Stephen Brophy v Debt Fix Pty Ltd
[2024] FWC 1451
•4 JUNE 2024
| [2024] FWC 1451 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Stephen Brophy
v
Debt Fix Pty Ltd
(U2024/1572)
| DEPUTY PRESIDENT SLEVIN | SYDNEY, 4 JUNE 2024 |
Application for an unfair dismissal remedy – objection that Applicant not dismissed – whether Applicant an employee or independent contractor
Mr Stephen Brophy performed cleaning work at the home of the Sole Director of Debt Fix Pty Ltd (Debt Fix) Mr Grant O’Donell from February 2019 until January 2024. He makes application pursuant to s 394 of the Fair Work Act 2009 (Cth) for an unfair dismissal remedy.
Debt Fix objects to the application on the basis that Mr Brophy was not dismissed because he was never an employee. It contends that he performed the cleaning work as an independent contractor.
Section 386 of the Act sets out the circumstances in which a person is taken to have been “dismissed” for the purposes of s.394. That section provides, relevantly, as follows:
“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.”
As is apparent from the terms of s 386(1), a person can only be dismissed when their employment comes to an end. In the absence of a relationship of employer and employee, a person cannot be dismissed within the meaning of s.386 and an application under s.394 cannot be made. This decision deals with the issue of whether an employer and employee relationship existed between Mr Brophy and the Respondent.
Background
The facts in the matter are straight forward. Evidence was provided in witnesses statements from Mr Brophy and Ms Malzard. Documentary evidence was also provided including Mr Brophy’s invoice books, bank statements, tax records and extracts from the Australian Business Registry. Both witnesses were cross examined.
Mr Brophy was a long term friend of Ms Joanne Malzard and Mr O’Donnell. Ms Malzard and Mr O’Donnell are married. Mr O’Donnell is the sole Director and Company Secretary of Debt Fix. Debt Fix is a financial advice business. Ms Malzard also works in the business.
Mr Brophy provided an account of a conversation a conversation with Ms Malzard in late 2018. He said the conversation was along the following lines:
JM: “I’m so annoyed I have to no start looking for new cleaners cause the ones I
have are lazy and don’t complete the tasks I ask them too and for $80 per hour
that’s frustrating”.
SB “I bet it must be, but say that again”.
JM: “I have to start looking for…”
SB: “No, not that bit.”
JM: “What, the $80 per hour?”
SB: “You pay them $80 per hour to clean and they are no good, babe I’ll clean
your house for that amount.”
…
SM: “If you need someone, let me start cleaning and if you are not happy with me
get new cleaners.
The house referred to was Ms Malzard and Mr O’Donnell’s home. Following that conversation there were two further discussions between Mr Brophy and Ms Malzard about Mr Brophy performing the cleaning work. The third conversation also involved Mr O’Donnell. It occurred around late January 2018. I was not provided with a detailed account of that conversation, but it is uncontroversial that Mr Brophy was to commence cleaning on the basis that he would do so for 5 hours per week at the rate of $80.00 per hour. Payment would be made by Mr O’Donnell’s business Debt Fix. Mr Brophy was to invoice Debt Fix and ensure that he had an Australian Business Number (ABN) He was to start in late February 2018.
Mr Brophy says that the labels employee or independent contractor were not used in the discussions. He said he started work around 23 February 2018. He said the arrangement he typically worked 5 hours per week from 7.00 am to 12.00 pm every Monday. In early 2019 he was offered and accepted another 5 hours taking the total to 10 hours per week. The additional hours being worked from 7.00 am to 12.00 pm on Thursdays. He said he was regularly paid $800 per week from 2019.
In his statement Mr Brophy asserted that while he had an Australian Business Number it was not active during the time he worked for the Debt Fix. He said he was not registered for Goods and Services Tax purposes. He was told to obtain insurance for the work. He was paid $80 per hour for all work performed. He was paid weekly and directly into his bank account. He did not advertise himself as a professional cleaning business. He also stated that he had done cleaning work for two other houses.
Mr Brophy described his first day of work as involving Ms Malzard taking him around the home explaining what she wanted cleaned, how and using what equipment. He initially supplied his own vacuum cleaner but was subsequently asked to use Ms Malzard’s. He described other duties he performed at Ms Malzard’s request as including walking the family dog, putting up blinds, making deliveries, cleaning outside gutters, and running errands. He said he reported to Ms Malzard and sought instructions from her when working. He said he was expected to attend the home at the allotted times. He stated that when he worked additional hours he would provide a report of the hours worked. Mr Brophy described them as overtime hours. I was provided with contemporaneous emails and text messages which included discussions about reconciling the hours worked with payments made.
Ms Malzard’s evidence was that she and Mr O’Donnell had been friends with Mr Brophy for over 15 years. In late 2018 she had a conversation with Mr Brophy about needing a cleaner and he offered to do the work at $80 per hour for 5 hours per week. No employment contract was entered into, and she understood that he would work as an independent contractor. She understood at the time that he had other clients who he performed cleaning for. She said there were three discussions before he started, and Mr O’Donnell was present at the third. He recollection was that those discussions included the need for Mr Brophy to have an ABN and for him to provide invoices before payment would be made. She said he was never into Debt Fix’s employment records as an employee. He was not paid as part of the payroll. During the time he performed the work he did not claim sick leave or annual leave and did not request group certificates. His hours of work were flexible and while in the first few months he provided invoices his stopped doing so and began simply requesting payment.
In late 2018 Ms Malzard said Mr Brophy was asked to increase the number of hours to 10 per week. Around this time Ms Malzard recommended Mr Brophy’s cleaning services to others. Ms Malzard said she did not supervise Mr Brophy’s work. In June 2023 Mr Brophy’s personal relationship with Ms Malzard and Mr O’Donnell broke down. There were arguments and Ms Malzard became wary of having Mr Brophy in her home. Mr Brophy continued to perform the work, but Ms Malzard took the view that he had become unreliable. In November 2023 Ms Malzard and Mr O’Donnell spoke to Mr Brophy about reducing his hours back to 5 per week. Mr Brophy was away in late 2023 and following a series of emails in January 2024 which covered the difficulties of the previous 6 months, disagreements about how many hours had been worked and paid for and the reduction in hours required for cleaning Ms Malzard told him that she no longer wished him to clean her house.
A number of documents were also tendered into evidence. Records from the Australian Business Registry show that Mr Brophy had a registered Australian Business Number which was activated on 28 February 2018 and remained current until 24 May 2022. It recorded Mr Brophy’s business type as Individual/Sole Trader. Mr Brophy’s recollection was different. I prefer the registry’s records.
Mr Brophy provided two Invoice Statement Books with copies of tax invoices provided by him to various clients going back to early 2018. The books include copies of invoices made out to Debt Fix from S B Cleaning Services on a weekly basis from 23/2/18 to 30/6/18. The first of these is dated 23/2/17. Mr Brophy gave evidence that the year 2017 appeared because he had performed cleaning work intermittently for Debt Fix in 2017. Ms Malzard denied that was the case and that Mr Brophy only started the cleaning work in 2018. I prefer Ms Malzard’s account. The reference to 2017 in the first two invoices was no doubt the common mistake made in the early months of a new year and should have read 2018 rather than 2017. This is consistent with Mr Brophy’s evidence that became aware that the work was available in early 2018 and offered to do the work at that time. It is also consistent with the fact that he commenced work in February 2018 and there are no other invoices issued work at that time. Mr Brophy’s bank statements from February 2018 record payments that match the early invoices dated 2017 but paid in March 2018.
The Invoice Books also show that invoices were not provided on a regular basis after June 2018. Ms Malzard said that they were sought but not provided. Mr Brophy said that invoices, recoding an Australian Business Number were only required for the first three months. Payments however were still made after that time.
Mr Brophy’s banking records were also provided. Evidence of the payments from Debt Fix is found in those records. The statements record payments from Debt Fix commencing 1 March 2018. The entries record the purpose of the payments as “Mount Street Clean”. Those statements were from February 2018 to August 2023. The statements record deposits from Debt Fix Pty Ltd they include a notation “Mount St Cleaning”. Mt St being the address of Ms Malzard and Mr O’Donnell’s home. In the months of March and April the payments occurred at irregular and frequent intervals and the amounts varied. The following amounts were paid in March and April 2018:
2 MARCH 2018
- $ 1,350.00
9 March 2018
- $ 1,450.00
14 March 2018
- $ 1,450.00
16 March 2018
- $ 1,450.00
3 April 2018
- $ 1,050.00
3 April 2018
- $ 1,450.00
10 April 2018
- $ 400.00
13 April 2018
- $ 400.00
20 April 2018
- $ 400.00
Thereafter, not strictly falling into a regular pattern, the payments from Debt Fix were in the order of 4 payments of $400 each month until January 2019 when the payments became 4 payments of $800 per month.
The bank statements also record payments from other sources which are described as payments for cleaning. Contrary to Mr Brophy’s statement it appears he did cleaning for many others. Those payments are not regular, and they are from various sources. In the main those payments are from named individuals rather than corporate entities. The Invoice Books include copies of invoices issued to East Coast Holdings Pty Ltd during 2022 for cleaning at a number of properties.
Mr Brophy’s taxation records were also provided. These records make no mention of employment by or income from Debt Fix.
Consideration
The question of whether Mr Brophy was an employee is to be determined by reference to the test at common law. The High Court considered that question in the decisions of cfmmeu v. Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Pty Ltd and Jamsek [2022] HCA 2.
The principles set out by the Court in those decisions have been conveniently distilled[1] by Wigney J in the matter of JMC Pty Limited v Commissioner of Taxation [2022] FCA 750 at [17] – [27]. That decision was successfully appealed, JMC Pty Ltd v Commissioner of Taxation [2023] FCAFC 76, however, his Honour’s summary was accepted by the parties to the appeal as accurate.
Having regard to those matters, I consider the following relevant to the current application:
a) The parties did not commit the terms of their relationship to writing and so there is no written contract that will be decisive of the character of the relationship.
b) In order to ascertain the relevant legal rights and obligations here, the contractual arrangements must be construed in accordance with the established principles of contractual interpretation.
c) Regard may be had to the circumstances surrounding the making of the contract, as well as to events and circumstances external to the contract which are objective, known to the parties at the time of contracting and which assist in identifying the purpose or object of the contract.
d) The characterisation of the relationship between the parties is not affected by circumstances, facts or occurrences arising between the parties that have no bearing on their legal rights.
e) Arrangements that deal with the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, and the deduction of income tax will all be relevant.
f) In characterising the relationship there is a need to consider first the extent to which Debt Fix had the right to control how, where and when the Mr Brophy performed the work. The second is the extent to which Mr Brophy can be seen to work in his or her own business, as distinct from the business of Debt Fix.
g) The characterisation of the relationship as being either one of employer and employee, or one involving the engagement of an independent contractor, is ultimately an evaluative judgment that takes into account the totality of the parties’ contractual rights and obligations.
I am satisfied that the three conversations at the end of 2018 and the beginning of 2019 gave rise to an oral contract. The first step is to ascertain the relevant legal rights and obligations arising from those conversations.
Guidance on determining the terms of an oral contract is provided in a recent case in the Equity Division of the NSW Supreme Court in Douglas v Mikhael [2023] NSWSC 979 which was upheld by the Court of Appeal in Douglas v Mikhael [2024] NSWCA 89. Put briefly, that guidance includes that it was essential to demonstrate that there was a relevant conversation with an intention to form a binding contract with a mutual intention by the parties for it to be legally binding. The history of the relationship between the parties involved may be considered so far as it may shed light on the nature of the agreement and the intentions of the parties. The behaviour of the parties both before and after the formation of the oral contract is also relevant. This includes actions and communications that occurred during the time of the contract’s formation and any subsequent conduct that might indicate the terms of the agreement.
I consider the three conversations that led to Mr Brophy performing the cleaning work amounted to an oral contract between Mr Brophy and Debt Fix. The terms of that contract as agreed and confirmed by the subsequent conduct of the parties were simply:
a) Mr Brophy perform the work of cleaning Ms Malzard and Mr O’Donnell’s home.
b) Debt Fix pay Mr Brophy $80.00 per hour to perform the work.
c) Mr Brophy spend 5 hours per week performing the work.
d) Mr Brophy ensure he had a current ABN.
e) Mr Brophy invoice Debt Fix for the work.
f) Debt Fix make payment to Mr Brophy’s designated bank in the amounts provided for in the invoice.
The second step is to determine whether the oral contract amounted to an employment contract or a contract for services.
I find that the oral contract gave rise to a contract for Mr Brophy’s services as an independent contractor. It was not employment. The matters which lead me to that conclusion include the nature of the initial discussion, which was for Mr Brophy to replace the cleaning contractors who had previously performed the work. I also accept the evidence that in later discussions requests were made by Mr O’Donnell that Mr Brophy have a current ABN and that he invoice for the work. Mr Brophy agreed to do so and arranged to have his ABN current for the work. The rate for payment for the work was the rate agreed in the first discussion. It was the same rate paid to the outgoing contractors, $80 per hour. While those payments were to be made by Mr O’Donnell’s company, Debt Fix, the work to be performed was at Ms Malzard and Mr O’Donnell’s home. Mr Brophy was not asked to work in the business conducted by Debt Fix.
The subsequent conduct of the parties, in the early stages of the arrangement, indicates that Mr Brophy had the sort of flexibility associated with performing work under a contract for services rather than in employment. The work to be performed was the cleaning of the home. It was not the cleaning of business premises. Accordingly, initial instructions were made by Ms Malzard as to what was to be cleaned and her preference for how the cleaning was to be done. There was little supervision. Ms Malzard did not control the work. Mr Brophy applied his skills to the tasks to produce outcomes that met Ms Malzard’s expectations. What equipment was to be used was a matter for discussion between Ms Malzard and Mr Brophy. The hours in the initial weeks were in excess of the 5 hours in the discussions suggesting flexibility to work as needed.
The initial payments were made pursuant to invoices provided by Mr Brophy. No tax was deducted. In the first invoice Mr Brophy provided details of his ABN and described the services as having been supplied by S B Cleaning. The services were described as 5 hours “cleaning (indoors)” and 8 hours “Outdoor Cleaning”. The first item was charged at $450 and the second $900. The second invoice similarly provided Mr Brophy’s ABN, referred to S B Cleaning and specified the work as 5 hours of cleaning services. The rate was recorded as $80 per hour. The totals in the early invoices were for amounts that did not always accord with the work described and were often not in multiples of $80. This suggests that the payments at the commencement of the work did not strictly accord with the arrangements made in early 2018. By April 2018 the payments in the invoices were in line with the original arrangements. Thereafter, the amounts paid were largely in multiples of $80. No explanation was provided for the discrepancies in the early weeks of the arrangements. I infer that the informality of the arrangements was such that Mr Brophy had some latitude what work was performed and what charges would apply in the early weeks of the contract.
For his part, Mr Brophy was also providing cleaning services to others. Mr Brophy’s bank statements suggest that during the course of the arrangement with Debt Fix he had a number of clients to whom he provided cleaning services. Debt Fix did not deduct and remit taxations payments as if Mr Brophy was an employee. Mr Brophy’s tax records at the commencement of the arrangement and throughout the term of the contract give no indication that he was employed by Debt Fix.
My assessment of these factors is that Mr Brophy was not, nor was ever intended to be, an employee of Debt Fix. The arrangement was for Mr Brophy to provide cleaning services in his own cleaning business. The initial offer to perform the work was made by Mr Brophy in circumstances where he was to replace a cleaning contracting firm. The rate of pay he was to receive was a commercial rate based on the earlier contract rate. While Ms Malzard provided some instruction about how she wanted her home cleaned the work was performed without direct supervision.
There was flexibility about when the hours would be worked and how the cleaning was to be done. Agreements were in place as to when Mr Brophy was expected to be working in the home, but the evidence suggests these arrangements were flexible. There were no pay slips provided by Debt Fix. Nor were they sought. No time sheets were kept recording when the work was done. The agreed position was that he perform the work as a contractor working under an ABN and invoicing for payment. The arrangement a contract for services.
For these reasons Mr Brophy was not employed by Debt Fix. Consequently, he was not dismissed and is not entitled to bring an application for an unfair dismissal remedy.
The Respondent’s objection is upheld. The application is dismissed.
DEPUTY PRESIDENT
Appearances:
R Burn, Solicitor, on behalf of the Applicant.
S Brophy, the Applicant.
A Rogers, of Counsel, on behalf of the Respondent
Instructed by S, Vinden, Solicitor.
Hearing details:
2024.
Sydney, in person.
30 April.
[1] See also Chambers and O’Brien v Broadway Homes Pty Ltd [2022] FWCFB 129 at [74].
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