Robert Santoro v Be Pay Australia Limited
[2024] FWC 848
•3 APRIL 2024
| [2024] FWC 848 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Robert Santoro
v
Be Pay Australia Limited
(U2023/13237)
| DEPUTY PRESIDENT DOBSON | BRISBANE, 3 APRIL 2024 |
Application for relief from unfair dismissal – jurisdictional objection – not an employee – jurisdictional objection upheld – application dismissed
Background
On 30 December 2023, Mr Robert Santoro (Applicant) made an application to the Fair Work Commission (Commission) for an unfair dismissal remedy under s. 394 of the Fair Work Act 2009 (the Act). The Applicant asserts that he was unfairly dismissed by Be Pay Australia Limited on 11 December 2023.
Be Pay Australia Limited (Respondent / Be Pay) is a barter trading exchange which uses the cryptocurrency, Barteos or BTE, as its digital currency. Be Pay solely represents Barteos in Australia and trades as “Barteos Australia”.[1] Be Pay objected to the application on the basis that it did not employ the Applicant and no employment relationship had ever existed between the Applicant and Be Pay. Rather, the Respondent asserts that the Applicant is one of the directors of Joinbte Pty Ltd (Joinbte), the company which entered into the “Barteos Australia Master Agent” agreement with Be Pay on 3 August 2022 (SDM Agreement). The SDM Agreement is dated 28 July 2022 and states it is a “contract of services”.
Prior to entering the SDM Agreement, the Applicant and the other director of Joinbte, Mr Wolfgang Hein, had entered into an agreement on similar terms to the SDM Agreement (the previous agreement). The previous agreement was dated 17 December 2021 and also stated that it was a “contract of services”. On 22 April 2022, an addendum to the previous agreement was agreed to by the parties, outlining new products and setting new commission rates.
The Respondent asserts that on 11 December 2023 it exercised its right to terminate the commercial contract between the Applicant and Be Pay due to on-going performance issues and allegations that arrangements were being made with an organisation that was a conflict of interest to Be Pay.[2] It is not in dispute that on 11 December 2023, the Director of Be Pay, Mr Peter Kritas, sent a letter to the Applicant and Mr Hein terminating the SDM Agreement.
The issue in dispute is whether an employment relationship existed between the Applicant and the Respondent at the time of dismissal and if so, whether that employment relationship was one of principal and independent contractor or employer and employee.
Directions were issued for the filing of submissions and any evidence on 13 February and 26 February 2024. The Applicant filed a response to the jurisdictional objection, an “outline of merits” and a list of documents including the previous agreement, a timeline of events and emails relating to the termination of the relationship. The Respondent did not file submissions and sought to rely on its Form F3 response, the SDM Agreement signed by the parties on 3 August 2022, a letter sent on 17 November 2023 from Mr Kritas to the Applicant and Mr Hein notifying them that they were under investigation for alleged breaches of the SDM Agreement and the termination letter sent on 11 December 2023 to the same.
After seeking the views of the parties, I conducted the proceeding as a determinative conference on 13 March 2024.
Permission to appear
The Respondent sought to be represented before the Commission by a lawyer.
Relevantly, s. 596(1) of the Act provides that a party may be represented in a matter before the Commission by a lawyer or paid agent only with the permission of the Commission.
Section 596(2) provides that the Commission may grant permission for a person to be represented by a lawyer or paid agent in a matter before the Commission only if:
(a) it would enable the matter to be deal with more efficiently, taking into account the complexity of the matter; or
(b) it would be unfair not to allow the person to be represented because the person is unable to represent himself, herself or itself effectively; or
(c) it would be unfair not to allow the person to be represented taking into account fairness between the person and other persons in the same matter.
The decision to grant permission is not merely a procedural step but one which requires consideration in accordance with s. 596 of the Act.[3] The decision to grant permission is a two-step process. Firstly, it must be determined if one of the requirements in s. 596(2) has been met. Secondly, if the requirement has been met, it is a discretionary decision as to whether permission is granted.[4]
The Respondent submitted that permission to be legally represented should be granted due to the complexity of the matter and as the Respondent had not filed submissions, it would enable its legal representative to orally address the Commission on the jurisdictional objection.
The Applicant objected to the Respondent being legally represented on the basis that he was only notified that the Respondent sought legal representation on the morning of the determinative conference. The Applicant said that if knew the Respondent would be seeking to be legally represented, he may have sought to be legally represented himself.
Having considered the parties’ positions, I granted permission for the Respondent to be legally represented on the bass that representation would enable the matter to be dealt with more efficiently, having regard to its complexity. At the determinative conference on 13 March 2024, the Applicant represented himself and the Respondent was represented by Mr Mark Carmody of Carmody Lawyers.
Relevant Legislative Provisions
Section 394(1) of the Act provides as follows:
“394 Application for unfair dismissal remedy
(1) A person who has been dismissed may apply to the FWC for an order under Division 4 granting a remedy.”
Section 396 of the Act provides as follows:
“396 Initial matters to be considered before merits
The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:
(a)whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c)whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.”
Section 382 of the Act provides as follows:
“382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a)the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii)an enterprise agreement applies to the person in relation to the employment;
(iii)the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”
Section 13 provides the definition of a “national system employee” as follows:
“13 Meaning of national system employee
A national system employee is an individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement.
Note: Sections 30C and 30M extend the meaning of national system employee in relation to a referring State.”
Evidence and Submissions
Respondent
In its Form F3 response, the Respondent asserts that a commercial and contractual arrangement was entered into between Joinbte and Be Pay on 3 August 2022 when the two directors of Joinbte, the Applicant and Mr Hein, signed the SDM Agreement. The Respondent submits that Joinbte is owned by the Applicant and Mr Hein, and any employment relationship they have would be with Joinbte itself. The Respondent contends that at no time was the Applicant ever employed or paid directly by it and as such, no employment relationship existed such that the Applicant could be dismissed under s. 394.[5] In the Respondent’s view, the termination of the SDM Agreement on 11 December 2023 was the termination of the contractual relationship between Joinbte and Be Pay.
The Respondent asserts that the SDM Agreement was terminated due to on-going performance issues and allegations that business arrangements were being made with other organisations while the Applicant and Mr Hein were meant to be focussing on the development of the Respondent’s business. Further, the Respondent alleged that the Applicant and Mr Hein regularly drew from the investment funds for personal use when that money was intended to be used for developing Be Pay’s business.[6]
After being notified of the potential breaches of the SDM Agreement, the Respondent informed the Applicant and Mr Hein on 17 November 2023 that it was initiating an investigation into the alleged misconduct. The Respondent said that following the investigation it had proposed reconciliation meetings with the Applicant and Mr Hein but they declined to attend.[7]
In relation to how the Applicant was paid by Be Pay, the Respondent’s Form F3 stated that the Applicant was not paid a salary or wage but rather, the Respondent would agree to regular drawdowns from the investor funds to Joinbte in amounts ranging from $175,000 to $300,000. The amounts were to cover “any personal entitlements for the Directors/Management of the Master’s business” and were subject to change based on performance results, return on investment and other factors determined by the Respondent.[8] In response to Question 1.6 of the Form F3 – In addition to their salary or wages, was the Applicant entitled to any other monetary amount(s) or any non-monetary benefit(s) at the time of the dismissal? – the Respondent answered “No”.[9]
In oral submissions, the Respondent asserted that the Applicant was not a national system employee regardless of whether the previous agreement or the SDM Agreement was the “correct” agreement. In relation to the conduct of the parties under the agreement, the Respondent submitted that the indicia indicates that the Applicant and the Respondent had an independent contractor arrangement. The Respondent asserted that the arrangement was one where the Applicant and Mr Hein: could work whatever hours they saw fit;[10] had to hold their own insurance;[11] were entitled to employ own staff;[12] and were paid for their services through commission and the issuance of cryptocurrency tokens. Further, the Respondent confirmed that payment to the Applicant and Mr Hein was on the basis that they issued an invoice to Be Pay. The Respondent also confirmed that there was no arrangement for taxation to be deducted, nor any allowance for superannuation nor annual or sick leave.
The Respondent contends that there are no indicia to suggest the relationship between the Applicant and Be Pay was anything other than an independent contractor arrangement and as such, the Commission has no jurisdiction to deal with the matter.
Applicant
The Applicant stated that he worked for the Respondent from 17 December 2021 to 11 December 2023. He accepted that he signed a contract with Be Pay and BE East Australia Pty Ltd (another company the Applicant believes is owned by Mr Kritas) in or around 17 December 2021 and an addendum to that agreement on 22 April 2022. The Applicant tendered an ASIC company search of Be Pay Australia Limited establishing that Mr Kritas was the current director of Be Pay.
The Applicant asserts that after signing the agreement, Mr Kritas directed him and Mr Hein to raise funds by selling cryptocurrency and told them that those funds would then be jointly managed. However, the Applicant said this did not occur. The Applicant contends that after the funds were raised, he and Mr Hein were forced into a sham contract, being the SDM Agreement. This is the crux of the Applicant’s application and is the basis upon which he asserts that his dismissal was unfair.
The SDM Agreement was tendered by the Respondent.[13] It was signed on 3 August 2022 by the Applicant and Mr Hein on behalf of Joinbte, in their capacity as directors. Under cross-examination, the Applicant accepted that he and Mr Hein are the directors of Joinbte Pty Ltd as trustee for the Joinbte Unit Trust and that he completed and signed the forms required to register the company with ASIC. The Applicant also said that he and Mr Hein signed a trust deed to create the Joinbte Unit Trust and received advice from his accountant prior to doing so.
The Applicant strongly disputes the authenticity of the SDM Agreement and alleges that it is a sham contract. The Applicant asserts that he was “in a personal contract”[14] under which he and Mr Hein raised investment funds for Mr Kritas. Once those funds were obtained, the Applicant submits that Mr Kritas directed them to set up Joinbte.[15] After Joinbte was registered, the Applicant said that Mr Kritas “reissued” a new agreement between Be Pay and Joinbte, being the SDM Agreement. The Applicant contends that the SDM Agreement is a sham because the Respondent paid for all the setup and running costs of Joinbte and that it only exists because of Be Pay.
The Applicant strongly asserts that he is an employee of the Respondent on the basis that he was directed on how, where and when to conduct his work.[16] He said that his work hours were determined by Mr Kritas and that it was expected he would start in the morning and finish in the afternoon. The Applicant also said he was provided with a computer, work uniform, promotional material and business cards paid by Be Pay to carry out his work duties.[17]
In relation to leave, the Applicant said that if he was sick, he would notify others in a WhatsApp group chat and he would still be paid for the day of leave. The Applicant confirmed he was not entitled to annual leave.
In response to my question about how the Applicant received monies from Be Pay after the SDM Agreement was signed, he said that he was instructed by Mr Kritas to issue invoices to Be Pay on a fortnightly basis. Be Pay would then deposit the money into Joinbte’s account and the Applicant would be paid by disbursing the money to himself. The Applicant said he was not paid contingent on work performance.[18] When asked who was responsible for the payment of tax, the Applicant said that Joinbte was responsible for paying company tax.
In relation to the Applicant’s alleged dismissal, he said that he was informed by Mr Kritas in November 2023 that the Respondent was conducting a five-week investigation into allegations that the Applicant and Mr Hein were colluding with competitors and running another business during the hours they were supposed to be working for Be Pay.[19] Under cross-examination, the Applicant accepted that prior to signing the SDM Agreement with Be Pay, he and Mr Hein had started another business called “WinBackDeals.com”, an online deals site. The Applicant said they had not generated any income from “WinBackDeals.com” and besides a two week trial, they did not work on that business while working for Be Pay.
The Applicant asserts that his alleged dismissal is unfair because to date, he has not been informed of the outcome of the investigation. He also submits that he was unable to discuss the investigation or allegations with Mr Kritas because Mr Kritas would only discuss the matter through “iCourt” (which the Applicant says is a recorded Zoom meeting with a judge and jury appointed by the Respondent) and it could not be done on a without prejudice basis. Further, the Applicant contends that his alleged dismissal is unfair because there was a lack of dedicated human resources and “expertise in the enterprise” because Mr Kritas was the only person that the Applicant was able to talk to and deal with.[20]
Terms of the SDM Agreement
The SDM Agreement is between two proprietary companies, Be Pay Australia Ltd and Joinbte Pty Ltd. Clause 14 of the SDM Agreement expressly characterises the engagement as an independent contractor relationship. Clause 14 states as follows:
“14. Independent Contractor:
Your engagement under this Agreement is as an independent Contractor and you work according to your own schedule and roster provided that you meet your obligations herein and your agreed Business Plan submitted to BePay. There is no other relationship between yourself, or BePay or the Licensor or the CDM or any other partner within the Barteos system except as agreed in your service role. All Service Fees payable to you under this and all agreements is made on verification of sales or work conducted and the lodgement of an Invoice to BePay by email to [email protected].”
Under the SDM Agreement, Joinbte (not the Applicant) is engaged as a “Master Agent” to act as a sales leader of Be Pay and promote Be Pay memberships within Australia.[21]
Clause 25 of the SDM Agreement outlines the basis upon which the Respondent may terminate the agreement and Joinbte’s services. It states as follows:
“25. Termination:
BePay may terminate this agreement and your Services without notice if you:
(a) do not bank funds from the sales or exchange of Products or Services or cryptocurrency of BePay into the nominated accounts as provided to you;
(b) bank funds from the sales of Products or Services of BePay into your personal bank or cryptocurrency accounts without written authourisation (sic);
(c) are found to be guilty of any serious misconduct including and not limited to, dishonesty, fraud, misappropriation of funds, stealing physical or digital property or acting in any way which in the opinion of either BePay or the Licensor could damage or be likely to damage the business interest or reputation of BePay or its affiliated companies or Clients;
(d) commit a material breach of this agreement;
(e) is charged with a serious criminal offence;
(f) in the opinion of BePay, is continually or grossly negligent or incompetent in the performance of the Services;
(g) has introduced the sale of a product or service that is unrelated to Barteos and has done so without the written agreement of BePay;
(h) fail to remedy a Notice of Default from BePay or the Licensor, after the service of a written notice which sets out the nature of the default, how the default can be remedied, and a reasonable time for remedy (which need not be more than 30 days);
(g) in the opinion of BePay, is colluding or working with a competitor.”
Under Annexure B to the SDM Agreement, clause 8 entitled “Independent Contractor” states as follows:
“8. INDEPENDENT CONTRACTOR
As a Contractor you are not employed by anyone or any entity nor do you have a day-to-day working relationship with the Country Manager or its team, other than the relationship pursuant to the Contract you signed and nor are you a subsidiary company of the Licensor or the Country Manager or the CDM or any of their entities that you work for with or in conjunction with their team. The Parties further acknowledge that the Licensor or the Country Manager or the CDM has no financial or other interest in your business or company. By entering into a Contract and despite any training, assistance and supervision afforded by the Licensor or the Country Manager or the CDM, the Contractor acknowledges that it shall always be an independent contractor providing services to the Licensor or the Country Manager or the CDM or the entities that you work for with or in conjunction with Licensor or the Country Manager or the CDM, and no party shall accrue any right or create any express or implied obligations on behalf of or in the name of the other. The Contractor shall at their own costs provide all resources, including but not limited to communication lines, staff recruitment, salaries, administration and sales expenses, stationery and forms and office space to adequately house and carry out its duties and business pursuant to their Contract. The Contractor shall be liable for their own taxes, including GST, superannuation and any entitlements and all financial infrastructure.”
Consideration
Is the Applicant an Employee or an Independent Contractor?
The principles to be applied in distinguishing between employees and independent contractors has been summarised in recent authorities. The High Court recently revised the applicable legal principles to determine whether a person is an employee or an independent contractor in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (‘Personnel Contracting’)[22] and ZG Operations Australia Pty Ltd v Jamsek (‘Jamsek’).[23] A useful analysis was applied in the Commission decision of Waring v Hage Retail Group Pty Ltd (‘Hage’):[24]
“[52] In two judgements delivered on 9 February 2022 the High Court of Australia pronounced on the law that applies in determining whether, absent a specific statutory rule, a person is an employee or contractor. In doing so, the Court reviewed past decisions of the Court (and other courts) and set out afresh relevant legal principles.
[53] In important respects the law as expressed by the High Court in Jamsek and Personnel Contracting has modified, if not replaced, former approaches. In particular, the past approach of the Commission (itself based on past court authority) as outlined in the leading full bench case of French Accent is, with some limited caveats, no longer good law.
[54] The High Court, via the combination of judgements in both Jamsek and Personnel Contracting, has largely rejected an approach whereby the relationship between parties across its life span is examined (including how the relationship operates in practice). The Court has stated that contractual terms and not performance, where those terms can be ascertained and where the contract is not a sham, will determine the true nature of the relationship. However, the Court has observed that the manner in which the relationship is worked in practice may be relevant for certain limited purposes, such as to find contractual terms where they cannot otherwise be ascertained or to determine the nature of any variation to agreed terms.
[55] Indicia (such as those identified in earlier cases in the Court) may be relevant but only insofar as the terms of the contract give voice to them. One approach, to be used as a guide, is to look at whether, under the contract, the worker is engaged to work in the business of another, though this may not necessarily be useful in all cases. The extent of a contractual right to control, as evident from the terms of the contract itself, remains a major signifier of an employment relationship. That an arrangement was brought about by the superior bargaining power of one party has no bearing on the meaning and effect of the contract.
[56] Amongst the caveats expressed by the Court, is that a mere label acting as a subterfuge to the true nature of the contractual relationship will not determine the status of the parties. In this respect at least, the law remains unchanged by these recent decisions.” (footnotes omitted)
In respect of the Applicant’s assertion that the previous agreement and SDM Agreement (the Contracts) were sham contracts[25] I reject this claim. The High Court upheld an appeal from the Full Court of the Federal Court in respect of the Sham Contracting provisions of the Act.[26] The High Court expressed the view that the purpose of the protection against Sham Contracting in the Act was not intended to be frustrated by a narrow interpretation.[27] The High Court concluded that a representation that a person who is actually an employee is instead an independent contractor would offend the protection afforded by the Act.[28]
The various terms of the Contracts between the Respondent and the Company of which the Applicant is a Director, demonstrate a business to business relationship. The role of the Applicant as a Director of the Company with which the Respondent is engaged encompasses a range of duties and obligations under the Corporations Act. It is uncontested that the Applicant has held that role since December 2021. I do not accept that some 3 years later the Applicant having not ever challenged his role as a Director in that relationship and having fulfilled his many obligations as a Director over that period of time, can possibly suggest now that the relationship has come to an end, that he was not a Director of a Company doing business with the Respondent but is rather now an employee of the Respondent. The Applicant has for example fulfilled entirely different taxation obligations over the previous 3 years as he would have if he was an employee. The arrangements in place have not been challenged by the Applicant until the cessation of the arrangement.
In this case I consider that the contractual terms are clear and in accordance with the High Court authorities, it is unnecessary to consider the indicia. The Applicant is not an employee of the Respondent. If I were to consider the indicia, on the evidence before me and as set out in this decision, I would also find that they do not point to an employment relationship.
Conclusion
I am therefore satisfied that there is no employment relationship between the Applicant and the Respondent. That being the case, it is unnecessary for me to determine whether the Applicant’s employment was terminated at the initiative of the Respondent. The Applicant’s application for unfair dismissal is therefore dismissed.
DEPUTY PRESIDENT
Appearances:
R Santoro, Applicant.
M Carmody for the Respondent.
Hearing details:
2023.
Brisbane (via Microsoft Teams):
March 13.
[1] Digital Court Book at p. 151 (‘DCB’).
[2] Ibid at p. 139.
[3] Warrell v Fair Work Australia [2013] FCA 291.
[4] Ibid.
[5] DCB at p. 139.
[6] Ibid.
[7] Ibid at p. 143.
[8] Ibid at p. 140.
[9] Ibid.
[10] Ibid at p. 43.
[11] Ibid at p.33.
[12] Ibid at p.29.
[13] Ibid at pp. 150-176.
[14] Ibid at p.11.
[15] Ibid at 57.
[16] Ibid at p.11.
[17] Ibid.
[18] Ibid.
[19] Ibid at pp. 16-17.
[20] Ibid at p. 19.
[21] Ibid at p. 151.
[22] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1.
[23] ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.
[24] Waring v Hage Retail Group Pty Ltd[2022] FWC 540.
[25] Ibid at p.11.
[26] Fair Work Act 2009 (Cth) s.357.
[27] Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 256 CLR 137; 90 ALJR 107; [2015] HCA 45, [15]-[17].
[28] Fair Work Act 2009 (Cth) s.357.
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