By: Charlie Bulos, Solicitor
Contractor or employee?
As indicate earlier, I find it necessary to partly cite or refer the decision of the Fair Work Commission in Christos Papathanasiou v HBS Group Pty Ltd (U2012/12560) MELBOURNE, 18 APRIL 2013 for better understanding to many. This is an extract from the above decision. It is a question whether the worker is an employee or contactor in the context of the circumstances in which he was working with the employer.
• “The Applicant submits the Tribunal must apply the definitive High Court majority decision in Hollis v Vabu in determining this matter. It submits this requires the Commission to consider the totality of the relationship between the parties. It also submits, based on the decision in Brodribb, that an indicia test is required to weigh up the relevant factors that should determine the nature of the relationship between the parties. It submits relevant indicia in the present matter include:
the principal’s capacity to control the worker in relation to the time and manner in which the work is carried out;
the capacity to delegate work;
the capacity to refuse work;
the manner in which the engagement commences, whether via quotation of fees and the tendering process, or via a job offer;
the matter of payment for the work and taxation;
the principles provision of tools and items necessary to complete the work, including insurance and work premises;
the relative power of the bargaining parties;
the mutuality of obligation between the parties; and
the extent to which the worker is incorporated into the organisation.
• It also referred to the Full Bench decision in the matter of Abdalla v Viewdaze Pty Ltd (Abdalla) where the Full Bench held the relevant test is:
“...whether the worker is the servant of another in that other's business, or whether the worker carries on a trade or business of his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own.”
• It also referred to the decision in Roy Morgan Research Pty Ltd v Commissioner of Taxation, which found that despite being engaged as independent contractors, market researchers were found to be employees due to indicia indicating, inter alia, the significant degree of control exercised over their work by the Company. The Applicant also referred to the decision in French Accent emphasising, in particular, the view of the Full Bench that parties cannot disguise the true nature of their relationship by putting a different label on it.
• Section 380 of the Fair Work Act defines “employee” to mean a “national system employee”. Section 13 of the Act defines “national system employee” as an:
“...individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement.”
• Section 15 in turn provides that:
“(1) A reference in this Act to an employee with its ordinary meaning:
(a) includes a reference to a person who is usually such an employee”
• The effect of these provisions is that resolution of the issue for determination requires the application of common law principles to determine whether the Applicant was an employee or, instead, engaged by the Respondent as an independent contractor.
• As the parties submissions have indicated there are well established principles of common law that have been developed to determine whether an individual is an employee or an independent contractor. Both parties referred to the decision in Abdalla in which the Full Bench summarised the legal principles that apply. Those principles were subsequently refined by a Full Bench of Fair Work Australia in the French Accent matter that both parties again made reference to. In that decision the Full Bench highlighted some of the difficulties in seeking to retrospectively categorise relationships as either one of employer and employee or principal and independent contractor. The Full Bench stated, in particular, at paragraph 25 of the decision:
“The FW Act imposes obligations on employers in relation to their “employees” and confers benefits and rights on “employees” without defining when a worker is an employee as distinct from an independent contractor. The definition of “employee” leaves it to the general law to supply that distinction. The nature of the established general law approach to distinguishing between employees and independent contractors may be seen as contributing to the problem precisely because the nature of the general law test is such that it does not admit a clear answer in every case. Once one adopts the position, as the general law has done, that the distinction is rooted in the objective character of the work relationship two things follow. First, the infinite variety of human affairs means that work relationships present as a spectrum, some of which are clearly relationships of employment and others of which are clearly relationships of independent contract but some of which are less clear cut. Secondly, that character of a work relationship is what it is and cannot be changed simply because the parties agree to label it differently (unless, of course, the relationship is sufficiently ambiguous that a clear determination is not possible, the situation addressed by the Massey Proposition). That is a matter clearly recognised by the courts and tribunals.”
• The Full Bench then continued to deal at length with the approach to be applied in distinguishing between an employee and an independent contractor. Those conclusions are contained in paragraph 30 of the decision in the following terms:
“The general law approach to distinguishing between employees and independent contractors may be summarised as follows:
• Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.
Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of an independent contract. While control of this sort is a significant factor it is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where the work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weighs significantly in favour of the worker being an employee.
‘The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.’ ‘[B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.” To be continued..