Smallwood v Ergo Asia Pty Ltd

[2014] FWC 964

[2014] FWC 964

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Leanne Smallwood
v
Ergo Asia Pty Ltd
(U2013/14383)

COMMISSIONER BISSETT MELBOURNE, 14 FEBRUARY 2014

Application for relief from unfair dismissal.

[1] Ms Leanne Smallwood (the Applicant) has made an application seeking relief from unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (the Act). She says that her employment was terminated by Ergo Asia Pty Ltd (the Respondent) on 23 September 2013.

[2] The Respondent has lodged a jurisdictional objection to the matter in that it says it was not the employer of the Applicant.

[3] At the commencement of proceedings I granted Mr Dircks permission to appear for the Applicant and Mr Galbraith of counsel permission to appear for the Respondent.

[4] This decision deals with the jurisdictional objection only.

Background

[5] The Applicant is in Australia on a 457 visa. In August 2012 she sought employment with the Respondent. At around the same time she sourced Geoffrey Nathan Consulting (GNC). GNC appear to provide migration services, including 457 visa sponsorship and the on-hiring of those individuals to organisations. 1

[6] On 20 September 2012 the Applicant advised the Respondent that GNC were a third party sponsorship company willing to take over sponsorship of her 457 visa but that GNC would need ‘an offer letter’ from the Respondent. 2

[7] On 22 September 2012 the Respondent sent an email and letter of offer to the Applicant. On 24 September the Applicant responded with a signed copy and a covering email that said that ‘if my visa is managed by GNC I believe they will pay directly in to my bank account.’ 3

[8] On 28 September 2012, apparently after some re-consideration, the Applicant advised the Respondent she would like to accept the job. She advised the Respondent that GNC ‘have run through my contract with me, I have attached a blank template for you to read through, they have advised once their contracts are confirmed and signed it will take roughly just 4 days to transfer the visa over.’ 4 The same day GNC emailed to the Respondent a ‘Workplace Service Agreement ‘‘for Leanne Smallwood on acceptance of the job offer from Ergo Asia.’5

[9] On 8 October 2012 there was an email exchange between the Respondent and GNC finalising the details of the Workplace Service Agreement prior to it being signed by the Respondent and forwarded to GNC. In that email exchange GNC said to the Respondent that the ‘workplace agreement does superseded (sic) the Ergo employment contract’ and confirmed costs should the Respondent wish to take over direct sponsorship of the Applicant. 6

[10] On 6 October 2012 the Applicant signed an employment contract with GNC. It was signed by GNC on 8 October 2012. 7

[11] Subsequent to this GNC arranged for the transfer of the Applicant’s 457 visa to themselves as the sponsor and on about 21 October 2012 the Applicant commenced work at the Respondent as labour supplied pursuant to the Workplace Service Agreement between the Respondent and GNC.

[12] On 7 November 2012 GNC invoiced the Respondent with respect to the Applicant’s employment at the amount specified in the signed Workplace Services Agreement for the period 22 October 2012 – 4 November 2012. GNC then invoiced the Respondent every fortnight for the same amount of $3,267.28. GNC met all PAYG and sponsorship obligations for the Applicant and supplied her with payslips and a group certificate.

[13] In September 2013 the Applicant’s employment was terminated by GNC following a complaint about her conduct in the workplace by the Respondent.

Evidence and submissions

[14] The matter to be determined is whether the Respondent is the employer of the Applicant.

[15] The Respondent says that it was not the Applicant’s employer.

[16] Mr Bruneau, the Human Resources Manager for the Respondent, gave evidence that it is not the Respondent’s practice or policy to directly employ (and therefore sponsor) 457 visa holders. His evidence is also that the contract and email offer of employment to the Applicant was in response to her advice that the employment offer was required to enable GNC to proceed with the 457 visa sponsorship. Mr Bruneau says it was never an intention to enter into an employment relationship with the Applicant. He did agree however that the offer and contract were the standard documents generated by the Respondent when employment is offered.

[17] The Respondent submits that the Applicant entered into an employment contract with GNC and that the Respondent entered into a services agreement for the supply of labour (specifically the Applicant) with GNC. This is clear from the documents in evidence including the signed Workplace Service Agreement and the employment contract between the Applicant and GNC.

[18] The Respondent says that the Applicant was not employed directly by it and that the Applicant was aware of this. She was aware of the arrangement between GNC and the Respondent as she introduced GNC to the Respondent; she was paid directly by GNC and received no remuneration from the Respondent; tax, superannuation and the like were paid by GNC; she received payslips and a group certificate from GNC; and she signed an employment contract with GNC.

[19] The Applicant did not commence working for the Respondent until late October 2012 after GNC had taken over the 457 visa sponsorship and the Applicant had signed a contract of employment with GNC. At this time GNC commenced invoicing the Respondent at the rate specified in the Workplace Services Agreement.

[20] The Respondent submits that there was no mutual intention to create a contract of employment and that the Respondent did not promise to pay the Applicant for work. As such the Respondent submits that two of the critical elements (intention and consideration) required for formation of a contract have not been met.

[21] Even if a contract of employment is found to exist the Respondent submits that it would be void for illegality and hence rendered ineffective.

[22] The Migration Regulations 1994 (Cth)specify the work restrictions for a 457 visa holder. Condition 8107 provides that a visa holder must only work in their nominated occupation and for the sponsor who employs them. The Respondent submits s.235(1) of the Migration Act 1958 (Cth) makes it clear that it is a criminal offence to work in breach of the visa conditions.

[23] The Respondent submits that the existence of a contract of employment between the Applicant and Respondent would have, as its object, doing a thing prohibited by the Migration Act. For the Applicant to have worked for the Respondent would be a breach of her 457 visa condition which would amount to a criminal offence under the Migration Act. The ‘employment’ would therefore be illegal and the contract void for illegality and unenforceable.

[24] The Applicant says her employer was the Respondent. She bases this on the letter of offer made to her by the Respondent and the signed copy of that contract she returned to the Respondent. The Applicant’s evidence is that Mr Bruneau did not at any time tell her that the Respondent did not directly employ 457 visa holders.

[25] The Applicant says that she ‘found’ GNC when she was searching the internet for employment and a sponsor that would enable her to continue to work in Australia in accordance with her 457 visa.

[26] The Applicant submits that the offer and acceptance of employment with the Respondent occurred prior to the time GNC ‘formally entered the scene’. 8 In any event the Applicant says legitimate questions remain, if the Applicant was employed by GNC, as to the ability of GNC under 457 visa arrangements to on-hire her services to a third party.

[27] The Applicant does not rely on or argue that there was a joint employment relationship with GNC and the Respondent such that the decision of the Full Bench in FP Group Pty ltd v Tooheys Pty Ltd 9is not relevant to this matter.

[28] The Applicant relies on the decision of the Full Court of the Federal Court in Damevski v Giudice and Ors 10 (Damevski) in support of the proposition that any reasonable person would conclude, on the basis of the evidence before the Fair Work Commission that a contract of employment was entered into between the Applicant and the Respondent and that the Respondent is bound by that contract.

[29] As to whether there was any consideration in the contract between the Applicant and the Respondent, the Applicant says that consideration, in the form of payment, does not have to be paid directly to the employee for there to be a contract of employment. The Applicant relies on the decision in Kitchen Design Systems Pty Ltd 11 (Kitchen Design) in which the Full Bench found that consideration could exist via a circuitous route.

[30] As to whether the contract entered into was valid, the Applicant submits that Mr Bruneau was not of the view that the contract was not valid but rather he took the word of Ms Beasley from GNC not to worry about it and that GNC would take over the contract.

[31] I have taken into account all of the evidence and submissions before me in reaching my decision.

Consideration

[32] The pre-requisites for the formation of a contract of employment are well known. These are:

(i) There must be an intention of the parties to create a legal relationship, the terms of which must be enforceable.

(ii) There must be an offer by one party and acceptance by the other.

(iii) The contract must be supported by valuable consideration.

(iv) The parties must be legally capable of making the contract.

(v) The parties must genuinely consent to the terms of the contract.

(vi) The contract must not be rendered ineffective by reason of conduct which is illegal or contrary to public policy. 12

[33] The matter in dispute requires resolution of whether the Applicant and the Respondent entered into a contract of employment.

Intent

[34] Intention is a necessary component of contract formation. The test of intention is objective, not subjective, and can be inferred from the surrounding conduct of the parties. 13

[35] In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd¹⁴ Gleeson CJ considered the issue of intention to conclude a contract and stated:

The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications: Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.

[36] It is therefore appropriate to consider not just those actions of the Applicant and Respondent prior to the Applicant signing the contract offered by the Respondent but also the actions of the parties after the Applicant signed the contract sent to her by the Respondent.

[37] I am satisfied on the evidence before me that it was the intention of the Respondent to have the Applicant work for it.

[38] The Applicant was clear from her first contact with the Respondent that she was on a 457 visa and that the sponsorship of the visa would need to be transferred to a company ‘currently set up as a sponsor.’ 15

[39] One of the conditions that attached to the Applicant’s 457 visa is a requirement that she works for the sponsor who nominated the position she was working in, or an associated entity of the sponsor. If she should cease working for that employer, she must find another employer to sponsor her. 16 This reflects s.235 of the Migration Act and condition 8107 in Schedule 8 of the Migration Regulations 1994. The Applicant was aware of these conditions.17

[40] The Respondent was not an employer registered to sponsor 457 visa holders. I accept that it was aware that it could not directly employ the Applicant as she was on a 457 visa as it was not a sponsor. Nothing turns on whether this practice was captured in a formal policy of the Respondent. An employer is either registered as a 457 visa sponsor or it is not. There is no evidence that suggests the Respondent was so registered.

[41] I accept the evidence of Mr Bruneau that it was not the practice of the Respondent to directly employ 457 visa holders. I also prefer the evidence of Mr Bruneau that he advised the Applicant that this was the case. If he had not there is no logical reason as to why the Applicant advised the Respondent that GNC were willing to take on her 457 visa. I am also satisfied that the Applicant encouraged the Respondent to provide her with the letter of offer when she told Mr Bruneau that GNC would require ‘an offer letter’ to enable GNC to take over the 457 visa sponsorship.

[42] From these facts I conclude that the Applicant was aware that the Respondent did not intend to sponsor her and therefore could not directly employ her.

[43] I am satisfied that the actions of the Respondent, viewed objectively, do not demonstrate a mutual intention to create a legal employment relationship with the Applicant. I accept that Mr Bruneau understood that, in entering into the Workplace Service Agreement with GNC, that GNC would take on the employment and sponsorship of the Applicant and that she would then be provided to the Respondent as labour hire. If it had been the intention of the Respondent to create a legal relationship with the Applicant there is no reason it would have needed to enter into the Workplace Service Agreement with GNC. If the Respondent’s intention was to legitimise the Applicant’s 457 visa there would have been no reason for Mr Bruneau to confirm with GNC that the Workplace Service Agreement would supersede the Ergo employment contract.

[44] Further, I am satisfied that the actions of the Applicant, viewed objectively, indicate that she did not intend to enter into a legal relationship with the Respondent. She was aware that she could only work for her 457 visa sponsor. She has never claimed that the Respondent was her 457 visa sponsor. All of her actions indicate that she intended that GNC fulfil that role. The Applicant was aware of her visa requirements. That she sought GNC take over the sponsorship objectively indicates that she intended to be employed by GNC and not the Respondent.

[45] I therefore find that there was no mutual intention to create a legal relationship.

Offer and acceptance

[46] I am satisfied that the Respondent made an offer of employment to the Applicant but that this was in the context of the Respondent considering this was necessary for GNC to take over sponsorship of the Applicant’s and her employment. In this respect the Respondent failed to fully understand the process that it was entering into and undertake its own due diligence on the appropriate processes to be followed or specific requirements of GNC. It appears that the Respondent allowed the Applicant to control the employment and visa processes without determining for itself the appropriate steps it should take.

[47] I am also satisfied that, at a later date, GNC made an offer of employment to the Applicant which she accepted. It is not clear what effect the Applicant thought this acceptance had on her contract with the Respondent.

[48] Given the Applicant’s knowledge of the conditions attached to her 457 visa it is reasonable to conclude that she accepted the employment offer from GNC because she knew she had to be employed by her sponsor.

[49] Contrary to the submissions of the Applicant I do not find any assistance in the decision in Damevski in deciding this particular issue. There is no dispute here that the Applicant signed an employment contract with GNC. She apparently believes that she also had a contract with the Respondent. Unlike Damevski there does not appear here to be an attempt to mislead the Applicant.

Valuable consideration

[50] The Applicant’s wages and all other entitlements have been paid to her by GNC. She agrees that she has received no remuneration at all from the Respondent.

[51] The Applicant relies on the decisions in Kitchen Design 18 and Damevski in support of its contention that payments to the Applicant through a third party do not exclude that there was valuable consideration between the Applicant and the Respondent.

[52] In Kitchen Design Ms Moran made an application for unfair dismissal. Kitchen Design Systems (KDS) claimed Ms Moran was a contractor and therefore not eligible to make such a claim. Alternatively, at first instance, it was argued that Ms Moran was an employee of KDS and not Freedom Kitchens who she had named as the respondent to her unfair dismissal application. KDS and Freedom Kitchens were part of the Estrom Group. Ms Moran had negotiated with her purported employer with respect to her hours of work and her rate of pay. To this extent there was an offer and acceptance and valuable consideration. Ultimately a company called Check Lec invoiced KDS for payment owed to Ms Moran. The Full Bench on appeal found that there was no contractual relationship between Check Lec and KDS and that none could be inferred. The Full Bench however found that there was consideration by Freedom Kitchens for Ms Moran’s services as the payments made by KDS to Check Lec were levied against Freedom Kitchens as part of the Estrom Group. 19 On this basis they found that Mr Moran had an employment contract with Freedom Kitchens.

[53] The matter before me can be distinguished from the decision in Kitchen Designs. This is not a matter where there is any suggestion that GNC and the Respondent are related organisations such that payments made by GNC could be seen to be payments made by the Respondent. It is clear, on the evidence, that GNC invoiced the Respondent at the rate set in the Workplace Service Agreement.

[54] In Damevski there was an attempt to establish an Odco type of contracting arrangement such that Mr Damevski would become an independent contractor supplied through the agency of MLC carrying out work for Endoxus who had been his previous employer. MLC made payments to Mr Damevski. The court found that there was no evidence of a hiring agreement, no employment relationship, and no signed agreement between Mr Damevski and MLC. Marshall J found that MLC acted as an agent for Endoxus and paid Mr Damevski on Endoxus’ behalf. Ultimately it was unanimously found that Mr Damevski was not a contractor but an employee of Endoxus

[55] The matter before me can be distinguished from the decision in Damevski on the basis of the facts. In this case there is a clear employment contract between the Applicant and GNC. That contract sets out wages and conditions of employment. There is no evidence that the Applicant was forced into the arrangement she was in with GNC by the actions of the Respondent or GNC. There is no claim in this matter that the Applicant is a contractor.

[56] By operation of the Migration Act the Applicant must be employed by her 457 visa sponsor. To do otherwise would place her in breach of her visa conditions. Her 457 visa sponsor was GNC and that was who employed her under an employment contract and paid her wages and other entitlements as well as meeting other obligations of an employer.

[57] I am satisfied that there was a valuable consideration but that this was between the Applicant and GNC in satisfaction of her employment contract with it. There was no consideration from the Respondent to the Applicant except that the Respondent had a Workplace Service Agreement with GNC that gave effect to the placement of the Applicant with the Respondent.

Legal capability and genuine consent

[58] It is not necessary to consider these matters.

Illegality

[59] The performance of a contract that involves conduct prohibited by legislation may be invalid and unenforceable. 20 The essence of statutory illegality lies in the element of prohibition. Legislation that prohibits a contract must be distinguished from legislation that precludes or limits the enforcement of a contract.21

[60] In respect of the contract of employment the Applicant says she has with the Respondent it is necessary to determine if that contract is prohibited by the Migration Act.

[61] The Migration Act states:

4 Object of Act

(1) The object of this Act is to regulate, in the national interest, the coming into, and presence in, Australia of non-citizens.

(2) To advance its object, this Act provides for visas permitting non-citizens to enter or remain in Australia and the Parliament intends that this Act be the only source of the right of non-citizens to so enter or remain.

...

[62] Section 4A of the Migration Act provides that Chapter 2 of the Criminal Code (except Part 2.5) applies to all offences under the Act.

[63] Section 13 of the Migration Act defines a ‘lawful non-citizen’ as a non-citizen who holds a visa.

[64] Division 3A of the Migration Act deals with the temporary sponsored work visa program.

[65] Section 235(1) of the Migration Act states:

235 Offences in relation to work

(1) If:

(a) the temporary visa held by a non-citizen is subject to a prescribed condition restricting the work that the non-citizen may do in Australia; and

(b) the non-citizen contravenes that condition;

the non-citizen commits an offence against this section.

[66] The Migration Act allows for the making of regulations not inconsistent with the Act.

[67] Schedule 8 of the Migration Regulations 1994 specifies special conditions that apply to various classes of visas including the 457 visa.

[68] Condition 8107(1) provides that:

8107 (1) If the visa is not a visa mentioned in subclause (3) or (4), and was granted to enable the holder to be employed in Australia, the holder must not:

(a) cease to be employed by the employer in relation to which the visa was granted; or

(b) work in a position or occupation inconsistent with the position or occupation in relation to which the visa was granted; or

(c) engage in work for another person or on the holder’s own account while undertaking the employment in relation to which the visa was granted.

...

(3B) If the visa is, or the last substantive visa held by the applicant was, a Subclass 457 (Temporary Work (Skilled)) visa that was granted on the basis that the holder met the requirements of subclause 457.223(8):

(a) the holder must work only in the occupation or position in relation to which the visa was granted; and

(b) if the holder ceases employment—the period during which the holder ceases employment must not exceed 90 consecutive days.

[69] These conditions accord with those on the Department of Immigration and Border Protection’s website and as the Applicant understood them to be.

[70] There is no dispute that the Applicant was, at the time the events subject to this decision unfolded, a ‘lawful non-citizen’. She held a valid visa and, although not working, was in the 90 day window provided in the regulations within which she was required to find another sponsor. She was, at this time, not in breach of her visa conditions.

[71] The Applicant’s 457 visa was transferred to GNC on or about 19 October 2012. Prior to that date she was within the 90 day window within which she was required to find alternative employment and visa sponsor: that is, she was not in breach of her visa conditions.

[72] The Respondent never took over sponsorship of the Applicant 457 visa. Therefore, had she worked for the Respondent she would have breached her visa conditions. Such a breach is a criminal offence pursuant to s.235(1) of the Migration Act.

[73] In Yango Pastoral Co Pty Ltd v First Chicago Aust Ltd²²(Yango) Gibbs CJA said:

There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful:

(1) The contract may be to do something the statute forbids;

(2) The contract may be one which the statue expressly or impliedly prohibits;

(3) The contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or

(4) The contract, although lawful according to its own terms, may be performed in a manner which the statue prohibits. 23

[74] Whether the Migration Act expressly or impliedly prohibits a contract of employment from being validly entered into was considered by the Court of Appeal of the Supreme Court of Queensland in Australian Meat Holdings P/L v Kazi. 24 In that matter Mr Kazi had injured himself at work but was, at the time of his injury, an ‘unlawful non-citizen’. At first instance it was found that s.253(3) of the Migration Act did‘not prohibit the making by an employee who was an unlawful non-citizen of a contract of employment between him and his employer.’25

[75] On appeal Davies JA (Williams JA concurring) considered the construction of s.253(3) of the Migration Act and, after considering a range of authorities including that in Yango along with the objects of the Migration Act, concluded that:

If it is in the national interest to prohibit unlawful non-citizens from performing work it must also be in that interest, it seems to me, to prohibit any such person obtaining rights under a contract to perform work. To do so would conduce to the object of the statute. I do not think therefore that the Act intended that a penalty should be the only consequence of a breach of s 235(3).

For the reasons which I have given, that a contract to perform work has as its whole object the doing of the very act which the statute prohibits, and that invalidity of a contract by a non-citizen to perform work is within the object stated in s 4(1), I think that the contract here was invalid. 26

[76] Whilst the matter in Australian Meat Holdings related to s.235(3) of the Migration Act the line of reasoning equally applies to s.253(1) of that Act. Davies JA considered that a prospective employer could protect itself by ensuring that a prospective employee could establish his or her citizenship or produce a valid work visa. In the matter before me the Applicant could not produce a valid work visa that would allow her to work for the Respondent.

[77] I am satisfied that the Migration Act impliedly prohibits a contract of employment between the Applicant and the Respondent.

[78] I am also satisfied that if such a contract could be validly made it would do something that the Migration Act forbids – that is have a 457 visa holder employed by an employer who is not the sponsor of the 457 visa holder

[79] Given my findings with respect to mutual intent and consideration it is not strictly necessary for me to find with respect to legality. The matter was however subject to submissions. Based on the authorities it would appear reasonable to conclude that if the contract is, as the Applicant contends, between her and the Respondent it is not lawful and hence is void and unenforceable.

[80] I therefore find that the contract, if it had been otherwise validly formed, is impliedly prohibited by the Migration Act. It is therefore invalid and unenforceable.

[81] The Applicant in submissions suggests that GNC could not legally on-hire the Applicant and that such an arrangement would be in breach of the 457 visa employer sponsorship arrangements. The Applicant would be correct if GNC was an employer sponsoring an individual (or a number of individual) employee. The Migration Act allows for a labour agreement to be entered into between an employer and the Australian Government if the employer is a recruitment company seeking to sponsor skilled workers to be on-hired to another business, and the occupations requested are on the Consolidated Occupations List. 27 It appears that this is the category within which GNC sits. There is no evidence that GNC was not acting in accordance with the Migration Act.

Conclusion

[82] For the reasons set out above I find that no employment contract was validly made between the Applicant and the Respondent.

[83] I therefore find that the Respondent was not the employer of the Applicant.

[84] The jurisdictional objection is upheld and the application for relief from unfair dismissal pursuant to s.394 of the Act is dismissed. An order to this effect will issue with this decision.

COMMISSIONER

Appearances:

G. Dircks for the Applicant.

A. Galbraith for the Respondent.

Hearing details:

2014.

Melbourne;

January 24, 29.

 1   GNC website:   Exhibit Ergo2.

 3   Exhibit Ergo 4.

 4   Exhibit Ergo5.

 5   Exhibit SM2, attachment LS-8.

 6   Exhibit Ergo 6.

 7   Exhibit Ergo 7.

 8   Transcript PN963.

 9   [2013] FWCFB 9605 (unreported, Hatcher VP, Catanzarit VP, Riordan C, 17 December 2013).

 10 [2003] FCAFC 252.

 11   [2007] AIRCFB 403 (Unreported, Lacy SDP, O’Callaghan SDP, Simmonds C, 13 July 2007).

 12   See Sappideen, O’Grady and Warburton, Macken’s Law of Employment: Sixth Edition (Thomas Reuters, 6th ed, 2008) [4.20].

 13   See Damevski [95] per Marshall J.

14 (1988) 18 NSWLR 540 cited in Damevski [141] per Merekl J.

 15   Exhibit Ergo1.

 16  

 17   Transcript PN579.

 18   [2007] AIRCFB 403.

 19 Ibid [50].

 20   See Chesire and Fifoot’s Law of Contract (9th ed) Seddon and Ellinghous, ch 18.

 21   Ibid 18.6.

22 (1978) 139 CLR 410.

 23   Ibid at 413.

 24 [2004] QCA 147.

 25 Ibid [1].

 26 [2004] QCA 147 [23]-[24].

 27 

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