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Managing Workplace Relations

Issue

  • Discuss the test to determine whether a person is an employee or an independent contractor?
  • Apply the test in the given case
  • Make a judgement as a court would do

Legislation-

Precedents

Application

  1. Deciphering a difference between an employee and an independent contractor (IC) is difficult. There isn’t any full-fledged rule to decide who is an employee and who is an IC. However, to rectify this confusion, the Courts of Australia have adopted a multi-factor test. In this, the court places more weightage on the facts of the case, especially who have the reigns of work that is to be performed. In the end, it is the court that decides who is an /employee and who is an IC. It takes notice of all the factors that whether the IC falls under tax or superannuation laws, or does the person has an Australian Business Number (ABN), do the person has control over his employment and the way he shall be working, is there any supply of tools/equipment, how many hours of work is there-is it standard or more/less than that, how are the payments made-is it work-based or wages after time-completion, is there any profit or loss from the job done, will the person be liable for any misconduct or negligence has done on his part, is the person given liberty to work at other places too, etc (ABCC, 2019).

In a full-bench of Federal Court of Australia, in a case of Tattsbet Limited v. Morrow (2015), applied the above test to determine whether an agency contractor is an employee or an IC. The worker named, Sharyn Morrow, was employed at Tattsbet in 2004 as per an agency agreement to manage and operate an agency of betting. The lower court, in pursuance to this fact, held that Morrow was an employee of Tattsbet. It decided this based on whether the alleged employee was working on someone else’s business or was he employed as an entrepreneur. The lower court based their judgement on the following factors (Weil, 2015) -

  1. The jurisdiction of the agency was beyond of what the appellant had provided
  2. Appellant provided with tools, plants equipment etc
  3. Appellant had full control on how the agency shall be conducted
  4. Ms Morrow was not allowed employment apart from the business meaning she was not allowed to involve herself in other employment
  5. Appellant could control the identity of the individuals employed at their agency.

The Federal Court, however, did agree to the justification of lower court but still held that Ms Morrow was an independent contractor. They applied the multi-factor test and hence came to the conclusion that-

  1. The agreement of the agency itself mentioned of the respondent to be an independent contractor
  2. The agreement was signed with the consent of the parties and hence both parties were aware of their nature of the relationship
  3. The respondent was paid for operating the agency and not for her knowledge or skills. She was given liberty to employ others to work
  4. She took the responsibility of an employer of hiring people, which was beyond her employment agreement.
  5. Her constant participation if the Goods and Services Tax (GST) system and the time she invested in the Business Activity Statement (BAS) was enough to hold that she was an independent contractor.
  1. The advertisement given by SuperEvents (SE) for a night shift security officer showed Alejandro Pena (Pena) an opportunity to work. During the interview process, SE told Pena that they aren't expecting to have an exclusive contract with the person and that the respected person is free to work somewhere else too. His shifts shall be on the discretion of Pena but in total, he needed to work 18 hours a week. He shall be responsible for his taxes. Apart from that, the contract said that he cannot be terminated before being served notice, 24 hours before the termination notice. No leaves whether being sick or annual are included, but he was provided with a uniform with SE logo. He was asked to record his ingoings and out-goings and record all of the events that happened at his shift.

He accepted the offer and set up his own company Safe and Secure Pty Ltd. The weekly wages that he received were credited in a company established account to help him manage his income tax and superannuation funds.

Applying the Multi-Factor Test in such a scenario, so at first, it seems to be that Pena is an independent contractor. He was given liberty to work at some other place while being employed at SE and also given flexible work hours. He was made to take care of his own income and superannuation taxes. However, moving further, when the company decided to not give him any sick or annual leave but did hand him over with a company's wardrobe showing the logo of SE, so that is an inclination to the outside world that Pena is an employee of SE. only employees are given the uniform, showing the logo of a company. He was then asked to count and record the hours of work he invested at his shift and any other events that happened while he is on his shift. Furthermore, the salary that he received was credited to a company established account, so that facility is given to a permanent employee and not some independent contractor. He was employed there for a year i.e., 12 months which is generally along considering the mot-so established fact that Pena was an independent contractor.

As per the Tattsbet case, the justification of the Federal Court is not very convincing and based on reasoning. It held their judgement and overruled the lower court's judgement, but unlike the lower court's judgement, it did not support its observation with reasonings. It just held that lower court judgment is not at par and they based their judgement on the knowledge and skills of the employee, his responsibility to hire people and his participation in GST and BAS.

Hence to interpret the given situation and taking cognizance of the facts of the case, so Pena was an employee of SE as he was employed and made to work just like any other employee of SE would be done. He was given uniform bearing SE’s logo, he got a bank account opened in name of the company, he was asked to maintain her records on time he worked and the events he worked or dealt with. Such things are asked and done for any employee and not for any independent contractor. To top it all, he worked there for a year where he could easily have left after some time. So the decision of Chloe to dismiss Pena was not at par with the oral contract they had and hence Pena is liable to sue Chloe and SE for wrongful termination of her employment.

  1. In the given scenario, Pena is a part-time employee at SE. He was indulged in working for the company just like any other employee. The oral contract that happened to be between the two, so SE was liable to serve a notice 24 hours before her termination which they didn't. Hence Pena's contention for wrongful termination of her employment stands valid in the eyes of this court of law.

To get a much more clearer picture, the given facts of the case are very similar to the case of 2009. Freestone v Morris & Partners Pty Ltd (2009), the company asserted the fact the appellant was an independent contractor and not an employee of the firm. Her task involved doing official works, including book-keeping. She was terminated from her employment without being given notice and hence he demanded compensation from the company. The company asserted that they had no written contract and she would release invoices through her registered business name every month. Along with that, she ran other businesses as well. It was held by the Australian Industrial Relations Commission that she was a part-time employee. Reasons were-

  1. She did not issue propaganda of her work which includes bookkeeping duties to the entire world.
  2. She did not even work at different places of work. She was working as per the will and direction of one of the business holders.
  3. She did not have any had or was provided with any significant tools or equipment.
  4. Her work was not prone to be deputized
  5. She was paid as per her hours she invested in the company and not based on completing the amount of work.

Another way, a case of 2013 also justifies the previous judgement. In Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd (2013), the company who shall recruit people to sell kitchenware products, they are contractors and not employees. They were called 'consultants.' Their job was to approach people at public places, like any shopping centre or mall and invite them to participate in a competition and win prizes and rewards. To the winners, they would contact them personally and would give a demo of the products with the sole purpose of selling them. These people had signed a contract stating them to be 'independent agents' and hence they aren't employees. The Federal Circuit Court held them to be employees. It was said that their nature of work would not describe them to be independent contractors. Reasons were-

  1. The company had full control over the kind of work these people shall do. These people were given a little autonomy to decide for the kind of demonstration they would do
  2. They were an important part of the company
  3. They were not allowed to sub-divide their work
  4. They were not responsible for the end result of such a demonstration, but they were expected to follow the company's instructions to yield results.

The company was also liable to be a sham company under the Fair Work Act 2009  and hence liable to pay the liabilities and employee entitlements of payment of modern awards to the people.

  1. To demarcate between employee and independent contractor, the principal or employer must list out certain guidelines in a more unblemished way. They are-
  2. They must have made a written contract. Whenever the employment of any person is concerned, it must be always in a written format.
  3. They must limit the measure of control they or their manager shall be imposing on the person.
  4. They must mention the exclusivity of the contract they are entering into
  5. They must mention if it is possible to delegate the work by the person or not
  6. Who shall have the onus of any faults that have been done and who shall be responsible for its rectification
  7. More clear description related to the usage of tools and equipment
  8. Mention more clearly the hours of work involved
  9. Whether the person is up for any leaves or not
  10. How the payment is to be done to the person
  11. Whether the work of the person shall be an essential part of the business or not

As for the conduct of SE, no doubt they did gave Pena the liberty on hours of work and his superannuation and income tax liabilities. They also gave him the freedom to work anywhere else as she so will too. But they did not draw a line of work that he shall be entitled to do. Their mistakes were-

  1. On one hand, they recruited him as a security agent and next thing they are sending him for external patrolling in different areas of the premises.
  2. They handed him a uniform which had a logo of their company's name. this is not done for any independent contractor
  3. On one hand, they asked him to pay his own taxes but on the other, they opened an account in the name of their company.
  4. Then he was asked to maintain the records of when he comes in and when he leaves. He was also made to supervise the events at his hour and the security supervisor who is available during the day shift shall not be available at night.
  5. He needs to intimate the employer for missing out or going on a leave beforehand.

All these acts summarize the intention of the SE to employ Pena as a contractor but get the work done of an employer. Hence to avoid such inconsistencies in future, they must be more elaborative and must know the boundaries of their acts.

Bibliography for Managing Workplace Relations

Online Articles

Australian Building Construction Commission. 2020. Employee or contractor [Online]. Available at: https://www.abcc.gov.au/your-rights-and-responsibilities/independent-contractors/employee-or-contractor [Accessed on 20/09/2020]

Weil, S. (2015). Australia: Examination of the test to determine worker status: Independent contractor or employee? [Online] Available at: https://www.mondaq.com/australia/employee-rights-labour-relations/423068/examination-of-the-test-to-determine-worker-status-independent-contractor-or-employee [Accessed on: 20/09/2020].

Case Laws

Tattsbet Limited v. Morrow [2015] FCAFC 62

Freestone v Morris & Partners Pty Ltd (2009) AIRC 223

Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd (2013) FCCA 216

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help

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