Predl v DMC Plastering Pty Ltd

[2014] FCCA 1066

FEDERAL CIRCUIT COURT OF AUSTRALIA

PREDL v DMC PLASTERING PTY LTD & ANOR [2014] FCCA 1066

Catchwords:
INDUSTRIAL LAW – Award – breach of award – nature of employment – whether the Applicant was a subcontractor or employee – whether the employee was casual or permanent – right to set off overpayments of wages against other outstanding entitlements – no right to set off – application allowed.

Legislation:

Fair Work Act 2009 (Cth), ss.44, 45, 90, 539(2), 550

Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30
Burcombe v Oldham and Others t/a The Royal Hotel (1996) 71 IR 404
Community & Public Sector Union and Others v State of Victoria (2000) 95 IR 54
Curtis v Perth and Fremantle Bottle Exchange Company Ltd (1914) 18 CLR 17
Fenwick v World of Maths [2012] FMCA 131
Forstaff Pty Ltd v Chief Commissioner of State Revenue (2004) 144 IR 1
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
James Turner Roofing Pty Ltd v Peters [2003] WASCA 28
Marshall v Whittaker's Building Supply Company Ltd (1963) 109 CLR 210
On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82
Poletti v Ecob (No 2) (1989) 91 ALR 381
Reed v Blue Line Cruises Ltd (unreported, Industrial Relations Court of Australia, Moore J, 26 November 1996)
Ryde-Eastwood Leagues Club Ltd v Taylor (1994) 56 IR 385
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16
Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250

Applicant: JASON PREDL

First Respondent: DMC PLASTERING PTY LTD

Second Respondent: DAMIEN CLAYPHAN

File Number: BRG 498 of 2012

Judgment of: Judge Burnett

Hearing dates: 10 April 2013; 4 November 2013

Date of Last Submission: 4 November 2013

Delivered at: Brisbane

Delivered on: 28 May 2014

REPRESENTATION

Solicitors for the Applicant: Cooper Family Law

Solicitors for the Respondents: Milner Lawyers

ORDERS

1. The matter be listed for hearing for assessment of compensation on a date to be fixed.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 498 of 2012

JASON PREDL

Applicant

And

DMC PLASTERING PTY LTD

First Respondent

DAMIEN CLAYPHAN

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. The Applicant, Jason Predl, claims that the First Respondent, DMC Plastering Pty Ltd (“DMC”), contravened the provisions of the Fair Work Act 2009 (Cth) (“FW Act”) during the course of his eight year employment. The particular contraventions alleged concern the non-payment of leave entitlements pay due throughout the period of his employment.

2. The Applicant initially contended that the he ought to have been employed on terms and conditions consistent with the Building Construction Industry Award – State 2003 (“the Award”). By operation of the Award and ss.44 and 90 FW Act he contends that as an employee he was entitled to annual leave payments upon the termination of his employment.

3. At the heart of the application was the question of whether or not the Applicant was indeed an employee of DMC or whether he was an independent contractor. If he was an employee a further question arises as to whether he was a casual or permanent employee. Finally, if DMC is liable to the Applicant for leave entitlements, is it able to set off over award payments made to him against any such liability?

Material Facts

1. The Applicant commenced working for DMC in September 2003. He says that he was employed as a plasterer, although in the course of cross-examination it transpired that he was initially employed as a trough hand. During his employment he gained a trade certificate which permitted him to describe himself as a plasterer. Nothing turns upon that matter. More significantly, he says that over time the nature of his employment changed in that he transitioned from the role of a trade employee into a supervisor, whereby he not only undertook trade duties himself but also supervised the performance and duties of others.

2. Sometime in 2003 the Applicant met up with Scott Holloran, a person he had worked with previously as a plasterer. Mr Holloran is the brother-in-law of the second respondent, Damien Clayphan. The Applicant says that Mr Holloran proposed that he work for DMC as a plasterer. The Applicant acquiesced to Mr Holloran’s invitation and says that a short time later Mr Holloran phoned him to say that he had a job with DMC and that he could start in about two weeks. At the time of that conversation the Applicant says that Mr Holloran spoke with him about hourly rates and advised him that he would be paid $18.00 per hour. He says that no other conditions of employment were discussed.

3. Having agreed to commence employment with DMC, the Applicant terminated his other employment and commenced with DMC in September 2003, initially on a job site at Arnold Street, Holland Park. He says that on that first day Mr Clayphan attended the site and he met him, but that there was no discussion concerning job terms and conditions.

4. He says that he worked for DMC and was paid for two weeks prior to having any formal discussion with Mr Clayphan about the job’s terms and conditions. He says that he had provided his bank details to Mr Clayphan for the purpose of direct transfer payments and that at that time Mr Clayphan had told him to come to him when he had an opportunity so that they could discuss “other matters.”

5. In about late September 2003 the Applicant went to Mr Clayphan’s residence at Birkdale and they sat down in the office of his house to discuss the terms of employment. He says that Mr Clayphan said to him that he would employ him for as long as he could give him work but that he needed to have an ABN so that the Applicant could claim tool and fuel expenses as a tax deduction. The Applicant did not impress me as a particularly sophisticated individual. He had his tax affairs attended to by a tax agent and I accept that he would not have been particularly astute when it came to these matters. I have no difficulty accepting his evidence that he accepted Mr Clayphan’s statements on these matters without question.

6. The Applicant also says that at this time Mr Clayphan told him that he could not guarantee him indefinite work. Likewise, I accept this statement. The statement accords with common sense. The building industry is notoriously volatile and DMC understandably did not wish to be committed, at least in the short term, to the responsibility and obligations of employees. The Applicant says that Mr Clayphan also told him that he would be paid $18.00 an hour and that this was the award rate. Again, I accept the Applicant’s evidence concerning the rate, but for reasons expressed later I do not accept that he was informed the rate was an “award” rate. The focus of the Applicant’s attention was upon the rate, particularly given that the pay was more than the Applicant had been paid in his previous job. To the Applicant that matter was, of itself, of more significance than whether or not the rate was the award rate. In any event, the Applicant was adamant that he was not told that the rate was above that in the Award; I accept that evidence.

7. At the time of taking up employment with DMC the Applicant was relatively inexperienced in the construction industry. His previous employment had been as a factory hand with Herron Pharmaceuticals. Given that background, I have no difficulty in accepting that he accepted Mr Clayphan’s statements at face value. He says that at the time there was no discussion about holidays, sick leave or any other entitlements. Again, these are matters which I do not expect would have been at the forefront of the Applicant’s mind given his relative inexperience in the employment market, and accordingly I have little difficulty in accepting that evidence. He says that they also discussed the supply of tools. He had to supply a hawk (a stand to hold the render), a trough, floats and a small tool (a metal bar for scraping out weep holes in render). These relatively small items are of a more personal nature. The other more substantial equipment and materials required were supplied by DMC, as is discussed later.

8. Finally, the Applicant says that they discussed the completion of a PAYG withholding form. He says that Mr Clayphan asked him to complete the section for the employee, which he did by crossing the box marked “registered for GST” on the basis that Mr Clayphan had told him, and he accepted, that he needed to earn more than $75,000.00 a year to be registered and that he would not be earning that much. Upon that basis he says that Mr Clayphan told him to cross the box marked “Flat rate of withholding is 20%” on the PAYG form. The form was completed on the basis that he would be earning only $18.00 per hour and would therefore earn insufficient monies to pay any more tax. He understood the form to mean that DMC could withhold from his pay income tax that he might otherwise be required to pay. He says that he was not told that he had an option to pay his own tax.

9. Consistent with that discussion on 15 September 2003 the Applicant also registered himself on the Australian Business Register as a sole trader.

10. In about August 2006 the Applicant says that he asked Mr Clayphan in writing to increase the PAYG withholding from 20% to 30%. This was on the advice of his accountant. At that time he was earning about $27.00 per hour, which shortly thereafter increased to $28.00 per hour. He was concerned that given the pay rise he needed to make more income tax allowance and his accountant had advised that the withholding rate be adjusted. These events appear to coincide with the Applicant’s elevation to the position of supervisor, which is discussed below.

11. A week or so after his initial meeting the Applicant was also given four or five “DMC” singlets, together with a “DMC” hat. The singlets were identifiable, being white with blue trim adorned with an orange DMC emblem on the left breast. There was also an emblem and phone number on the back. He was told that he had to wear these singlets and a hat on site each working day, and he did so. In addition, he says that he was provided with business cards for DMC and later in his employment he drove a vehicle emblazoned with DMC logos.

12. The Applicant says that from the commencement of his employment he was never told that he was a casual employee, although he accepts that he would simply be told what work would be available for him and where he could go. From the outset he says that he was employed on a regular and systemic basis and that although the initial representation had been that there would be no guarantee of work the reality proved otherwise. DMC challenged the apparent continuity of his employment. In the course of cross-examination the Applicant was taken to wage records which indicated a number of occasions when he worked less than a full week. However, some observations ought be made about those records. Firstly, a number of those occasions were weeks in late December; presumably those weeks merged into the Christmas stand down period when he was meant to be on holidays, consistent with the stand down period that operates throughout the construction industry over every Christmas period. Nothing is to be inferred from those weeks. In other instances he says that it was possible that he did not work a full week because of the weather. Given the nature of the work, which was largely conducted outdoors, it is understandable that if the weather was inclement there may have been no work for him. Otherwise the wage records appear to indicate that he has worked on average over 38 hours a week. That is to say that he appears to have been engaged on a full-time basis.

13. A review of the Applicant’s payroll transaction details reveals that between his initial employment in September 2003 until 2011 he was regularly employed by DMC to work more than 32 hours in any one week.[1]

    [1] Assuming a 42 hour working week, 32 hours represents 80% of that time.

14. For instance, in the first six months the Applicant worked for less than 32 hours in any one week in 10 out of 24 weeks. In the following six months that reduced to 3 out of 24 weeks. In the following 12 months he worked less than 32 hours in 10 out of 48 weeks. From September 2005 through until July 2008 (being a little over three years) he worked more than 32 hours per week for every week except 8 weeks over that 3 year period. From July 2008 through to termination he worked on average 20 out of 24 weeks on a full time basis. His payroll data confirms that he was principally employed by DMC from about February 2004. That is, he worked on average 4 or more days per week for DMC for more than 80% of the weeks in any one year. Significantly, the Applicant worked for no other employer throughout the period of his engagement with DMC.

15. The Applicant says that the manner in which work was allocated was by a text message sent by Mr Clayphan the day before any job was to be done. The message contained details for the next job he was to work at, including a start time and address. He was also advised of the nature of the work, such as being told that it was a “knockout” job, meaning one day’s work rendering a residential home.

16. Mr Clayphan says that persons such as the Applicant could reject a job that was offered by SMS message, and that there were times when persons including the Applicant did not accept an offer of work. He also says that there were days when they accepted work but did not attend the worksite. He observed:

    “It was also common for subbies including the Applicant not to work when they had accepted a job. Where this happened the subbie would just text me and say something like “won’t be in today.” I never asked or required the subbie to tell me why he wouldn’t be in that day. I didn’t pay sick leave or other leave entitlements.”[2]

    [2] Affidavit of Damien Clayphan filed 6 November 2012 at [13].

17. However, the Applicant said that the nature of the SMS messages was that they were not optional in the sense that he was being afforded an opportunity to either accept or reject the work, but rather were directive in their nature. The only occasion when the Applicant says he did not comply with an SMS direction was when he was sick. The clear impression I formed from the evidence was that DMC would inform the Applicant and other employees of the time and place for a job, and they were expected to attend. The employment was in the nature of a direction and not an offer, as was suggested in cross-examination. To that end I accept the Applicant’s evidence that there was never any real option provided in the SMS to reject the job offer.

18. On attending a site the Applicant says that there would usually be in place a render pump, the bags of render, beads and any other scaffolding or frame pieces needed to scale walls. He states that when he attended site he also discovered who he was to be working with on that particular day. Each of these other members had also received SMS messages from Mr Clayphan and had attended accordingly. The manner of organisation deposed to by the Applicant confirms my earlier view that the style of offer was not optional but directory.

19. The Applicant says that until he was subsequently appointed a supervisor Mr Clayphan controlled the worksite, the workers and the manner in which the work was conducted.

20. In 2005 the Applicant was appointed as a supervisor. During the course of his performance of duties as supervisor the overall supervisory and directory approach of Mr Clayphan was emphasised by the information and directives that he issued to the Applicant. For instance, he says that by SMS he was often requested to provide to Mr Clayphan detailed specifics about when other employees would take breaks and the manner in which they conducted work. He also provided information concerning timeframes within which work was to be completed and gave directions to press the staff to work harder and faster. The Applicant says that when appointed as supervisor he was told by Mr Clayphan to “watch the hours of other staff members, and to push the staff to undertake work quickly.”[3] He said for instance he was issued with a directive on 21 October 2010 headed “NOTICE RE WORK HOURS,”[4] which listed a series of dot points relevant to his responsibilities as supervisor. They included:

    “-   START TIME IS WHEN RENDER WORK HAS BEGUN NOT WHEN YOU ARRIVE ON SITE.

    -    KNOCK OFF IS WHEN RENDING STOPS NOT WHEN YOU GET IN YOUR VEHICLE TO GO HOME.

    -    SMOKO IS 20 MINUTES DURATION ONLY

    -    LUNCH IS 30 MINUTES ONLY. IF YOU CHOOSE TO WORK THROUGH LUNCH THAT DOES NOT MEAN SMOKO IS MORE THAN 20 MINUTES

    -    THE ABOVE ITEMS WILL BE MONITORED CLOSELY FROM NOW ON

    -    HOURS WORKED ARE REPORTED DAILY BY THE SUPERVISORS AND ARE PAID ACCORDINGLY

    -    IF YOU HAVE DISCREPANCY WITH YOUR HOURS, IN THE FIRST INSTANCE, DISCUSS WITH THE APPROPRIATE SUPERVISOR WHO WILL THEN CONTACT DAMIEN IF REQUIRED

    -    SUPERVISORS PLEASE ENSURE ALL WORKERS AND SUBBIES UNDER YOUR DIRECTION ARE SHOWN BY THIS NOTICE”

    [3] Affidavit of Jason Predl filed 30 January 2013 at [36].

    [4] Annexure JP4 to the affidavit of Jason Predl filed 30 January 2013.

21. It is not disputed that on the average worksite there would be generally three other persons together with the Applicant as supervisor.

22. At about the same time as the Applicant was appointed supervisor he was also given the use of a DMC vehicle. Prior to being given use of the vehicle he was required to get to various worksites by his own means. After 2005 he attended the various sites driving the DMC vehicle for which a fuel card had also been supplied. There was in place an arrangement whereby the Applicant would make some contribution for petrol but that was only to apply in respect of private use.

23. In addition, when required to travel to sites remote from his home location DMC paid the Applicant’s travel and accommodation costs. That would usually include basic motel accommodation together with a small allowance for meals.

24. In 2006 DMC issued the Applicant with a new vehicle. Consequently DMC proffered a “contract” for completion by the Applicant concerning the use of the vehicle. In particular, the contract observed:

    “It is a condition under this contract that when approached by a member of the public seeking a quotation for rendering when the employee is dressed in DMC Plastering clothing, working on a DMC Plastering job or driving the said vehicle the employee is responsible for giving the member of the public a DMC Plastering business card. Business cards have been supplied in all vehicles and it is the responsibility of the employee to ensure that supply is replenished when needed. If it has been found at any stage that the employee has been negligent in completing the above, the employee will be punished which may include removal of the vehicle from the employee’s use or dismissal.”

25. Finally, the Applicant says that he was not permitted to subcontract his duties to third parties.

26. Initially, the Applicant provided DMC with weekly invoices of the kind exhibited at Annexure JP6 to his affidavit filed 30 January 2013. The invoice particularised a day, location and time of work, together with the value of the claim. The Applicant would deliver the invoice to DMC which in turn would pay the Applicant the sum claimed less the relevant withholding tax. The Applicant never registered for nor collected GST on any invoice he delivered to DMC.

27. The Applicant says that this process persisted until about June 2004 when he was then issued with a payslip of the kind illustrated at Annexure JP7. I note that the payslip referred to the Applicant as “Employee” and that under the heading “Employer Contributions” there was provision for superannuation of $75.60, which coincidentally equates to 9% of the amount payable. Plainly, superannuation would not be payable by DMC to the Applicant if he were a true contractor and not an employee.

28. Subsequently an arrangement was put in place where the Applicant would SMS details of the hours claimed to DMC. Later, when he became a supervisor, he would not only forward by SMS his own details but also the details of employees whom he was supervising. Sometimes this would lead to dispute concerning the hours worked, but the dispute was more generally concerned with issues of productivity rather than the strict entitlement to be paid for the hours worked.

1. Some additional insight into the relationship between the Applicant and DMC can also be seen from the “CONTRACT BETWEEN DMC PLASTERING SERVICES PTY LTD AND JASON PREDL” prepared for the Applicant at the time he took possession of the new vehicle.[5] It should first be observed that the parties define themselves respectively as “employer” and “employee” for the purpose of the contract. Furthermore, the contract notes the provision of a vehicle being supplied to “the employee for unconditional use” with only “fuel consumption and negligence” to be paid by the employee. Additionally, the contract notes that when “the employee is dressed in DMC Plastering clothing, working on a DMC Plastering job or driving the [DMC] vehicle [he] is responsible for giving [members] of the public a DMC Plastering business card.” Failure to do so would involve “the employee [being] punished which may include removal of the vehicle from the employee’s use or dismissal.”

   [5] Annexure JP5 to the affidavit of Jason Predl filed 30 January 2013.

2. The terms of the so-called “contract” arguably constituted admissions against DMC in respect of the issue of the Applicant’s employment. The concept of an employee being “punished” or dismissed is consistent with a relationship of employment rather than a contractual relationship. Contractors that breach contracts are subject to claims for damages and/or termination.

3. Furthermore, there was evidence of the competitive nature of the plastering business. Against that background it would be odd that DMC would actively assist another competitor by supplying, at its own cost, a subcontractor with a vehicle which could be used to the advantage of another competitor.

4. Further, there was the issue of the Applicant’s employment as supervisor. The plain inference from DMC’s evidence was that the Applicant was engaged as a contract supervisor to in turn supervise other subcontractors. While I accept that arrangements may be structured in any manner or form, one matter following upon this arrangement was the Applicant’s full time engagement by DMC to undertake such supervisory tasks. In all other respects the conditions relevant to the relationships between the Applicant and DMC remain the same. That is to say that, notwithstanding the change in character of the Applicant’s duties, no other changes were evident in the relationship between him and DMC.

5. Finally it was submitted that other persons were employed on this basis. The evidence of Mr Peter Knight was relied upon in that regard;[6] his evidence was not helpful. Evidence of the Applicant’s tax returns was also of no utility. The fact remains, as addressed elsewhere, that the self-characterisation of the relationship by the parties is not dispositive of the issue. 

   [6] Affidavit of Peter John Knight filed 18 December 2012.

6. In summary, the evidence demonstrated that the Applicant:

   a)Was employed exclusively by the First Respondent. While there may have been some occasions when he was not employed for a full 38 hour week, the facts demonstrate that for the overwhelming majority of the time between 2003 and termination the Applicant was employed by DMC, for “greater than 80% in any one week”;

   b)Operated under the direction of DMC. He was instructed as to which sites to attend and on the duties to be undertaken at the various sites. He subsequently progressed to the position of supervisor of other workers on sites to which DMC was contracted;

   c)Was issued with indicia identifying him as part of DMC’s business. The indicia were initially limited to singlets and a hat. Subsequently he was issued with a motor vehicle and was directed to issue business cards when dealing with the public; and

   d)Was supplied with most of the equipment necessary to undertake the works for which he was employed. That included scaffolding, drills, leads, concrete mixers, pumps, first aid equipment, buckets, materials and beads. The Applicant was only required to supply personal equipment such as trowel and sponges.

7. On 17 December 2012, the Applicant gave DMC formal notice of his resignation. Upon termination he was not paid any termination benefits, being principally his unpaid annual leave for the six years preceding his resignation.

8. In response to the Applicant’s case, Mr Clayphan, the director of DMC, gave evidence that all persons engaged by him were engaged on a labour-only subcontract basis. I have no doubt that he genuinely believed that to be the case. Even so, his belief, however genuine, ignores the true legal status of the arrangement between himself and those who were engaged on that basis.

9. Mr Clayphan gave evidence that nothing turned on the SMS messages sent to the Applicant with details of the site at which he was being offered work. However, even if I accept that matter, a difficulty still arises as to how DMC could have organised labour (contract or otherwise) without some basis for expecting that, following a direction to attend a site, the labourer would attend. For instance, taking Mr Clayphan’s evidence to its logical conclusion, if he could not rely upon labour attending as directed by his SMS offer, it is conceivable that no one would attend site upon the presentation of an SMS offer, leaving him unable to fulfil his contractual obligations. Alternatively, if one allows for the prospect of a broadcast to all subcontractors when only one or two may be required, then he could be left in the position of having too much labour on site, such that the job could not be completed efficiently. Although these matters were not the subject of cross-examination, I think that as a matter of common sense it is open to infer that there must have been some element of organisation in both directing the attendance of  labour and the expectation that labour would attend upon that order – to do otherwise would have rendered the worksites utterly chaotic. Labour would not attend upon a direction if the degree of regularity and circumstances of engagement were such that the relationship did not have a character of employment rather than plain contracting. Mr Clayphan did not impress me as a witness who necessarily would have been tolerant of such chaos; indeed, he now operates a successful plastering business, a fact which of itself counters that conclusion.

The Applicant’s Claim

1. Mr Predl claims that he was employed by DMC as a full time employee (Construction Worker Level 3 – Trade Qualified Plasterer) throughout the relevant period of his employment, and accordingly claims for unclaimed accumulated annual leave entitlements due as at the date of his termination. Critical to the resolution of this issue is the question of whether or not he was an employee or contractor and, if he was an employee, his appropriate characterisation, that is, whether he was a permanent or casual employee.

Relevant Principles

1. In Fenwick v World of Maths [2012] FMCA 131 I set out the relevant principles for determining the question of whether a person is an employee or contractor. For convenience I restate them.

Was the Applicant a Contractor or Employee?

1. The principles governing the issue of whether or not a person is employed under a contract of employment or is an independent contractor have been the subject of considerable judicial examination.  The two leading cases on the subject are Hollis v Vabu Pty Ltd (2001) 207 CLR 21 and Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16. The relevant principles have recently been restated and summarised by Bromberg J in On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82. In that decision his Honour commenced by noting that in determining the issue the Court must look to the real substance of the relationship in question, and not merely the form.[7] In making that observation he followed the observations of Isaacs J in Curtis v Perth and Fremantle Bottle Exchange Company Ltd (1914) 18 CLR 17, where at 25 he said:

   “Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance.”

   [7] At [189].

2. In this case, notwithstanding the dispute between the Applicant and DMC concerning the label attached to describe their relationship, it is self-evident that that dispute is barren. Here there must be an examination of the real substance of the relationship in question.

3. Commencing at [201] his Honour examined the basis for distinguishing between an employee and an independent contractor.  He noted that the analysis must commence with a proper identification of the parties to that relationship, their role, function and the nature of the interactions which constitute their relations.  His Honour noted that the law had moved beyond the “degree of control” test formerly accepted and that the modern approach was “multi-factorial” and that a range of indicia may be examined although that approach was not always useful because while there was value in a multi-factorial test, it may not always adequately illuminate the totality of the relationship.  He considered as appropriate a test which may be described as a ““smell test,” or a level of intuition.”  In summarising the principle in Hollis v Vabu Pty Ltd which provided for the application of a multi-factorial approach, his Honour noted that it provided a “focal point around which relevant indicia can be examined.”  That focal point has been elsewhere expressed as the “ultimate question” posed by the totality approach: Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30 at [34]. His Honour noted that the “ultimate question” was posed by Windeyer J in Marshall v Whittaker's Building Supply Company Ltd (1963) 109 CLR 210 at 217 in a passage which the majority in Hollis strongly endorsed at 40. His Honour continued:

   “[207] … The majority in Hollis (citing Windeyer J) said, the distinction between an employee and an independent contractor is “rooted fundamentally” in the fact that when personal services are provided to another business, an independent contractor provides those services whilst working in and for his or her own business, whereas an employee provides personal services whilst working in the employer's business: at [40]. Unless the work is being provided by an independent contractor as a representative of that entrepreneur's own business and not as a manifestation of the business receiving the work, the person providing the work is an employee …”

   [208] Simply expressed, the question of whether a person is an independent contractor in relation to the performance of particular work, may be posed and answered as follows:

   Viewed as a “practical matter”:

   (i) is the person performing the work an entrepreneur who owns and operates a business; and

   (ii) in performing the work, is that person working in and for that person's business as a representative of that business and not of the business receiving the work?

   If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee.

   [209] The question which this approach poses appears to me to be the central question in the application of the totality test. The question provides the focal point around which the indicia thrown up by the totality test may be examined. The central question has two elements. The first is whether the person has a business. The second is whether the work or the economic activity being performed is being performed in and for the business of that person …”

4. Concerning the first element, that is, to carry on a business, his Honour stated that it was to “conduct a commercial enterprise as a going concern.”[8] He noted that usually that would involve the acquisition and use of both tangible and intangible assets in pursuit of profit and that the desire to make profit was an important element. His Honour noted that generally a business would enter into transactions on a continuous and repetitive basis in pursuit of profit and that a business typically has, or at least aspires to have, value (constituted by either goodwill or realisable assets) which extends beyond its physical assets. His Honour noted that a common intangible asset of a business is its “name, brand, reputation or goodwill” and that typically the activities of a business will be organised in a business-like manner including the use of systems. His Honour considered that the word “business” imports the notion of system, repetition and continuity and it normally ought be operated in a “business-like way.”[9]

   [8] At [210].

   [9] At [210].

5. At [211] his Honour observed that the nature of business will vary and some of the typical indicia that he identified may be less important in some settings than in others. For instance, he noted that the characteristics of a share trading business would be different to those of a retail business and again to those of a business selling personal services. Respectfully, so much is self-evident. However, in respect of a personal services business his Honour specifically stated:

   “[212] A personal services business is a business which is likely to involve system, repetition and continuity in the pursuit of profit. A genuine personal services business will aspire to make profits and not simply be paid remuneration, as is an employee. Such a business will seek to be remunerated not simply for the provision of the labour of the self-employed entrepreneur that provides the personal services, but also for the risks involved in that person being an entrepreneur.

   [213]… By its very nature, a genuine commercial enterprise is an undertaking which involves risk. Business risk is a product of a need for a business to invest (either in physical assets, time or effort) at a cost and without any certainty or assurance of that cost being recovered and any profit being made. Unlike an employee who generally seeks security, and is not risk-tolerant, a personal services business is prepared to invest time, money and effort with little or no certainty that such investment will be rewarded with a financial return. All of that is done in the hope of making a profit. It is in that sense, that an entrepreneur operating a personal services business seeks profit and not simply remuneration, for the personal services provided.

   [214] A genuine independent contractor providing personal services will typically be: autonomous rather than subservient in its decision-making; financially self-reliant rather than economically dependent upon the business of another; and (as I have said) chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.

   [215] In an employment relationship, there will typically be an entrepreneur, but that will be the employer, it will never be the employee. The employer will take the risk of profit or loss. The employee seeks the security of fixed and certain remuneration. Unlike the independent contractor, the employee has no business, and typically will have no interest or desire, in exposure to the risk of loss in return for the chance of profit.”

6. In considering his Honour’s remarks against the background of this case, I am of the view that the Applicant was in fact an employee and not an independent contractor.  Although purportedly contracting, the Applicant was not conducting business in the sense in which his Honour has articulated the definition of that term.  For instance, the risks to the Applicant in the conduct of the operation if it were to be a business were two-fold:

   a)He would not be paid by the First Respondent and perhaps incur the risk of being an unsecured creditor pending payment.  In that regard the risk that he bore was no different to the risk he would have incurred as an employee, because the system for payment provided that the Applicant submit an invoice which included the particulars of the duties undertaken by him and in respect of which he claimed recompense. Against that background the risk was the same in either event, and accordingly that risk could not be said to favour the conduct of the business in the sense that it would if for instance the invoices were rendered monthly rather than weekly, as was generally the case here.  

   b)There was also the performance risk.  That is to say that if the Applicant was unable to attend to his duties as supervisor then damage to reputation was caused to the goodwill of DMC. The Applicant was minimally exposed to that risk. That is because unless the Applicant regularly failed to attend at sites to arrange plastering activities, the loss of reputation would be suffered by DMC and not by the Applicant. Although as between the Applicant and DMC the Applicant’s failure to attend as arranged may have caused inconvenience, it probably would not have caused their arrangement inter se to be terminated. Accordingly, there would have been no transfer of the risk borne by DMC to third parties onto the Applicant.  As a corollary of that matter any goodwill generated by the Applicant in his attention to the performance of his duties would not have accrued to his benefit.  Goodwill would accrue to DMC through the growth in demand for its services, services which were in turn not necessarily required to be provided by the Applicant.  Given the specific nature of the services provided by DMC it is unlikely that if the Applicant was, for instance, a superlative performer he could capitalise on his ability by providing those services to another contractor. In the building industry works are generally undertaken between set hours. Thus it would have been unlikely that the Applicant could have replicated his work activities elsewhere on any particular day he worked for DMC. It follows in this case that the Applicant could not be seen to be chasing profit that represented a return on risk, but rather simply was receiving payment for time, skill and effort provided.

7. The matter of risk and profit feeds into the other indicia which were identified by his Honour. For instance, given the Applicant’s reliance upon the submission of weekly invoices, he was not financially self-reliant and was largely economically dependent upon DMC.  It is not to the point that DMC considers that it only engaged the Applicant on a casual basis and that the Applicant was free to undertake other employment and enjoy other income earning opportunities if he so chose. Given that in essence the Applicant was selling his time, which was incapable of being leveraged, it is plain that he was not financially self-reliant.  In other words he could not look to other sources of cash flow generated by his personal effort to ensure his economic independence from DMC.

8. Furthermore, the provision of his service was not autonomous in its decision making.  The service provided was provided essentially at the direction of DMC in a format designed and largely prescribed by DMC.  The only factor which appears to favour the conclusion that the Applicant conducted a business is that his services required such skill as to be suggestive of the pursuit of trade through a business.

9. The next matter to be considered is for whom the economic activity was being performed. As noted above, the Applicant’s activity for DMC did not appear to constitute the provision of an economic activity involving an opportunity for profit and a risk of loss, at least between the Applicant and DMC. It was an activity that involved the payment of money consistent with the remuneration that an employee would receive for providing labour. Furthermore, any risk from the Applicant’s perspective was minimal and directed to the performance of the service arguably as an employee.  He was entitled to be paid irrespective of how poorly the service was delivered.

1. This matter was particularly highlighted by a number of factors expressed in arrangements between them which addressed the manner in which they characterised the relationship between them: Forstaff Pty Ltd v Chief Commissioner of State Revenue (2004) 144 IR 1 at 26. For instance, pay slips from June 2004 incorporated a discrete sum for his superannuation. This need not have been paid to the Applicant if he was in truth an independent contractor. Secondly, the vehicle contract expressly referred to the relationship as a master/servant relationship by its use of terms such as “employer” and “employee.”

2. Finally, although the customary “control test” is not always dispositive of the matter, the fact remains that the system of work was one by which the Applicant as supervisor was largely subject to the control of DMC, a matter evidenced for instance by the detailed instructions he was given by DMC on management of employees on site.

3. On the other hand, the risks associated with the provision of equipment and assets required for the performance of the economic activity lay entirely with DMC, not with the Applicant.  The applicant was provided the necessary significant tools by DMC.

4. It follows that I consider the Applicant to have been an employee and not an independent contractor.

Casual or permanent employment

1. Given that I am satisfied that the Applicant was an employee and not an independent contractor, the next matter for resolution is whether or not he was employed on a casual or permanent basis.

2. At the outset an issue arises as to whether it was a term of the contract of employment that the Applicant was employed subject to the terms of an award and, if so, which award. If not, he was employed as a National System Employee.[10]

   [10] Section 13 FW Act.

3. The Applicant said in evidence that during his initial conversations with Mr Halloran he was told that the rate of pay was $18.00 per hour. At that time no basis for this rate was discussed and he happily commenced work at that rate. About two weeks later he met with Mr Clayphan. During discussion at that time he was informed by Mr Clayphan that the rate was $18.00 per hour. He said that at that time Mr Clayphan told him that this was the “award rate.” The Applicant says that he did not know the award rate, so he accepted it. Mr Clayphan denies making that statement.

4. On balance I prefer the recollection and evidence of Mr Clayphan to that of the Applicant on this point. Each witness agrees that the Applicant undertook the process of having his tax affairs set up to accord with the style of arrangement expected of an independent contractor. If the rate to be paid was to be an award rate then one wonders why a “contractor” arrangement would be contemplated. Secondly, the Applicant’s case on this point was inconsistent. Despite referring to award rates at the time of his initial discussion with Mr Clayphan and alleging in evidence that he was employed as a plasterer as defined in the Award, in submissions the Applicant contended that he was covered by the National Employment Standards (“NES”) and was not bound by an award. If that was so then it seems unlikely that the Applicant would have been informed of an award by Mr Clayphan. For reasons addressed later I suspect that the Applicant was in fact covered by an award, but his knowledge of those matters was not evident to him at the time of his initial discussion with Mr Clayphan. Respectfully, I consider the Applicant’s references to an award to have followed the bringing of these matters to his attention, and find that they were not formalised in his mind at the time of his initial discussion , nor were they discussed, as Mr Clayphan contends.

5. The issue concerning the characterisation of an employee as casual or otherwise has always been a vexed one. Strictly speaking the contractual relationship between a casual employee and employer is an engagement by engagement relationship. Regular engagement is not inconsistent with casual employment: Ryde-Eastwood Leagues Club Ltd v Taylor (1994) 56 IR 385. In that case the provisions of the award significantly influenced the outcome. At 395 the Industrial Relations Commission of New South Wales (“the Commission”) observed:

   “We have reviewed those provisions of the Award to ascertain whether they prescribe or affect the nature of casual employment, as understood in a common law sense (see Doyle and Richens), in the industry regulated by the Award. Our conclusion is that they do not. [The Commission then proceeded to examine the specific clause and continued] In other words, in our view, the Award does not, as a matter of law, regulate the terms on which casual employees may be engaged but only the payments to be made to them once a contract of employment as a casual is entered into as that concept is defined in cl 3 of the Award. That conclusion as to the interaction between a common law contract of employment and an award is unsurprising. As was observed by Latham CJ, in Amalgamated Collieries of WA Limited v True (1938) 59 CLR 417 at 423:

   “When any person is employed to do work to which an award applies, the parties are bound by a contract. Their legal relations are in part determined by the contract between them and in part by the award. The award governs their relations as to all matters with which it deals …

   But an award never deals with all the matters which affect the relations of any particular employer and any particular employee. The creation of the relation of employer and employee depends upon an agreement between them and not upon any award. Thus, the existence of the obligations under an award in relation to a particular employer and employee always depends on the existence of a contract between them. So, also, there are terms of their relationship which do not depend upon any award. For example, the employee must always obey the lawful orders of his employer, but awards do not commonly include a term to that effect.””

6. In that instance the Commission concluded that the award did not contain a term prescribing or proscribing the making of a contract of employment between an employer and employee for employment as a casual on the basis of an ongoing or continuous contract. If the award initially contended for by the Applicant was operative, its time might be dispositive.

7. In any event, Mr Predl’s evidence was that following his initial conversation he would receive an SMS message every morning informing him of the site he was to be at and a start time. When asked whether he considered himself able to refuse the offer, he stated that he believed he could not.[11] The only exceptions to his attendance were the rare occasions on which he was ill, in which event he would send an SMS message to advise of his condition consistent with the instructions given to him to that effect when he was initially engaged.[12]

   [11] 10 April 2013 T22 line 14.

   [12] 10 April 2013 T22 line 41-43; T23 line 18-30.

8. Plainly, Mr Predl considered the nature of his engagement to have changed following his first six months with DMC. I accept that proposition. Between his initial engagement in September 2003 and late February 2004 his hours suggest irregular and sporadic employment. From late February 2004 his employment records demonstrate that he was employed on a full time basis. In my view from this time his employment arrangement changed in character consistent with the manner in which the regularity of his employment changed.

9. In his evidence the Applicant stated that he understood the SMS messages to be a direction to attend a work site rather than merely an offer of employment which he could reject. Understandably his views concerning those arrangements were fortified once he was appointed to supervise a crew. Although Mr Clayphan denied that the Applicant was engaged as a supervisor, his response in cross-examination constituted ‘weasel words.’ It was quite plain from the evidence that the Applicant was engaged to supervise work crews and concurrent with that engagement was afforded the additional benefit of the use of a DMC vehicle. As I have noted earlier the provision of that vehicle was hardly consistent with a contractor relationship, nonetheless a person employed as a base level employee rather than someone placed in a position of authority. Although the terms of the Applicant’s employment had not been discussed at the time of initial engagement, it is apparent that from within a short time following the commencement of employment he believed the arrangement to be a constant, regular and enduring one approximating a permanent position. The manner in which DMC communicated with him reinforced that view. That is, by forwarding to him SMS messages directing him to attend sites, he understood such messages to constitute a direction to attend and that to disregard them would lead to his termination. That was particularly so given his role as site manager.

10. In many respects this application has parallels with that considered by the Industrial Relations Court of Australia in Burcombe v Oldham and Others t/a The Royal Hotel (1996) 71 IR 404. There the employee was not informed of the status of his employment at the time of commencement. His hours were generally regular and he was largely employed on a full time basis. In his reasons Marshall J referred to Reed v Blue Line Cruises Ltd (unreported, Industrial Relations Court of Australia, Moore J, 26 November 1996) at page 10-11, where Moore J stated:

    “A characteristic of engagement on a casual basis is, in my opinion, that the employer can elect to offer employment on a particular day or days and when offered, the employee can elect to work. Another characteristic is that there is no certainty about the period over which employment of this type will be offered. It is the informality, uncertainty and irregularity of the engagement that gives it the characteristic of being casual.”

11. In this case, as in Burcombe v Oldham and Others t/a The Royal Hotel, the observation of Marshall J that “None of the characteristics referred to above by Moore J are applicable to the engagement, and employment after initial engagement, of [the Applicant]” is apposite.

12. Finally, the question of an award, in any event, is not determinative. In Community & Public Sector Union and Others v State of Victoria (2000) 95 IR 54 at 56, Marshall J observed:

    “[9] Whether a person is a casual employee or not is not determined by reference to the Award. The Award simply prescribes many of the terms and conditions of employment of such employees. In this matter it is contended by the applicants that the so-called casual prison officers at the Barwon gatehouse are not truly employed on a casual basis.

    [10] Neither is the question of whether an employee is a casual employee or not determined solely by reference to the employer's categorisation of the position, although such consideration is a relevant factor in the overall determination. As is accepted by the parties, the term “casual employee” has no fixed meaning. The true nature of any employment relationship will depend on the facts and circumstances of each case: see Doyle v Sydney Steel Co Ltd (1936) 56 CLR 545 at 551, 565.”

13. In this case the Applicant contended that he might be subject to award coverage.[13] If he were then, for instance, cl.4.2.2 of the Award would be helpful. If there was no award coverage then the matter must be addressed in accordance with the general principles. In this case the circumstances of employment lack the characteristics identified in Reed v Blue Line Cruises Ltd.

    [13] The Applicant contended at the outset that he was covered by an award but in closing submissions that position appears to have been abandoned: 4 November 2013 T8 line 7-13.

14. It follows that on the facts I consider the Applicant not to have been a casual employee of DMC from late February 2004.

Set Off

1. The First Respondent contends that in the event that it is liable to pay the Applicant leave entitlements (as I am satisfied it is) then it ought be entitled to a set off on account of over award payments made by it to the Applicant during the course of his employment. However, as a matter of principle a set off is impermissible. As was explained by Anderson J in James Turner Roofing Pty Ltd v Peters [2003] WASCA 28 at [18]-[19]:

   “[18] … The term “set off” is conveniently used merely to denote a defence by the employer to the effect that the payments which he actually made to the employee were sufficient to discharge all of his obligations. That is not really a claim of set off. It involves no allegation of mutual indebtedness.

   [19] With this understanding, the question of set off arises in this case because the appellant contends that the amount paid to the respondent exceeds the maximum amount which the appellant was obliged to pay to the respondent under the award in respect of any of the periods of work in question …”

2. I accept the term ‘set off’ here for convenience. More specifically, the question here is whether the amounts which have been paid to the Applicant should be credited to the Respondent’s obligations which probably arose under the default award prior to the Work Choices legislation[14] and more recently the FW Act’s NES, or an award if the Applicant was so covered.

   [14] The Workplace Relations Act 1996 (Cth), as amended by the Workplace Relations Amendment Act 2005 (Cth).

3. Although reference was made to an award, the parties did not contractually bind themselves to its operation. As I have found earlier the parties did not consider the effect of any award upon their arrangement. Although they initially characterised their arrangement as a contractor/principal arrangement, it plainly was not. Likewise, the arrangement by its nature was not a casual arrangement, although I am prepared to accept that initially that style of arrangement was in the parties’ minds.

4. Although the parties had no regard to any award at the time that they concluded their initial arrangement, nor at any later time, they cannot gainsay its effect upon their employment relationship. Relying upon James Turner Roofing Pty Ltd v Peters the First Respondent contends that it was entitled to set off overpayments made in the course of the term of employment against the unpaid accrued employment benefits due to the Applicant. However the operation of that principle is confined to very limited circumstances. In essence there may only be a set off if the other payment is expressly:

   “[21] … appropriated by the employer to a particular incident of employment … So a payment made specifically for ordinary time worked cannot be applied in satisfaction of an obligation to make a payment in respect to some other incident of employment such as overtime, holiday pay, clothing or the like even if the payment made for ordinary time was more than the amount due under the award in respect of that ordinary time.”

5. This principle has been echoed in other decisions. For instance, in Poletti v Ecob (No 2) (1989) 91 ALR 381 at 393 the Full Court of the Federal Court stated:

   “… The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment … [That] situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes.”

6. Similarly, in Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250, Goldberg J, after examining a number of authorities dealing with the point including Poletti v Ecob (No 2), neatly enunciated the principle at [61]:

   “[61] Put shortly, where there is a payment made for, or in respect of, ordinary hours of work which is in excess of the award obligation, the excess cannot be set-off against a claim for underpayment of overtime unless at the time of the payment of the excess, the employer designates that that excess over the amount of the award obligation is paid for the purpose of satisfying any entitlement to [the other award benefits].”

7. Here the hourly rate was not expressed to be payable in respect of any obligation but the regular obligation to pay the Applicant for an hour of his labour. The sums paid insofar as they exceed the award rate were not expressly designated to be payable in respect of other entitlements including the Applicant’s leave entitlements. It follows that in my view the over award payments were not designated for that award or statutory benefit, and accordingly a set off is not permissible. That situation prevails irrespective of whether the Applicant’s entitlements were statutory or award based. In the event that the Applicant’s entitlements were founded in statutory minima there is no logical reason why the principle applicable to overpayments of entitlements due under awards ought not apply to the safety net arrangements put in place by the various statutory instruments extant through the course of the employer/employee relationship.

8. It follows that I do not consider DMC to have any entitlement to set off overpayments against the other employee entitlement liabilities.

Quantum

1. As I have indicated earlier, some uncertainty prevails concerning the award arrangements governing the Applicant’s employment. It is more likely than not that the Applicant was subject to a default award issued by the Queensland Industrial Relations Commission. However during the course of his employment there were significant changes to industrial arrangements effected by the Work Choices legislation and, in due course, the FW Act. The precise quantum of the Applicant’s award entitlements requires a consideration of those matters. Although the Respondents offered to place material before the Court following the hearing addressing that matter, together with material including calculation of the First Respondent’s set off, no material has been forwarded. In the circumstances it is impossible for the Court to effect an assessment of the Applicant’s entitlements or the First Respondent’s set off. That matter will require further hearing unless the parties can agree this matter between them. Realistically, the matter should be capable of ready agreement.

Accessorial Liability

1. The First Respondent has contravened either ss.44 or 45 FW Act by failing to pay the Applicant his annual leave entitlements. That conduct constitutes a contravention of the FW Act and is a civil remedy provision: s.539(2).

2. The Second Respondent was the director of the First Respondent and accordingly is included in the First Respondent’s contravention as its guiding mind. It follows that he too is liable: s.550 FW Act.

Conclusion

1. In conclusion, I am satisfied that between February 2004 and December 2011 the Applicant was employed by DMC as an employee. Furthermore, the Applicant was not employed on a casual basis. He accrued holiday and leave entitlements throughout that period and is entitled to those benefits. Notwithstanding the fact that DMC may have made over award payments to the Applicant, no right of set off exists in respect of such payments.

ORDERS

1. The matter be listed for hearing for assessment of compensation on a date to be fixed.

I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date: 28 May 2014