[2013] FWCFB 9339 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604—Appeal of decision
VICE PRESIDENT HATCHER |
SYDNEY, 4 DECEMBER 2013 |
Appeal against decision [[2013] FWC 6715] of Commissioner Ryan at Melbourne on 13 September 2013 in matter number U2013/5511.
Introduction
[1] Mr Alan Dick was a taxi driver. He previously had a long term arrangement with Mr James Voros whereby he drove a taxi owned by Mr Voros. Mr Voros brought the arrangement to an end on 5 December 2012. Mr Dick lodged an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the Act) against Mr Voros on 3 January 2013. In order to be eligible for an unfair dismissal remedy, a person must be “protected from unfair dismissal” as that expression is defined in s.382 of the Act. A fundamental element of that definition is that the person has to have been an employee at the time of dismissal. After Mr Dick filed his application, Mr Voros moved that the application be dismissed on the basis that Mr Dick was not at the time their arrangement came to an end and never had been his employee, and that their relationship had been one of bailment. That contention was dealt with in a hearing before Commission Ryan on 31 May 2013. On 13 September 2013 the Commissioner issued his decision on the matter (Decision). 1 The Commissioner determined that Mr Dick had been an employee of Mr Voros. Mr Voros seeks permission to appeal and appeals the Decision in this respect.2
[2] After the appeal was filed but before it was heard, we received an application from Mr Michael Jools for permission to intervene in the appeal. In his application, Mr Jools described himself as a taxi driver who worked for a taxi operator, and also as the representative of the Australian Taxi Drivers Association. In a written submission made in support of the intervention application, Mr Jools’s counsel set out the basis for the intervention application as follows:
“5. The applicant for intervention seeks the exercise of the discretion for the following reasons:
(i) The subject matter of these proceedings being the determination of employment as opposed to bailment is of some complexity;
(ii) The Taxi Driver’s Association of Australia has a relevant interest in the determination of that question being the examination of the question as to whether taxi drivers may be employees and therefore subject to the modern award;
6. The determination of that question would be relevant to the application of the Fair Work Act being;
(i) whether taxi drivers should have an economically sustainable safety net of minimum conditions for cab drivers: s 3(c);
(ii) whether taxi drivers have the capacity to investigate and enforce employee entitlements: s 3(f);
7. It seems that the respondent to the appeal may not be represented by counsel. The writer has spoken to the solicitor for the respondent who indicated today that counsel has not yet been briefed. The Tribunal may benefit in having submissions by counsel being made on these points.”
[3] We determined to grant Mr Jools’s intervention application. We considered that the matter raised in paragraphs 5 and 7 of the submission as set out above constituted a proper basis for the grant of permission to intervene. As it turned out, Mr Dick was unable to secure the representation of counsel in the appeal, and at the hearing his solicitor took the convenient and appropriate course of adopting the submissions made by counsel for the intervener against the appeal; thus the grant of intervention ensured that we had a proper contradictor in the appeal. However, we should briefly make some comment about paragraph 6 of the above submission. The determination of this appeal does not involve any policy question about what the industrial entitlements of taxi drivers should be. Under the Act, the National Employment Standards and award entitlements only apply to persons who are “national system employees” as defined in s.13 of the Act or within the extended meaning of that expression in s.30C or s.30M. Where taxi drivers are concerned, the application of those entitlements will turn on the question of whether they are, at law, employees. That question is to be determined by reference to well-established common law principles. The Commission does not, either in this case or generally, have the power to determine whether taxi drivers should as a matter of merit be entitled to the minimum standards and benefits conferred by or under the Act. Accordingly, our decision to grant permission to intervene to Mr Jools was not founded on the matters referred to in paragraph 6 of his submission above.
The facts
[4] The facts of this matter were not in dispute. The basic facts were set out in the Decision as follows:
“[4] The Applicant who has been driving taxis since 1966 commenced driving for the Respondent in 1996. The Applicant had previously been driving for Mr O’Callaghan who was the owner of a set of taxi plates. In 1996 Mr O’Callaghan leased out his plates to the Respondent and at the same time the Respondent entered into arrangements with each of Mr Callaghan and the Applicant that they would be the drivers of the taxi.
[5] The arrangements made between the Applicant and the Respondent, so that the Applicant drove the Respondent’s taxi, were all verbal. There was no written arrangement between the Applicant and the Respondent.
[6] When the arrangement commenced in 1996 the Respondent’s taxi was driven by the Applicant during the daytime and by Mr O’Callaghan during the night time.
[7] The Applicant and the Respondent shared the takings from the taxi. The Respondent’s evidence was that the takings were shared on the basis of 50% to the Respondent and 50% to the Applicant. The Applicant’s evidence was that the Respondent’s share was 52% of total takings with the Applicant receiving 48%. The Respondent introduced into evidence the trip sheets filled out by the Applicant each day he drove the taxi which clearly show that the sharing of takings was 52% to the Respondent and 48% to the Applicant.
[8] The trip sheets recorded a range of data relating to the use of the taxi, including start and finish times, distances travelled, fares taken, amount spent on fuel, condition of the taxi and the driver’s details which included his ABN.
[9] Whilst the Applicant would actually pay for the fuel, either out of cash takings received on that day or out of his own money, he would claim the amount back from the Respondent.
[10] The Respondent maintained the taxi and kept it registered and in running order, maintained the insurance on the taxi and bore the costs of repairing the taxi if the Applicant damaged it.
[11] When the arrangement commenced in 1996 the Applicant was not registered as a business. The Applicant gave evidence that when ABN’s were introduced (1 July 2000) the Respondent requested that the Applicant supply the Respondent with an ABN. The Applicant complied with this request.
[12] The Respondent did not provide the Applicant with any form of paid leave.
[13] The Respondent did not deduct any tax from the Applicant’s earnings, nor pay any tax on the Applicant’s behalf.
[14] The Respondent did not make any superannuation payments on behalf of the Applicant.
[15] At the commencement of the arrangement the Respondent would put aside $5 per week and pay $250 to the Applicant at the end of the year. The Applicant referred to this arrangement as a rebate of rental. This arrangement ended, apparently at the initiative of the Respondent, in or about 2008.
[16] The relationship between the Respondent and the Applicant ended on 5 December 2012 when the Respondent advised the Applicant that the relationship was terminated.
[17] However, there is another relationship which is relevant to these proceedings. The Applicant had since 2002 been the tenant in a house owned by Mrs Voros. In 2012 a dispute arose between the Applicant and Mrs Voros over claims made by the Applicant in relation to the condition of the house and over claims made by Mrs Voros in relation to unpaid rent. The Applicant engaged a solicitor to represent him in relation to this matter and Mrs Voros was also represented by a solicitor.
[18] On 29 November 2012 the Applicant was given notice to quit the house he and his family were living in. Mrs Voros, through her solicitors, subsequently made an application to VCAT on 19 December 2012 to have the Applicant and his family removed from the house.”
[5] However, two factual aspects of the matter require elaboration by reference to evidence which was not in contest before the Commissioner. The first concerns the extent to which Mr Voros exercised any control over Mr Dick about what work, if any, he did. In his submissions Mr Voros directed us to the following parts of the transcript of the cross-examination of Mr Dick:
“That was the basis of the arrangement is that you could drive wherever you wanted. It wasn't Mr Voros's business to direct you to work in Toorak or - - - ?
---No.
It was entirely your decision?---Yes.
Entirely your decision when you got behind the wheel?---Exactly.
And entirely your decision to not get behind the wheel if you decided you didn't want to work?---If I wasn't going to work I'd let Jimmy know in case he wanted to put another driver on the car.
But you made the decision didn't you?---Yes. 3
...
In relation to the taxi you were given possession of the taxi, weren't you?---Yes.
For your use as you saw fit?---Yes.
As I said before to drive wherever you wanted and to - do you agree with that? Drive wherever you could get customers wherever you saw fit?---Yes. 4
...
You're driving a cab, you can work as I said one hour or you can work 12 hours, you can do what you please because you were in charge of that cab during the time that the other driver wasn't using it?---That's right. 5”
[6] This evidence given by Mr Dick was consistent with the following evidence given by Mr Voros in his witness statement concerning the oral agreement he reached with Mr Dick in December 1996 concerning the basis upon which Mr Dick would “hire” his taxi:
“It was also agreed that Mr Dick would simply hire the taxi and could use it as he saw fit provided that he did not damage the taxi, made sure that it had [a] reasonable amount of petrol and was kept clean, and that all monies received by him would be subject to the operation of the metre in the taxi. Otherwise he could use the taxi wherever he wanted to operate, and he could use it for such hours as he saw fit. I had no involvement in how or where he operated the taxi. I would, however, pick up the taxi on a Sunday to service it.”
[7] The second aspect concerns the arrangements between Mr Dick and Mr Voros concerning the payment of moneys. Mr Voros’s evidence in his witness statement as to the payment arrangement both as orally agreed in December 1996 and as it worked in practice, upon which he was again unchallenged in cross-examination, was as follows:
“It was also agreed that he would pay me 50% of his net takings after deductions of expenses such as petrol and keeping the cab clean as the terms of payment for hire of the cab. That amount would be calculated by him and he would pay me the hire fees weekly.
The hire arrangement commenced in or about December 1996. Mr Dick provided his own uniform/clothes.
Mr. Dick received fares from the public for operation of the taxi by way of cash and in some cases by way of credit card. The credit card monies would be paid by the credit card company and into my account. Mr. Dick would pay me the agreed hire fees and retain the balance of his income received as cash payments. It was agreed that if the credit card payments outweighed the cash payments received by Mr. Dick, I would return to him in cash the remainder of his 50% of the takings. It was a rare occurrence that I would have to return money to Mr. Dick under this arrangement.
Mr. Dick’s income varies from day to day, week to week, depending on how many jobs he received and how many hours he worked. On occasions he would earn very little and at other times, if he worked long hours and it was a busy period he would earn significantly larger sums.
Mr. Dick would then pay me the hire fees and retain the balance of his takings. I was able to ascertain what monies had been received by Mr. Dick from the meter. However, as Mr. Dick was aware, this hire arrangement was one of trust and he needed to be honest and not take fares without using the meter and he was required to pay me the hire fees at the end of the week.”
[8] This evidence was broadly confirmed by a bundle of “trip sheets” which Mr Dick filled out on each occasion that he operated the taxi. Among other things, the trip sheets contained a method of calculating the total “cash pay-in”. The calculation began with a record of the fares registered on the taxi meter for the shift. From that was deducted an amount for “retained moneys”. Counsel for Mr Voros explained to us, without being contradicted, that this amount represented 48% of the total fares on the meter. The mathematical calculations on the trip sheets we have examined confirm that the “retained amount” which was deducted was 48% of the total fares on the meter. The balance left over (that is, 52% of the metered fares) is described on the trip sheets as “rental”. There were then two further deductions. The first was for “cash fuel”, representing an offset in favour of Mr Dick for the fuel he had purchased during the shift. The second was an amount described as “Less TSOs/Eftpos”, which represented the amount of fares paid by credit card. Counsel for Mr Voros explained, again without being contradicted, that fares paid by credit card were electronically deposited into Mr Voros’s bank account, so that this represented a further offset in Mr Dick’s favour. The final “cash pay-in” amount represented the amount payable by Mr Dick to Mr Voros. Some of the trip sheets show that this was a negative amount, usually on shifts where a higher proportion of the metered fares was paid by credit card. A negative “cash pay-in” represented an amount payable by Mr Voros to Mr Dick.
The Decision
[9] After setting out the facts and the submissions of the parties, the Commissioner in the Decision commenced his consideration of the matter by dealing with the question “Can a taxi driver be an employee?”. In answering this question, the Commissioner referred at length to the Federal Court decision in De Luxe Red & Yellow Cabs Co-Operative (Trading) Society Ltd & Ors v Commissioner of Taxation 6, and the Federal Court Full Court appeal decision in the same litigation, Commissioner of Taxation of the Commonwealth of Australia v De Luxe Red & Yellow Cabs Co-Operative (Trading) Society Ltd & Ors7, and came to the conclusion that taxi drivers may be employees. The Commissioner then dealt with the “Changed Industrial Relations Environment since De Luxe Red & Yellow Cabs Cases”, and pointed to award and statutory provisions providing minimum standards for employed taxi drivers which had existed from or after 2006 to “distinguish the De Luxe Red and Yellow Cabs cases from the present industrial relations environment”. The Commissioner then went on to describe the existence of awards covering taxi drivers in NSW from about 1926 to 1982, and the previous regulatory landscape for the taxi industry in Victoria, to confirm his conclusion that taxi drivers could be employees. The Commissioner then dealt with the question “Are the relationships of Bailor/Bailee and Employer/Employee Mutually Exclusive?”, and based on his analysis of relevant parts of the text Palmer on Bailment, 3rd edition, 2009, stated the following propositions in answer to the question he posed:
● The relationships of employer and employee and bailor and bailee are not mutually exclusive.
● However, the relationships of bailor and bailee and employer and employee can be regarded, for most practical purposes, as being mutually exclusive.
● The relationships of bailor and bailee and employer and employee are imposed for different purposes and identified by different tests.
[10] The Commissioner then applied the tests developed by the common law for distinguishing between employees and independent contractors, as summarised by the Full Bench in Jiang Shen Cai trading as French Accent v Do Rozario 8, to the facts of the matter. The Commissioner recognised in his findings that Mr Voros exercised no control over Mr Dick in the performance of his taxi driving work, and also recognised that the method of payment was “neither a wage nor salary nor is it a payment which is calculated by reference to completion of tasks” (whilst however still characterising the percentage split of fares as “the amount of payment made to the Applicant”), but came to the conclusion nonetheless that Mr Dick was the employee of Mr Voros. A significant factor in the Commissioner reaching this conclusion was that an analysis of Mr Dick’s earnings showed that he earned much less than he would have if he had been paid as an employee under the relevant modern award classification. From this analysis the Commissioner reasoned as follows:
“[164] Viewed as a practical matter the above analysis of remuneration does not support a contention that the Applicant was conducting a business of his own. Whilst it is not uncommon for persons who conduct their own business to accept remuneration below the minimum levels set by the modern awards and the NES there are generally some obvious commercial reasons for doing so such as in the start up phase of a new business or to protect an existing business from failing. In the present matter there is no evidence of any reason why the Applicant would conduct a business on the basis of accepting remuneration so significantly below the remuneration that would be paid to an employee doing the same work with the same pattern of hours of work. Viewed as a practical matter it appears completely implausible that the Applicant was conducting his own business on the basis of intending to receive remuneration so significantly inferior to that which an employee would have been entitled for the same work.”
Consideration
[11] The question of whether a person is an employee for the purpose of an application for an unfair dismissal remedy made under s.394 of the Act is one of jurisdictional fact. In this appeal we must therefore determine whether the Commissioner reached the right conclusion as to whether Mr Dick was an employee, not simply whether the Commissioner’s finding in this respect was reasonably open to him. 9
[12] The courts have developed a multi-factorial approach, in which there is no single decisive criterion, to determine whether a contractual relationship is one of employment or one subject to a contract for services. 10 That approach is usually applied in two areas where the distinction is important, namely disputes about the duties and obligations owed by the contracting parties to each other, and disputes about whether one party is liable to a third party for injury caused by the other party in the performance of the contract.11 The usual premise for the application of this approach is the existence of a contract whereby one person is engaged and paid by another for the provision of work or services, with such a contract needing to be properly characterised in order to determine the parties’ rights and obligations. The various criteria which have been taken into account under this multi-factorial approach, which were comprehensively listed by the Full Bench in Jiang Shen Cai trading as French Accent v Do Rozario, have to a significant degree been shaped by that employee/independent contractor dichotomy. It was, as earlier discussed, that approach which was applied by the Commissioner in the Decision to reach the conclusion that Mr Dick was an employee.
[13] However, for there to be an employment relationship, certain fundamental elements must exist. An employment contract is, at its essence, a work-wages bargain, so that the “irreducible minimum of mutual obligation” necessary to create such a contract is an obligation on the one side to perform the work or services that may reasonably be demanded under the contract, and on the other side to pay for such work or services. 12
[14] It is, we consider, clear on the facts in this case that those fundamental elements of an employment relationship did not exist. Firstly, neither under the terms of the oral agreement between them or under the arrangement as it operated in practice was Mr Dick required to perform any work or provide any services for the benefit of Mr Voros. As the evidence earlier recited makes plain, once he had taken possession of Mr Voros’s taxi, Mr Dick was free to perform as much or as little work with it as he liked. In providing a taxi service to customers, he did so when, where and for whom he saw fit, without any reference to Mr Voros. Thus the provision of a taxi service by Mr Dick to any customer is properly to be characterised as a contractual arrangement between Mr Dick and the customer freely entered into by Mr Dick, and not as the performance of any contractual obligation which Mr Dick had to Mr Voros.
[15] Secondly, Mr Voros did not make any payment to Mr Dick for the provision of any work or services. Rather, Mr Dick paid Mr Voros an agreed percentage, less the cost of fuel, of the fares he had collected from his customers as the fee for the “hire” or “rental” of the taxi. On the question of payment, counsel for the intervener submitted that “money passed both ways”, but we do not consider with respect that that is a correct characterisation of what occurred. As earlier explained, the amount owing as a “cash pay-in” by Mr Dick was sometimes a negative amount, but that was a result of the credit card payments sent directly to Mr Voros’s account exceeding his agreed percentage of the fares less the cost of fuel. The fact that in that situation the cash pay-in was expressed as a negative amount confirms that the underlying premise of the arrangement was that it was Mr Dick who was paying Mr Voros, and not the other way around. This was consistent with the oral agreement between the two men as described in the evidence. It was also consistent with Mr Voros’s contention that the agreement between them was one of bailment, under which Mr Dick was granted possession of the taxi for his use for a defined period and for which he paid Mr Voros the agreed percentage of fares collected as “rental”.
[16] The Commissioner’s use of the common law criteria developed to distinguish between an employer-employee relationship and a principal-independent contractor relationship distracted him, with respect, from the real question: was Mr Dick an employee of Mr Voros? 13 The starting premise for the application of those criteria, being as earlier stated the existence of a contract whereby one party was engaged and paid by the other for the provision of work or services, was simply not present here, with the result that the contract between Mr Dick and Mr Voros could never have been characterised as either an employment contract or a contract for services.
[17] The conclusion we have reached concerning the nature of the contractual relationship between Mr Dick and Mr Voros is consistent with a long line of authority concerning the proper characterisation of the usual type of relationship between taxi owners and taxi drivers in Australia. It is sufficient if we refer to a few of these authorities. Perhaps the seminal Australia authority, and one critical to the development of what might be described as the “standard model” of taxi driver operations in Australia is that of the Industrial Commission of NSW in Yellow Cabs of Australia Limited v Colgan. 14 That case concerned a claim by a taxi driver that he was an employee and had been underpaid wages owing to him under an applicable award. In their majority judgment, Street and Cantor JJ described the arrangement whereby Yellow Cabs leased its taxis to drivers in return for a rental payment of 50% of the metered fares collected in the following way15:
“Strong reliance was also placed upon the terms of the agreement, by which the parties thereto are described as “lessor” and “lessee,” terms which it was conceded were possibly not entirely accurate as a description of the parties in their true relationship to one another. The agreement itself is described as a “memorandum of agreement,” and possibly in a case such as this where a chattel has been handed over pursuant to an agreement between the parties, the more accurate terms might be “bailor” and “bailee.” But we do not think that the use of these terms is sufficient in itself to cast doubt upon the genuineness of the agreement. It was conceded by all parties at the hearing of the appeal, that the matter must be determined, not by attention to the strict technical meaning of individual expressions used, but upon the whole of the terms of the agreement, and looking at the whole of the agreement, we think that the terms “lessor” and “lessee” were convenient terms to use, and terms which were easily understood and sufficiently closely described the parties in their relationship to one another. They are well known terms having a general significance in ordinary language, and their use in this agreement is not inconsistent with the general intention of the parties, as evidenced by the rest of the language, to embark upon a joint adventure for their common profit upon agreed terms. It was essential that there should be terms and conditions in the agreement regulating the relationship of the parties one to another, and regulating also the use to which the taxi cab could be put, and to a certain extent the manner in which it was to be used. The company was handing over the individual drivers, who under the agreement were to have the sole control of the cabs and the running and management thereof for the purposes contemplated by the parties, a valuable asset, on the proper care and use of which the whole future of the join adventure depended, but the terms of the agreement do not themselves provide for the detailed and continuous control and direction which is a necessary incident of the relationship of employer and employee.”
[18] The significance of the decision in Yellow Cabs of Australia Limited v Colgan was described by the Industrial Commission of New South Wales in its 1970 Report concerning “Section 88E of the Industrial Arbitration Act, 1940-1968 in so far as it concerns Drivers of Taxi-Cabs, Private Hire Cars, Motor Omnibuses, Public Motor Vehicles and Lorry Owner-Drivers” in the following way 16:
“The decision in the case ... has proved to be of the utmost significance for the taxi-cab industry, which ever since has been carried on in the transport districts with the drivers working under some system of bailment and co-adventure analogous to that adopted by Yellow Cab Company and which was established by the decision as not bringing about the relationship of employment between owner and driver.”
[19] In Dillon v Gange 17 the issue of the proper characterisation of the contractual relationship between a taxi owner and driver arose in relation to a claim in negligence brought by the plaintiff against both the owner and the driver arising from an injury caused by the driver to the plaintiff. There was a written contract between the taxi owner and the driver which inter alia provided that the taxi driver “took on hire” a taxi-cab from the owner, that the taxi-cab was to be used for the purpose of the carriage of passengers for reward, and that the driver should pay to the owner 62½% of the gross amount received by him as fares. The High Court unanimously decided that the contractual relationship between the owner and the driver was not an employment relationship. Starke J said “the cases are decisive that the relationship created by the agreement ... is that of bailor and bailee and not that of master and servant”18, and Williams J said:
“Apart from clause 3(a), which provided that the lessor should indemnify the lessee to the extent therein mentioned against liability for any damage whether to passengers or otherwise assessed by conciliation or by process of the law in respect of any collision or accident in which the cab might be involved whilst being driven by the lessee as a hired taxi-cab, the agreement was substantially to the same effect as the agreement referred to in such decisions as Yellow Cabs of Australia Ltd. v. Colgan, Checker Taxi-cab Co. Ltd. v. Stone, and the English cases cited infra. In all these cases the agreement was held to constitute the driver at common law a bailee of the car and not an employee of the owner.
Clause 10 of the agreement of 13th September specifically provided that whilst the cab was in the possession of the lessee he should have the sole control of the cab, and of the running and management thereof; and should be at liberty to use the same for the purpose of transportation of passengers and luggage in accordance with any Acts and regulations or by-laws relating to taxi-cabs in such times and such places as the lessee in his absolute discretion should deem fit. This clause showed that during the times when Linehan was entitled to the exclusive possession of the cab he was not to be subject to the control of the respondent. The agreement made Linehan a bailee of the cab and not a servant of the respondent.”
[20] In Northern District Radio Taxicab Co-operative Ltd v Commissioner of Stamp Duties 19 the Supreme Court of New South Wales (Sheppard J) considered, for the purpose of a question of the application of stamp duty legislation, the nature of the relationship between taxi owners and drivers in circumstances where the drivers in question hired the taxi-cab from the owner pursuant to a contract of bailment and in consideration for which they paid the owner 60% of the chargeable fares earned by them. Before considering the specific arrangement in question, the Court said20:
“Before proceeding, I should say what is no doubt well known, namely, that in most cases drivers of taxicabs owned by other persons are not employees of such owners, but are bailees of the cabs which they drive. I refer, inter alia, to Smith v General Motor Cab Co. Ltd. and to Dillon v Gange.”
[21] After setting out certain provisions of the standard bailment agreement in question, the Court observed that the agreement was identical to that found in the schedule to the Taxi Drivers (State) Award made by the Taxi Drivers (State) Conciliation Committee in 1972. It was a requirement of that award that no taxi-cab be driven by a person as a bailee unless an agreement the same as or to the same effect as or no less favourable than that set out in the schedule had previously been executed. The Court went on to say 21:
“Although the relationship of master and servant does not exist between the owner of a taxicab and a driver thereof, the Conciliation Committee had power, so it was conceded by both parties, to make the award in question by reason of the provisions of s.88E(1)(a) of the Industrial Arbitration Act, 1940. The benefit which an agreement in terms of that in the schedule to the award confers upon drivers is that it provides for them (in clauses which I have not set out), although they are not employees, annual holidays, sick leave and long service leave, or payments in lieu thereof.” 22
[22] De Luxe Red & Yellow Cabs Co-Operative (Trading) Society Ltd & Ors v Commissioner of Taxation 23 concerned an application by a number of taxi operators, taxi-cooperatives and taxi-plate owners for declarations that they were not required to deduct any amounts as income tax under the PAYE provisions of the Income Tax Assessment Act 1936 or to pay the superannuation guarantee charge under the Superannuation Guarantee (Administration) Act 1992. Although the contracts between the applicants and the taxi drivers with whom they contracted throughout Australia varied, they generally had the same fundamental feature, namely that the driver paid an amount (being either a flat fee or a specified percentage amount of fares collected) for the possession and use of a taxi. The critical conclusions of the Federal Court (Hill J) were as follows:
“In my view, reinforced by the preponderance of authority to which reference has been made, the agreement between the operators and drivers in each of the present cases was one of bailment and not one of employment. Although no single factual matter is determinative, it is the cumulative weight of all the facts which leads me to this conclusion.
First, the driver pays the owner and not the other way around. Of course, where the arrangement calls for a division of the gross fares, it can be said that a payment of 40% to the owner is no different than the owner paying 60% to the driver. Nevertheless, form is not wholly irrelevant. While the fixed payment method more clearly is marked as a bailment, than the gross percentage of meter method, I do not think that ultimately a distinction should be drawn between them.
Second, where there is an agreement in writing (as in Perth and Melbourne), or implied by legislation (as in NSW), that agreement is one of bailment and not specifically of employment. Indeed, in NSW, the relationship of employment is expressly negated....
Third, although some control is exercised by the operators over the drivers, that control is only such as is necessary to ensure compliance with legislation concerning taxis rather than such as to signify an employment relationship....
Drivers are free to obtain work as they wish, and in fact do so, often utilising mobile phones. As well, drivers will pick passengers up from the streets, or from ranks. There is no compulsion on the drivers to use the network, although clearly it will be in the interests of drivers to do so.
...
It is only in NSW that industrial legislation requires payment of long service leave, sick pay and workers compensation premiums. While these matters support in that State an argument in favour of employment, the industrial legislation must be viewed against the background of the Yellow Cab decision in 1930 and the many subsequent determinations thereafter in which it has been accepted that the relationship is one of bailment and not employment. In all States stamp duty is exigible on the basis that there is a bailment relationship between owner and driver, a matter not conclusive, but nevertheless supportive of the applicants' case.
I would, accordingly conclude that the relationships existing between all applicant operators and their drivers are properly to be characterised as relationships of bailment, and not as relationships of employment.”
[23] This decision was upheld on appeal by the Full Court of the Federal Court in Commissioner of Taxation of the Commonwealth of Australia v De Luxe Red & Yellow Cabs Co-Operative (Trading) Society Ltd & Ors 24. The Full Court (Beaumont, Foster and Sackville JJ) said:
“But, in our view, it would be wrong to seek to divorce the issue of the true character of the relationship from its well established general law and statutory setting. When the present circumstances are viewed in that setting or context, a conclusion that the drivers are bailees in a joint adventure is appropriate, notwithstanding the degree of control reserved to the bailor. Such a reservation is not, as was noted in Yellow Cabs, necessarily inconsistent with a bailment relationship.”
[24] It may be accepted that it is possible for a taxi owner to engage a person as an employee to drive his or her taxi. That possibility is not excluded by the general law, nor by any statutory provision of which we are aware. However, to conclude that a particular taxi driver is engaged as an employee would require the identification of a type of working arrangement significantly different to that described in the above cases. An example of this is the Commission’s decision in McDougal v Castlemaine Taxis Pty Ltd 25, which concerned whether two drivers working in the monopoly taxi service of a country town were employees. The Commission (Lewin C) in that case concluded as follows:
“[14] In my view, in the circumstances of this case, the drivers were the respondent's workforce. The structure of the particular taxi service that the respondent provided in the town was such that one company held all of the licenses and owned all of the taxis, that company was owned by two people who engaged all of the drivers. On the evidence, I think it is accurate, to say that the drivers worked for the company rather than on their own account.
[15] The proprietors and the drivers provided the taxi service of the town. The company and its proprietors self identified as the employer of the drivers in publicity and advertising. The taxi service was operated in a prescribed, orderly and established manner for the convenience of passengers and all of the drivers conformed to the pattern of service provision in a system of work allocation and performance, effectively governed and controlled by the respondent. I reach this conclusion based on all of the evidence before me including the documentary evidence of the lease agreements and the witness evidence of the interactions within the relationships between the parties.
[16] In particular, I am satisfied that, notwithstanding documentation of the relationship between the parties which might indicate otherwise, the weight of the evidence is such that the manner in which the relationship substantially manifested itself was that the applicants sold their labour to the respondent. In my view, the true relationship between the applicants and the respondent in the everyday operation of the taxi service was that the applicants performed work and were remunerated for the performance of work.”
[25] The factual distinctions between the working arrangement described above and what we have described as the standard model are readily apparent. However, in the case of Mr Dick and Mr Voros, there are no distinctive facts such as to justify a conclusion about the nature of their relationship at odds with the “well established general law setting”. Contrary to the submissions of counsel for the intervener, we do not consider it is open for us to treat the earlier decisions as not providing authoritative guidance for us here but rather as merely individual cases decided on their own particular facts. That line of authority has established a legal paradigm in respect of taxi owner-taxi driver relationships in which the relationship between Mr Dick and Mr Voros, on the facts, squarely fits. In any case, even unaided by authority, we would consider that it is clear in this case that there was no employment relationship.
[26] In an alternative submission, counsel for the intervener identified two matters which, he submitted, separated this case from the standard model and indicated the existence of an employment relationship. The first was that Mr Dick provided “personal service” to Mr Voros, in the sense that he was not permitted to delegate the performance of the work. We cannot accept this submission. The premise upon which it is based, namely that Mr Dick was contractually required to provide any type of service to Mr Voros at all, is incorrect for the reasons already explained. The second was that Mr Voros had the power to dismiss Mr Dick. This submission was not founded upon any actual term of their agreement, but upon an inference drawn from the manner in which their relationship ended. The evidence was that on 5 December 2012, Mr Voros sent Mr Dick a text message stating: “Due to your actions you no longer have a car”. The reason for this action, as Mr Voros explained in his evidence before the Commissioner, was that since November 2010 Mr Dick had begun falling behind on the payment to him of “hire fees” under the “hire agreement”. There was also a collateral issue of late or non-payment of rent for a house which Mr Dick had been renting from Mr Voros’s wife which was said to have contributed to a loss of trust. Mr Voros said that he “considered [Mr Dick] had breached the hire agreement”, and also that he no longer trusted Mr Dick to properly register on the meter all fares collected by him. These facts are, we consider, more consistent with the termination of a bailment agreement for breach rather than a dismissal under a contract of employment.
[27] Finally, we consider that there was no proper basis for the Commissioner to rely upon his analysis of the remuneration received by Mr Dick to conclude that he was an employee. We are not aware of any authority that stands for the proposition that the fact that a service provider earns less than he or she would if paid award wages is determinative or strongly indicative of that person being in an employment relationship. If anything, the cases stand for the contrary proposition: if the service provider is not remunerated as an employee would be - that is, by way of regular wage payments, and with the provision of employee leave entitlements, and with PAYE taxation deducted - that is usually taken as one indicator tending against the existence of an employment relationship. 26
[28] The Commissioner’s conclusion that Mr Dick had been the employee of Mr Voros was an error on a question of jurisdictional fact. In that circumstance and consistent with s.400(1) of the Act we consider that it is in the public interest to grant permission to appeal. The appeal must be upheld, and Mr Dick’s application for an unfair dismissal remedy must be dismissed as being beyond the Commission’s jurisdiction under the Act.
[29] We order as follows:
(1) Permission to appeal is granted.
(2) The appeal is upheld.
(3) The Decision of Commissioner Ryan of 13 September 2013 is quashed.
(4) Mr Dick’s application for an unfair dismissal remedy is dismissed.
VICE PRESIDENT
Appearances:
A. Gotting of counsel for Mr J. Voros
O. Seoud, solicitor, for Mr A. Dick
I. Latham of counsel for Mr M. Jools
Hearing details:
2013.
Melbourne:
14 November.
2 In the Decision the Commissioner also granted Mr Dick’s application for an extension of time to file his application, it having been filed outside the prescribed 21 day time period. Mr Voros does not challenge this aspect of the Decision.
3 PNs 151-155
4 PNs 201-203
5 PN 268
6 [1997] FCA 840; (1997) 36 ATR 600
7 [1998] FCA 361; (1998) 82 FCR 507
9 Pawel v Australian Industrial Relations Commission [1999] FCA 1660, (1999) 97 IR 392 at 395 [14] per Branson and Marshall JJ
10 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24 per Mason J
11 ACE Insurance Limited v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146 at [26]-[27] per Buchanan J.
12 Forstaff Pty Ltd v Chief Commissioner of State Revenue [2004] NSWSC 573; (2004) 144 IR 1 at [90]-[91]; Building Workers' Industrial Union of Australia v Odco Pty Ltd [1991] FCA 87; (1991) 29 FCR 104 at 114; Automatic Fire Sprinklers Pty Ltd and Another v Watson [1946] HCA 25; (1946) 72 CLR 435 at 465 per Dixon J
13 See Forstaff Pty Ltd v Chief Commissioner of State Revenue [2004] NSWSC 573; (2004) 144 IR 1 at [78]; Tasmanian Contracting Services Pty Ltd v Young [2011] TASSC 49 at [6]
14 [1930] AR (NSW) 137
15 Ibid at 170
16 Volume 1 paragraph 8.4 p.148
17 (1941) 64 CLR 253
18 Ibid at 263
19 [1975] 1 NSWLR 346
20 Ibid at 347
21 Ibid at 348
22 Section 88E(1)(a) of the Industrial Arbitration Act 1940 (NSW) as it was at that time deemed inter alia a driver of a taxi cab who was not its owner to be an employee for the purpose of that Act and the Annual Holidays Act 1944 (NSW) and the Long Service Leave Act 1955 (NSW).
23 [1997] FCA 840; (1997) 36 ATR 600
24 [1998] FCA 361; (1998) 82 FCR 507
26 Jiang Shen Cai trading as French Accent v Do Rozario [2011] FWAFB 8307 at [30]
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