[2012] FWA 5137 |
|
INTERIM DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Kuat Chee
v
Renown Business Solutions Pty Ltd
(U2012/3911)
COMMISSIONER JONES |
MELBOURNE, 9 JULY 2012 |
Application for relief from Unfair Dismissal - Small Business - Employee or Independent Contractor
Background
[1] On 9 January 2012, Mr Kuat Chee (the Applicant) made an application for relief from unfair dismissal under s. 394 of the Fair Work Act 2009 (the Act).
[2] On 5 June 2012 the application was dealt with by Conference pursuant to S. 398 of the Act.
[3] An issue emerged in the course of the Conference in respect of which, at the agreement of the parties, I now issue an interim decision.
Issue to be determined
[4] The issue to be determined is whether or not pursuant to s.121(b) of the Act the respondent is a Small Business.
[5] Ss. 121 (b) of the Act provides:
121 Exclusions from obligation to pay redundancy pay
(1) Section 119 does not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first)
(b) the employer is a small business employer.
[6] S. 23 of the Act provides:
23 Meaning of small business employer
(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
(2) For the purpose of calculating the number of employees employed by the employer at a particular time:
(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and
(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.
(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.
(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):
(a) the employee who is being dismissed or whose employment is being terminated; and
(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.
[7] The Applicant submits that at the time he was notified of his dismissal, the Respondent employed 15 employees in the business.
[8] The Respondent submits that two of the individuals referred to by the Applicant are independent contractors, not employees. These individuals identified by the Respondent are:
● Ms Elisabeth Perrin; and
● Mr Scot MacRae
[9] The Respondent submits that each of these individuals are contractors providing services (bookkeeping and information technology, respectively) to the Respondent through their respective businesses (Pericon Pty Ltd and Scot MacRae IT, respectively). Both invoice the Respondent for their services and both provide contract services to other businesses. Invoices submitted for the services provided by the individuals are paid by the Respondent as gross amount without any deductions.
[10] The Applicant submits that these individuals are employees because they are subject to the day to day direction and control by the Respondent. They have a dedicated workspace within the Respondent’s premises and generally utilise the Respondent’s equipment. They hold themselves out (in emails) as being employees of the Respondent’s business. They work regular hours from week to week, do not quote for the provision of their services and are included in the Respondent’s social functions.
[11] In response to directions issued by Fair Work Australia, the Applicant and Respondent provided an Outline of Submissions. The Applicant provided three witness statements:
● Witness statement of Mr Kuat Kwan Chee (the Applicant);
● Witness statement of Mr Garon Line, Chief Executive Officer, Enterprise Management Portals Pty Ltd;
● Witness statement of Mr Vadim Kouzmenko.
The Respondent provided one witness statement:
● Mr Colin Walker, Director, Renown Business Solutions Pty Ltd.
At the Conference the Applicant and Respondent were both self-represented, both Mr Chee and Mr Walker were sworn in at the commencement of the Conference and the Applicant’s witnesses gave sworn evidence.
[12] At the completion of the Conference directions were issued to the Respondent to provide further relevant information. The Respondent provided the requested information being tax invoices from MacRae IT issued to the Respondent for the months from August 2011 through to January 2012 and tax invoices from Pericon Pty Ltd issued to the Respondent for the weeks 11 November 2011 to 25 January 2012. The Respondent also provided two further witness statements:
● Witness statement of Ms Elisabeth Perrin; and
● Witness statement of Mr Scot MacRae.
[13] At the request of the Respondent, a further conference was listed on 5 July 2012 to have those witnesses called and give sworn evidence.
Distinction between employee and independent contractor - the authorities
[14] A succinct summary of the approach of the common law to the determination of whether an individual is an employee or an independent contractor provided in ACE Insurance Ltd v Trifunovski [2011] FCA 1204 by Flick J:
‘... first, the distinction between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’ (Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the ‘totality’ of the relationship (Hollis at 33 [24]); thirdly, a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.’ 1
[15] In Abdalla v Viewdaze Pty Ltd, 2 a distillation of the ‘indicia’ which have guided courts in relation to this issue was set out as follows (footnotes excluded):
‘Following Hollis v Vabu, the state of the law governing the determination of whether an individual is an employee or an independent contractor 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 independent contract. While control of this sort is a significant factor 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 their 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 weights 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.”
· Whether the worker performs work for others (or has a genuine and practical entitlement to do so)
The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, if the individual also works for others (or the genuine and practical entitlement to do so) then this suggests independent contract.
· Whether the worker has a separate place of work and or advertises his or her services to the world at large.
· Whether the worker provides and maintains significant tools or equipment.
Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.
· Whether the work can be delegated or subcontracted.
If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.
· Whether the putative employer has the right to suspend or dismiss the person engaged.
· Whether the putative employer presents the worker to the world at large as an emanation of the business.
Typically, this will arise because the worker is required to wear the livery of the putative employer.
· Whether income tax is deducted from remuneration paid to the worker.
· Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.
Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.
· Whether the worker is provided with paid holidays or sick leave.
· Whether the work involves a profession, trade or distinct calling on the part of the person engaged.
Such persons tend to be engaged as independent contractors rather than as employees.
· Whether the worker creates goodwill or saleable assets in the course of his or her work.
· Whether the worker spends a significant portion of his remuneration on business expenses.
This list is not exhaustive. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.’ 3
[16] In relation to these indicia the Full Bench observed:
‘(5) If the indicia point both ways and do not yield a clear result the determination should be guided primarily by whether it can be said that, viewed as a practical matter, the individual in question was or was not running his or her own business or enterprise with independence in the conduct of his or her operations as distinct from operating as a representative of another business with little or no independence in the conduct of his or her operations.
(6) If the result is still uncertain then the determination should be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu.’ 4
Consideration
[17] I have adopted the approach of the common law as extracted above to the determination of the issue at hand.
[18] I now turn to a consideration of the evidence separately in relation to Ms Perrin and Mr MacRae.
Ms Perrin
The evidence
[19] Having regard to a Current and Historical Company Extract issued by the Australian Securities and Investments Commissioner, I have satisfied that Ms Perrin is the sole director and shareholder, as well as secretary of Pericon Pty Ltd (Pericon).
[20] Ms Perrin explained that Pericon is a labour hire company (run by Ms Perrin and her husband) which provides bookkeeping and commercial shop fitting services. Pericon employs 2 employees who provide shop fitting services to clients and engages subcontractors to undertake shop fitting for clients where they need extra labour. The employers of Pericon do not provide bookkeeping services. Ms Perrin is responsible for the bookkeeping requirements of Pericon and her husband undertakes the remaining responsibilities associated with running the Pericon business. 5
[21] In evidence is a letter from the Respondent to Ms Perrin dated 2 February 2010 which states at the beginning of the correspondence, ‘Following our conversation, Renown offers you a contract to provide bookkeeping services on the following basis.’ There is then set out two periods of time - 8 February 2010 to 12 February 2012 and 15 February 2010 to 30 June 2010. In each period there is stipulated that ‘contract’ services are to be provided from 9.30 am to 3.00 pm per day. In the first period, the days worked are stipulated to be ‘Mon, Tues, Thu, Fri’, in the second, ‘five days per week’. The rate per hour excluding GST is stipulated as $37.50 in both periods. The description of payment method includes the following, ‘Pericon submits a weekly invoice for your services to Renown Business Solutions which will be paid weekly.’ The correspondence describes, under the heading, ‘Tasks to be performed’, ‘The main task is to perform the bookkeeping functions for Renown Business Solutions Pty Ltd, using the Dynamics SL Accounting System.’
[22] Preceding this correspondence were emails between Ms Perrin and Mr Walker which are relevant. The first email from Ms Perrin sent on 14 January 2010 set out the hours Ms Perrin was available to work and finished with the following:
I am happy to either go on wages or provide you with a tax invoice?
[23] Mr Walker responds by email on 19 January 2010 as follows:
I have been able to talk to Craig & Garon, and we are all in agreement with you working part time, on the hour (sic) stated.
Looking the Rates for a bookkeeper the annual salary is about $55 000 per annum.
I am looking at $30.00 per hour for a Part time employee 27.5 hours @ $30.00 = $825.00, plus 9% Super + sick leave and annual leave on a .75 pro-rata basis. Ie 6 days sick and 3 weeks annual leave, or as a contractor 1.25 x $30 per hour x 27.5 hrs = $1031.25 per week + GST with no sick or annual leave.
I will give you a call re the above.
[24] Ms Perrin’s evidence is that the arrangement with the Respondent to provide bookkeeping services 5 days a week from 9.30am - 3pm was one which suited her family responsibilities. 6
[25] An email was sent to all employees of the Respondent by Mr Walker on 4 February 2010 stating:
I am pleased to announce that I have been able to convince Liz to come back to work at Renown ...
Liz started work with me in 1989 and spent 13 years, as our bookkeeper, before having two children. Now that both are at school, Liz will work part time 9.30 am to 3 pm, 4 days a week in February, and then 5 days (sic) week...
Liz will sit at reception.
[26] The copies of Tax invoices issued by Pericon to the Respondent for the period 11 November 2011 to 25 January 2012 disclose that Tax invoices were issued each week for ‘contract services’ by Pericon at a rate of $37.50 for 27.50 hours, except for the period immediately before Christmas in December 2011 and over January 2012, when the hours invoiced for varied from the 27.50 hours.
[27] In evidence was an email dated 19 May 2011 from Ms Perrin to employees of the Respondent in relation to security pass number confirmation, representing herself as:
Liz Perrin Renown Solutions Ph +613 9532 2444 liz.perrin@renown.com.au www.renown.com.au 7
[28] Ms Perrin states that in emails she sent externally whilst providing services for Renown had the same identifying information. 8
[29] Mr Walker submitted it was a practise of the Respondent to use Renown Signatures on the base of the email. He stated the same thing happened when the Respondent’s employees were contracted out to provide services at the Respondent’s clients. 9
[30] The unchallenged evidence of the witnesses was:
● Ms Perrin sat at the reception during the hours she worked at the Respondent; 10
● In addition to bookkeeping services, Ms Perrin provided reception and general administrative services; 11
● On a day to day basis management would instruct Ms Perrin on the activities she was to perform; 12
● The Respondent allows Ms Perrin to perform duties for Pericon from its premises. These duties include accepting deliveries and telephone calls from Ms Perrin’s husband. The time spent on these duties count to around an hour a week; 13
● Ms Perrin did not contract out the services she was required to provide to the Respondent to another person or an employee of Pericon; 14
● Ms Perrin was provided a computer and software by the Respondent to perform her duties and on the occasions she worked from home, she accessed the Respondent’s system remotely 15
● Ms Perrin provides bookkeeping services for Pericon. These services were undertaken in the evening and averaged 12 hours a week. 16
[31] Having regard to the evidence, I find:
● Ms Perrin was engaged to provide services on a part-time basis to undertake bookkeeping duties for the Respondent;
● Ms Perrin undertook those duties as well as reception and administration duties in the premises of the Respondent at a reception desk, generally from 9.30 am to 3.00 pm, five days a week;
● Ms Perrin conducted the bookkeeping duties using computer and software owned by the Respondent;
● Invoices were issued by Pericon each week for generally 27.5 hours, for a gross hourly amount;
● Ms Perrin, in email communications, represented herself as part of the Respondent’s business;
● Ms Perrin was under the day to day direction and control of the Respondent’s directors and owners - Mr Walker and previously, Mr Line.
● Ms Perrin through Pericon provided bookkeeping services to her husband’s business, these services being provided in the evenings.
Conclusion
[32] There is evidence which favours indicia suggesting Ms Perrin provided her bookkeeping services as an independent contract; such as the ‘Contract - Booking Assignment’ offered by the Respondent on 2 February 2010 and the Tax invoices issued by Pericon at a gross amount.
[33] I am satisfied that, on balance, having regard to the totality of evidence, that Ms Perrin was an employee of the Respondent. The indicia which I have had particular regard to are:
● The fact that Ms Perrin was under the direct control of the Respondent in relation to the actual duties she performed;
● The arrangement was in all respects (other than the gross amount paid and the absence of annual leave and sick leave and the like) that of a part-time employee working regular hours (27.50 hours) each week other than holiday periods;
● Ms Perrin held herself out an emanation of the Respondent;
● Ms Perrin predominantly performed the duties for the Respondent at its premises and any bookkeeping services she provided for her husband and others appear to have been done in the evenings.
[34] In all I have adopted, consistent with the authorities, a practical view of the relationship and formed the view that Ms Perrin was not running her own business with independence in the conduct of her operations whilst providing services for the Respondent, but rather as a representative of another business with little or no independence in the conduct of her operations.
Mr MacRae
The evidence
[35] The evidence in relation to the arrangement between Mr MacRae and the Respondent is as follows: 17
a) Mr MacRae agreed to provide general information technology services (IT services) to the Respondent for12 hours minimum each week performed at a discounted wholesale rate ($71.00);
b) On average Mr MacRae performed the IT services on-site (at the Respondent’s premises) on Tuesday and Thursdays for an average minimum 12 hours a week and offsite (at his office) 30 hours a month;
c) Where Mr MacRae worked less than 12 hours or more than 12 hours he invoiced the Respondent for the actual hours worked;
d) Mr MacRae, “was on call for us to do that work on behalf of Renown as and when we chose.” 18 Mr Walker would give Mr MacRae the tasks to perform.19 There was a task list of what was expected of him, such as, back-up, new systems, updates on systems, trial restores;20
e) Mr MacRae provided his own computer and software in perform IT services for the Respondent; 21
f) Tax invoices are issued to the Respondent by Scot MacRae for the services provided by Mr MacRae. Scot MacRae IT does not contract any of the Respondent’s work to another person; 22
g) Scot MacRae IT provides services to approximately 10 companies, of which the Respondent is one. 23 Mr MacRae derives 20% of his income from the Respondent.24
[36] The tax invoices issued by Scot MacRae IT to the Respondent over the months August 2011 to December 2011 are in accordance with the oral evidence, disclosing that:
● Mr MacRae was generally provided with at least 12 hours per week;
● Mr MacRae predominately worked Tuesday and Thursday over the period (around 57 of the 58 Tuesdays and Thursdays), 25 although he also worked additional days;
● The services were of a general IT nature.
[37] It is also apparent that, in addition to the IT service provided to the Respondent, Mr MacRae invoiced the Respondent for services provided to clients of the Respondent. Mr Walker stated:
Commissioner, in answer to that, for outside services, I will ask him to give me an estimate of the number of hours it will take him to perform that duty and then I would pass that information over to the client to say that “Scot MacRae will come out and do X, Y, Z, and I estimate that will take six hours or eight hours or a day to perform,” and I get an agreement that the client will actually pay - or agrees to pay that as a charge. 26
Did you get an extra amount for the services Mr MacRae provided a client such as Peak Oil?
Yes, we would value add to his services and he would quote that wholesale rate to us and we would charge the retail rate. 27
[38] It is to be noted that the Respondent, as a software consulting firm, contracted its employees as consultants to clients who were implementing the Respondent’s software system. 28 Consequently, employees like Mr Chee (the Applicant) were also contracted by the Respondent to clients to provide on-site consultancy. The difference in the contracting arrangements by the Respondent of Mr MacRae’s IT services to clients of the Respondent and the contracting of the Respondent’s employees (such as the Applicant) to provide consulting services, is that the Applicant was paid a salary and Mr MacRae, through Scot MacRae IT, was paid a gross hourly rate.29
[39] Mr MacRae also issued emails whilst providing services to the Respondent identifying himself as:
Scot MacRae Renown Solutions Ph +613 9532 2444 Mb + 614 333 10 888 smacrae@renown.com.au www.renown.com.au 30
[40] Mr Walker stated that it was a practice of the Respondent in respect of contractors working for the Respondent, to use the Renown identifier as a signature at the base of their emails and that this was a practice accepted by the Respondent’s clients in respect of the Respondent employees contracted to provide onsite services. 31
Conclusion
[41] Having regard to the evidence I find that:
● Mr MacRae provides IT services to the Respondent pursuant to an agreement that he provide these services for a minimum of 12 hours each week on Tuesday and Thursday of each week with services provided on additional days as necessary. Further, Scot MacRae IT would invoice the Respondent for Mr MacRae’s service a gross discounted amount of $71.00 an hour;
● Tax invoices were issued to the Respondent by Scot MacRae IT for services provided by Mr MacRae over the period August 2011 to January 2012, for work provided to the Respondent and to other businesses, being clients of the Respondent;
● The Tax invoices disclose that Mr MacRae provided general IT services and regularly provided these on at least Tuesday and Thursday each week at a gross hourly rate of $71.00;
● The Respondent further contracted out Mr MacRae’s services to clients of the Respondent. The Respondent arranged quotes with clients for Mr MacRae’s services. Mr MacRae continued to invoice $71.00 per hour for this work and the Respondent charged the client a higher amount (value adding) for Mr MacRae’s services;
● Mr MacRae performed his work under the direction and control of the Respondent, providing IT services as required by the Respondent;
● Mr MacRae held himself out as part of the Respondent business in email communications;
● Mr MacRae provided his own computer equipment and software and worked from home;
● Scot MacRae IT provided services for businesses other than the Respondent.
[42] Having regard to the totality of the evidence, I am satisfied that Mr MacRae was an employee of the Respondent. In reaching this conclusion I have had particular regard to the fact that during the periods which Mr MacRae provided work for the Respondent he worked under the directors’ and owners’ direction and control, providing general IT services as required by them. Moreover, the Respondent contracted out Mr MacRae to its clients to provide IT services in the same way it contracted its employees to undertake consultancy work for its clients. Further, Mr MacRae provided these services as a general rule on Tuesday and Thursday, meeting the needs of the business for regular IT services.
[43] I am satisfied that, having regard to the evidence, Mr MacRae was not running his own business with independence in the conduct of his operations whilst providing services for the Respondent, but rather as a representative of another business with little or no independence in the conduct of his operations.
Conclusion
[44] Having found that Ms Perrin and Mr MacRae were employees of the Respondent, it follows I am satisfied that the Respondent employed 15 employees at the time of the Applicant’s dismissal and was, consequently, not a small business. The exclusion set out in S. 121(1)(b) of the Act, therefore, does not apply to the termination of the Applicant’s employment.
COMMISSIONER
Appearances:
Mr Kuat Chee, appearing on his own behalf.
Mr Colin Walker, appearing on behalf of the Respondent.
Hearing details:
Tuesday, 5 June 2012
Thursday, 5 July 2012
1 At [29].
2 121 IR 215.
3 Ibid at [34].
4 Ibid. This summary of the law by the Full Bench has been subsequently applied by Full Bench of Fair Work Australia and its predecessors: Kitchen Design Systems v Moran [2007] AIRCFB 403.
5 Transcript of Hearing - 5 July 2012 at [597] - [613].
6 Ibid at [587] - [590].
7 Witness Statement of Vadim Kouzmenko, Exhibit C1, Attachment G.
8 Transcript of Hearing - 5 July 2012 at [626] to [627].
9 Transcript of Hearing - 5 June 2012 at [348].
10 Ibid at [105].
11 Transcript of Hearing - 5 July 2012 at [631].
12 Ibid at [593]; Transcript of Hearing - 5 June 2012 at [171].
13 Witness Statement of Elisabeth Perrin, Exhibit W3; Transcript of Hearing - 5 July 2012 at [620].
14 Transcript of Hearing - 5 June 2012 at [181].
15 Transcript of Hearing - 5 July 2012 at [621].
16 Ibid at [615].
17 Transcript of Hearing - 5 June 2012 at [175], [367], [398 - 399]; Transcript of Hearing -5 July 2012 at [464], [470], [520 - 521].
18 Transcript of Hearing - 5 June 2012 at [344].
19 Ibid at [382].
20 Transcript of Hearing - 5 July 2012 at [484], [532].
21 Ibid.
22 Ibid at [491].
23 Witness Statement of Scot MacRae, Exhibit W2 at [1].
24 Transcript of Hearing - 5 July 2012 at [526].
25 Ibid at [522].
26 Transcript of Hearing - 5 June 2012 at [380].
27 Ibid at [396] - [397].
28 Ibid at [342].
29 Ibid at [410] - [429].
30 Witness statement of Vadim Kouzmenko, Exhibit C1, Attachment F.
31 Transcript of Hearing - 5 June 2012 at [348].
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