Mr James McCarron v Commercial Facilities Management Pty Ltd T/A CFM Air Conditioning Pty Ltd

[2012] FWA 10625

[2012] FWA 10625

FAIR WORK AUSTRALIA

DECISION

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

Mr James McCarron
v
Commercial Facilities Management Pty Ltd T/A CFM Air Conditioning Pty Ltd
(U2012/13636)

COMMISSIONER ROE MELBOURNE, 18 DECEMBER 2012

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 made on 25 September 2012 by James McCarron (the Applicant) in respect of his dismissal by Commercial Facilities Management Pty Ltd T/A CFM Air Conditioning Pty Ltd (CFM or the Respondent).

[2] The Respondent argued that the Applicant did not have the required minimum period of service for protection from unfair dismissal. It is not in contention that the Applicant was working for the Respondent from February 2012 until 19 September 2012. The Respondent suggested that they may be a small business employer. However at the commencement of proceedings it was established that the Respondent accepted that there were 15 full or part time employees on the payroll at the time of the dismissal of the Applicant. This number included the Applicant. It is also not in contention that the Applicant was an employee of the Respondent at the time of the termination at the initiative of the employer. It is therefore clear that the Respondent is not a small business employer.

[3] The Respondent argues that the Applicant was a contractor not an employee between February and June 2012. It was therefore established and agreed at the start of the proceedings that if the Applicant was an employee not a contractor from February to June 2012 he would have been employed for 8 months and therefore would be protected from unfair dismissal. If the Applicant was a contractor not an employee from February to June 2012 he would have been employed for less than three months and therefore would not be protected from unfair dismissal.

[4] The submissions and evidence provided by the parties went to both the issue of the merits of the claim of unfair termination and to the issue at hand. I have only had regard for the material which is directly related to the question of whether or not the Applicant was an employee during the period from February to June 2012. The parties were self represented. Evidence was given by Ms Aldis a director of the Respondent and by the Applicant and the Applicant’s partner Mrs McCarron who had been employed as the office manager for the Respondent for about 18 months up until shortly before the Applicant’s termination.

[5] It is not in contention that on 7 December 2011 the Applicant was offered a position as a Business Development Manager with the Respondent commencing on 6 February 2012. The employment contract included:

• Salary of $80,000 per annum.



• Motor vehicle allowance.



• Fuel card and e-tag.



• Motor vehicle servicing.



• Company telephone.



• Annual leave and sick leave in accordance with the NES.



• Superannuation.

[6] The Applicant says that he signed an employment contract whereas Ms Aldis says that the document was not signed as the Applicant wanted to “free lance” as a consultant. The Applicant says that Ms Aldis preferred “cash payments” and he agreed to be paid in this way for a period of three months. The Applicant says that it was agreed that he would not be paid superannuation but that the Respondent would instead pay his tax. The Applicant says that he was told that at the end of the three months he would “go on the books”.

[7] It is not in contention that during the period February to June 2012 the Applicant was paid weekly by direct transfer to his bank account and that income tax was not deducted from his pay. I am unable to determine whether or not the Applicant signed the employment contract referred to above. I am also unable to determine at who initiated the arrangement for pay without deduction of income tax. However, I am satisfied that there was mutual acceptance of that arrangement.

[8] Ms Aldis says that a new employment offer was made on 4 July 2012 and an updated contract was then signed. The Applicant says that there was no new employment offer but rather a document was drawn up to reflect the introduction of changed commission arrangements. The signed document provided is consistent with the Applicant’s evidence; it is not a full employment contract.

[9] Ms Aldis says that from July onwards the job had more of a development rather than a sales focus. The Applicant says that there was no change in the nature of the job performed. The documentary evidence does not suggest a substantial change. I found the evidence of the Applicant in this matter convincing and I am satisfied that there was no substantial change to the duties of the Applicant.

[10] The Applicant says that his job title remained the same on the web site and on his business card throughout the period he worked for the Respondent. This was not contested.

[11] It is not in contention that the Applicant was allocated a work email address, personalised business cards and company uniform. The Applicant’s mobile phone number was also on the web site and his business card. It is also accepted that the Applicant’s photo and company job title appeared on the company website advertising staff members and in the DVD promoting CFM services.

[12] Mrs McCarron gave uncontested evidence that she was asked to make up monthly invoices for the Applicant’s wages and not to enter them into the bookkeeping system, just keep them on file. The wages were entered into the bookkeeping system in the spend money section using the accounting code for consulting. GST was shown and entered for claiming purposes when due and the wage then processed electronically into the Applicant’s bank account on a weekly basis.

[13] Mrs McCarron gave evidence that she personally informed the Respondent that the ABN the Applicant was using was not registered for GST and was told by Ms Aldis that “it didn’t matter, no one will ever check.”

[14] Mrs McCarron gave evidence of a number of other unorthodox accounting practices at the company.

[15] Mrs McCarron and the Applicant gave unchallenged evidence that the invoices were all generated at the same time at the end of the so called contract period when the Applicant was about to go on the books. The Applicant was in fact paid each week based upon hours worked. Ms Aldis argued that on occasion there were deductions for hours taken off for illness or other leave. The Applicant gave evidence that he was paid for some periods of sick and annual leave during this period. It is not necessary to determine whether or not the Applicant was paid for sick leave and annual leave during this period. What is not in contention is that the Applicant was paid on the basis of hours worked and in the main the weekly hours were regular.

[16] The Applicant gave uncontested evidence that upon commencement of employment he undertook an Air Conditioning 101 course as requested and paid for by CFM and he also spent the first 2 weeks accompanying CFM technicians on daily service duties.

[17] The evidence of the Applicant was supported in the main by documentary evidence and by the evidence of Mrs McCarron.

[18] Ms Aldis says that the Applicant provided his own vehicle. However, the invoices show that the Applicant received $220 per week travelling expenses during the so called contract period and exactly the same amount as “motor vehicle allowance” during the later wages period.

[19] The Applicant gave uncontested evidence that he worked exclusively for the Respondent throughout the period and that he worked full time and each day Monday to Friday. The Applicant gave evidence that he started work between 7.30am and 8.30am each day and finished between 3pm and 4.30pm and also did some work in the evenings.

[20] Ms Aldis accepted that the Applicant was directed by her and the other director in respect to his duties and work requirements. He was largely autonomous in the implementation of these requirements.

Distinction between employee and independent contractor - the authorities

[21] I adopt the approach summarised by Commissioner Jones in Chee v Renown Business Systems Pty Ltd: 1

“[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.’

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

[22] In particular I have regard for:

1. The job title which remained consistent throughout the wages period and the so called contract period.

2. The exclusivity of the relationship throughout the period.

3. The regularity and full time nature of the employment and the 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.

6. The public expressions of the company through the website, uniform, and business card show the Applicant as an employee and exclusively related to the company.

7. The provision of training by the Respondent.

8. The absence of any written contract whose terms suggest a contractor relationship and the existence of documents which suggest the contrary intention.

9. The Applicant did not provide his own tools or equipment generally. He was provided with facilities by the company and with a car allowance.

10. There is no evidence that the Applicant conducted business with others or had any practical opportunity to do so. The Applicant did not generate any goodwill in his own business.

[23] The only indicators which suggest a contractor relationship are the method of payment and the failure to pay superannuation or to deduct income tax. The indicators in this regard are not persuasive. In particular I am satisfied that the invoices were all produced at the same time at the end of the so called contract period and that in fact payments occurred on a weekly basis and were not in response to any particular invoice from the Applicant as a contractor. The arrangements are of the sort which one might expect with tax avoidance or minimisation rather than with a contractor arrangement.

Conclusion

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

COMMISSIONER

Appearances:

Mr James McCarron appeared for himself.

Ms Melanie Aldis appeared for the Respondent.

Hearing details:

2012

Melbourne

December 14

 1   [PR525246] at paragraphs 14 - 16.

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