Paterson v The State of South Australia
[1997] IRCA 195
•13 Jun 1997
DECISION NO:195/97
CATCHWORDS
INDUSTRIAL LAW - unlawful termination - person regularly engaged in carting roadmaking materials in own truck - work carried out in conjunction with a road gang - payment on hourly rate plus kilometre allowance - percentage of time spent in labouring duties assisting weekly hire labourers in the road gang - whether independent contractor or employee
Workplace Relations Act 1996 (Cth)
Matter No. 1733 of 1995
BARRY WILLIAM PATERSON v THE STATE OF SOUTH AUSTRALIA
von Doussa J
Adelaide
13 June 1997
IN THE INDUSTRIAL RELATIONS
COURT OF AUSTRALIA
SOUTH AUSTRALIA No. 1733 of 1995
DISTRICT REGISTRY
BETWEEN: BARRY WILLIAM PATERSON
Applicant
AND: THE STATE OF SOUTH AUSTRALIA
Respondent
MINUTES OF ORDER
JUDGE MAKING ORDER : VON DOUSSA J
WHERE MADE : ADELAIDE
DATE ORDER MADE : 13 JUNE 1997
THE COURT ORDERS THAT:
The decisions of the Judicial Registrar made on 19 July 1996 and 13 August 1996 be set aside.
The application pursuant to s.170EA of the Workplace Relations Act 1996 be dismissed.
There be no order as to costs.
Note: Settlement and orders are dealt with by Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS
COURT OF AUSTRALIA
SOUTH AUSTRALIA No. 1733 of 1995
DISTRICT REGISTRY
BETWEEN: BARRY WILLIAM PATERSON
Applicant
AND: THE STATE OF SOUTH AUSTRALIA
Respondent
REASONS FOR JUDGMENT
Coram : von Doussa J
Place : Adelaide
Date : 13 June 1997
The respondent seeks a review pursuant to s.377 of the Workplace Relations Act 1996 (Cth) (“the Act”) of decisions of a Judicial Registrar made on an application pursuant to s.170EA of the Act. The review has been conducted on the papers without further evidence in addition to that before the Judicial Registrar.
From October 1978 the applicant, Mr Paterson, was engaged as a “hire truck operator” by the Department of Transport, formerly the Highways Department. The Department is an agency of the respondent. In the application pursuant to s.170EA, Mr Paterson alleged that he had been employed by the respondent since that date as an employee, and that his employment was unlawfully terminated on 3 November 1995.
At trial the parties agreed that it would be convenient if the Judicial Registrar were to determine as a preliminary issue whether Mr Paterson was an employee for the purposes of Part VIA Division 3 of the Act. The respondent contended that Mr Paterson was at all times engaged as an independent contractor and therefore excluded from the operation of the Act.
The Judicial Registrar directed that this issue be determined as a preliminary one. The Judicial Registrar, after reviewing evidence led before her, concluded that several factors pointed to the relationship between Mr Paterson and the respondent being more akin to a relationship of employer and employee than principal and contractor. The preliminary issue was therefore determined in favour of the applicant.
At a subsequent hearing the Judicial Registrar held that Mr Paterson was paid as a casual, but he was nevertheless a full-time employee. As he was paid as a casual the Judicial Registrar held that Mr Paterson was not entitled to a severance payment, or compensation in lieu thereof. However, as he was a full-time employee he was not excluded from the operation of s.170DB pursuant to regulation 30BC (which excludes “casuals” from certain provisions of the Act). Accordingly the applicant was awarded a payment in lieu of five week’s notice pursuant to s.170DB. The payment was calculated by allowing five week’s remuneration at the hourly rates which Mr Paterson had received under his contract with the respondent. The amount calculated was $4,725. In addition it was held that Mr Paterson’s employment had been terminated in circumstances that were harsh, unjust or unreasonable in that he was not given specific advice regarding his position in advance of the termination, and no attempts were made to lessen the impact of that event on him. Compensation was awarded for the lost opportunity for Mr Paterson to prepare himself for his employment being terminated. On this score the compensation was assessed at $4,000.
Upon the review the respondent contends that Mr Paterson was engaged as an independent contractor, and that the relationship of employer and employee at no time existed between the parties. In the alternative, the respondent contends that if Mr Paterson were an employee, in the circumstances which occurred in November 1995 his employment was not terminated. Further, it is contended that Mr Paterson’s employment was “casual” within the meaning of regulation 30BC so as to exclude him from the notice provisions of s.170DB. Finally it is contended that in light of the decision of the High Court in State of Victoria v Commonwealth of Australia (1996) 138 ALR 129, the award made under s.170DE(2) based on the finding that there was a termination which was harsh, unjust or unreasonable should be set aside. I did not understand counsel for the applicant to resist this final submission.
The major question which has been canvassed between the parties throughout is whether the engagement of Mr Paterson was as an employee pursuant to a contract of service, or whether he was engaged as a contractor pursuant to a contract for services. As King CJ observed in Lenzoot Haulage Pty Ltd v Sinclair (1986) 42 SASR 506 at 510, the question whether a person is an employee or an independent contractor has arisen in many contexts and under many statutes. The criteria by reference to which the question is to be determined are well settled although often difficult of application. In this case there are aspects of the relationship between the parties which point in favour of the relationship being one of employer and employee, and there are other aspects which suggest that Mr Paterson was engaged as an independent contractor. In the result it is necessary to consider and weigh these factors, and for the Court to make up its mind into which category the case should be put.
The Judicial Registrar identified a number of features of the relationship which she set out in her reasons for decision. As I understood the submissions made on the review, the parties do not challenge that these factors were correctly identified. Indeed there was little dispute about most of them in the evidence. The respondent contends that upon a proper consideration of these factors the Court should determine that Mr Paterson was an independent contractor. I propose to list the factors identified by the Judicial Registrar, adding to some of them additional information which appears in the evidence. The factors are as follows:
The applicant operated a business as a self employed truck driver prior to the relationship commencing with the respondent. I add that he had operated that business in partnership with his wife from 1963 until 1973.
The applicant’s relationship with the respondent commenced in 1978 soon after he approached an employee of the respondent seeking work. The relationship continued without a break (other than the usual breaks of the road gang or because of illness of the applicant) until late in 1995.
Initially the applicant’s duties mostly involved driving his truck to assist with various road building projects around Adelaide. Over the years the applicant was required to perform labouring duties for the respondent. There is some discrepancy between the applicant’s evidence and that of Mr Vogelsang, his supervisor, as to the actual amount of labouring work. However it is clear that by 1995 the amount of labouring work being performed by the applicant was in the vicinity of fifty percent of his duties. I add that the applicant made available a single axle truck, and worked in conjunction with a road gang. He was required to use his truck to cart roadmaking materials and equipment, many of the journeys being short ones. It will be necessary to say something more about the labouring duties after completing the summary of factors identified by the Judicial Registrar.
The applicant was paid an hourly rate regardless of what duties he performed as well as a daily variable amount for mileage.
The hourly rate he was paid was more than double that of labourers engaged on the road gangs. I add that the rate paid to hire truck operators was negotiated between the Department and the Tip Truck Operators Association of South Australia Limited, a body that represented hire truck operators engaged by the Department. The rates negotiated from time to time were reflected in determinations published by the Commissioner for Public Employment. Many hire truck operators were, at least in early years, employed by the Department. There were two types of engagement. The first type related mainly to large trucks where payment was made on a tonne per kilometre rate. The second type related to smaller, single axle, trucks where payment was primarily based on hourly rates. Historically hourly rates had been adopted as the smaller trucks were engaged in metropolitan work where traffic light and traffic congestion problems extended journey times, and many of the trips were so short that remuneration on a tonne/kilometre rate would not produce a realistic return to the operators. From the contract rates, a hire truck operator was required to pay all outgoings in respect of the operation of the truck.
The applicant could be sent home after 2 hours if there was no work. I add that this could occur if wet weather prevailed.
He was not paid sick leave or annual leave.
He was provided with some safety equipment. I add that the safety equipment involved a red vest, safety boots and a hard hat. The Department required all persons present on road work sites to wear such items, whether they were employees, contractors or visitors.
He used his own truck whilst performing carting duties, but used the respondent’s equipment when performing labouring duties. I add that the equipment involved in the labouring duties was no more than a shovel, a broom or a wheelbarrow.
He paid insurance premiums on his truck. He did not self insure his labour.
Taxation deductions were made from his pay in accordance with the Prescribed Payments System.
He was covered by the respondent, at least since the introduction of the Workers Rehabilitation and Compensation Act 1986 (SA), for any compensable injury.
He held himself out to the Australian Taxation Office as an independent contractor operating a business and claimed deductions for expenses that were very much higher than would have been expected for an employee. I add that these expenses were almost exclusively related to the operation of trucks owned by the applicant. The extent of the deductions claimed by him varied over the years from between about 20 per cent to in excess of 50 per cent of his annual gross income received from the operation of the trucks.
The applicant worked the same hours that the road gangs worked. He did not work when the gangs were on a rostered day off.
The applicant owned a number of trucks, however at any given time he only used one truck in performing his duties for the respondent.
The applicant was subject to the control of the supervisor of the road gang. I add to this reference to control later in these reasons.
There was a difference between what the applicant actually did, and what he was required by the respondent to do. He worked for no one except the respondent, but the respondent did not require it of him. He did not operate as a partnership, although the respondent was indifferent as to whether he did. He did not send anyone to work in his place if he was sick or unavailable, although the respondent has allowed that to occur in relation to other truck drivers. I add that the majority of the hire truck operators engaged by the respondent did operate in partnership or through a company.
The Judicial Registrar observed that much of the evidence on these topics led by the parties in support of their respective positions did not actually go towards proving anything about the relationship between the respondent and the applicant. With that comment I agree. The Judicial Registrar went on to express her conclusion that she considered the following three factors determined the issue in favour of the applicant:
The way in which the roadworks are conducted.
The lack of breaks and length of the relationship between the respondent and the applicant.
The regular, close and consistent nature of the relationship between the respondent, through its road supervisor, and the applicant.
I am unable to share the view of the Judicial Registrar that these three factors, alone or in combination, are determinative of the issue. In my view these three matters are largely neutral.
I do not consider that the length of the relationship between the respondent and Mr Paterson to be an important factor. Numerous relationships which are truly contracts for service continue for long periods where it is in the mutual interests of the parties for this to occur. The length of the relationship may prove nothing more than that it was an advantageous one to both sides.
The first and last of the matters relied on by the Judicial Registrar are aspects of the question of control. The question of control is often an important criterion in determining the nature of a disputed relationship. However it is but one of a number of issues which must be considered and is not in itself determinative: Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 per Mason J at 24. The hire truck operators were required to operate their trucks in conjunction with the activities of the road gang. Even if a hire truck operator were plainly an independent contractor (for example, in the case of a truck owned by a company) the operator would inevitably be subject to close control from the supervisor as to what was done and when. Moreover, the operator would obviously have to work at hours which fitted in with the activities of the road gang. Control in such matters as the hours of work, the place of work, and the activities to be performed with the truck in my opinion do not assist in determining the nature of the relationship. Of more significance in the present case is the fact that Mr Paterson was himself in control of the maintenance and operation of his truck. It was up to him whether he had a new truck or a secondhand truck. It was up to him whether he maintained it himself, or had it maintained by others. It was up to him to determine where he purchased fuel and parts.
It is necessary to discuss in more detail the fact that Mr Paterson was required to perform an amount of labouring work. The picture conveyed by the evidence is that in the late 1970’s and the early 1980’s there was much road building activity being undertaken by the Highways Department. There were many road gangs, and numerous hire truck operators paid on hourly rates. The hire truck operators were not expected to perform any work other than to drive their trucks. However they were dependent for the assignment of work upon the supervisor of the gang, and a practice grew up whereby drivers, when not actively driving, would offer assistance in such matters as shovelling, sweeping, or directing traffic to keep onside with the supervisor.
In about 1983 the amount of roadworks being undertaken by the Department diminished. The Department reduced its workforce, and the work available to hire truck operators also diminished. There was not enough work for those who had previously been engaged. The Department considered it was uneconomic to engage a hire truck operator for an eight hour day when there was insufficient truck work to occupy that period. To encourage their continued engagement, the hire truck operators spent more of their time assisting the construction workers in the road gang. Demarcation issues then arose as to the work that should be performed by full-time employees, who were members of unions, and the hire truck operators.
In 1984 a tripartite agreement was reached between the Australian Workers Union, the Transport Workers Union and the Highways Department. That agreement was recorded in a letter dated 21 June 1984 (Exhibit A1). The evident purpose of the agreement was to resolve the demarcation issues, to determine the coverage of the two unions, and to preserve the continued engagement of hire truck operators. The letter of 21 June 1984, from the Highways Department to the unions, commences:
“Further to our recent discussions on the conditions of hire and use of contract truck owner/drivers in the Department, I set out below the general and specific conditions agreed upon for continued engagement of owner drivers and undertake to uphold Highways Department’s continued compliance with them...”
Item II of the letter reads:
“UTILIZATION
CONDITIONS
NECESSARY FOR ON-
GOING CONTRACTUAL
ENGAGEMENTOwner/drivers in category (2) with Urban construction gangs usually only have sufficient cartage to occupy their trucks for up to 50% of the week.
Continued engagement of a contract truck owner/driver is dependent on the Department’s ability to make use of the truck and/or the driver to the extent that it costs the Department to hire him and his truck. To this end, the Department needs to use the services of the category 2 owner/driver in the same manner as it uses the services of employed construction workers paid at driver’s award rates in it’s construction gangs. These employees perform all the duties permitted of a construction worker.
Anything less than this will create the situation in which the Department cannot use either truck or driver for extended periods (assessed at about 50%) forcing their lay off as contractors (recognising that they are not weekly paid wage earners). There is a strong possibility that this will create hardship to the point at which truck ownership and operation is not viable.”
The terms of the agreement reached between the Department and the unions were circulated to the hire truck operators, and thereafter, the hire truck operators were expected, if they were engaged for a day, to participate for up to 50 per cent of their time in the same work as members of the construction gangs who were full-time employees of the Department. The evidence suggests that until late 1994, and into 1995, hire truck operators were probably engaged for about 30 per cent of their time assisting in the work of the construction workers, but then, as the amount of available truck work was still falling, hire truck operators spent more of their time, perhaps up to about 50 per cent, assisting construction workers.
It was put in argument by the respondent that there were contractual documents between the parties that assisted in determining that Mr Paterson was engaged as an independent contractor. In every case where the nature of the relationship is in question, it is to be determined by reference to criteria found in the terms of the agreement constituting the relationship. Where the terms of that relationship are reduced to writing the nature of the relationship is to be ascertained from the written document: Lenzoot Haulage Pty Ltd v Sinclair at 511 and Narich Pty Ltd v Commissioner of Payroll Tax (1983) 50 ALR 417 at 420-421. If the nature of the relationship is ambiguous after the written terms have been considered, an express provision in the agreement purporting to define the status of the party engaged can remove the ambiguity: AMP Society v Chaplin (1978) 18 ALR 385 at 389-390. In the present case however the documents to which the respondent refers are not, in my opinion, documents that purport to lay down the terms of the engagement, nor do they make any express provision as to the nature of that relationship. The documents are a form of indemnity agreement prepared by the Highways Department for signature by hire truck operators. The terms of the indemnity provide that the hire truck owner will keep the vehicle insured on terms that indemnify the hirer against liability of the hirer for any claim or claims for damages arising out of the use of the vehicle up to $200,000, and that the owner agrees to indemnify the hirer against such damage to that extent. There are a number of associated documents which merely record that Mr Paterson as owner of a nominated vehicle produced evidence of insurance. These documents do no more than evidence one factor to be taken into account when deciding the nature of the relationship, that factor being the provision of the indemnity which points towards the conclusion that the relationship involves a contract for services rather than a contract of service.
During the years 1980-1984 the certificates acknowledging production of proof of insurance record that the insurance was in the name of Mr Paterson and his wife. The respondent argues that this is a matter of significance. However I do not think it is entitled to any weight. During these years Mr Paterson for taxation purposes treated himself as the sole owner of the trucks involved.
The fact that the respondent had arranged workers’ compensation cover in respect of the hire truck operators, to cover them for injuries suffered whilst assisting construction workers, is not evidence that the respondent has treated hire truck operators as employees. The Workers Rehabilitation and Compensation Act 1986 makes provision for the extension of the Act to self employed persons: s.103. It is, nevertheless, one of the factors to be considered.
Evidence was also led that towards the end of the relationship the respondent made payments to the Australian Taxation Office in respect of the Superannuation Guarantee Levy. Those payments were however made on the basis that particular operators were sole traders. The payments do not provide evidence that the respondent was treating the relationship with those operators as that of employer and employee.
If the relationship between the parties were to be determined by considering the conduct of the parties and their course of dealing in the period from 1978 to 1983, in my opinion there could be little doubt that during that period Mr Paterson was an independent contractor. He was providing substantial plant and equipment at his expense and risk: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. He held himself out to the Australian Taxation Office as an independent contractor, and included amongst his business expenses an allowance for his motor car, power and light. And he was paid a rate more than double that received by road gang employees.
On the other hand in the later period, particularly in 1995, the indicia in favour of an employer/employee relationship were much stronger. But for the rate of remuneration, the performance of labouring work assisting the construction workers has all the hallmarks of an employer/employee relationship. However the rate of remuneration is not a matter that can be overlooked, nor can the labouring aspects of Mr Paterson’s work be divorced from his work as a hire truck operator. Even during the times when Mr Paterson was assisting the construction workers in the gang, he was paid an hourly rate more than double that of the construction workers. He was paid that rate because he was a hire truck operator, and because he was not treated as an employee of the Department.
In my opinion it is significant that in the early years of the relationship the indicia found in the terms of the agreement, to be implied from the conduct of the parties and the course of their dealings, points strongly to the conclusion that Mr Paterson was an independent contractor. Plainly at that time both parties considered that this was the status of Mr Paterson. From 1984 the work performed by Mr Paterson changed because the amount of available work diminished. However the purpose of the tripartite agreement was not to change the nature of the legal relationship between the parties, but to preserve and continue it so that a minimum number of hire truck operators were put off. That fact, coupled with the further facts that Mr Paterson has continued to represent himself as a contractor to the Australian Taxation Office, and has continued to receive for all his work an hourly rate more than double that of an employee, lead me to the conclusion that Mr Paterson was at all times an independent contractor working under a contract for services.
I refer briefly to the conclusions of the Judicial Registrar expressed in her second judgment. In support of the conclusion that Mr Paterson was not entitled to a severance payment the Judicial Registrar said:
“In my view the only construction that can be placed upon the arrangement between the Applicant and the Respondent is that he was an employee paid as a casual bearing in mind the following factors.
· It is obvious that he was engaged on a different basis to that of the weekly hired employees of the Respondent.
· He was regarded by the Department and by himself as an independent contractor.
· He was only paid when he worked.
· He could be sent home in wet weather and only be paid for 2 hours work.
· The rate he was paid of $23.84 in addition to mileage of 56 cents per kilometre was more than double the rate paid to the weekly hire labourers.
It seems to me that there was an intention on the part of both parties that the Applicant was to be responsible for annual leave, sick leave and severance payments from the hourly rate that he was paid...”
In my view these factors point to the conclusion that Mr Paterson was an independent contractor. Plainly his engagement was not “casual”. It was long term and regular. The importance of the hourly rate as an indication that Mr Paterson was an independent contractor and not an employee became evident when the Judicial Registrar sought to address the payment that should be made in lieu of notice. She adopted the hourly rate for the purposes of the calculation paid in respect of the provision of a truck and a driver. This is about double the net rate after meeting expenses at which the applicant was remunerated under his contract with the respondent.
In my opinion the review should succeed. The decisions of the Judicial Registrar should be set aside and the application under s.170DE should be dismissed.
In the event that the review succeeded, the respondent argued that costs should be awarded against the applicant pursuant to s.347 of the Act. It was argued that as the applicant filed a tax return, in which he described himself as a carrier conducting his own business, after the institution of the proceedings, that should be taken as an indication that he knew that the application was bound to fail; and accordingly the application should be characterised as one instituted vexatiously or without reasonable cause. The applicant’s description in his taxation returns was but one of many factors to be weighed and was not in itself determinative. In my opinion there should be no order for costs on the dismissal of the application.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Justice von Doussa
Associate:
Dated:
Counsel for the applicant : Ms P Y Wong
Solicitor for the applicant : Duncan and Hannon
Counsel for the respondent : Mr M Evans and Mr J Hankin
Solicitor for the respondent : Crown Solicitor (S.A.)
Date of hearing : 8 April 1997
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