Volodin and Secretary, Attorney-General's Department
[2021] AATA 1434
•19 May 2021
Volodin and Secretary, Attorney-General's Department [2021] AATA 1434 (19 May 2021)
Division:GENERAL DIVISION
File Number(s): 2019/8524
Re:Alexander Volodin
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
DECISION
Tribunal:Member D K Grigg
Date:19 May 2021
Place:Brisbane
The Tribunal sets aside the decision under review and substitutes it with a decision that the Applicant is eligible to receive financial assistance ("advance") pursuant to section 10 of the Fair Entitlements Guarantee Act 2012 (Cth). The matter is remitted to the Respondent to determine the amount of the advance payable to the Applicant.
........................[SGD]............................
Member D K Grigg
Catchwords
FAIR ENTITLEMENTS GUARANTEE - whether applicant was an "employee" or independent contractor at the relevant time - relevant indicia of employee relationship - relevance of intention of parties - "sham" contracts - decision under review set aside
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Fair Entitlements Guarantee Act 2012 (Cth)
Fair Work Act 2009 (Cth)Income Tax Assessment Act 1936 (Cth)
Cases
Australian Air Express Pty Ltd v Langford [2005] NSWCA 96; 147 JR 240
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122
Curtis v The Perth and Fremantle Bottle Exchange Co Ltd [1914] HCA 21; (1914) 18 CLR 17
Damevski v Guidice [2003] FCAFC 252
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45
Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366
Re Porter; Ex parte Transport Workers Union of Australia (1989) 34 IR 179Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179; (1988) 18 FCR 449
Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16
Wesfarmers Federation Insurance Ltd v Stephen Wells t/a Wells plumbing [2008] NSWCA 186
Secondary MaterialsAdministrative Arrangements Order (Cth), made on 29 May 2019
Explanatory Memorandum to the Fair Entitlements Guarantee Bill 2012
REASONS FOR DECISION
Member D K Grigg
19 May 2021
Contents
Background and Claim history
ISSUE FOR THE TRIBUNAL
RELEVANT PROVISIONS FROM THE FEG ACT
Meaning of "employee"
CONTENTIONS - SUMMARY
CHRONOLOGY OF EVENTS
Witness Testimony
Mr Maney
Ms Brown
Ms Randall
Mr Kaiser
Ms Volodina
Ms Versefeld
SUBMISSIONS
Mr Volodin's Submissions
CONSIDERATION
CONCLUSION
DECISION
BACKGROUND AND CLAIM HISTORY
1.On 23 November 2013 Mr Volodin entered into an employment agreement with an information technology start-up company known as Sportsmed Global Australia Pty Ltd ("SMG").[1] SMG was incorporated on 8 November 2012. The sole director and shareholder was Mr Zane Hall.[2] SMG later changed its name to SMG Technologies Pty Limited in June 2015 and then to SMG Corporation Pty Ltd in November 2017.[3]
[1] Exhibit 1, T Documents, T5, pages 67-82, Employment Agreement.
[2] Exhibit 1, T Documents, T25, page 497, ASIC Data Extract dated 29 October 2018.
[3] Ibid.
2.Pursuant to the employment agreement, Mr Volodin was engaged as a permanent full-time employee by SMG to provide the services of a "mathematician expert-software engineer" ("Employment Agreement").[4] As part of his role Mr Volodin analysed health and injury data and built statistical models to assess the probability of injuries.[5]
[4] Exhibit 1, T Documents, T5, page 80, Employment Agreement.
[5] Exhibit 1, T Documents, T5, pages 55 - 88, FEG Claim Form of Mr Volodin, dated 13 November 2018.
3.The Employment Contract provided, among other things, that:[6]
[6] Ibid page 67.
•Mr Volodin's employment commenced on 2 December 2013
•His salary would be paid monthly
•He was entitled to 20 days annual paid leave
4.In the latter part of 2016 Mr Volodin and SMG began discussions regarding the failure of SMG to pay all of Mr Volodin's wages and entitlements. Mr Volodin and SMG then commenced negotiating a new payment structure for the future. These discussions are set out and examined later in this decision.
5.The end result of the discussions between Mr Volodin and SMG is that SMG agreed to pay Mr Volodin's earnings directly to his sister, Anna Viktorovna Volodina, who resides in Russia. This arrangement was documented in the form of a consultancy services contract which commenced in January 2017.
6.On 31 October 2018 Mr Volodin was informed that SMG had gone into liquidation and that a liquidator had been appointed on 29 October 2018.[7] Mr Volodin wrote to the liquidator and advised that:[8]
[7] Exhibit 1, T Documents, T5, page 85, Notice to Employees by liquidator; T11, page 145 Letter from Mr Volodin to Mr Varendorff.
[8] Exhibit 1, T Documents, T11, page 145, Letter to Mr Varendorff regarding being an employee.
(a)between December 2013 and January 2017 he was a full-time employee of SMG;
(b)in January 2017 SMG asked Mr Volodin to sign a contractor agreement because SMG had a lack of funds; and
(c)between January 2017 and November 2018 he continued to work full-time in the same capacity as under his employment agreement.
7.Mr Volodin says that SMG were not paying his wages and that he was put on a consultancy contract by SMG so that they could avoid paying his employee entitlements.[9]
[9] Exhibit 1, T Documents, T11, page 161, Claim Form Review Letter from Mr Volodin.
8.Mr Volodin was advised by the liquidator to complete a Formal Proof of Debt Form if he had any outstanding entitlements.[10] The liquidator advised Mr Volodin that as a result of the liquidation his employment with SMG had been terminated.
[10] Exhibit 1, T Documents, T5, page 86, Notice to Employees by liquidator.
9.Mr Volodin lodged a proof of debt with the liquidator claiming unpaid salary and entitlements on 21 February 2019.[11] Mr Volodin informed the liquidator that his salary prior to termination was US$120,000.
[11] Exhibit 1, T Documents, T5, page 88, Proof of Debt Form completed by Mr Volodin
10.Mr Volodin ultimately received some money from the liquidator for unpaid employee entitlements up to December 2016. The liquidator of SMG found, after its investigations, that Mr Volodin was not an employee after December 2016.[12] Presumably this was because Mr Volodin was not noted on the company register as an employee and because there were concerns about the Consulting Services Contract.
[12] Exhibit 17, Applicant Statement in Reply to Lauren Versefeld, under statement 17.
11.On 13 November 2018 a fair entitlements guarantee claim ("the FEG Claim") was received by the Department of Employment from Mr Volodin for fair entitlements guarantee assistance pursuant to the Fair Entitlements Guarantee Act 2012 (Cth) ("the FEG Act").[13]
[13] Exhibit 1, T Documents, T5, pages 55 - 88, FEG Claim Form of Mr Volodin, dated 13 November 2018.
12.The FEG Act is "an Act to provide for financial assistance for workers who have not been fully paid for work done for insolvents or bankrupts, and for related purposes". The main object of the FEG Act (set out in section 3) is "to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers".[14]
[14] Exhibit 1, T Documents, T3, pages 16-28, Notice of Review outcome letter dated 21 November 2019.
13.Mr Volodin claimed that he had not been paid in full between December 2013 and January 2017.[15] In terms of employee entitlements, Mr Volodin claimed that SMG owed him:[16]
[15] Exhibit 1, T Documents, T5, page 60, FEG Claim Form of Mr Volodin, dated 13 November 2018.
[16] Exhibit 1, T Documents, T5, pages 60-61, FEG Claim Form of Mr Volodin, dated 13 November 2018.
•12.6 weeks of unpaid wages totalling $46,620;
•20 weeks of annual leave totalling $74,000;
•4 weeks of PILN totalling $14,800; and
•8 weeks of redundancy payments totalling $29,600.
14.As referred to above, prior to lodging his FEG claim, Mr Volodin had attempted to recoup his unpaid entitlements through the insolvency practitioner by lodging a Proof of Debt claim.
15.Mr Volodin told the FEG Branch that he arranged for his sister to sign the Consultancy Contracts and to have his "salary" paid to her because he owed her money.[17]
[17] Exhibit 1, T Documents, T14, page 216, Applicant Submissions to FEG for Review dated 29 July 2019.
16.On 21 March 2019 the Fair Entitlements Guarantee Branch ("FEG Branch") decided that Mr Volodin was not entitled to FEG assistance because he was not an employee of SMG within six months of the appointment of the insolvency practitioner. Independent contractors are not eligible for payment under the FEG Act.[18] Only employees are potentially eligible for FEG assistance.[19] Mr Volodin requested a review of the FEG Branch decision.
[18] Exhibit 1, T Documents, T3, pages 27-28, Letter from FEG Branch to Mr Volodin dated 21 November 2019.
[19] See s 10 Fair Entitlement Guarantee Act 2012 (Cth).
17.In November 2019 the Department became aware from the Australian Taxation Office ("ATO") that no PAYG tax had been withheld by SMG in relation to Mr Volodin since 31 December 2016.[20]
[20] Exhibit 1, T Documents T16 pages 332, Emails from Applicant from to FEG Review officer; T17 page 344 Emails from FEG Review officer to Applicant; T20 pages 399, 412, Screenshots provided by the Australian Tax Office.
18.The explanation of the contractual arrangements with SMG given by Mr Volodin to the FEG Branch in November 2019 was as follows:
• Zane Hall signed agreement between SMG Technologies (New Zealand) and my sister in Russia to process my salary. There were two contracts, first contract covered 2017 and second contract covered 2018. On the first contract, he paid 10K AUD per months, on the second contract he paid 10K USD per month. I considered that payments as a repayment of the debt that I owed to my sister when she supported me in period between 2014 and 2016 when Zane Hall did not pay me salary at all. Zane Hall considered that payments as my salary with some benefits. When liquidation started and I helped liquidators to extract information from e-mails. I found private e-mail from Lauren Bothma to Zane Hall dated 16.01.2017 where she explained to him the benefits from paying my salary through New Zealand company. As a result, he got the following benefits: no super, no payg, no leave, no taxes as my sister paid taxes in Russia[21]
[21] Exhibit 1, T Documents T16 pages 331, Emails from Applicant from to FEG Review officer.
• I would like to add some notes to clarify some points that might look complex. In January 2017, Zane Hall asked me to go onto contractual arrangement with SMG Corporation (Australia) however I did not go. Instead of this, I asked him to pay my salary directly to my sister to repay my debt and I asked him to sign backpay contract. My sister required USD but not AUD, so Zane confirmed that he could pay in USD to avoid losses in currency convertion on my side (in the opposite case, I had to convert AUD to USD and send money to Russia).
The bank on Russian side required contract between my sister and foreign company otherwise funds could be blocked by foreign currency control. When Zane and my sister signed contract, he did not ask me about going onto contractual arrangement because:
1. he decided to silently remove myself from accounting records as if I don't have any relationships with SMG
2. I constantly asked him about backpay contract and he avoided any conversations about contracts
Until the date of liquidation (29.10.2019), I was 100% sure that I am still employed by SMG Corporation (Australia) and my salary goes to my sister (similar to novated lease scheme, when company pays part of the salary to external company without avoiding employee entitlements). I never considered myself or presented myself as a contractor and I never thought that my relationships with SMG somehow changed. I am not lawyer or accountant, so I could not check that he removed myself from accounting records as if I don't work in SMG[22]
[22] Exhibit 1, T Documents, T17, page 340, Email from Applicant to FEG Review Officer.
1.I was considered by internal employees (my former colleagues) as full-time employee
2.I was presented to external clients as an employee
3.I participated in all internal and external discussions and meeting as an employee
4. Zane told me that he considered myself as an employee
5. Zane told me that he presented myself to liquidators as an employee
6.I worked from the Brisbane office and followed company rules and policies I realized the difference between employee and contractor only in 2019 when liquidation started and liquidator asked me this question. In summary, since December 2014 I represented myself as an employee of SMG. This is why I looked for legal advice to prove my status based on Australian law.
(emphasis added)
19.On 21 November 2019 a delegate of the FEG Branch assessed Mr Volodin's request for a review.[23] The delegate decided to affirm the decision of 21 March 2019 on the ground that Mr Volodin was not an "employee" as required by the FEG Act but an independent contractor.[24]
[23] The delegate has authority to make internal review decisions under section 39(1) of the FEG Act.
[24] Exhibit 1, T Documents, T3, pages 119-130, Letter from FEG Branch to Mr Volodin, dated 21 November 2019.
20.On 23 December 2019 Mr Volodin applied to this Tribunal for review of the Secretary's decision.[25]
[25] Exhibit 1, T Documents, T1, pages 1 -5, Application for review dated 23 December 2019.
21.On 15 December 2020 the liquidator determined that Mr Volodin should be paid $222,493.22 in respect of unpaid wages and entitlements for the period November 2013 to December 2016.[26]
[26] Exhibit 17, Applicant Submission in reply to Lauren Versefeld, Letter from Vincent’s regarding outcome of investigation.
22.The Tribunal has jurisdiction to review this decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) and section 40 of the FEG Act.
23.At the hearing:
(a)Mr Volodin gave evidence via videoconference;
(b)Mr Volodin called the following witnesses who gave evidence by way of statement and at the hearing by telephone:
•Mr Raymond Maney - Mr Maney was a full-time employee of SMG between August 2016 and August 2018 as a software and data engineer;
•Ms Melissa Brown - Ms Brown was a full-time employee of SMG between June 2018 and November 2018 as general manager of operations;[27]
[27] Exhibit 8, Statement of Melissa Brown dated 25 March 2020, paragraph 2 – 3.
•Ms Kylee Randall - Ms Randall was a full-time employee of SMG between April 2017 and June 2018 as head of consultancy and special projects;
•Mr Nikolaus Kaiser - Mr Kaiser was a full-time employee of SMG between February 2015 and July 2017 as a customer experience lead; and
•Anna Viktorovna Volodina, Mr Volodin's sister.
24.The Respondent called Ms Lauren Versefeld (formerly Lauren Bothma) to give evidence. Ms Versefeld provided a statement and also gave evidence at the hearing by telephone. Ms Versefeld was executive manager corporate services of SMG between March 2016 and September 2017. As part of her role Ms Versefeld administered SMG's payroll.[28]
[28] Exhibit 16, Statement of Lauren Versefeld dated 8 December 2020, paragraph 16-18.
ISSUE FOR THE TRIBUNAL
25.The issue for determination by the Tribunal is whether Mr Volodin met the eligibility criteria for fair entitlements under the FEG Act. This requires a consideration of whether Mr Volodin met the requirements in section 10 of the FEG Act. It is not in dispute that Mr Volodin was an employee of SMG until December 2016, however, the date his employment ended is in dispute. The date that Mr Volodin's employment ended, and the reason for his employment ending, is crucial to making a finding regarding whether Mr Volodin met the criteria set out in section 10(1)(c) of the FEG Act.
RELEVANT PROVISIONS FROM THE FEG ACT
26.One of the main objects of the FEG Act is set out in section 3(a) as follows:
(a) to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i)the employers are insolvent or bankrupt; and
(ii) the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii) the former employees cannot get payment of the entitlements from other sources; ...
27.Section 10 of the FEG Act sets out when a person will be eligible for advance. It provides relevantly that:
(1) A person is eligible for an advance if the Secretary is satisfied of all of the following:
(a) the person's employment by a particular employer has ended;
(b) after the commencement of this section, an insolvency event happened
to the employer;
(c) the end of the employment:
(i) was due to the insolvency of the employer; or
(ii) occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
(iii) occurred on or after the appointment of an insolvency practitioner for the employer;
(d) the person is (or would, apart from the discharge of the bankruptcy of the employer, be) owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
(e) the person has taken steps, so far as reasonable, to prove those debts in the winding up or bankruptcy of the employer;
(f) if the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts
(emphasis added)
28.Pursuant to an Administrative Arrangements Order (Cth) made on 29 May 2019, the Attorney General's Department administers the FEG Act.
Meaning of "employee"
29.The term "employee" is not defined in the FEG Act. For the purpose of the FEG Act, the "term "employee" refers to an employee at common law and does not include contractors": Explanatory Memorandum to the Fair Entitlements Guarantee Bill 2012, paragraph 4.
30.Whether someone is an "employee" or "contractor" is determined by the common law. There is a plethora of cases that have considered the indicia of an employee.
31.The Full Federal Court noted in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 ("Personnel Contracting”) that "Courts traditionally viewed "control" as the determinative factor'[29] but that "the current approach ...is multi-factorial, requiring an assessment of the "totality of the relationship": Stevens v Brodribb [Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, at 29]" (at [73]).
[29] The Full Court cited see, for example, Yewens v Noakes [18801 UKLawRpKQB 25; (1880) 6 QBD 530 (at 532-3 per Bramwell LJ); Performing Rights Society Limited v Mitchell and Brooker (Palais de Danse) Limited [19241 1 KB 762 (at 767- 8 per McCardie J
32.The Full Federal Court cautioned in Personnel Contracting that "there is no universally accepted understanding of how many indicia, or what combination of indicia must point towards a contract of service, the balancing exercise is necessarily impressionistic"[30], and that "such an approach inevitably involves what has been described as a "smell test", or a "level of intuition": On Call Interpreters (at 121-2 [204] per Bromberg J)." (at [74]).
[30] Re Parter; Ex parte Transport Workers Union of Australia (19891 FCA 226; (1989) 34 IR 179 (at 184 per Gray J)
33.In On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 ("On Call') Bromberg J considered what was meant by the ordinary meaning of "employee" in determining whether interpreters were employees or independent contractors.
34.Bromberg J explained that the assessment of whether someone is an employee is an objective one and requires a consideration of the substance and nature of the relationship between the relevant parties. Bromberg J posed the following practical test:
[208] Simply expressed, the question of whether a person is an independent contractor in relation to the performance of particular work, may be posed and answered as follows:
Viewed as a "practical matter":
(i) is the person performing the work an entrepreneur who owns and operates a business; and,
(ii) in performing the work, is that person working in and for that person's business as a representative of that business and not of the business receiving the work?
If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee.
[209] ... The central question has two elements. The first is whether the person has a business. The second is whether the work or the economic activity being performed is being performed in and for the business of that person.
[210] As to the first element, to carry on a business is to conduct a commercial enterprise as a going concern: Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd (2005) 222 CLR 194 at [83]. It will usually involve the acquisition and use of both tangible and intangible assets in the pursuit of profit: Gribbles Radiology at [39]... A business typically has (or at least aspires to have) value (goodwill or saleable assets) beyond its physical assets: Steven v Brodribb at [37]. A common intangible asset of a business is its name, brand, reputation or goodwill. Typically, the FEG Activities of a business will be organised in a business-like manner, including by the use of systems: Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 at 314- 315. The word "business" imports the notion of system, repetition and continuity: Hungier v Grace (1972) 127 CLR 210 at 216-217. A business will normally operate in a business-like way; Puzey v Commissioner of Taxation [2003] FCAFC 197 at [48].
... [212] A personal services business is a business which is likely to involve system, repetition and continuity in the pursuit of profit. A genuine personal services business will aspire to make profits and not simply be paid remuneration, as is an employee. Such a business will seek to be remunerated not simply for the provision of the labour of the self-employed entrepreneur that provides the personal services, but also for the risks involved in that person being an entrepreneur.
[214] A genuine independent contractor providing personal services will typically be: autonomous rather than subservient in its decision-making; financially self-reliant rather than economically dependent upon the business of another; and, (as I have said), chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.
(emphasis added)
35.In On-Call Bromberg J identified the indicia of a business as follows:[31]
[31] [2011] FCA 366, at [217].
• Do the economic activities of the putative business involve the taking of risk in the pursuit of profits?
• Does the putative business engage in a repetitive and continuous manner with purchasers of its services?
• Does the putative business employ or engage persons other than the owner/operator to carry out its economic activities?
• Is goodwill (name, brand and reputation) being created by the economic activities of the putative business?
• Is the putative business promoted as a business to the public through advertising or other promotional means?
• Does the putative business have tangible assets such as buildings and equipment which are utilised to support its economic activities?
• Does the putative business have the basic transactional systems that are common of a business of that kind? For instance: invoicing systems; standard rates and terms and conditions of trade; insurance coverage; payment and debt collection systems; appropriate financial records; budgeting or forecasting systems; business based arrangements with a bank or other financial institution
• Do the services provided by the putative business involve the provision of labour of sufficient skill to be suggestive of the pursuance of a profession or trade through a business
• Are the regulatory requirements of a business (including business name registration, taxation, GST and ABN registration and compliance) being met by the putative business?
36.Bromberg J then set out the indicia as to whose business the economic activity is being performed in (case references excluded):[32]
[32] Ibid [218].
• Does the provision of the economic activity provide an opportunity for profit and involve the risk of loss...?
• In that respect and in relation to profit:
- to what extent is the reward for the provision of the FEG Activity negotiable and negotiated commercially?
- to what extent does the putative owner/entrepreneur have the capacity to manage the FEG Activity so as to maximise the potential for profit?
• In that respect and in relation to risk:
- to what extent is the agreed payment contingent upon the person providing a satisfactory result (i.e. are there financial consequences for poor performance)?
- who bears the risks associated with providing any equipment or assets required for the performance of the economic activity?
• Does the putative business or the putative employer's business control and direct or have the capacity to control and direct the manner in which the economic activity is carried out?
• Is the economic activity represented or portrayed as the FEG Activity of the putative business or that of the putative employer's business?
• To what extent is the person providing the economic activity integrated with the business receiving the FEG Activity?
• To what extent is the person providing the economic activity financially self-reliant from, as opposed to, economically dependent upon or organisationally tied to, the business receiving the FEG Activity? Exclusivity is suggestive of an employment relationship however, it does not follow that a person who provides casual or part time work to multiple purchasers is not an employee
• Is the person providing the economic activity free to employ his or her own means (employees or contracted agents) to produce the FEG Activity or must that person personally perform the work?
• To whose business does any goodwill created by the economic activity enure?
• In contracting to provide the economic activity has the person agreed to provide an outcome or result?
• To what extent is the person providing the economic activity doing so with his or her own tools and equipment?
• If the person is providing their own equipment, to what extent can the person be directed in the management and control of that equipment?
• Have the parties involved characterised the economic activity as that of the owner/entrepreneur being performed in and for that person's business, or alternatively as part of the receiving business, and to what extent does that characterisation reflect the reality?
37.Other potentially relevant indicia identified by Bromberg J is whether income tax has been withheld and whether annual, long service or sick leave is afforded. His Honour noted that there are differently held views regarding what inference should be drawn in relation to these factors (citing Wesfarmers Federation Insurance Ltd v Stephen Wells trading as Wells plumbing [2008] NSWCA 186 at [40]-[42]) ("Wesfarmers")[33] and held that "reliance on these factors may involve circularity of reasoning particularly where these factors are based upon the self-assessed and objectively incorrect label that the parties have attached to their relations: see Hollis at [37] and Owens and Riley at 140". That is understandable given that the arrangements made are often based on the subjective opinions, preferences or misunderstandings of the parties involved. Bromberg J referred to the fact that such contractual arrangements are imposed on one party and that it is important in that context to look to the "reality of the relationship in determining whether an employment relationship exists". Bromberg J noted that this was important as to do otherwise "would place many workers who are in truth employees, beyond the protective reach of labour law".[34]
[33] Ibid [219]
[34] On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 at [200].
38.In Wesfarmers the NSW Court of Appeal cited Australian Air Express Pty Ltd v Langford [2005] NSWCA 96; 147 IR 240 at [49]-[53] where the Court said:
49 The authorities have not dealt consistently with the significance of a person being treated for tax purposes as if he or she was an independent contractor. In Stevens (at 37) Wilson and Dawson JJ referred to the payment of remuneration without deduction for income tax as indicating a contract for services. In Hollis the majority did not regard this factor as material. McHugh J, on the other hand, (at 49 [691) regarded the fact that a finding the bicycle couriers were employees would "make employers retrospectively guilty of a number of statutory offences", including those relating to compliance with taxation legislation, as militating against that conclusion.
50 In Scerri v Cahill (1995) 14 NSWCCR 339 an applicant for workers compensation was said not to be "a worker'' because (inter alia) his tax return did not give credit for any PAYE deductions, but only for deductions pursuant to the Prescribed Payment System ("PPS”).[35] Bainton AJA (with whom Kirby ACJ and Rolfe AJA agreed) sought to explain (at 403 - 404) the provisions of the Income Tax Assessment Act 1936 (as amended) (Cth) dealing with the PPS and concluded (at 405) that:
[35] Prescribed payment system ("PPS"} was originally introduced in the early 1980s to cover contractors in certain industries such as building and construction. The purpose was to ensure contractors did not avoid paying personal income tax. This system was replaced by the PAGY systems: A Question of Balance: The Tax Treatment of Small Businesses, Commonwealth (1995).
"Generally prescribed payments will not include salary or wages paid to an employee as such but ... that is not invariably so."
51 Bainton AJA (at 405) held that the deduction of PPS shown in the applicant's tax return did not establish that he was carrying on a business on his own account on the basis that (inter alia) "for all that appears the deductor of those payments (and his advisors) may have found the legislation as difficult to follow as I find it" and, in effect deducted amounts by mistake.
52 Gray J expressed a like view in Re Porter (at 185) saying that "to place heavy reliance on [the fact that PPS deductions were made] ... is to assume that the payer has acted in accordance with the requirements of income tax legislation in choosing one type of deduction rather than another''. A similar approach was taken in Sammartino (at 212 [1041) where, although the Commission accepted that "access to PPS deductions was founded upon Mr Sammartino not being an employee", it concluded that "it would be far-fetched to attribute to Mr Sammartino an understanding of the conditions about the use of a PPS Declaration". It held, accordingly, that the use of PPS Declarations had "little independent weight as an indication of the true character of the contractual relationship": Sammartino at 212 [105].
53 In other cases the fact that PPS rather than PAYE tax was deducted has been treated as significant. In Paddison v Ultimate Image Pty Limited tlas Hawkesbury Plasterworks [2004] NSWCA 410 at [26] Sheller JA (with whose judgment Santow JA and Levine J agreed) observed that the fact the respondent was making PPS deductions favoured the view that the appellant was self-employed and not an employee. In the Taxation Decision (at 538 - 539) Meagher JA regarded the fact that the gross payment to the couriers was subject to deduction of PPS as important - in particular, the fact that the Commissioner of Taxation acquiesced in the couriers' description of themselves as independent contractors and taxed them accordingly.
(emphasis added)
39.In Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21 (“Hollis”), the High Court reiterated the warning of Windeyer J in Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 about linguistics (form), rather than substance, determining legal rights:
[37] Observations by Windeyer Jin Brooks v Burns Philp Trustee Co Ltdr are in point here. His Honour was dealing with the different ways in which the terms "void" and "unenforceable" had been used with respect to illegality and said:
"The words used do not matter if the actual legal result they are used to express be not in doubt or debate. But it has always seemed to me likely to lead to error, in matters such as this, to adopt first one of the familiar legal adjectives ... and then having given an act a label, to deduce from that its results in law. That is to invert the order of inquiry, and by so doing to beg the question, and allow linguistics to determine legal rights."
Intention of the Parties
40.As the decisions referred to above confirm, just because the parties describe their relationship as one of independent contractor, or even if they intended the relationship to be one of independent contractor, this does not necessarily make it so.
41.The following two cases provide useful illustrations.
42.In Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45 ("Quest') the High Court unanimously found that Quest had misrepresented two employees were performing work as independent contractors under contracts for services in breach of section 357 of the Fair Work Act 2009 (Cth) ("FWA"). Quest had previously employed two individuals as housekeepers for its serviced apartment business. Years later Quest entered into a contract with a labour hire company whereby the labour hire company purported to contract with the individuals as independent contractors, and then provide them to Quest under a labour hire contract. Despite this new contractual arrangement, the cleaners performed their role as they had done as employees. The High Court held:
[10] ... In law, they never became independent contractors. At the time Quest represented that they were performing work for Quest as independent contractors of Contracting Solutions, they remained employees of Quest under implied contracts of employment
(emphasis added)
43.In Quest the High Court also referred to the quote from Gray J in Re Porter (1989) 34 IR 179 (at 184) where Gray J noted that "the parties [to the arrangement] cannot create something which has every feature of a rooster [i.e. an employment arrangement], but call it a duck [i.e. an independent contractor arrangement] and insist that everybody else recognize it as a duck'.
44.The decision in Quest confirms that the parties' intentions are not conclusive of the legal status of the parties' relationships. Particular emphasis was made of the fact that, other than the new contracts entered into by the parties, for all intents and purposes nothing else had changed.
45.In Damevski v Guidice [2003] FCAFC 252 ("Damevski”) the Full Federal Court considered the nature of an employment relationship again in the context of an employee who had been transitioned to a "contracting system" due to the "cost pressures" experienced by the employer. It is worth setting out the facts as summarised by the Fair Work Commission:
[2] It is common ground that the appellant commenced employment with Endoxos as a cleaner in August 1998 in Canberra. He worked cleaning buildings pursuant to contracts obtained by Endoxos. From the commencement of his employment he was provided with a van bearing Endoxos identification and with petrol and maintenance also paid for by Endoxos. Endoxos also provided a company uniform.
[3] On 14 July 2001 Endoxos held a meeting with all of its staff to discuss a restructure. The appellant received notification of the meeting but did not attend. Two days later, on 16 July 2001, Endoxos wrote to the appellant and indicated that, as had been explained at the meeting, the company was under severe cost pressures and it had decided to abandon its existing employment arrangements and to adopt a contracting system. The employees could participate in this arrangement by becoming contractors to a company called MLC Workplace Solutions Pty Ltd (MLC). It was also indicated that if employees did not wish to become contractors Endoxos would be forced to relinquish its cleaning contracts. It was explained that if that occurred the appellant would lose his job with Endoxos and his employment with any new contractor could not be guaranteed.
[4] Endoxos' letter of 16 July 2001 included detailed material in relation to the contract proposal. There were formal documents which required completion if the appellant decided to relinquish his employment with Endoxos and to become a contractor to MLC. Apart from the formal documents there was a 16 page booklet produced by MLC entitled 'The Contractors Guide, The Agency Contracting System.' The booklet outlines the relationship between MLC and its contractors and between MLC and its clients, such as Endoxos, to whom it provides labour. The booklet also contains information about the advantages to employees of becoming contractors and deals with loss of income insurance, taxation and other matters.
[5] On 23 July 2001 the appellant signed and returned to Endoxos a written acknowledgment that he understood the information in Endoxos' letter of 16 July and agreed to the proposal that he become a contractor to MLC. The acknowledgement was a proforma which had been included with the letter of 16 July.
[6] On 16 August 2001 the appellant also signed and returned to Endoxos another pro forma document in the following terms:
'I, Riste Damevski, of [address], hereby confirm that my employment with Endoxos Pty Ltd ceased/will cease on 19 August 2001, on mutually agreeable terms which will encompass the payment (or drawing down) of accrued entitlements due to me as at the above date.
I understand that once my entitlements are calculated (as at the above date), I will be informed in writing of said entitlements, and I will be offered the choice of one of the following options:
i) receiving the monetary equivalent of the entitlement, or
ii) availing myself of leave at a future date (at a time mutually agreed upon by both parties), and drawing down on the entitlement.
(signed by Riste Damevski 16/8/01 and for and behalf of Endoxos Pty Ltd 1718101)'
[7] On 19 August 2001 Endoxos paid the appellant all of his outstanding entitlements in relation to his contract of employment with it. Thereafter it appears that the appellant continued to carry out cleaning work pursuant to contracts between Endoxos and its various clients. It is accepted that after 19 August the appellant supplied timesheets to both MLC and Endoxos. He continued to wear Endoxos clothing, although he apparently was not obliged to do so, and to use the Endoxos van. He was also supplied with a telephone.
[8] The appellant registered a business name on 21 January 2002.
[9] On 8 February 2002 the appellant was called to the Endoxos office and told by the Managing Director of Endoxos, Mr Lindsay Burke, that he was 'being taken off the job' and that he would lose the Endoxos van and telephone. MLC did not contact the appellant about this issue although he contacted MLC and informed it of the situation. MLC offered him no other work but provided him with a separation letter so that he could claim unemployment benefits.
[10] The appellant said in oral evidence before the Commissioner that he understood that in signing the document on 16 August 2001 and sending it to Endoxos he was resigning from the company and that from 20 August he would be engaged as a sub-contractor. He said he was unaware whether he would be contracting with Endoxos or with MLC. He also testified that from 20 August, until the termination of his engagement in February 2002, he was paid by MLC.
[11] Evidence was given on behalf of Endoxos to the effect that Endoxos no longer has any employees in the Australian Capital Territory although it still holds a number of cleaning contracts. MLC, described as a contracting agency, provides labour to Endoxos for the purpose of those contracts.
There is no legal connection between Endoxos and MLC other than the arrangements for the provision of labour.
[12] For the most part our summary of evidence is drawn from the Commissioner's decision. The appellant submitted on the appeal that the following matters, which were not mentioned by the Commissioner in his decision, are also relevant:
* precisely the same work practices and arrangements existed after 19 August 2001 as before that date;
* there was the same level of supervision including the allocation of work at the new sites, including the use of the mobile phone supplied by Endoxos;
* the appellant did not have any capacity to delegate the work; and
* the appellant did not submit invoices to Endoxos or MLC.
[13] The last point requires some clarification. The material contained in the Contractors Guide provided for contractors to notify MLC of their hours and a form was provided. Prior to his resignation from Endoxos the appellant filled in a timesheet regularly and gave it to that company. After August 2001 he continued to do so but also gave a copy of the timesheet to MLC."
(emphasis added)
46.Damevski argued that "practically'' nothing had changed and that he was still an employee. Merkel J found (at 172) that "all of the relevant features of Damevski's employment, save for the manner and quantum of payment, remained unchanged." Merkel J pointed out that:
The failure of Endoxos to achieve that outcome [of its employees becoming independent contractors] is a result of the parties not having the legal capacity to determine the nature of their contractual relationship by the use of labels that do not accord with the real substance of that relationship
47.In Damevski Merkel J set out relevant cases on the issue of the relevant of a parties' intentions:
[140] In Re Willow Fashions (Australia) Pty Ltd (In Liq); Leveque v Downey as Liquidator of Willow Fashions (Australia) Pty Ltd (In Liq) (unreported, Supreme Court of Victoria, Hayne J, 27 April 1995) ("Re Willow”) certain employees of one company agreed to cease working for that company and to be simultaneously employed by a related company after they had been told that their work and conditions would be "the same". Hayne J (at 13) found that the employees intended that the agreement they reached would "create the legal rights and obligations which those agreements gave the appearance of creating". In accepting that the employees could not claim unpaid wages from their former employer after the related company became insolvent Hayne J (at 10-11) noted that, even if the purpose of the contractual arrangements made by the controllers of the respective employers was unworthy, dishonourable or even dishonest, that "does not demonstrate that the agreements which they caused the companies which they controlled to make were unreal". Re Willow is an example of a case where the parties were bound by their "common intention" to enter into the agreements they made concerning cessation of employment with one employer and commencement of employment with another, albeit related, employer. As was observed by Lord Diplock in Gissing v Gissing [1970] UKHL 3; [1971] AC 886 ("Gissing") at 906:
"the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party."
[141] In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 ("Australian Broadcasting Corporation”) at 548-550 Gleeson CJ considered the issue of intention to conclude a contract in circumstances where intention was to be determined from a consideration of a series of communications exchanged between the parties, rather than on the basis of the construction of a single document. In that context his Honour stated at 550:
"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."
(emphasis added)
48.Accordingly, while some weight is given to the intention of the parties, how the parties decide to deal with one another is not decisive.[36] It is the intention of the parties viewed objectively by conduct, not subjectively that is primarily relevant. Isaacs J explained it this way in Curtis v The Perth and Fremantle Bottle Exchange Co Ltd [1914] HCA 21; (1914) 18 CLR 17 at 25:
"Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance."
[36] ACE Insurance Limited v Trifunovski [2013] FCAFC 3, at [32].
CONTENTIONS - SUMMARY
49.The Respondent contends that there are two critical dates to determining Mr Volodin's eligibility under the FEG Act; 10 January 2017 and 29 October 2018:
(a)10 January 2017 is the date Mr Volodin confirmed in an email that he had resigned as an employee from SMG. The Respondent submits that this was the date that Mr Volodin's position changed from employee to independent contractor.
(b)29 October 2018 is the date SMG went into liquidation.
50.If the Tribunal determines that Mr Volodin's relationship with SMG changed from that of employee to independent contractor on 10 January 2017, Mr Volodin will not be eligible for any payments under the FEG Act. This is because it would mean his employment ended more than six months prior to SMG entering into liquidation (see section 10(1)(c), FEG Act).
51.Mr Volodin submits that he remained an employee of SMG until SMG went in liquidation.
CHRONOLOGY OF EVENTS
Overview
52.Mr Volodin told the Tribunal that in 2015 SMG stopped paying his salary. He says the CEO, Mr Hall told him he would repay him when he obtained an investor or sold part of the company.[37] As a result of being out of pocket, Mr Volodin says he borrowed money, approximately US$150,000, from his sister who resides in Moscow ("the Loan"). His sister then "demanded'' the money be returned.[38] Following the hearing, with the Tribunal's leave, Mr Volodin supplied a copy of a loan repayment agreement between himself and his sister which provides that Mr Volodin agreed to repay the sum of US$157,800 to his sister by way of equal monthly instalments. The agreement is dated 21 November 2016 ("Loan Repayment Agreement"). The representative of the Respondent, Mr He, elected to not ask Mr Volodin any questions or make any submissions about the Loan Repayment Agreement.
[37] Exhibit 13, Applicant submissions dated 29 May 2020, paragraph 8 – 9.
[38] Transcript dated 18 January 2021 (beginning at 1:59PM), page 6, 8.
53.Mr Volodin says he then arranged for SMG to pay his salary directly to his sister through the Consultancy Contracts.[39] Of the $150,000 loaned from his sister Mr Volodin says he received approximately $50,000 to $70,000 in cash by way of 2 or 3 transfers to his Australian bank account and that the remainder was used to build a house in Russia for Mr Volodin's family to live in when they returned to Russia.[40] This was corroborated by Ms Volodina at the hearing.
[39] Ibid, 6, 8 – 10.
[40] Transcript dated 18 January 2021 (beginning at 10:10AM) pages 10 – 11.
Genesis of Consulting Services Contract between SMG and Ms Volodina
54.In the middle of 2016 Ms Volodina asked for the Loan to be repaid.[41] This is reflected in the Loan Repayment Agreement.
[41] Exhibit 13, Applicant submissions dated 29 May 2020, paragraph 10.
55.In October 2016 Ms Bothma emailed Mr Volodin as follows: On Thu, Oct 20, 2016 at 10:34 AM, Lauren Bothma < [email protected]> wrote:
> Alex,
> Thanks for the update yesterday on your agreement with Zane to engage you on a 100% contract basis with your Russian based company effective in the new year.
> Can you please send me the company name and company ABN (or equivalent in Russia) so I can prepare the paperwork?
> Thank you
56.On 20 October 2016 and 18 November 2016 Mr Volodin emailed Ms Bothma and informed her that his sister was setting up a legal entity in Russia and would hire Mr Volodin through that entity.[42]
[42] Exhibit 1, T Documents, T15, pages 274, 308, 324, Email chain between Mr Volodin and Ms Bothma (Versefeld).
57.On 18 November 2016 Mr Volodin informed Ms Bothma that he had created a legal entity in Russia and asked her if she could provide the two contracts they discussed (one for payback and one for consultancy starting 2017).[43] At the hearing Mr Volodin says this email was incorrect because he never registered a legal entity in Russia, instead his sister registered herself in Moscow as a sole trader.[44]
[43] Ibid 274, 308.
[44] Transcript dated 18 January 2021 (beginning at 10:10AM) page 25.
58.On 21 November 2016 Mr Volodin informed Ms Bothma he wanted to review the proposed contract with lawyers and would then arrange for a bilingual version of the contract to be prepared. Mr Volodin requested that Ms Bothma send draft contracts to him for review.[45] At the hearing Mr Volodin said he did not speak to lawyers or prepare a bilingual version of the contract.[46]
[45] Exhibit 1, T Documents, T15, pages 278 – 279, Email chain between Mr Volodin and Ms Bothma (Versefeld).
[46] Transcript dated 18 January 2021 (beginning at 10:10AM) page 27.
59.Mr Volodin reviewed the draft contracts and then provided Ms Bothma with an updated version. Ms Bothma then requested Mr Volodin provide further drafts of the contracts containing clauses dealing with the following:[47]
[47] Exhibit 1, T Documents, T15, page 309, Email between Mr Volodin & Ms Bothma (Versefeld).
> 1. Intellectual Property (refer to example contract provided)
> 2. Moral Rights (refer to example contract provided)
> 3. Confidentiality (refer to example contract provided)
> 4. Tax Liability (refer to example contract provided)
> 5. No relationship of agency nor employment and no indemnity (refer to example contract provided)
> 6. Clauses to survive termination - point 1-3
> 7. Governing Law (and which law defaults when laws conflict)
> 8. Payment Terms (Option.1-3)
60.Ms Bothma advised Mr Volodin on 23 November 2016 that it was Mr Hall's preference that he enter into a contract for services.[48] Ms Bothma provided Mr Volodin with a sample consultancy agreement for his consideration. Mr Volodin thought the sample contract provided by Ms Bothma was too long so he sent another version for her to consider.[49]
[48] Exhibit 1, T Documents, T15, page 278, Email chain between Mr Volodin and Ms Bothma (Versefeld).
[49] Ibid 302.
61.On 30 November 2016 Ms Bothma asked Mr Volodin to amend the draft contract to, among other things, specifically provide that there was no relationship of agency or employment. [50]
[50] Ibid 309.
62.On 2 December 2016 Mr Volodin sent Ms Bothma suggestions on how to reduce super payments.[51]
[51] Ibid 318.
63.Mr Volodin sent an email to Lauren Bothma on 21 December 2016 proposing two options for him to be paid outstanding wages. Mr Volodin wrote "/ don't want to lose money on taxes". The first option proposed was to enter into two consultancy agreements - one consultancy contract would be to cover the back pay that SMG owed him for unpaid wages and the other consultancy agreement would be for "ongoing consultancy services". The second option proposed by Mr Volodin was for Mr Volodin to provide consultancy services to SMG and focus on business development in Russia with a view to obtaining a future share in whatever opportunity he created.[52] In the email Mr Volodin went on to explain he needed money quickly and proposed that some money could be paid to him in cash and some could be paid in gold:
[52] Ibid 272.
From: Alex Volodin
To: Lauren Bothma
Subject: paymentsDate: Wednesday, 21 December 2016 11:15:43 AM
Dear Lauren,
I don't want to loose [sic] money on taxes as i am a bit limited right now. I want to propose the following options:
Option 1
I continue working full time and we sign two contracts:
- SMG I RU (back payment within 2017)
- SMG I RU (ongoing consulting services)
Option 2
I provide consulting services to SMG (guide and support Raymond) for 1500 AUD I month and focus on business development (Russian venture funds or private investors). If i am successful, i will get some share from the opportunity that i created. We sign one contract:
- SMG I RU (back payment within 2017)
>From my point of view, option 2 is better for the business and for both parties. I don't know when, but i will have to get back to Russia one day as my relatives are not young, so i would like to create a business there and taking into account that market is very hot there - this is the right time and i see a lot of opportunities to apply Xela there.
Some points about my current issues:
Currently i am not in a good financial position and it concerns me a lot:
1. I have 10K left on my account
I haveto spend 12K by the end of January 2017 ( i expected that 6500 + 6500 would cover it)
2.
Ineed some form of reserve at minimum 30K
3.
Ihave to pay for visas in 2017 (60K)
4.
I expect to get 60K in January, however if i’'s not possible due to financial pressure, i propose the following plan:
1. Pay 6 500 AUD for December in cash or via invoice from Russian company (i would prefer in cash)
2. Pay 30 000 AUD in January for me to create reserves (invoice from Russian company)
3. Pay the outstanding amount in two forms:
- in money withing 2017
ingold within 2017–- 2018 (4 kg)
-
(emphasis added)
64.Mr Volodin says that Mr Hall told him he was unable to pay the outstanding wages and employee entitlements and asked him if he could go onto a contractor arrangement instead.[53] The former CEO of SMG, Mr Hall, did not give evidence at the hearing. However there are emails from Mr Hall to Mr Volodin which confirm that:[54]
[53] Exhibit 1, T Documents, T11, page 161, Applicant Submissions for FEG Review Claim.
[54] Ibid 162.
(a)SMG owed Mr Volodin money;
(b)That Mr Hall told Mr Volodin that he would find a way to reduce the back pay.
65.The parties elected to proceed with option 1. Ms Bothma sent Mr Hall a break down of the monies owed by SMG to Mr Volodin totalling $222,910.40 and a copy of the proposed contract.[55]
[55] Ibid 147 – 152.
66.There are two different consulting services contracts between Ms Volodina and SMG before the Tribunal. One consultancy contract has both Ms Volodina's and Mr Hall's signatures ("2017 Consulting Contract").[56] The other consultancy contract is only executed by the CEO of SMG, Mr Hall, but is not executed by Ms Volodina ("2018 Consulting Contract”).[57]
[56] Exhibit 1, T Documents, T11, pages 154 – 160, Consultancy Contract dated 1 January 2017.
[57] Exhibit 1, T Documents, T9, pages 98-104, Consulting Contract dated 1 December 2017.
67.The 2017 Consulting Contract was intended to cover the period between January 2017 and December 2017. It provided, among other things, that:
•Ms Volodina will provide SMG with consulting services for 12 months
•Ms Volodina was to "design and [implement] algorithms to perform descriptive and predictive statistical data analysis"
•Ms Volodina will provide "the Services as an independent contractor"
•The Contract "does not create a relationship of employment'
•SMG is not responsible for the payment of any taxes or the deduction of any income tax on behalf of Ms Volodina
•Ms Volodina would be paid a total cost of AUD$120,000 paid by way of 12 monthly instalments commencing January 2017 of $10,000 per month with the final payment being made in December 2017
68.The 2018 Consulting Contract covered the period between December 2017 and November 2018 and contained the same terms as the 2018 Consulting Contract. The difference is only with respect to the payment schedule. The 2017 Consulting Contract provides that Ms Volodina would be paid a total amount of US$127,680 paid by way of 12 monthly instalments of US$10,640 per month commencing December 2017 with the final payment being made in November 2018.
69.On 15 December 2017 Mr Volodin sent SMG a signed copy of the Contract (it is not clear which contract).[58]
[58] Exhibit 1, T Documents, T15, page 275, Email chain between Mr Volodin and Ms Bothma (Versefeld).
70.In an email to Ms Bothma and Mr Hall on 20 December 2016, Mr Volodin acknowledged that he would no longer receive his usual wage:
P.S: as it was agreed i will stop receiving 1 500 AUD per month in 2017 as there will be a contract agreement between my Russian legal entity and SMG.
71.A further version of the contract was sent by Mr Volodin to Ms Bothma containing a clause that either party could terminate the contract. Mr Volodin explained to Ms Bothma in an email that this termination clause had been included "taking into account that it's an ongoing consultancy agreement'.[59]
[59] Exhibit 1, T Documents, T9, page 135, ASIC Current and Historical Organisation Extract.
72.On 1 January 2017, SMG Technologies Ltd (formerly Sportsmed Global Australia Pty Ltd[60]) entered into a consulting services contract with Ms Anna Viktorovna Volodina ("Ms Volodina").[61]
[60] Exhibit 1, T Documents, T15, page 291, Email chain between Mr Volodin and Ms Bothma (Versefeld).
[61] Exhibit 1, T Documents, T11, pages 154 – 160, Consultancy Contract dated 1 January 2017.
73.On 9 January 2017 Ms Bothma confirmed by email to Mr Volodin that he "will be transitioning to an Independent Contractors Agreement effective 1 January 2017'. Ms Bothma asked Mr Volodin to provide written confirmation of his resignation from his employment with SMG effective 31 December 2016. Ms Bothma also noted that with respect to the outstanding back pay that an amount had been agreed but that the repayment arrangement was not agreed.[62]
[122] Exhibit 1, T Documents, T14, page 220, Email between Mr Hall and Mr Volodin dated 11 September 2018.
[123] Exhibit 1, T Documents, T14, page 221 – 224, 267 – 268, Email between Mr Hall and Mr Volodin dated 11 September 2018.
140.The evidence does not weigh in favour of a finding that Mr Volodin was operating a business as an independent contractor.
141.Mr Volodin continued to be paid after January 2017 as he always had been, namely the same amount each month. The only difference being that his salary was paid directly to his sister. There was no variation of the amount paid correlating to any specific tasks or time taken which one would expect if Mr Volodin was operating his own business. No quotations were provided for the work to be performed. Mr Volodin says he was paid under the Consultancy Services Contracts until August 2018.[124]
[124] Exhibit 2, Supplementary T documents, page 8, Table of Salary Statistics (particulars of debt).
142.There is no evidence here that Mr Volodin could delegate his work to others, or that he had assumed any independent business risk, or that he could perform work for others, as would be expected of someone in an independent contractor relationship. Fellow employees called to give evidence all described Mr Volodin of having the appearance of nothing having changed. They were not even aware, based on Mr Volodin's and SMG's conduct, that there had been any change in the contractual nature of their relationship.
143.Unlike in Damevski, Mr Volodin did not register a business name for himself or supply timesheets in return for payment. Even if he had done so, Damevski makes it clear that this would not be conclusive evidence that he was an independent contractor. Here Ms Volodina acted as the third party in the tripartite arrangement, this does not alter the true nature of the relationship between SMG and Mr Volodin.
144.As in Damevski the evidence demonstrates that Mr Volodin and SMG intended that Mr Volodin's employment with SMG was to be terminated by mutual agreement but that Mr Volodin would carry out his services in the same manner as before, essentially under an implied employment arrangement.
CONCLUSION
145.On balance, given the evidence and the legally held meaning of "employee", the Tribunal is not satisfied that Mr Volodin was an independent contractor after January 2017. The Tribunal finds that there was no change to the substance of the relationship between Mr Volodin and SMG and that the totality of the relationship remained as one of employer/employee, albeit that SMG did not withhold income tax or pay Mr Volodin his employee entitlements or that Mr Volodin did not declare his income to the ATO.
146.As a result of the Tribunal's findings, Mr Volodin is eligible for any fair entitlement payments under the FEG Act as he met the eligibility criteria in section 10(1)(c) of the FEG Act. Mr Volodin's employment ended due to the insolvency of SMG and the appointment of the liquidator.
147.As in Quest and Damevski, the relevant features of Mr Volodin's employment, save for the manner and quantum of payment, remained unchanged.
148.Objectively, the Tribunal finds that the substance of the relationship overall is one of employer and employee.
DECISION
149.The Tribunal sets aside the decision under review and substitutes it with a decision that the Applicant is eligible to receive financial assistance (" advance") pursuant to section 10 of the Fair Entitlements Guarantee Act 2012 (Cth). The matter is remitted to the Respondent to determine the amount of the advance payable to the Applicant.
I certify that the preceding 149 (one hundred and forty-nine) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg
......................[SGD]..........................
Associate
Dated: 19 May 2021
Date of hearing:
18 - 19 January 2021
Date reserved:
15 March 2021
Applicant
Mr A Volodin (by videoconference)
Counsel for the Respondent:
Mr Z F He
Solicitors for the Respondent:
Respondent:
Ms Laura Crick
Secretary, Attorney General’s Department
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