Smith v Cadraw Pty Limited

[1996] IRCA 283

DECISION NO:   283/96

CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - EMPLOYEE - CONTRACTOR - RELATIONSHIP OF PARTIES

INDUSTRIAL RELATIONS ACT, 1988 Ss 170DE(1) & (2) EA EDA EE(2)&(3)


 Stevens v. Brodribb Sawmilling Pty Limited 160 CLR 16
Purvis v. Chieftain Management Pty Limited unreported 29 September 1995 Marshall J. 527/95
May v. Lilyvale Hotel Pty Limited unreported 1 December 1995  Wilcox C.J.  628/95

BEVERLEY ANN SMITH   v    CADRAW PTY LIMITED

(A.C.N. 062 168 432)

NI     1228 of  1996


Coram:  LINKENBAGH JR
Place:  SYDNEY
Date:  3 JULY 1996

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY

NI 1228 of 1996

BETWEEN

BEVERLEY ANN SMITH
Applicant

AND

CADRAW  PTY LTD (A.C.N. 062 168 432)
Respondent

Coram:          Judicial Registrar Linkenbagh
Place:            Sydney
Date:              26 June 1996

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. That the respondent pay to the applicant as compensation pursuant to the provisions of Section 170EE(2) and (3) the sum of $10,000.

1. The  $10,000 shall be paid by four instalments each of $2500 on 26th day of the months of July, August, September and October 1996 and on default in payment of any instalment the whole of the balance then due with interest pursuant to the Court Rules shall be due and payable.

Note: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY

NI  1228 of 1996

BETWEEN

BEVERLEY ANN SMITH
Applicant

AND

CADRAW  PTY LTD  (A.C.N. 062 168 432)
Respondent

Coram:          Judicial Registrar Linkenbagh
Place:            Sydney
Date:              26 June 1996

REASONS FOR DECISION

Delivered ex tempore - revised from the transcript

This is an application pursuant to the provisions of Section 170EA of the Industrial Relations Act 1988 which was filed in the Industrial Relations Commission on 25 January 1996.

The applicant and the respondent came into contact with one another by reason of the applicant’s responding to an advertisement in the newspaper in October of 1995 and subsequently early in November being invited to an interview with Mr Manuele for the respondent.  The applicant's training is as a draftsperson, for want of a better word, and she specialises in drafting work to do with electrical and mechanical plans.

She is a woman aged 50 years who returned to the workforce in 1986 having had a family of six children and for about eight years she worked using her training in drafting.  In 1995 she obtained employment with the Holy Family Education Centre working 15 hours per week and earning from that employment $10.61 per hour.  Her evidence was that her income in that employment was supplemented by benefits from the Department of Social Security.   The applicant sought to initiate a career change and obtained qualifications in the area of cosmetics, but that re-training did not result in her obtaining suitable employment in that field.

In October of 1995 the applicant was anxious to obtain employment which would generate a higher income than that which she was earning at the time and that was her motivation in applying for the position for which she was subsequently interviewed by Mr. Manuele.

There is a variation in the evidence of the applicant and Mr Manuele as to what was said at the interview.  Where there is a variation in the evidence I prefer the evidence of the applicant.  That is largely because of my assessment of the applicant and Mr Manuele in the witness box and considering their responses in the areas of the evidence where they disagree. 

The applicant's evidence about the interview was that she did a test on a computer during the interview to show her abilities, that there was discussion about rates of pay, that she requested to be paid $25 an hour and she was offered $22 an hour with the prospect of that amount being raised to $25 after two weeks.  The applicant asked for a guarantee of permanent work and indicated that she needed full time work.  There was discussion about superannuation and she was informed by Mr Manuele that she should take care of her own superannuation. 

The applicant was offered the position and commenced work the following day.  Mr Manuele's evidence is that the fact that the position was to be permanent was not mentioned and  that  the applicant sought $28 an hour rather than $25. He said  that the offer of $22 a week was accepted with the proviso that there would be a possible rise later on depending upon her performance and the availability of work.  Mr Manuele said that the applicant offered to work at home and the applicant denies that that was so. 

The parties agree that none of the terms of the engagement or their separate understandings of what the arrangement were were reduced to writing.  The applicant commenced work on 7 November and there is no contest before me that her work performance was other than very satisfactory and no issue was taken with any aspect of her conduct in the work place.

The applicant worked 40 hours for some weeks between 7 November and 8 January and a lesser number of hours in some weeks. Most of the time she was engaged in plans to do with a contract which the respondent had with a hospital.  The evidence is that that work ran out during December and the applicant then started to work on another project, which is described in the applicant's time sheets as Arnotts Auto Wash.  It seems that by 8 January work was slow and Mr Manuele for the respondent informed the applicant that there was no work for her and that she should telephone him.  When she did telephone she was informed that there was no work available for the foreseeable future.

The evidence of the applicant and Mr Manuele is at variance at this stage, the applicant saying that there was a definite no work available attitude on the part of Mr Manuele, and Mr Manuele saying that the unavailability of work was of a  more temporary nature than was understood by the applicant.

The applicant has tendered in evidence various letters that she generated during the relevant period.  Those letters indicate her understanding of the position at the time.  Exhibit D is a letter dated 6 November 1995 from the applicant to the Holy Family Parish Office tendering her resignation from her part time job with the Parish Office. In that letter she apologises for the short notice of her resignation and I quote from it: "I have been offered a five day week of employment, which I have accepted".  The response from the Holy Family Parish to that letter is exhibit E and I quote from it: "Of course we regret your decision but are pleased that you have found full time employment".

The applicant wrote to the respondent on 10 January and that letter is exhibit K. It refers to a permanent position working  40 hours per week at $22 per hour and refers to the fact that the applicant is "no longer employed by you".  The respondent's attitude at the time is  reflected by Exhibit 1, and quoting from it, Mr Manuele says:

First of all I have never promised you a permanent position.  The job was in a contract basic.  Possible long term depending on performance and work load.

He refers to having telephoned the applicant on Tuesday 9 January for more work and being told by her that she was not available because of other work commitments.

The understanding of the parties as to the nature of the relationship is only one factor that the Court must take into account in determining the true nature of the relationship. There is no doubt in my mind that the applicant perceived herself as an employee and that the respondent perceived her as a contractor, with whatever meanings each of the parties might give to those titles. The Court is required as we are told in the decision by the High Court in Stevens v Brodribb Sawmilling Pty Limited 160CLR16 that the Court must look in each case to the whole of the circumstances in determining this question of what is the nature of the relationship. This Court follows Stevens v Brodribb Sawmilling Pty Limited in the decision of Justice Marshall in Purvis v Chieftain Management Pty Limited which is unreported and is decision number 527/ 1995 of 29 September 1995. His Honour in that case quotes some words of Justice Gray from another case, those words being:

A Court will always look at all of the terms of the contract to determine its true essence and will not be bound by the express choice of the parties as to the label attached to it.  The parties cannot create something which has every feature of a rooster but call it a duck and insist that everybody else recognise it as a duck.

In this case it seems to me that the applicant thought that what they had was a duck and the respondent thought what they had was a rooster and they each earnestly believed that they were correct in their assessment of the nature of the relationship.  

It is for me to determine the true nature of the relationship on the evidence before me and I determine that relationship was of employment.  There is evidence before me as to many of the aspects of the relationship.  There was an advertisement, the terms of which are not before me, but it was an advertisement, perceived by the applicant as one inviting applications for employment.  There was no express mention by either party of the concept of sub-contracting or the status of the applicant as a sub-contractor, either at the interview or in any document, and in fact there are no documents between the parties which set out the terms of the relationship.

The applicant's letters at the time leave no doubt that she perceived herself to be an employee and  there is some significance to be placed on the terms of those letters.  The remuneration was at an hourly rate and was to be paid weekly on Fridays.  Those factors, to my mind, indicate more of the concept of employment than sub-contracting but may be equivocal.  The applicant's evidence is that at the interview she made it clear that she required full time employment, being a 40 hour week.  Mr Manuele's evidence goes part of the way to agreeing with that in that he agrees that it was to be a 40 hour week and possibly more hours each week, but he puts the rider on that that it depended upon the availability of work. The availability of work is not a feature of the arrangement as far as the applicant was concerned.

The applicant worked out of the respondent's premises and used the respondent's equipment and those two aspects are factors which lean towards the concept of employment.  The respondent agreed that he covered the applicant for Worker's Compensation in case there was an accident.  It may well be that the reason for that is the wide definition of ‘worker’ in the relevant Workers Compensation legislation, but nonetheless Mr Manuele's evidence certainly indicates that he perceived himself as having some responsibility towards the applicant in the event of injury in the work place.

The evidence about Income Tax is that the applicant completed a Payee Declaration pursuant to the Prescribed Payments System of the Australian Taxation Office.  She did not pay income tax instalments under the ‘Pay as you Earn’ system. Had she done so, that would have been a factor tending to the conclusion that there was an employment relationship.  The use of the Prescribed Payments System  prima facie might indicate an intention of the parties to have their relationship seen as a contractual relationship.  However, having observed the applicant in the witness box and heard her responses to questioning in relation to the taxation arrangements, I am satisfied that she had no understanding at all as to what the document that she signed really meant. She certainly did not, in my assessment of her, understand that it was designed in any way to work against the view that she was not an employee of the respondent.

Stevens v Brodribb Sawmilling Pty Limitedis still authority for the proposition that the control test is a vital aspect in consideration of the assessment of the relationship between the parties to a work relationship.  The evidence in this case is very clear that the respondent exercised control over the applicant.  He dealt with his customers and he gave out work to the applicant.  He said in evidence "I tell her what to do".  It is true that in actually doing her work she used her own expertise and judgment.  That is what she is employed to do, but she had no control over what work was allocated to her or when it was allocated or any part in the liaison with the client.

I quote again from Mr Manuele's evidence when he said "I tell her what to do.  She knows how to do it."  That is an honest summary of how the arrangement worked.  I am satisfied that the respondent exercised a high degree of control over the applicant.  She started work at about the same time each morning.  She worked all day except when the work ran out and she then went home so there would not be any obligation to pay her her hourly rate for time when she did not work. But while the work was there and given to her by the respondent she did the work using the respondent's premises and equipment. 

The work was supervised by Mr Manuele.  It was sent out to the client.  It was corrected and was returned to Mr Manuele who then instructed the applicant to make any alterations or amendments to the work in accordance with the client's wishes.  For all of those reasons I am satisfied that this relationship was one of employer/employee. 

I now turn to the question of whether there was a termination of the employment at the initiative of the employer and for reasons that I have already covered in some detail I have no difficulty in coming to a finding that Mr Manuele informed the applicant that her services were no longer required.  The next question that I must look at is whether or not the respondent has satisfied the onus placed on him by Section 170EDA of the Act that there was a valid reason for the termination of the employment within the meaning of Section 170DE(1). 

The assertion of the respondent is that there was a shortage of work.  The respondent has not placed before me any evidence to  satisfy me that there was in fact a shortage of work as at 8 January 1996.  The applicant's evidence is that the Arnotts job which she had started was given to another draftsman in the office and had that not happened then she would have continued on with the Arnotts job.  I am not satisfied that there was a shortage of work on the evidence before me. 

I note that Mr Booler for the respondent conceded that if I found that there was a valid reason for the termination of the employment the respondent would concede that it had not followed the correct procedures and that there would be an issue of harshness, justness or unreasonableness within the meaning of Section 170DE(2). I do not, however, have to address that as I am not satisfied that there was a valid reason for the termination of the employment as at 8 January 1996.

I turn then to the question of a remedy.  The applicant does not seek reinstatement.  There is evidence that she has lost faith in the respondent because of his failure to pay her wages on time and because of a need which she perceived to inform the Australian Taxation Office that the respondent had not been passing on to that office the deductions which it made from her earnings during the period of her employment. 

Whilst I am not bound by an indication from an applicant that reinstatement is not desired I certainly have no difficulty in this case in coming to the conclusion on all of the evidence that reinstatement would be impracticable.  Compensation is therefore the alternate remedy. 

In assessing the amount of compensation I am required to take into account all of the circumstances of the case.  The applicant's remuneration immediately prior to termination was at the rate of $22 per hour for an expected 40 hour week in a normal week, being $880 per week.

The cap on compensation pursuant to Section 170EE(3) is 26 weeks at $880 being $22,880.  The applicant has earned moneys since the termination from two sources and those amounts are set out in exhibit L.  Those amounts totalled $2850. 

The applicant remains unemployed and it would appear that she has made vigorous efforts to obtain comparable employment since January without success.  Her loss at the rate of $880 goes on and is likely to go on beyond the expiry of the 26 week period immediately following termination. If I were to follow the reasoning of the Chief Justice in May v Lilyvale Hotel Pty Limited and if I were minded to award the maximum compensation, the applicant would receive the maximum available notwithstanding her earnings since January.

I am not minded to do that because I find that the employment was likely to come to an end at some stage. It is difficult to say when that would be.  My reasons for coming to that conclusion are the applicant's evidence that she was looking for other employment before Christmas of 1995 and the evidence to which I have referred as to her loss of trust in the respondent.

Certainly balanced against that there is the fact that the applicant needed this employment and had given up other employment and her Social Security benefits to engage in full-time employment with the respondent.  It is my view that notwithstanding her evidence of her need for full-time employment she appears to be a woman of principle and that is evidenced by the tone of her letter to the respondent dated 10 January and her letter to the Taxation Office which is exhibit F. Given the perception that she was forming of Mr Manuele it is unlikely that she would have been able to maintain this employment for six months.

In all of the circumstances of this case it is appropriate that the applicant receive a substantial amount by way of compensation.  For the reasons I have given it is not in my view appropriate that she receive the maximum amount and in the exercise of my discretion I determine that the applicant should receive the sum of $10,000 by way of compensation and the orders I make are:

1. That the respondent pay to the applicant as compensation pursuant to the provisions of Section 170EE(2) and (3) the sum of $10,000.

1. The  $10,000 shall be paid by four instalments each of $2500 on 26th day of the months of July, August, September and October 1996 and on default in payment of any instalment the whole of the balance then due with interest pursuant to the Court Rules shall be due and payable.

I certify that this and the preceding ten (10) pages
are a true copy of the reasons for decision of
Judicial Registrar Linkenbagh as recorded in the transcript
and revised by the Judicial Registrar.



Associate:
Dated: 3 July 1996

Solicitor for the applicant:	George West
Solicitors for the respondent:	Thomas Booler and Co
Date of hearing:	26 June 1995