Wisewould v the Workers' Compensation Regulator
[2015] QIRC 201
•25 November 2015
QUEENSLAND INDUSTRIAL RELATIONS COMMISSION
CITATION: | Wisewould v the Workers' Compensation Regulator [2015] QIRC 201 |
PARTIES: | Wisewould, Bradley v Workers' Compensation Regulator |
CASE NO: | WC/2014/336 |
PROCEEDING: | Appeal against a decision of the Workers' Compensation Regulator |
DELIVERED ON: | 25 November 2015 |
HEARING DATES: | 1 and 2 July 2015 |
HEARD AT: | Cairns |
MEMBER: | Industrial Commissioner Black |
ORDERS: | 1. The Appeal is allowed; 2. The determination of the regulator in its decision dated 21 May 2014 about who was the employer of Kirstenfeldt is set aside and substituted with a decision that the employer is Rossal Pty Ltd (ACN 104 118 489); 3. Costs are reserved. |
| CATCHWORDS: | WORKERS' COMPENSATION - APPEAL AGAINST DECISION - dispute over who was the employer of an injured worker - employment relationship or independent contractor relationship a consideration. |
| CASES: | Workers' Compensation and Rehabilitation Act 2003, s 11, s 30, s 32, s 550 |
| APPEARANCES: | Mr C. Ryall, Counsel instructed by Gayler Cleland Solicitors for the Appellant. |
Decision
Introduction
Bradley Wisewould ("the appellant") appeals a decision of the Workers' Compensation Regulator ("the regulator") dated 21 May 2014 in which the regulator accepted a claim for compensation from Colin Kirstenfeldt. It was not in dispute that Kirstenfeldt had suffered a compensable injury. The error said to exist was that Kirstenfeldt was not employed by the appellant but had been employed by Rossal Pty Ltd ("Rossal") at the time of his injury. Rossal was a company owned by Ross and Sam Frumento. While the company was formed in 2003, Ross Frumento had been engaged in cane farming, cane harvesting and engineering since 1988.
The sugar cane crushing season in North Queensland typically extends from June through to November or December each year. At the relevant time cane crushed by the Tully Sugar Mill was harvested by approximately 35 harvesting groups. Each group harvested the cane produced by designated growers. Typically the groups were made up of a harvestor driver and three haul-out operators (also referred to as bin drivers). Rossal had the rights to three harvesting groups.
Under arrangements put in place by Rossal for the 2013 crushing season, one harvesting group was managed or operated by Ross and Sam Frumento, a second group was operated by Steven DeLacy, while the third group (Group 28) was operated by the appellant. The effect of the evidence, as I understood it, was that the harvestor driver was the head of the work group or the person in charge. The haul-out operators collected the harvested cane in bins and transported the bins to holding stations. Tully Mill was then responsible for transferring the cane from the holding areas to the mill.
Nature of the Appeal
The appeal to the Commission is by way of a hearing de novo. To succeed with the appeal, the appellant must establish on the balance of probabilities that at the time of his workplace injury on 12 September 2013, Kirstenfeldt was not his employee, but was employed by some other entity viz Rossal.
Evidence
During the course of the proceedings, evidence was provided by eight witnesses. The witnesses for the appellant were as follows:
·Bradley Wisewould
·Dick Camilleri
·Adrian Shepherd
·Santo Contarino
·Hayley Kuhnell
·Paul Misale
The witnesses for the regulator were as follows:
·Ross Frumento
·Leisa Girard
The Pre-Existing Arrangement
It was the appellant's evidence that during the 2012 crushing season and for the first five or six months of 2013 he was engaged full-time on an employment contract on an hourly rate. He said that he insisted on the payment of an hourly rate during the 2012 crushing season notwithstanding that the norm was for a per tonne rate to apply. The employment contract however was not able to be located and was not entered into the evidence.
Frumento acknowledged that Rossal had a standard employment contract and confirmed that a document in the evidence as Exhibit 11 constituted such a contract. He said that the contract applied to employees under his banner (Rossal) and acknowledged that a term of a version of the standard employment contract was that total remuneration was determined by a payment "per tonne plus superannuation". However he did not concede that the appellant had been engaged on an employment agreement prior to the commencement of the 2013 crushing season and his evidence at T2-3 implied that a contract arrangement was in operation:
"Right. Okay, and the arrangement you had with him, how did you employ him – and I’m only focusing on 2012?‑‑‑We employed him as an ABN. He billed us every week as a – with an invoice. Yes.
And when you say billed every week, was that for the hours of work he would conduct each week?‑‑‑On that particular – 2012, he was on an hourly rate. He billed us for so many hours, whatever he’d done for the week and put an invoice in. Yes.
Right, and then you would pay that invoice?‑‑‑That’s correct."
The appellant agreed that before the start of the 2013 crushing season he would invoice Frumento each week to recover the cost of his labour. His invoice book is in the evidence as Exhibit 1. It shows that the appellant invoiced Rossal Pty Ltd on 19 May 2013, 25 May 2013, 2 June 2013, 9 June 2013, and 19 June 2013. Each invoice is made out to Rossal Pty Ltd and each one included the term "Contract Labour" and, except for the invoice dated 19 May 2013, all invoices specified a number of hours. The hours worked ranged from 41.5 hours to 54.25 hours. Each invoice was payable to Brad Wisewould with a Darwin address specified. The first three of the invoices also included what I understand to be an ABN number. No other information was provided. Further none of the invoices sought recovery or reimbursement for costs relating to anything other than the appellant's own labour.
The Subcontract Arrangement
It was not in dispute that the appellant's remuneration method changed from an hourly rate to a per tonne rate at the start of the 2013 crushing season. Frumento said in effect that he invited the appellant to take charge of one of the harvesting groups under a subcontract arrangement. Frumento's evidence was that he held the principal contract and that he was ultimately responsible for the operation of the three harvesting groups. He owned the plant and machinery and he paid the insurance on the machinery.
Frumento said that he entered into the new arrangement with the appellant to assist him secure a credit rating in circumstances where he had been denied finance to enable him to buy a new vehicle. Frumento evidence at T2-4 was:
"He couldn’t get finance and that’s when it come about that I’d say, okay, well how about we try and help you gain a bit of a credit rating and that and I – that’s when I offered that subcontract where he employed all the guys…"
The terms of the subcontract arrangement were settled in a meeting or meetings held in June 2013. The effect of Frumento's evidence was that the sub-contract arrangement replaced or superceded the prior hourly rates arrangement. Frumento described the subcontract arrangement in the following terms (T2-5):
"Well, you referred to you offered him a subcontract. Can you give the details of what you offered him in respect to the basis of that subcontract?‑‑‑Well, I offered him so many cents a tonne on everything that was cut per the – for the week, but his liability was to pay the men, pay the super and he was supposed to cover his Workers Comp ‘cos he was an employer before. "
…
" ‑‑‑Basically told him how it had to run and how it, you know – how the wages worked and that was his responsibility and his responsibility was to keep the men together, working together as a team, maintenance side of things and everything and that was how it – we wanted things to work and we were to oversee the whole operation, of course, was – at the end of the day, we’re still liable to get the cane off. You know, we’re the contractors.
It was Frumento's evidence at T2-6 that it was the appellant's responsibility to pay the wages of the bin drivers based on their pre-determined tonnage rate. He said that the appellant "was liable to disperse it to the three operators he had under his banner – under his wing". He said that once the tonnage cut was known, the appellant would raise an invoice and the money would be paid into the appellant's account. He said that as soon as he got paid, the appellant got paid.
The quantity of cane cut per week was posted on the website of the Tully Mill. All relevant persons, including Frumento, the appellant and the bin drivers were able to access the data. The data was published the day after the week ended and everyone was then in a position to determine the level of remuneration that they would receive.
Girard participated in the June 2013 meeting which discussed the subcontract arrangements. It was her evidence at T2-23:
"What was discussed?‑‑‑Yeah. Well, it was basically a discussion regarding Brad’s involvements with the season and the cutting, him taking on his crew, what was expected from him, from Ross and Sam, seeing he was using his machinery. That’s Ross and Sam’s Rossal’s machinery. They discussed things like he was to provide, like, his own vehicle, his responsibilities for the workers, what tonnes they were going to cut, who they were cutting, farmers, etcetera, time spans, that sort of thing, maintenance issues that they were – that was his responsibilities, and what was expected because he’d worked on the machinery prior.
And who was to provide the machinery for the cutting for that particular season?‑‑‑Rossal Proprietary Limited. The company owned the machinery."
Ms Girard said however that the appellant never did supply his own vehicle and throughout the period of the contract he was using a company vehicle that had been loaned to him. The evidence also established that Rossal was responsible for the cost of fuel used by machinery in the harvesting operation.
The appellant's evidence about the June 2013 meeting was recorded at T1-15:
"The agreement you signed, what was that about? What were the terms of it? Do you know?‑‑‑So what happens with the contract there, because it’s not an hourly rate you’re paid on a per tonne basis. So we had to agree on the per tonne basis that I was paid for me driving and operating a harvester for Ross Frumento.
So your agreement was about payment – the agreement you signed was about payment as an operator of the harvester?‑‑‑Correct.
And am I right in saying that this was different from the previous year because instead of an hourly rate, you accepted tonnage rate?‑‑‑That’s right. I was on a – well, Ross wanted me to be under a contract. So he had me locked up in his – in his operation. Because what happened is the farmers wanted to know that I was driving that machine. Because I’d previously cut all the farmers’ cane the previous year. So they all wanted to know that I was cutting the cane again this year. So Ross wanted me under a contract because that gives him a lot more security to go to farmers and say, well, here, Brad signed the contract. You know, Brad’s operating the harvester again, you know, you’ve got the same haul-out operators. You know, so it gave Ross credibility in front of the farmers."
The appellant's proposition was that the scope of the contract entered into was primarily limited to his commitment to operate the harvester for Group 28. However, he said that Frumento asked him to include other commitments (T1-15):
"And you don’t have a copy of it. Were any other arrangements made that year with Ross Frumento and his company in relation to the harvesting for that season?‑‑‑Yeah. We had two harvesting groups. And Ross Frumento approached me and Steve – the other individual harvester operator for the other group. And he asked both of us if we would pay the employees ourselves, and the reason being that he wanted to avoid paying payroll tax. Steve strongly – he – we both went away and thought about it. Steve, group 26 harvest operator, he objected the idea on the grounds that it was too much paperwork and he didn’t want to – he just wanted to have a simple thing. And Ross asked if I would do it. I don’t – well, at that point in time I had $20,000 outstanding to me. And he kind of locked me into a corner. So, yeah, I had to agree to his terms, so – yeah."
The appellant said that the entire payroll function was taken over by Rossal. He said that Rossal's office staff would calculate all the entitlements based on the relevant tonnage rate, and would determine the tax and superannuation deductions. The appellant described the payroll arrangement in the following terms (T1-16):
"Then on the Monday we come along again and Leisa wanted to speak to me about setting up the payment structure. So every Thursday, what happens is, the mill will get the – the mill will send through the cane output for the whole week. So let’s say we’ve cut 7,000 tonne for the whole week. And let’s say Ross is getting paid $10 per tonne. So there’s $70,000 that gets paid into Rossal’s account every Thursday. Then that – then Ross sits down and he works out the individual breakdown of me being on 68 cents and then the other blokes being on 50 cents. So he works out, you know, Brad’s going to get paid this much, Sheppy – Adrian Shepherd will get paid this much, Anthony Charlton will get paid this much, Donald will get paid this much. Gives that to Leisa and then Leisa contacts George. George creates an invoice in Darwin, all broken down. And then Leisa goes into my account – they put the money into my account, Leisa goes into my account and distributes the individual money out of my account into the individual operator's accounts."
While the appellant's evidence suggested that Rossal took control of the payroll function from the commencement of the subcontract agreement, the effect of Girard's evidence was that while the appellant initially had responsibility, Rossal took over in July 2013 and soon after the start of the crushing season. She said that Rossal calculated the individual entitlements of the appellant and the bin drivers and transferred the total of these entitlements into the appellant's account. Additionally, she would use the appellant's bank password to access his bank account and transfer the wages of bin drivers from this account into the individual accounts of the bin drivers.
Ms Gerard's explained the circumstances associated with transfer of the payroll function at T2-23:
"Why were you doing Mr Wisewould’s books? Had he requested you to do those?‑‑‑Yeah. Well, we discussed it, and he said that he was wanting us and happy for us to do the books. Well, one, we had the MYOB system already set up, so all I basically needed was to create a file for him and – and he was up and going, and he wanted to get going pretty, you know, immediate, so ‑ ‑ ‑
And what was entailed doing his books? What sort of tasks ‑ ‑ ‑?‑‑‑I would process ‑ ‑ ‑
‑ ‑ ‑ were you looking after on his behalf?‑‑‑ ‑ ‑ ‑ payroll for him and pay his workers. I would also keep tab of the super and pay the super as well for him, and that was basically my part. I would receive – I would send a lady called Georgie tonnages, in which she would then invoice me for Brad’s invoice on a weekly basis once we got going, and – yeah. That was basically my – my part.Right. Okay. And how long did that continue for? So when did that start and how long did it continue for?‑‑‑Approximately July, and went through to October. Yeah.
Right. Okay then. And would you invoice – can you recall, would you invoice Mr Wisewould for the bookkeeping tasks?‑‑‑I did."
Ms Girard's evidence was the transfer of the payroll function occurred with the agreement of the appellant. She said that the appellant was charged a bookkeeping fee for completing the payroll service. Frumento agreed that Ms Wakefield provided the appellant with bookkeeping services. The appellant confirmed at T1-62 that Ms Girard deducted $140 from his account for bookkeeping services and that Rossal generated an invoice to effect recovery of the amount.
An example of the payroll records kept by Rossal for the appellant was in the evidence as Exhibit 8. This document comprised a payroll advice for the period 1 June 2013 to 8 October 2013 and it detailed weekly wage payments made to Colin Kirstenfeldt from 9 August 2013 to 12 September 2013. The name "Brad Wisewould" and his ABN number were shown in respect to each pay advice. Exhibit 9 was evidence of the fact that the appellant invoiced Rossal for remuneration earned by both the appellant and the bin drivers working in his group. The invoice included in the exhibit displayed two line items – one saying "Contract Harvesting Week 8" and the other saying "Superannuation". The appellant's ABN is included on the invoice. This is the same ABN that is included on his pre-crushing invoices (Exhibit 1) and on the payroll advice (Exhibit 8). The invoice also disclosed that the "Contract Harvesting" line item attracted GST, but the superannuation amount did not.
The appellant said that the determination of the remuneration by Rossal took into account the number of days worked per week by the operator. If an operator did not work the full week, the tonnage cut on the days absent would be deducted from the weekly tonnage and the wage entitlement reduced accordingly. These circumstances required the completion of time sheets.
Frumento agreed that either the appellant and the haul-out operators working with him, or just the haul-out operators, completed time sheets. He said that the appellant would bring the timesheets into the Rossal office. His evidence about the process was set out at T2-19:
" … Brad just brings the timesheets in, and it tells you what day they work as a rule, and you just calculate the tonnages and the – the days they worked or whatever they cut in that particular day.
Isn’t it the case that you were the person that ultimately decided how much a person like Colin would get paid? You’d review those timesheets yourself?‑‑‑I check over the times and tonnages – not the times. Times have got nothing to do with it. It’s just the days and the tonnage they cut in that day."
Exhibit 12 provided an example of how Frumento's oversight of the payroll process and his review of timesheets could lead to corrections being made by him in the payments proposed by the appellant. In the email which formed Exhibit 12 the appellant was asked by Rossal to change an invoice because Frumento had become aware that Kirstenfeldt had not performed any work on a particular day. The relevant content of the email is set out below:
"Please change this invoice as according to Ross – Colin did not haul a stick of cane on Sunday (although he has put down hours!) so he has taken tonnage for Sunday off Colin."
The appellant said that he did not receive any payment from Rossal to cover the cost of payroll administration. However Frumento disputed this and said that the tonnage rate paid to the appellant was sufficient to cover an administrative component, wages, superannuation, and workers compensation insurance. He said that there was a profit margin in the exercise for the appellant and he said that the appellant could have kept two cents a tonne for that purpose.
Whether Frumento set the per tonne rate to apply to bin drivers working in the appellant's group was another matter in contention. Frumento denied that he dictated the rate that had to be paid by the appellant and said that when the bin drivers were engaged he told them the rate that "they should get". His evidence at T2-14 is set out below:
"And what occurred, wasn’t it, was that you directed how much both Brad and his – the employees that were working with him as haul-out operators would get paid from time to time. Regardless of any agreement?‑‑‑I said there’s a certain amount you’ve got to pay them to be over the award. The rest is up to you. How you manage it. I always said that. There could be up to six to eight cents a tonne that he could pick up as profit if he wanted to.
I – look, that’s not the case, is it? When you spoke to Adrian Shepherd and Mr Charlton and Mr Locke, you agreed a rate that they would get paid per tonne?‑‑‑They should get that pay – that rate. But it’s up to Brad what he paid them."
Frumento's evidence however was contradicted in part by an email in the evidence as Exhibit 5 in which the appellant was informed by Rossal that Frumento had decided to reduce his rate from 68 cents per tonne to 65 cents per tonne. The email also stated that if things improve Frumento "will put your rate back up again". This email indicates that Frumento had the discretion to unilaterally increase or decrease the appellant's rate. The email also included reference to the rates paid to two haul-out operators working with the appellant. In this regard the email stated that Frumento may revise the rate of 62 cents a tonne paid to Anthony Charlton and Donald Locke and states that "this rate for Anthony will only remain at this whilst you are working with 2 not 3 haul outs". This content indicates that Frumento had the capacity to alter the tonnage rates payable to the operators working with the appellant and who were paid by the appellant.
Frumento accepted that he exercised close oversight of the appellant's harvesting group. His evidence at T2-7 was that Rossal was part of an overall team effort and that he regularly monitored the activities of the harvesting group and intervened if necessary:
"Right. Okay. Now, as part of the agreement you had with Mr Wisewould, who was responsible for the care and safety of the workers?‑‑‑Well, he was, because there was a – it’s a team effort, but, as well, we had to overlook things as well as – you know, we owned the machinery. We checked over things regularly, but if it was too wet – there was a number of occasions that a couple of binnies didn’t want to cut because it was dangerous, and they actually pulled out of the paddock, and he wanted to keep going, and that’s when we pulled him up."
The arrangement between Rossal and the appellant ended on 19 October 2013 when Rossal terminated his contract. Frumento said that the appellant had managed Group 28 and had driven the harvestor "for two-thirds of the season, till we – till we made him redundant, like, we put him off" (T2-8). Frumento explained at T2-16 that he stepped in and took over the harvesting group including the employment of bin operators:
"As the season progressed you needed to allocate new haul-out operators to Mr Wisewould’s crew?‑‑‑That’s correct. Yes.
And that’s what you did. You employed people and then directed them to work with Mr Wisewould?‑‑‑Well, as things failed – when we – things weren’t working out, yes, we started employing towards the end. We actually took over the whole run."
The letter of termination of contract is in the evidence as Exhibit 10. The letter stated inter alia that the appellant was being informed that his "contract with Rossal Pty Ltd for the 2013 cane season as a contract harvestor operator has ceased as of the 19/10/2013." The letter stated that Frumento had "no choice but to end the contract after several incidents and reports from unsatisfied customers".
Sourcing of labour arrangement
While Frumento said that he did not employ the bin drivers working with the appellant and did not enter into employment agreements with them, it was not disputed that he was actively engaged in the recruitment of these drivers.
Gerard's evidence at T2-22 was that it was her understanding that the appellant was to employ his own crew but that Frumento was "to help him source them". Frumento said that he "engaged" workers but he did not "employ" them (T2-16). Frumento agreed that he placed advertisements on two occasions for bin men (T2-8). When Frumento became aware that Group 28 required a bin driver he would source the driver and place them with the appellant.
Kirstenfeldt did not give evidence in the proceedings but Frumento said that Kirstenfeldt had worked for him on previous occasions and he was familiar with his experience and know-how. It was Frumento's evidence at T2-9 that Kirstenfeldt had responded to a newspaper advertisement placed by Rossal. He said that at the time that Kirstenfeldt called him to express an interest in work opportunities, the appellant had a vacancy for a bin driver. Frumento said that:
"… I knew Colin from the previous years of harvesting with other groups and he was experienced, and I basically just spoke to him over the phone because I – I knew what he was capable of doing, and he was a – he was in a need of a job, and I said, well, if you’re right for tomorrow, I’ll get Bradley Wisewould to pick you up, because we needed another bin driver for him.
The appellant's evidence in respect to the recruitment of Kristenfeldt was recorded at T1-18:
"And how did you come to meet him?‑‑‑Obviously with haul-out operators that were quitting all the time because of the equipment, Ross rang me and said, I’ve got a new haul-out operator for you. His name’s Colin Kirstenfeld. Can you pick him up from the Feluga Tavern at 6 o’clock as you go through? And that was the conversation I had with Ross. That was it.
And did you – when you picked up Mr Kirstenfeld, did you speak to him about how much he would be paid for working in your group?‑‑‑No, no.Did you speak to him about the hours that he was to work?‑‑‑No.
Did you ask him to sign any paperwork?‑‑‑No, he – no. He had ‑ ‑ ‑
No, no. Just – I’m asking you ‑ ‑ ‑?‑‑‑No. No.
Did you inquire into his experience or training?‑‑‑No."
It was the evidence of Michael Stewart's partner, Hayley Kuhnell, that Michael Stewart had worked with the appellant during the 2013 crushing season commencing from a date in late July or early August and ending on 21 September 2013. She said that Frumento gave Stewart the job and that she was with Stewart when he completed the necessary paperwork in Frumento's smoko shed. Her evidence about the matter was recorded at T1-55:
"Do you have any recollection precisely what the paperwork was?‑‑‑It was a contract for him to – as I understand, it was a contract for – there to read and sign to say that he worked for Ross Frumento; personal details with his name, address, next of kin, you know; bank details and all that stuff; and a tax declaration form."
Ms Kuhnell also said that when Stewart's first fortnightly pay was not transferred into his account at the expected time, either she or Stewart contacted Girard who subsequently met them in a florist in Tully and handed over some cash. Girard agreed that she had provided Stewart with an advance on his wages. She said that Stewart had asked the appellant for an advance, but that the appellant did not have the money and he asked Girard if she could provide the advance.
Frumento agreed at T2-18 that he recruited Stewart to work as a haul out operator with the appellant. He said that he met with Stewart and his partner at his El Arish premises to confirm arrangements. He said that the appellant needed another bin driver and that he "couldn't keep men".
Adrian Shepherd had previously worked for Rossal in 2010, 2011, and 2012. In 2013, he commenced work with Rossal for about a four week prior to the start of the crushing season. During this time he was involved in preparing machinery for harvest. He said that when he started work in 2013 he signed an employment contract with Rossal, but that he had not retained a copy of the agreement. Shepherd said that he provided Rossal with his bank account and superannuation details. He said that he was paid by direct debit into his account and that the payment was made by Girard. He said that he was paid at an hourly rate for the work performed prior to the crushing. He also said that his employment agreement included a rate per tonne which was set by Frumento. As I followed the evidence the tonnage rate would apply to work performed for Frumento during the crushing season.
Shepherd said that when the crushing commenced he was told by Frumento to work with the appellant's harvesting group as a bin driver. He said that the other bin drivers were Donald Locke and Anthony Charlton.
Frumento agreed that Shepherd was deployed to work with the appellant when the crushing commenced but he regarded this as a separate employment arrangement. He said that Shepherd "had to swing over to Brad Wisewould's banner", and that Shepherd had signed an agreement with the appellant. However he said later in his evidence that Shepherd was paid by the appellant and "signed a declaration with him". I take it that the reference to a declaration was to a tax declaration form which Frumento said had been signed by the appellant. It was Frumento view that "if you sign a tax declaration you're the employer".
In the end result while the evidence established that some of the bin drivers signed an employment agreement with Rossal in respect to work performed for Rossal in 2013, the evidence did not support a finding that anyone signed an employment agreement with the appellant.
Shepherd did not disagree that the basis for his remuneration and his payroll arrangement changed when he commenced work in the appellant's harvesting group. His evidence in this regard was recorded at T1-54:
"when I started the month beforehand, I was working under Rossal. They were paying me an hourly rate. And I was told that once we started cutting the cane we would be working under Brad Wisewould’s ABN, and that’s – for when we were cutting cane, the tonnage rate, that’s who we were getting paid through.
And who told you that?‑‑‑Ross Frumento."
Frumento rejected a proposition that either Shepherd or the other two bin drivers working with the appellant (Charlton and Locke) had signed an employment agreement with Rossall in respect to work performed in the harvesting group.
Misale's circumstances were similar to Shepherd's. He had commenced work with Frumento under the Rosall banner performing welding work before the start of the crushing. He said that he had signed a contract with Frumento. When the crushing started he was deployed by Frumento into the appellant's harvesting group working as a bin driver where he worked for a time with Kirstenfeldt.
It was Santo Contarino's evidence that he had been employed by Frumento Transport in 2013 in the capacity of float driver. His job was to move the harvesting gear around from site to site. He had signed an employment agreement with Rossal Pty Ltd which was included in the evidence as Exhibit 7.
Workers Compensation Insurance
The appellant said at T1-16 that in the June 2013 meeting he was informed by Frumento that Rossal would pay for workers' compensation insurance. He said that given this assurance he was happy to go ahead with the arrangement proposed by Frumento.
Frumento however disputed the appellant's version and said that while Rossal was responsible for machinery insurances it was not responsible for workers' compensation insurance. In his evidence in chief Frumento expressed his position in the following terms (T2-5):
" … pay the men, pay the super and he was supposed to cover his Workers Comp ‘cos he was an employer before. He had his own Brad Wisewould Industries he called himself and he used to employ people in the wheat belt and he had his own business and he knew all that, he knew how to employ people and I said as long as you’ve got the – everything in place, it’s all fine by us."
In this evidence Frumento stops short of saying that it was part of the subcontract arrangement that the appellant would pay workers' compensation insurance. Rather he appeared to be conveying that he presumed that the appellant would pay the workers' compensation insurance. His presumption was based on the fact that the appellant had his own company and had employed people before.
Girard's evidence was similarly expressed. She agreed that insurances were discussed at the meeting but said that the appellant never asked whether Rossal would pay workers' compensation insurance. The effect of Girard's evidence was that the issue was not discussed and that she understood that it would be the appellant's responsibility. Her evidence at T2-23 is as follows:
"Right. Okay. And can you recall whether Mr Wisewould agreed to a – what you’ve just said – WorkCover insurance, etcetera? Like, did he agree to ‑ ‑ ‑?‑‑‑I thought he understood that it was his responsibility."
The effect of Frumento's and Girard's evidence was that workers' compensation insurance was not specifically discussed but that they presumed that if the appellant was taking responsibility for payroll, such responsibility would include payment for workers' compensation insurance.
It is not necessary to resolve the conflict in the evidence. It was not in dispute that the appellant agreed to take responsibility for paying the wages and superannuation of the bin drivers. In the circumstances it does not seem an unreasonable expectation that the responsibility for labour would include responsibility for all on-costs associated with the employment of labour including workers compensation insurance. In resolving questions about whether the appellant was the employer of Kirstenfeldt or whether the appellant independently contracted to Rossal, the inclusion or exclusion of workers' compensation insurance in the list of labour on-costs to be borne by the appellant, is not determinative.
Independent Contractor
A question for consideration is whether the relationship between the appellant and Rossal should be characterised, at law, as an employment relationship or an independent contractor relationship. A finding that the relationship was not an independent contract relationship would support a conclusion that Kirstenfeldt was not an employee of the appellant.
In French Accent[1] a Full Bench of the Fair Work Commission dealt with the guidelines to be applied in distinguishing between employees and independent contractors. Matters for consideration with a significant application to the appeal are listed below:
[1] Jiang Shen Cai T/A French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307.
§The nature of the work performed and the manner in which it is performed;
§The terms and terminology of the contract;
§Whether there is a right to exercise control and the extent and nature of the control;
§The extent to which one party is subject to direction and supervision by the other party;
§Whether the putative subcontractor provides and maintains tools and equipment;
§The method of remuneration including the deduction of income tax;
§Whether the putative subcontractor is remunerated by periodic wage or salary or by reference to completion of tasks;
§Whether the putative subcontractor spends a significant portion of his remuneration on business expenses;
§The capacity of the putative subcontractor to perform work for others;
§The payment of annual leave and sick leave to the putative subcontractor;
§Whether the work of the putative subcontractor involves a trade or distinct calling;
§Circumstances regulating the termination of the putative subcontract.
The Full Bench warned however that a consideration of these indicia is not:
" … a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation."
Frumento held the rights to the harvesting groups and was responsible for the performance of the groups or the work outcomes of the groups in accordance with conditions or specifications agreed with growers and the mill. He would be prepared to intervene if necessary to protect his interests. The fact that he made the early offer to recruit labour and moved quickly to accept responsibility for the payroll function are indicative of his overarching responsibility for the effective functioning of the appellant's harvesting group. His capacity to make a decision to reduce the levels of remuneration of the bin drivers and the appellant, and his ability to implement such a decision, are factors indicative of significant levels of control.
The evidence did not explore the nature and extent of the appellant's control over, or supervision of, the bin drivers. There was no evidence that the appellant inducted bin drivers, delivered training, and provided ongoing direction and supervision. Nor was any evidence adduced of performance management activities. Further, despite the rate of turnover of bin drivers there was no evidence that the appellant had terminated the employment of any bin driver.
Propositions supporting a finding that the relationship between the appellant and Rossall was that of an independent contract include:
§ The appellant paid the bin drivers including Kirstenfeldt and the payment process involved the deduction of income tax and the remittance of superannuation contributions;
§ The content of Exhibit 8 is indicative of the existence of an employer/employee relationship between the appellant and Kirstenfeldt;
§ The appellant held an ABN and had previously employed employees under his company structure;
§ The implementation of the payroll arrangement was a valid fee for service activity which was not inconsistent with the operation of the independent contract arrangement;
§ While Frumento recruited Kirstenfeldt, he was employed and paid by the appellant and worked under the direction and supervision of the appellant;
§ Frumento's evidence at T2-4 was evidence of formation of contract;
Propositions supporting a finding that the appellant was an employee of Rossal include:
§The appellant did not propose the subcontract arrangement. The appellant's interest was in performing the role of harvestor operator. His acquiescence should not be construed to mean that he was motivated to enter into a genuine independent contract arrangement;
§Frumento controlled recruitment. He recruited the bin drivers, designated the rate per tonne to be paid and made the decisions about where new labour hires would be directed to work;
§Frumento was able to intervene and reduce the per tonne rate paid to the appellant and the bin drivers and therefore their remuneration;
§The contract was a labour only contract and remuneration was based on a piecework system;
§The appellant drove to work in a vehicle supplied by Rossal. He drove a harvester provided by Rossal and fuelled by Rossal. The appellant was required to account for fuel usage by providing information about the quantity of fuel used and relevant odometer reading. In the event of discrepancies he was called to account;
§Rossal took over the payroll administration soon after the commencement of the crushing which meant that Rossal maintained all payroll records, calculated all entitlements, arranged for the remittance of income tax and superannuation components, and transferred the net pay owing to the bin drivers from the appellant's account to the individual bin drivers account;
§Rossal acted unilaterally in terminating the appellant's contract;
§Whether or not the bin drivers placed with the appellant had entered into contracts with Rossal, there was no documentary evidence of the existence of an employment agreement with the appellant;
§Some of the bin drivers were initially employed under an employment agreement with Rossal and were working for Rossal before being "transferred" by Frumento to the appellant;
§The appellant's evidence in which he described himself as "just a harvesting operator" and maintained that Ross Frumento "ran the whole business".
The extent and nature of Rossal's control over the appellant's activities suggest that the relationship did not constitute a valid independent contract arrangement. Frumento exercised close oversight over the operations of the appellant's harvesting group, recruited labour, designated the level of remuneration, and acted unilaterally to alter the level of remuneration. Apart from the payroll administration activity which was quickly ceded to Rossal, the appellant's contribution under the subcontract arrangement was predominantly, if not solely, the supply of his own labour. The probability that the appellant's pre-existing arrangement was an employer/employee arrangement and the fact that the method of remuneration used in the subcontract arrangement was a common feature of Rossal's employment agreements, are considerations which are consistent with a conclusion that it was more probable than not that the subcontract arrangement did not constitute a valid independent contract.
When concerns emerged with the manner of performance of work by the appellant, Rossal stepped in and took over the harvesting group. While there was evidence of prior warnings given to the appellant by Rossal, there was no evidence of any negotiation around the terms of the contract or about Rossal's capacity to act unilaterally to bring the subcontract arrangement to an end. Rossal's actions in terminating the appellant's contract and taking over the group activities were more consistent with an employer/employee relationship, than with an independent contractor relationship.
Employee
A finding that the appellant was an employee of Rossal and not an entity subcontracting to it, is a factor for consideration in determining whether Kirstenfeldt was an employee of the appellant. Other factors or propositions supporting a conclusion that Kirstenfeldt was not an employee of the appellant include the following:
·The evidence did not support a finding that the appellant entered into an employment agreement or a contract with Kirstenfeldt. Exhibit 8 alone does not establish the existence of a contractual arrangement between the appellant and Kirstenfeldt;
·There was no evidence of any written agreement between Kirstenfeldt and the appellant nor was there any evidence of any discussion between the appellant and Kirstenfeldt arising from which a contract could have been formed by offer and acceptance;
·The sourcing arrangement should be construed as indicative of the extent and nature of the control exercised by Frumento over employment. The evidence of Misale, Shepherd and Kuhnell showed that employment agreements were in place with Rossall who allocated them to work with the appellant;
·Frumento knew Kirstenfeldt, offered Kirstenfeldt work, told him how he would be remunerated and fixed the level of remuneration, and deployed him to work with the appellant;
·While Frumento said that it was open to the appellant to determine the level of remuneration of the bin drivers subject to award restrictions, the evidence did not support a conclusion that the appellant had given consideration to such a possibility nor had he exercised any such discretion;
·Conversely, by his own actions, Frumento had established that he could exercise a discretion to intervene in the remuneration arrangements applicable to bin drivers and to reduce their remuneration.
Conclusion
The central matter for determination is whether an employment or contractual relationship pursuant to section 11 of the Workers' Compensation and Rehabilitation Act 2003 existed between Kirstenfeldt and the appellant at the time of his injury in September 2013.
I accept that when Frumento proposed the introduction of a subcontract agreement he intended that the appellant would be responsible for the payment of wages including labour on-costs. While Frumento suggested that he was doing the appellant a favour by proposing a subcontract arrangement and that a subcontract arrangement would improve his credit rating, I prefer to proceed on the basis that the motivating consideration was the establishment of a vehicle under which the harvesting group took responsibility for labour.
While the appellant acceded to the request to enter into the subcontract arrangement, it is doubted on the evidence whether there was any particular benefit for the appellant in entering into the arrangement. Matters occurring after the event suggested that he was not well equipped to handle his responsibilities. The appellant claimed that his role was primarily to drive the harvestor. His view that other activities were peripheral to his core function was supported by the fact that from the start and without interruption, Frumento took on the task of recruiting bin drivers and that very early in the crushing season Rossal took over the payroll process. These factors create a doubt about the appellant's capacity to enter into a genuine independent contract. If Rossal had not taken on the recruitment and payroll functions, it might be inferred that the subcontract arrangement may have failed or would not have been viable.
The evidence around how Kirstenfeldt was recruited and the evidence of Misale, Shepherd and Kuhnell is supportive of a view that while the appellant was ostensibly responsible for his own labour arrangements, the practical reality was that Frumento discharged this responsibility. There was no evidence led supporting a view that the appellant had the capacity to reject the labour supplied by Frumento. The effect of Frumento's evidence and the evidence of Misale, Shepherd and Kuhnell was that Frumento took charge of recruitment. He made the decision to employ and he made the decision to place the employee in the appellant's harvesting group. Further some of the bin drivers were employed by Rossal under employment agreements before being allocated to work with the appellant. Some of these employment agreements included a remuneration structure which included a rate per tonne which was the designated piece work payment practice applicable to work performed during the crushing season. It followed that the employment agreements were flexibly framed to accommodate work during both the slack season and the crushing season. In this particular context the designation of the appellant as the employer assumes an artificial character.
In Golden Plains Fodder Australia Pty Ltd v Millard[2] the Full Court of the Supreme Court of South Australia summarised the law relevant to a determination to be made about which employer employed a particular employee:
[2] Golden Plains Fodder Australia Pty Ltd v Millard [2007] SASC 391.
"Where there is an issue of identifying the employer of an employee when there might be two (or more) possible employers, courts have adopted the approach of resolving the issue by the application of the principles developed for determining whether a person was an employer at all.
The touchstone is the practical reality of the relationship.18 Courts have consistently emphasised that in determining whether a relationship between parties is one of employment or independent contract, the court should focus on the practical reality of the relationship.
The totality of the circumstances surrounding the relationship of the various parties, including conduct subsequent to the creation of the alleged employment relationship, is relevant.
Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of the relationship. The documentation may have been brought into existence for other purposes, for example, for tax minimisation or the reduction of insurance premiums, without reflecting the reality of the parties’ relationship. The payment of wages by a particular entity is not conclusive of the existence of an employment relationship. The beliefs of the employees as to the identity of the employer is admissible and is entitled to
be given weight."
It was the respondent's submission that Exhibit 8 "plainly demonstrates the manner in which Mr Kirstenfeldt was paid" and that the exhibit "evidences that the appellant paid Mr Kirstenfeldt, including superannuation and tax". It was also submitted that Exhibit 4 (Payroll Activity Summary) set out the wages, tax, and net pay components of the remuneration paid to the employees of the appellant.
While I accept that the appellant was party to an arrangement wherein he was responsible for paying the bin drivers working in his harvesting group, this factor alone is not determinative of an independent contract arrangement nor is it determinative of the existence of an employment or contractual relationship between Kirstenfeldt and the appellant. In my view a consideration of all the facts and circumstances relevant to this appeal leads to a balance of probabilities conclusion that Kirstenfeldt was employed by Rossal.
The appeal is allowed. The regulator's determination in its decision dated 24 May 2014 that the employer of Kirstenfeldt was the appellant is set aside and replaced with a determination that the employer of Kirstenfeldt was Rossal Pty Ltd. The matter of costs is reserved.
I order accordingly.
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