Sean Fogarty and Lion Global Pty Ltd v Cybernet Australia Pty Ltd and Cybernet Manufacturing Incorporated
[2021] FWC 2512
•12 MAY 2021
| [2021] FWC 2512 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
Section 365 - Application to deal with contraventions involving dismissal
Sean Fogarty and
Lion Global Pty Ltd
v
Cybernet Australia Pty Ltd and
Cybernet Manufacturing Incorporated
(C2021/360)
| Deputy President Anderson | ADELAIDE, 12 MAY 2021 |
Application to deal with contraventions involving dismissal – services agreement between US based company and Australian resident – agreement terminated - whether dismissed by either named respondent – whether employee or independent contractor - no dismissal - application dismissed
On 22 January 2021 Sean Fogarty (Mr Fogarty or the first Applicant) made a general protections application to the Commission under section 365 of the Fair Work Act 2009 (FW Act) alleging contraventions of the FW Act associated with his alleged dismissal.
Mr Fogarty alleges that either he or his company Lion Global Pty Ltd (Lion Global or the second applicant) was dismissed by either named respondent, Cybernet Australia Pty Ltd (Cybernet Australia or the first respondent) and Cybernet Manufacturing Incorporated (Cybernet Manufacturing or the second respondent) effective 2 January 2021.
Cybernet Australia and Cybernet Manufacturing (collectively referred to as Cybernet) oppose the application. Each filed responses raising a jurisdictional issue.
The jurisdictional issue is that neither Mr Fogarty nor Lion Global were dismissed within the meaning of the FW Act and that in the absence of a dismissal the Commission has no jurisdiction to deal with the application. They contend it should be dismissed.
The decision of the Full Court of the Federal Court of Australia in Coles Supply Chain Pty Ltd v Milford[1] requires the Commission to determine a dispute about the fact of a dismissal under section 365 of the FW Act before the Commission can exercise powers conferred by section 368. It is thus necessary to determine the jurisdictional issue for Mr Fogarty’s application to proceed further.
I issued directions on 22 February 2021 and further directions on 8 and 20 April 2021.
I heard the jurisdictional matter by video conference on 28 and 29 April 2021.
Procedural matters
In advance of the jurisdictional hearing, a number of procedural matters required determination.
Amendments to application
As originally filed, the application was brought solely by Mr Fogarty against the first respondent (Cybernet Australia).
On 22 February 2021[2], for reasons set out in the audio record of proceedings, I granted Mr Fogarty’s application to add Cybernet Manufacturing as a second respondent. I declined Mr Fogarty’s application to name a director of Cybernet Manufacturing (Mr Hossein Asadibagheri[3]) as a respondent. I declined a request by Mr Fogarty[4] that the Commission include in “all paperwork and proceedings” a reference to his allegation that “the Respondents have contravened the Fair Work Act”.
On 8 April 2021, for reasons set out in the audio record of proceedings, I granted Mr Fogarty’s application to add his company Lion Global Pty Ltd as a second applicant. I did so on the basis that the rights of Cybernet were reserved as to any related or additional jurisdictional issues or submissions arising.
Representation
Cybernet sought leave to be represented. This was opposed by Mr Fogarty who was and remained self-represented. Mr Fogarty had, however, been provided some basic legal advice from the Commission’s Workplace Advice Service both prior to and during these proceedings.
After having received written submissions, on 8 April 2021, for reasons set out in the audio record of proceedings, I granted permission under section 596 of the FW Act for Cybernet to be represented. I did so on the condition that the Commission would provide an appropriate level of assistance to Mr Fogarty to enable him to put his case and test that of Cybernet, consistent with the Commission’s independent statutory charter.
Proceedings were conducted on that basis.
Production
On 8 April 2021 Mr Fogarty made two applications seeking orders for production of nineteen categories of documents from each respondent. After hearing both parties on the issue, and for reasons set out in the audio record of proceedings, I declined to make the orders sought, with leave reserved for the making of a more limited application.
On 12 April 2021 Mr Fogarty made two further applications seeking orders for production of eleven categories of documents from each respondent. After considering submissions by the parties, I declined to make the orders sought for the following reasons:[5]
“I am not satisfied that an order to produce the documents sought should be made. Even though Mr Fogarty has sought to refine his request from that made earlier, it remains a substantial list of documents he seeks. They may be of interest, but I am not satisfied that they are of direct relevance. Some may be, but others may only have tangential relevance. For example, the orders sought seek various information relating to the Respondents’ businesses both here and internationally, including but not limited to, legal advice provided to the Respondents, sale orders for the past 20 years, APAC sales forecasts and copies of FDA, TGA or other certifications. There is also a significant element of ‘fishing’ in the application rather than a clear identification of how each document sought advances the jurisdictional issues in circumstances where a substantial volume of documents are already before the Commission. Overall, at this late stage of proceedings an order (were it made) would be likely to be oppressive in terms of compliance and not in the interests of justice or the efficient administration of the matter.
I have considered the applications and submissions, and conclude that it is not appropriate to make Orders in the terms sought.
The matter will proceed, as listed, on 28 April 2021 based upon the material already filed.”
Proceedings
Proceedings were conducted by video conference with Mr Fogarty in New South Wales, the representative of both respondents in South Australia, and the two Cybernet witnesses in different overseas time zones (one on the US west coast, one in Asia). Hearing times were adjusted to accommodate these circumstances.
An electronic court book was prepared by my chambers and provided to the parties (including witnesses) in advance of the hearing. The court book comprised 761 pages.
Consistent with my decision on representation, I provided general assistance to Mr Fogarty to frame questions of Cybernet’s witnesses (rather than make statements). I explained to both parties why I would not allow questions on subject matters that dealt with issues of merit rather than jurisdiction.
Proceedings during the late afternoon of 28 April 2021, during the evidence of Mr Hossein, were disorderly. Mr Hossein is a director of Cybernet Australia and Chief Executive Officer of Cybernet Manufacturing. Instead of simply answering relevant questions as required, Mr Hossein, contrary to my direction, made gratuitous and condescending comments directed at Mr Fogarty who was asking questions. Mr Hossein also sought to comment on the relevance of questions despite being made aware that it was the Commission’s, and not his, role to rule on relevance. Mr Hossein apologised to the Commission but continued to lapse into these tendencies. Towards the conclusion of his evidence on 28 April 2021 Mr Hossein claimed to no longer have access to materials in the court book. I advised Mr Fogarty that should there be a specific relevant document he sought to put to Mr Hossein that Mr Hossein could apparently not access remotely, it would be again made available to Mr Hossein to assist cross-examination.
Prior to proceedings commencing on 29 April, Mr Fogarty emailed the Commission[6] raising a “concern and complaint” that he was not able to properly cross examine the respondent’s witnesses due to witnesses claiming not to have the court book. Mr Fogarty also complained at what he considered “harassing, defamatory and bullying behaviour” whilst asking questions, pointing to an earlier bullying claim he had filed in the Commission on 14 January 2021 (discontinued on 12 February 2021).
Upon the resumption of proceedings, Mr Fogarty asked for Mr Ali and Mr Hossein to be recalled to allow further questions. Cybernet objected to this course. Having indicated my provisional view that Mr Hossein should be recalled in the interests of fairness, and being satisfied he had the court book, Mr Hossein agreed to do so. I indicated that further cross examination would not be at large, would not be unilaterally time limited but would be limited to relevant matters Mr Fogarty intended to ask the day prior but felt unable to ask, and on certain further emails produced by Cybernet overnight.
Mr Hossein was further cross examined. Whilst less disorderly than the day prior, Mr Hossein did not fully desist from gratuitous commentary despite further cautions from the Commission.
After then giving his evidence, Mr Fogarty did not subsequently press his request that Mr Ali be recalled.
It is also relevant to note that during proceedings on 29 April I granted Mr Fogarty an opportunity to take time to consider advice he indicated he had received that afternoon from the Workplace Advice Service on his application.
Notwithstanding the evident challenges in conducting this proceeding, I am satisfied that all parties have been afforded the requisite degree of procedural fairness.
At the conclusion of proceedings, I reserved my decision.
Observations on the evidence
Mr Fogarty was entitled to be upset by Mr Hossein’s insulting, discourteous and belligerent conduct whilst giving evidence. No matter what position Mr Hossein holds in Cybernet, it was disrespectful of the Commission, not just Mr Fogarty. Mr Hossein was aware that the Commission had indicated that, as a matter of procedural fairness, Mr Fogarty would be assisted to frame relevant questions. His legal representative did not quarrel with that course.
Whilst I make some allowance for the difficulty of hearings being conducted remotely by video conference and from overseas, and the potential for persons to speak over each other or the Commission, Mr Hossein’s conduct was not inadvertent. It crossed the line. Geographic remoteness does not explain discourtesy. No matter what view Mr Hossein holds of Mr Fogarty, of his desire for a financial settlement or of the allegations made against Mr Hossein and his company (including allegations of misrepresentation, monies owed, use of aliases and the like) the witness box is not a place to vent one’s frustration, especially when permission has been granted to be represented.
The belligerent nature of Mr Hossein’s evidence causes me to treat his evidence with caution given the self-evident risk of overstatement amidst the many opinions expressed, gratuitous and otherwise. Whilst not all Mr Hossein’s evidence can be discarded on this basis, it is coloured by this discourtesy.
The same cannot be said of Mr Ali’s evidence. Mr Ali[7] is a director and Global Senior Vice President of Cybernet Manufacturing. I found Mr Ali to be to the point in his evidence. He was firm but did not cross the line of being disrespectful. Whilst his evidence strayed at times into opinion, his evidence of factual matters was largely plausible and consistent with the written record.
Mr Fogarty gave his evidence sincerely. His recall of events at the time his services were ended was reasonably clear, but he was considerably more vague about events leading up to his engagement by Cybernet in 2019. On occasions Mr Fogarty conflated what he believed to be contained in a communication with what was actually communicated.
Mr Fogarty’s witness statement was brief[8]. He relied heavily on the voluminous written materials filed on his behalf (including in the originating proceeding), his written submissions[9] and in fifteen emails sent in response to the Commission’s directions.[10] Many of the written materials filed by Mr Fogarty go to issues of merit, not jurisdiction. However, a considerable number are relevant either directly or contextually to jurisdiction. I take all relevant materials into account together with his oral evidence.
Overall, whilst broadly reliable, it is necessary to treat aspects of Mr Fogarty’s evidence with some caution given the haziness of his recall of events in 2019, some inconsistencies between his recall and the written record, and his tendency to place gloss, no matter how inadvertent, on interpretation of certain events.
I generally prefer the evidence of Mr Ali where there are inconsistencies with the evidence of Mr Fogarty or Mr Hossein.
Facts
I make the following findings relevant to the jurisdictional issue.
Cybernet
Cybernet Manufacturing is incorporated in the State of California, United States of America. It is a manufacturer and supplier of equipment (such as computer products) to the health industry, including hospitals. It operates internationally, including in the United States, Asia and the Asia-Pacific.
In August 2017, in order to undertake warranty and repair services to its Australian clients, Cybernet Manufacturing established a service company Cybernet Australia Pty Ltd registered in the State of Victoria, Australia.[11]
Mr Ali is a director and Global Senior Vice President of Cybernet Manufacturing. Mr Hossein is its Chief Executive Officer. Mr Hossein is also a director of Cybernet Australia.
Mr Fogarty and Lion Global
Mr Fogarty is a resident of New South Wales, Australia. He claims to have had experience over more than two decades in the health industry particularly in New South Wales directly and through his business Lion Global.
Mr Fogarty incorporated his company Lion Global Pty Ltd in approximately 2000. Mr Fogarty is the sole director. Through Lion Global, Mr Fogarty has performed services for businesses in Australia and overseas, including sales work via, what he says, is an extensive network of business contacts.
Aside from being a vehicle through which Mr Fogarty has undertaken this work, Lion Global is also the holder of various domain names.
Lion Global has continued to exist in the period since Mr Fogarty ceased work for Cybernet.
Mr Fogarty and Cybernet
In around August 2019 Mr Fogarty expressed interest in working for Cybernet. Cybernet reciprocated that interest. It was seeking a person based in the Asia-Pacific who could be a point of reference for its regional business.
On around 8 September 2019 Mr Fogarty flew to California from Sydney to discuss arrangements with Cybernet, to be acquainted with its products and systems and to meet senior management. He was with Cybernet in its head office for a week.
During that week, agreement was reached between Mr Fogarty and Cybernet that Cybernet would engage the services of Mr Fogarty as its Asia-Pacific and Middle East Regional Sales Manager.
The method by which Mr Fogarty would provide these services was discussed. Mr Fogarty and Cybernet agreed that it be via an independent contractor relationship with services provided through Mr Fogarty’s company Lion Global. Financial terms were also discussed and agreed. Neither party expected it to be full time work. Mr Fogarty was prepared to work hours as needed and commit to Cybernet with the prospect of earning significant dollar commissions on large new orders.
The Agreement
A draft agreement was prepared by Cybernet. During the course of the week in California, the draft was exchanged, further discussion occurred and the draft was revised into a final document. On the day Mr Fogarty was due to leave (13 September 2019) the agreement in final form was put to him for signing. He initialled each page and signed it, as did Mr Hossein on behalf of Cybernet. The Agreement is in evidence.[12]
The parties to the Agreement were “Sean Fogarty DBA[13] Lion Global Pty Ltd (“Contractor”) and Cybernet Manufacturing Inc (Cybernet”).
The Agreement was titled:
“INDEPENDENT CONTRACTOR AGREEMENT”
The agreed services were:[14]
“to promote Cybernet brand awareness through business development activities, establish new accounts, maintain and grow existing relationships, though all of which increase Cybernet revenues in Australia, New Zealand, Asia and middle east markets”.
Performance of services
Upon his return to Australia, Mr Fogarty commenced providing services to Cybernet.
To support his sales activities, Mr Fogarty was provided a Cybernet business card which read:[15]
“Sean Fogarty
Asia-Pacific & Middle East
Regional Sales Manager”
The business card identified the name and registered address of Cybernet Australia.
I make findings concerning other matters relating to the performance of services by Mr Fogarty later in this decision in considering the indices of an employee or contractor relationship.
In the second half of 2020 the relationship strained.
Cybernet considered that Mr Fogarty was not bringing in new business and not servicing clients or prospective clients in the expected manner. By way of example are the following communications by Mr Hossein to Mr Fogarty:
“Sean, I don’t understand your sales style, you tell the customer that “I have been asked to ask these questions” I don’t understand your mindset, is that supposed to make the customer feel better or us look stupid…”[16] (6 November 2020)
“Many leads (min of 14) have been sent to you…many red task items that have not been cleared up yet! Also on follow up with the leads I see a robot style reply…It’s been more than 13 months now with Cybernet and not one new customer..”[17] (17 October 2020)
For his part, Mr Fogarty considered that he was being asked to do too much, wanted his remuneration reviewed, felt bypassed for lucrative sales orders and not sufficiently supported. By way of example are the following communications by Mr Fogarty to Cybernet:
“Proposed Agenda
Our current and possible updated agreement
·My role and Territory
·My Remuneration – base, Commission, Benefits, Bonuses etc”[18] (11 March 2020)
“I am doing far more than “robot one liners”. I find it deeply offensive in these recent emails with unwarranted insinuations being made which are not accurate and belittling of my professional experience. The emails are not supportive emails, there is no positive training or further instructions to help progress / close the sales opportunity…”[19] (9 November 2020)
“I am concerned that some possible new Cybernet…leads may not have all been passed onto myself from within the allocated region…”[20] (19 December 2020)
In December 2020 things went from bad to worse. Mr Fogarty considered that he was owed commissions which had not been paid and that he should also receive Australian employment entitlements. He considered that Cybernet and its directors were engaging in nefarious practices, including misrepresentation and use of aliases. He penned his concerns in an email to Mr Ali (cc Mr Hossein) on 31 December 2020:[21]
“I take offense at the manner in which I was spoken to last week…I am very concerned with the issue about having to chase Cybernet for owed commissions…”
“I have concerns when people at Cybernet are using false identities…”
“I raised my concerns about management style, micromanagement and this review prior to joining Cybernet…”
Mr Hossein immediately replied:[22]
“Sean
If you don’t think Cybernet is the right company for you to work because of all the reasons you mentioned below, we will accept your resignation or termination of the independent contractor agreement, you decide…It appears you try to disrespect the company by this email so my suggestion is for you to find a better company to work for.
Hossein Asadi”
Mr Hossein and Mr Ali discussed the matter further, including emails sent earlier on 31 December 2020 by Mr Fogarty claiming unpaid commissions. A decision was made to end the relationship with Mr Fogarty and his company. By email from Mr Ali to Mr Fogarty dated 2 January 2021 Mr Ali advised (in part) as follows:[23]
“Hello Sean
Thanks you for your email
We find it interesting that you have time to search and dig up rubbish posted by a couple of disgruntled employees…
As such, we are terminating your independent contractor’s agreement effective immediately for the following but not limited to reasons:1.Lack of Performance for the last 16 months
2.Your attempt and use of verbiage to disrespect and intimidate Cybernet senior management
Your access to CRM has been closed off.
Your access to Cybernet email…has been closed off…
Ali A Begheri
Global Senior Vice President”
Mr Fogarty commenced these proceedings on 22 January 2021. He claims adverse action (dismissal) in breach of workplace rights under Part 3-1 General Protections of the FW Act. He claims unlawful conduct under section 365 of the FW Act by both respondents against both he and his company Lion Global.
Consideration
Section 365 of the FW Act provides:
“365 Application for the FWC to deal with a dismissal dispute
If:
(a) a person has been dismissed; and
(b) the person, or an industrial association that is entitled to represent the industrial interests of the person, alleges that the person was dismissed in contravention of this Part;
the person, or the industrial association, may apply to the FWC for the FWC to deal with the dispute.”
Section 365 requires a dismissal to have occurred as a jurisdictional fact. “Dismissal” for these purposes (and other purposes of the FW Act) is defined in section 386(1), which provides:
“386 Meaning of dismissed
(1)A person has been dismissed if:
(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or
(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.”
It follows that, for the purposes of an application under section 365, a dismissal is required to have occurred from a contract of employment between the person dismissed and their employer. It needs to be a dismissal by the employer in the sense of the dismissal being “on the employer’s initiative” or caused by “conduct engaged in by the employer”. It is that employer which must be the respondent to proceedings as it is only that employer against whom an application under section 365 of the FW Act may be brought.
Was Mr Fogarty or Lion Global employed by Cybernet Australia or Cybernet Manufacturing at the date of alleged dismissal (1 January 2021, taking effect 2 January 2021) and was he or Lion Global dismissed by one of the respondents on that date?
Claims against Cybernet Australia
For a contract of employment to exist, there must be a contract.
I am not satisfied that there was a contract between either Mr Fogarty or Lion Global and Cybernet Australia which could underpin a claim under Part 3-1 of the FW Act.
Cybernet Australia was not a party to the Agreement with Mr Fogarty and Lion Global. There was no separate agreement, express or implied, entered into by Mr Fogarty under which he or his company provided services to Cybernet Australia. He invoiced Cybernet Manufacturing for payments[24], not Cybernet Australia.
That Cybernet Australia’s contact details were on Mr Fogarty’s business card and that its phone number was diverted to his phone is not evidence of a contract between the parties. I accept the evidence of Mr Hossein that Cybernet Australia was a service company established by Cybernet Manufacturing for repair and warranty purposes in the Australian jurisdiction and that its details were placed on Mr Fogarty’s business card to assist in his marketing as a local Australian-based representative of Cybernet. There was no agreement for the provision of services to Cybernet Australia. As noted by a full bench in different proceedings Sean Fogarty v GETT Asia Ltd and GETT Geratetechnik GmbH:[25]
“even if it were accepted that Mr Fogarty performed work for GETT Asia during the period of the negotiations, this is simply not enough to establish a contract at common law.”
There being no contract between either Mr Fogarty or Lion Global and Cybernet Australia, there can be no contract of employment between those parties. There being no contract of employment with Cybernet Australia, it is not possible for Cybernet Australia to have dismissed either Mr Fogarty or Lion Global within the meaning of the FW Act.
For these reasons, the application insofar as it is brought against Cybernet Australia is not within the Commission’s jurisdiction and must be dismissed.
Claim by Lion Global against Cybernet Manufacturing
Lion Global is an incorporated entity.
The protections afforded by Part 3-1 of the FW Act are provided to “a person”. This is expressed to mean a person “whether an employee, an employer or otherwise”.[26]
However, that Part 3-1 includes independent contractors and not just employees does not mean that all statutory causes of action under Part 3-1 apply to independent contractors or the corporate entities through which services under an independent contract are delivered.
As noted, the cause of action in this matter is brought under section 365 of the FW Act. This requires a person to have been “dismissed” within the meaning of the FW Act. As further noted, dismissal requires a contract of employment to have existed at the relevant time.
A contract of employment can only exist between an employer and an employee.
Being a foreign corporation, Cybernet Manufacturing is a national system employer for the purposes of the FW Act.
However, Lion Global Pty Ltd is not an employee of a national system employer because it is not and cannot be an employee. Section 335 provides that these terms have their ordinary meanings. An employee must be a natural person, an “individual”[27]. A contract of employment cannot be made between one corporate entity and another corporate entity. It can be made only with an individual such as Mr Fogarty, a natural person, not with his company.
For this reason, whilst Lion Global may have standing for other purposes under Part 3-1 of the FW Act, it has no standing to bring an application under section 365.
That being so, the application insofar as it is brought by Lion Global against Cybernet Manufacturing is not within the Commission’s jurisdiction and must be dismissed.
Claim by Mr Fogarty against Cybernet Manufacturing
Mr Fogarty, as an “individual” within the meaning of section 30C(1)(a) of the FW Act has standing to bring an action under section 365 of the FW Act against Cybernet Manufacturing as a “national system employer”, provided Mr Fogarty can establish that he was an employee, and that he was dismissed from his employment.
There is no dispute that the services provided by Mr Fogarty were brought to an end on the initiative of Cybernet Manufacturing. This much is plain from the termination email sent by Mr Ali on 2 January 2021.
The issue in dispute and requiring determination is whether Mr Fogarty was an employee or, alternatively, an independent contractor at that time.
Whether a person is an employee of a particular entity at a given time is a combined question of fact and law. This question must be determined on an objective basis, not a subjective belief.
It is trite to note that a variety of relationships exist which result in work being performed. Not all are employment relationships. The common law distinguishes between a contract of service (being an employment relationship) and a contract for services (being a contractor/principal relationship).
A multi-factor test derived from court authorities has been applied by the Commission when determining whether an employment relationship exists and (if so) with whom. A leading case outlining relevant principles is French Accent.[28] The Commission is obliged to consider the totality of the relationship having regard to various indicia that might shed light on the true nature of the relationship.
Also, well-established is that courts look to the real substance of a relationship to determine if an employment relationship exists.[29] Another expression of this principle has been said by a full bench of the Commission to be “what might be described as the commercial authenticity of those arrangements”.[30]
Intention
I take into account the circumstances in September 2019 in which the “Independent Contractor Agreement” was reached. There was no misunderstanding at that time about the nature of the agreement. Mr Fogarty agreed to provide services through his existing corporate vehicle, Lion Global. That also suited Cybernet. Mr Fogarty agreed to do so as an independent contractor. By offering his corporate vehicle that he had owned and operated for twenty years, it was unambiguous to both parties that Mr Fogarty was proposing to provide services through his company.
The terms of the agreement were consistent with that intent. Aside from the agreement being titled “Independent Contractor Agreement”, it expressly provided that:[31]
“It is the express intention of the parties to this Agreement that Contractor is an shall be an independent contractor and not an employee of Cybernet. Nothing in this agreement shall be interpreted as creating or establishing an employment relationship…”
Though Mr Fogarty sought to discuss changes to the Agreement during its life (from March 2020 concerning his territory and remuneration) no changes to these elements were agreed or made. It was only in the final months of his work that Mr Fogarty asserted that he should receive benefits under Australian employment law. Those assertions were contested by Cybernet.
Also contextually relevant is that the proposed agreement was the subject of discussion between the parties in the days prior to it being presented in final form and signed. I do not accept Mr Fogarty’s evidence that it was a take it or leave it demand made upon him. Whilst there was some pressure of time to sign the final draft on the day of his departure, given the discussions of the preceding days it was not a draft that emerged unexpectedly or which unilaterally specified he and his company as a contractor.
This evidence of an intention to enter into an independent contractor relationship weighs towards that conclusion.
However, whilst this factor points in that direction, neither the Agreement’s title nor intention is determinative. It is well established that whilst the ‘label’ parties give to their relationship is a relevant consideration, the parties cannot deem the relationship to be something which, in substance, it is not.[32]
I now turn to consider the indicia summarised in French Accent to the extent relevant to Mr Fogarty’s period of service.
Control
The particular nature of work performed is relevant to assessing whether this consideration weighs one way or the other.
Mr Fogarty was engaged via his company to promote Cybernet’s brand awareness, garner new sales and maintain and develop existing client relationships. In Mr Ali’s words, he was employed “to bring in new and incremental business and build brand awareness.”[33]
Mr Fogarty was geographically remote from headquarters. For large parts of 2020, his ability to meet people face to face even in Australia (let alone the region) was constrained by the COVID-19 pandemic.
The evidence before me is that after a period of familiarisation with Cybernet’s products and systems, Mr Fogarty was initially given scope and some discretion as to how to provide the required services and draw in new business. From time to time head office or other managers would provide leads or guidance. It was only as time progressed and Mr Hossein and Mr Ali did not see (in their view) new business coming in via Mr Fogarty and became concerned with his style that they became more directive. There were some directions given, such as a direction (in December 2020) to attend a local health industry trade show[34]. In the second half of 2020 Mr Fogarty saw these interventions as micromanagement. Somewhat inconsistently, he also saw himself as not being adequately guided or supported. He reached out wanting direction and guidance; in the latter months that direction was given but not given in the form he wanted – senior management became critical and frustrated, which in turn saw Mr Fogarty became critical of and frustrated with senior management.
Mr Fogarty was required to work within the internal IT and other systems (CRM) created and operated by Cybernet. That he was required to do so is not indicative one way or the other. I accept Mr Ali’s evidence that the frequency of Mr Fogarty using the CRM system was largely up to him.[35] It is a neutral factor. Both a contractor or an employee securing business or following up leads for Cybernet would reasonably be expected to access the Cybernet systems for that purpose.
Mr Fogarty was provided a Cybernet email address. I consider this a neutral factor. I do not accept Mr Fogarty’s submission that this clearly points to an employment relationship. Given his role was promotional for Cybernet products and required him to network, an email address with a Cybernet domain is not indicative one way or the other. Similarly, given his marketing responsibilities, I do not find that his business card or the fact that the Cybernet Australia’s phone number was diverted to his phone to be strongly indicative one way or the other.
Mr Fogarty was required to participate in phone or video hook-ups or conference calls with senior management and other officers. These occurred as and when required. If Mr Fogarty was required to be present, he was required to attend (and did so). An expectation to attend meetings is somewhat indicative of an employment relationship, though in the context of a person providing services in a geographically distinct overseas location and where (for the first time) Cybernet were engaging an Australian-based representative for the region, it is not a matter that weighs heavily in that direction. I accept Mr Ali’s evidence that Mr Fogarty did not have a direct report,[36] though was generally accountable to head office. A reasonable level of accountability was expected by head office of those providing remote services, whether as employees or contractors.
Considered in context, I do not consider that the manner in which Mr Fogarty and his company provided services or was required to be accountable for the services provided weigh strongly one way or the other. What occurred was capable of being indicative of either an employment or a contractor relationship, albeit one that was in free-fall by the last quarter of 2020.
I now turn to the question of working hours. No set number of working hours were stipulated in the Agreement, nor were any otherwise advised. Whilst Mr Fogarty and Cybernet had an expectation that he would work less than full time hours, it was understood that Mr Fogarty would put in the hours as needed to deliver the services. I accept Mr Fogarty’s evidence that he worked more than ten hours per week on average though I consider his evidence that he worked every day including weekends and continuously throughout mornings, afternoons and evenings to overstate his hours. Whilst Mr Fogarty checked emails regularly and, due to time zone differences, did work across 24 hour periods, apart from being required to attend certain conference calls with senior management or directed to attend a particular trade fair, he was not directed as to the hours he had to work. I accept Mr Ali’s evidence:[37]
“you established your own hours, you worked when you wanted to…you gave us status reports of your activities”.
Overall, a moderate degree of control over what Mr Fogarty was required to do and how he was required to do it was exercised. The level of control was lighter once Mr Fogarty first became familiar with Cybernet products and systems, but became directive in the final months as Cybernet became concerned with the lack of new business being transacted. Across this period, there was a moderate level of control as to when Mr Fogarty was required to work.
In these circumstances, I consider the issues of control (control of what, when and how much work was to be performed) to weigh somewhat in favour of an employment relationship.
Entitlement to work for others
The Agreement provided that the contractor was “free to perform services for others, or be employed by other entities except to the extent that so doing causes Contractor to breach Contractor’s obligations under the Agreement or creates a direct conflict of interest.”[38]
Mr Fogarty’s evidence was that this constituted a prohibition on working for others. Clearly it is not. Mr Fogarty conflated the exception with the rule.
In practice, Mr Fogarty did not work for others. He spent his time in the fifteen months with Cybernet working only for Cybernet. In this period, however, his company Lion Global continued to operate (and hold domain names) though not otherwise trade.
There is no evidence before me that Mr Fogarty either directly or through his company was required to either exclusively work for Cybernet, or precluded from working for others. That he did so was his decision. He did so because in part he was initially committed to Cybernet. In part that commitment reflected a business decision made by Mr Fogarty. He was especially attracted to the prospect of he and his company earning very large dollar commissions on securing large contracts for the supply of equipment to NSW Health. He considered that whilst the base contracted remuneration was (in his view) modest, a 5% commission on a large purchase order could be lucrative. On this basis he was prepared to put in the hours necessary and did not seek work from other sources.
I accept the evidence of Mr Ali[39] that Mr Fogarty was not prevented from working for others. He was capable of doing so within the terms of the Agreement and at all times had his corporate vehicle ready and able to do so.
This factor weighs somewhat in favour of a contractor relationship.
Separate place of work and advertising of services
Mr Fogarty worked from his private home. Whilst this may in some circumstances be suggestive of a contractor relationship, it is not necessarily so (especially during the COVID-19 pandemic). Neither Cybernet Manufacturing nor Cybernet Australia had a dedicated operational office in Australia (Cybernet Australia’s address on Mr Fogarty’s business card appears to be that of its registered address in Victoria). Mr Fogarty was its regional representative.
In this matter, the location from which services were performed is a neutral consideration.
The services performed by Mr Fogarty were promoted via a Cybernet business card. I have found that the card was issued for promotional purposes to link potential clients in the region with Cybernet via Mr Fogarty. The business card only referenced Mr Fogarty and not Lion Global. Given that Mr Fogarty was the face of Lion Global and that the card was used for personal contact and marketing purposes, this is not a matter that weighs one way or the other.
The manner in which the services provided by Mr Fogarty were advertised is a neutral consideration.
Provision and maintenance of tools and equipment
Mr Fogarty used his personal computer and mobile phone in performing work for Cybernet (with scope for some expense reimbursement[40]). Whilst this may in some circumstances be suggestive of a contractor relationship, it is not necessarily so.
I accept Mr Fogarty’s evidence that certain software required by Cybernet was placed by Cybernet onto his personal devices in order to facilitate and monitor his work and incorporate it into Cybernet’s internal systems.
In this matter, the equipment used to perform work is a neutral consideration.
Entitlement to delegate or sub-contract work
The Agreement provided that the contractor “may hire third parties to assist Contractor in performing services for Cybernet with Cybernet’s written approval”.[41]
In practice Mr Fogarty did not delegate his services to any third party nor did he request to do so.
The nature of the work (being sales and promotion) bore a direct relationship to the particular salesperson engaged by Cybernet Manufacturing and that salesperson’s business network and salesmanship – in this case, Mr Fogarty.
Having regard to both the practice of the parties and the nature of the services performed under the Agreement, I do not consider that the entitlement to delegate was anything more than a theoretical possibility.
In these circumstances, the non-delegation of services to a third party and the practical difficulties in doing so having regard to the nature of the services performed weighs somewhat towards an employment relationship.
Right to suspend or dismiss
Both Cybernet and Mr Fogarty had the right, under the terms of the Agreement, to terminate the work arrangement on notice (one month) or for cause.[42]
These rights are consistent with an employment relationship but not necessarily inconsistent with a contractor relationship.
In the circumstances of this matter, this is a neutral consideration.
Public presentation
Mr Fogarty was marketed as Cybernet’s representative in the region. His company (Lion Global) was not so marketed. I have found that given his sales role this public presentation was consistent with both an employee or a contractor relationship, and a neutral consideration.
Mr Fogarty relies on the fact that, from time to time, in either internal correspondence or to third parties Cybernet referred to him as “working for Cybernet” or, even more particularly, “an employee” of Cybernet.
I am satisfied that on occasion this did occur. One such example is an internal communication between Mr Hossein to Mr Fogarty on 17 October 2020 copied to Mr Ali and other senior managers. In it Mr Hossein referred to a particular customer having been a customer a “long time prior to your employment”.[43] On another occasion Mr Hossein said that “we hired you”[44] and on yet another he said that attending a show was “part of your job”[45].
The use of such language is consistent with an employment relationship. However, its use was irregular. When it was said, it was a shorthand description in respect of which little thought was given. It carries no more weight than other communications where Mr Hossein referred to the “independent contractor agreement”. The various descriptors or labels used by Mr Hossein are relevant but not particularly weighty factors.
In these circumstances, I consider the language used to describe the relationship during its term to weigh slightly, but only slightly, in favour of an employment relationship
Deduction of income tax and GST
Throughout the fifteen months of work no income tax was deducted by Cybernet from monies paid to Mr Fogarty’s company. This was consistent with the Agreement which provided that “Contractor is solely responsible for all taxes and withholdings”[46]. Payments made were gross amounts in US dollars converted to AUD. The sums paid to Lion Global were ex GST. Lion Global was registered for Australian-based GST.
Mr Fogarty had the benefit of the full value of sums paid until such time as his company would be assessed by the Australian taxation authorities on assessable income. Mr Fogarty’s evidence was that he knew the sums received on invoice would have to be subsequently declared at his end for taxation assessment at the corporate tax rate applicable to Lion Global.
This is clearly in contrast to arrangements applying to employees. It weighs in favour of a contractor relationship.
Cybernet did not, and was not required under the terms of the Agreement, to deduct monies for workers compensation or for superannuation. This too is in contrast to arrangements applying to employees and weighs in favour of a contractor relationship.
Provision of invoices and periodic payment
Throughout the fifteen month period Mr Fogarty, through his company Lion Global, sent two invoices to Cybernet – one on 18 June 2020 and the other on 21 December 2020. In other words, Mr Fogarty elected to first invoice after nine months, and then send a second invoice after a further six months. He did so despite the Agreement contemplating more frequent (fortnightly) payments.[47] The evidence before me is that at least on one occasion Cybernet followed up with Mr Fogarty to ascertain when he would be sending through invoices for payment[48] and once proposed to pay on monthly invoice if that better suited Mr Fogarty[49].
The invoices prepared by Mr Fogarty were marked for “services rendered”.
The invoices were not issued in the name of Mr Fogarty. They were sent under the name of Lion Global Pty Ltd (as contracted) and it was to Lion Global that payments were directed.
Invoicing for the payment of monies is in contrast to PAYG (Pay As You Go) arrangements applying to employees and weighs in favour of a contractor relationship.
Invoicing for payment to a company and not an individual is in contrast to arrangements applying to employees and weighs in favour of a contractor relationship.
Payments for services rendered being sought and made at nine and six monthly intervals is in contrast to more frequent arrangements applying to employees and weighs in favour of a contractor relationship.
Mr Fogarty submits that Cybernet instructed him on how to formulate an invoice into a weekly amount, and that doing so was indicative of an employment relationship. I do not agree. Mr Ali’s evidence[50] was that he asked Mr Fogarty to correct an invoice so that it accurately related to the period Mr Fogarty was invoicing. In doing so, Mr Ali explained how a weekly amount could be calculated then converted into the number of weeks of the intended invoice. This was orthodox administrative guidance given to assist the accuracy of an invoice submitted for payment.
Overall, the method and frequency of payment weighs in favour of a contractor relationship.
Paid leave
Mr Fogarty was not provided paid leave of any form. Nor was there a contractual entitlement to paid leave. Mr Fogarty asserted, in the final months of his service, a right to employment entitlements under the National Employment Standards of the FW Act (which include forms of paid leave). Those are entitlements that apply only to employees as defined. That an entitlement is asserted does not establish the status of a relationship. Conversely, that paid leave is not provided simply because a contract does not provide for it does not determine the relationship’s character.
That paid leave was not provided weighs slightly, but only slightly, towards a contractor relationship.
Nature of the work
I have had regard to the nature of the services provided by Mr Fogarty and Lion Global in considering whether the delivery of sales and promotional services weigh one way or the other. Whilst the work could equally have been performed as an independent contractor or employee, I have concluded that the circumstances of this matter weigh somewhat in favour of an employment relationship.
Creation of goodwill and other saleable assets
Mr Fogarty held out to Cybernet that he had a long and extensive network of contacts, particularly in the New South Wales health industry, to support the services he was contracted to perform.
His work, in theory at least, was capable of accruing goodwill of value to both he and his company (Lion Global) and to Cybernet.
As the relationship ended acrimoniously and in circumstances where Cybernet considered there had been under-performance but in circumstances where Mr Fogarty considered there had been gains made but not adequately supported, it is not possible to ascertain whether goodwill was created or accrued to either party from the relationship.
In this matter, it is a neutral consideration.
Proportion of remuneration spent on business expenses
There is no evidence before me of the proportion of remuneration Mr Fogarty or Lion Global spent on business expenses. Given that Mr Fogarty was providing personal services and largely using equipment supplied by Cybernet, the likely proportion would have been very small.
The Agreement also provided for reimbursement of certain business expenses upon presentation of receipts and approval by a manager.[51]
Considered overall, this factor weighs somewhat towards an employment relationship.
Other matters – remuneration package
Unless otherwise increased by agreement, the remuneration package (termed “compensation’ in the Agreement) was for a rate of USD$4,000 per month plus 5% flat commission on all new sales.
A remuneration package structured in that manner is not indicative of either an employment or a contractor relationship. It is not uncommon that a commission based incentive is built into an employee’s remuneration and it is equally not unusual that a base amount would be provided for a contractor in addition to a percentage of business transacted.
What is relevant however in this matter is my finding that Mr Fogarty exercised judgement when entering into the Agreement that whilst he considered the base payment modest, the prospect of leveraging lucrative commissions on large new sales was a risk he was prepared to take. This was akin to taking a business risk – a judgement whether financial reward was likely to match or exceed personal effort:[52]
“I stuck with it because I was promised the lure, or the bait, of a 5% commission on big deals; and the pipeline which I did request to be provided showed a pipeline of over USD$5million…”
It was only after six months (March 2020) that Mr Fogarty proposed a discussion about the remuneration package and set out his view that “I need to be making at least $200,000 usd per year to stay ahead. Sydney is very expensive with high taxes so I need to put in place a formula that will provide this…”[53]
It was only in the shadow of a relationship in free-fall over the final months that Mr Fogarty asserted employment-type rights. They were not agreed.
That there was (and remains) a dispute over commission payments is not indicative one way or the other. That dispute largely concerns whether particular business was a “new sale” (attracting commission) or otherwise. Both contractors and employees can equally come into dispute with their principal or employer over sums due.
Considered overall, and taking into account the business risk exercised in formulating the remuneration package but noting that risk / reward considerations can also apply to certain employment arrangements (especially sales), this factor weighs slightly in favour of a contractor relationship.
Other matters
There are no matters arising not otherwise dealt with.
Conclusion on employee/contractor
There are factors that tend towards a contractor relationship on the one hand and an employment relationship on the other, and other factors which (in the circumstances of this matter) are neutral or of only slight weight one way or the other.
I do not consider the Agreement to have been a mere label or subterfuge to avoid obligations. I reject Mr Fogarty’s submission that it was a sham. Mr Fogarty’s evidence[54] that he signed the contract simply because he “was doing them a favour” is not plausible. In both form and practice the arrangement was entered for genuine purposes and considered beneficial by both Mr Fogarty and Cybernet. Mr Fogarty presented his existing company Lion Global as the vehicle through which his personal services would be contracted. Lion Global was not created for this purpose. It had existed for nearly twenty years prior.
I take into account that in practice, and certainly through Mr Fogarty’s eyes, the work performed and the manner in which it was performed were akin to that of an employee. However, this was more pronounced as the performance concerns arose and the relationship deteriorated.
Ultimately, this matter must be determined on objective factors, not subjective belief. An evaluative judgement is to be made, having regard to the weighing of relevant considerations. The mutual intent to work as a contractor through his already established company, coupled with the structure of remuneration arrangements (including the exercise of some business risk), the non-deduction of income tax (with its consequent advantage to Mr Fogarty) and the nature and infrequency of invoicing by Lion Global become particularly weighty in that context. They outweigh the moderate level of control exercised and the other factors that somewhat suggest an employment relationship.
Considered overall, and having conducted the weighing exercise, I conclude that Mr Fogarty was not an employee at the date his service contract was terminated.
Justiciability
Cybernet submit that in any event the Agreement is not justiciable before Australian courts or tribunals as it provided (clause 11) that the governing law was “the law of the State of California”.
It is a well-established principle that a statutory jurisdiction of Australian courts and tribunals cannot be excised simply by a governing clause in a private contract.[55] Whether the FW Act applies to the relationship between Mr Fogarty and Lion Global and Cybernet Manufacturing or Cybernet Australia is a product of the terms of Australian law, not the Agreement.
The FW Act does not recognise that the statutory jurisdiction it confers on the Commission can be set aside by agreement of the parties.
Mr Fogarty was an Australian citizen residing in Australia performing services in Australia through his Australian-registered company for Cybernet Manufacturing. Cybernet Manufacturing was a national system employer. That is more than sufficient connection to establish jurisdiction notwithstanding the governing law provision of the Agreement.
These factors establish both justiciability and the territorial reach of the FW Act with respect to this matter.
Conclusion
As Mr Fogarty was not an employee of Cybernet Manufacturing, he was not dismissed by Cybernet Manufacturing within the meaning of section 365 of the FW Act. That being so, and given that the associated claim by Lion Global against Cybernet Manufacturing and the claim by both Mr Fogarty and Lion Global against Cybernet Australia also fall outside jurisdiction, the application C2021/360 as amended must be dismissed.
An order[56] giving effect to this decision is issued in conjunction with its publication.
DEPUTY PRESIDENT
Appearances:
Mr S Fogarty, on his own behalf and on behalf of, Lion Global Pty Ltd
Ms E Carling, with permission on behalf of, Cybernet Australia Pty Ltd and Cybernet Manufacturing Incorporated
Hearing details:
2021
Adelaide (with video connections)
28 and 29 April
[1] [2020] FCAFC 152
[2] Order 8 April 2021
[3] Referred to in these reasons, for convenience, as Mr Hossein
[4] Application F1 8 February 2021 clause 2.1 paragraph 2
[5] Decision by email Chambers-Anderson DP 23 April 2021 12.30pm
[6] Sean Fogarty to ‘Chambers-DP Anderson’ 29 April 2021 7.49am
[7] Mr Ali Asadibagheri; referred to in these reasons, for convenience, as Mr Ali
[8] A1
[9] A2
[10] A3 and A4
[11] HA1
[12] AA1
[13] Doing Business As
[14] AA1 Clause 1
[15] A3 court book page 640
[16] A3 court book page 509
[17] A3 court book page 512
[18] A3 court book page 419
[19] A3 court book page 428
[20] A3 court book page 530
[21] A3 court book page 441
[22] A3 court book page 441 Email 31 December 2020 7.30pm
[23] A3 court book pages 454 to 457
[24] AA2
[25] [2019] FWCFB 1177 at [16] on appeal from [2018] FWC 7756
[26] Section 336(2)
[27] Section 30C(1)(a)
[28] Jiang Shen Cai trading as French Accent v Rozario[2011] FWAFB 8307 at [30] (French Accent) applying Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Roy Morgan Research Pty Ltd v Commissioner of Taxation [1997] 37 ATR 528 and Hollis v Vabu [2001] HCA 44
[29] On call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 206 IR 252 at [89]
[30] FP Group Pty Ltd v Tooheys[2013] FWCFB 9605 at [22]
[31] AA2 clause 2(a)
[32] Abdulla v Viewdaze Pty Ltd t/as Malta Travel (2003) 122 IR 215 at [34]
[33] Audio transcript 28 April 2021 2.41pm
[34] A3 court book page 526 “going to a show is part of your job”: email Mr Hossein to Mr Fogarty 31 December 2020 6.46pm
[35] Audio transcript 28 April 2021 3.16pm
[36] Audio transcript 28 April 2021 3.11pm: “you would be giving us status of your activities from time to time…you were reporting your activities”
[37] Audio transcript 28 April 2021 3.15pm
[38] AA2 clause 2(d)
[39] Audio transcript 28 April 2021 2.52pm
[40] AA1 clause 6
[41] AA1 clause 2(e)
[42] AA1 clause 8
[43] A3 court book page 512
[44] A3 court book page 529
[45] A3 court book page 526
[46] AA1 clause 4(a)
[47] AA1 clause 3
[48] A3 court book page 438: email Mr Ali to Mr Fogarty 29 December 2020
[49] A3 court book page 538: email Mr Ali to Mr Fogarty 31 December 2020
[50] Audio transcript 28 April 2021 1.37pm
[51] AA1 clause 6
[52] Audio transcript 29 April 2021 3.54pm
[53] A3 court book pages 533 - 534: email Mr Fogarty to Mr Hossein and Mr Ali 11 March 2020
[54] Audio transcript 29 April 2021 4.21pm
[55] Akai Pty Ltd v The People’s Insurance Co Ltd 141 ALR 374
[56] PR729233
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