶¹ Evidence of Ms Cassidy in transcript dated 23 June 2015 at PN456; Mr McDonald in transcript dated 25 June 2015 at PN3955-PN39561, and in transcript dated 26 June 2015 at PN4048 and PN4105 and following.

⁶² First Statement of Mr McDonald at paragraph 66; Transcript dated 25 June 2015 at PN2627.

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