DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mark Mitchell
v
Uraidla Physio
(U2017/625)

Application for an unfair dismissal remedy – preliminary jurisdictional issue – whether employee or independent contractor – overall relationship assessed having regard to various competing indicia – no sense of sham arrangements but substance of the relationship assessed in line with relevant authorities – on balance found to be employment – jurisdiction found – arrangements to be made to hear and determine the substantive application.

1. Background and case outline

[1] Mr Mark Mitchell has made an application under s.394 of the Fair Work Act 2009 (the FW Act) seeking a remedy for an alleged unfair dismissal. Mr Mitchell worked as a Physiotherapist between 1 July 2014 and 31 December 2016 at Uraidla Physio (the respondent).

[2] Uraidla Physio is a small private physiotherapy practice conducted by Ms Nadine Schultz in the Adelaide Hills. In general terms, during the relevant period the practice involved a single treatment room that was utilised by Ms Schultz and regularly at other times by Mr Mitchell.

[3] It is common ground that in order to make the application, Mr Mitchell must be an employee within the meaning of the FW Act. This arises from s.382 of the FW Act, which provides that an employee may be protected from unfair dismissal. The definition of “employee” for this purpose is the ordinary meaning of the term. 1

[4] Mr Mitchell contends that his relationship with Uraidla Physio, at the time that it ended, was in practice one of employment; whereas the respondent contends that Mr Mitchell was at all times an independent contractor and not an employee. This issue has been dealt with as a preliminary point and is the subject of this decision.

[5] Mr Mitchell maintains that he was at the time of his dismissal an employee of Uraidla Physio based upon the following contentions:

• There was no written contract in relation to his engagement and the only conditions that were discussed were the hours he would work and the method that would be used to calculate the amount he would be paid.



• Mr Mitchell was asked by the respondent whether he wished to be an “employee”, in which case he would be paid an hourly rate, or a “contractor”, under which he would be paid a percentage of his billings. Mr Mitchell opted for the “contractor” arrangement.



• The respondent exercised discretion and control over the work performed by Mr Mitchell and if he suggested changes to services, Uraidla Physio had complete control over whether these would be implemented.



• Mr Mitchell at all times believed he was working in the business of Uraidla Physio rather than conducting his own business alongside that of the respondent.



• Uraidla Physio had control over the hours worked by Mr Mitchell and any changes to those hours required the approval of that business. The applicant also had an ongoing expectation that these hours would continue.



• Uraidla Physio bore the risk in relation to services performed by Mr Mitchell. Although the applicant maintained insurance, this was in place to cover his own business outside of Uraidla Physio and not his work for the respondent.



• Uraidla Physio supplied all stationery, software and equipment required by Mr Mitchell and he did not need to provide anything himself.



• There was a general arrangement that payments would be made fortnightly (although this was at times sporadic) and Mr Mitchell did not provide invoices to the respondent.



• Mr Mitchell generated goodwill for Uraidla Physio, and not his own business, during his engagement.



• Mr Mitchell was not permitted to nominate another Physiotherapist to perform his hours of work.

[6] Mr Mitchell contends that the Commission should consider the totality of the relationship and determine whether he was working as a representative of his own business or as a representative of Uraidla Physio. When considered in that manner, he submits that he was an employee within the meaning of the FW Act.

[7] Uraidla Physio maintains that the nature of the relationship was at all times that of an independent contractor based upon the following contentions:

• Uraidla Physio asked Mr Mitchell, during the initial discussions, whether he would prefer to be engaged as an employee or an independent contractor and he indicated his preference for the latter.



• Mr Mitchell was engaged to provide stand-alone physiotherapy services direct to clients and was responsible for attracting and maintaining his own client list.



• The respondent exercised no control over the applicant’s service delivery, aside from insisting that sessions ran for no less than 30 minutes.



• The respondent did not determine Mr Mitchell’s hours of work but rather they were negotiated between the parties.



• Throughout his engagement with Uraidla Physio, Mr Mitchell also provided services through his own physiotherapy business and at another established practice.



• Mr Mitchell initiated and arranged for an advertisement in a local newspaper to promote his services without any input from the respondent aside from an offer to pay a portion of the associated costs to enable him to establish a client base.



• Uraidla Physio did not provide any equipment solely for Mr Mitchell’s use. Due to issues of practicality, the applicant was not required to provide his own massage table and was also free to use the respondent’s dry needles. Mr Mitchell however, was free to, and did, provide equipment in relation to services he wished to deliver that were not already in the room, including Chinese Cups, a foam roller and a heat gun for use on orthotics.



• The respondent terminated the services of Mr Mitchell as they were no longer required and there was no consideration by either party of severance pay which is suggestive of an independent contractor relationship.



• Mr Mitchell was only paid a percentage of his client billings based solely on invoices to clients and was not paid at all for any associated administrative work such as following up on unpaid bills.



• Uraidla Physio did not deduct income tax or make superannuation contributions on behalf of the applicant. Mr Mitchell was also not treated as an employee for WorkCover purposes.



• Mr Mitchell did take periods of “leave” both in relation to illness and recreation however there was never any discussion or expectation that he would be paid for these periods and the applicant maintained his own income protection insurance.



• The personal nature of the services provided would not tend to create goodwill for the respondent’s business but rather for the applicant as an individual whom clients would, and did, follow to another practice.

[8] In effect, Uraidla Physio contends that the parties were professional peers and agreed to establish a relationship which was intended to be that of an independent contractor. Further, it submits that Mr Mitchell genuinely worked as a contractor including by taking the business risks associated with that status.

2. The evidence

[9] Mr Mitchell provided a witness statement and gave sworn evidence in support of his case. He also provided various documents including email exchanges about issues and changes that arose during the relationship with Uraidla Physio. In addition, Mr Mitchell provided copies of billings reports, some other business records of Uraidla Physio and correspondence including the letter concluding the relationship dated 5 December 2016, which indicated that the services would no longer be required as of 1 January 2017.

[10] Ms Schultz also provided a witness statement and gave sworn evidence in support of the position advanced by Uraidla Physio. This evidence included various email exchanges and notes including correspondence about revisiting pay structures as authored by Mr Mitchell.

[11] Both witnesses were extensively cross-examined. I found that both witnesses generally gave their oral evidence in an open and honest manner. I did find Mr Mitchell’s written evidence to be less credible on certain aspects, and in particular, in relation to the understanding of the original discussions leading to the formation of the relationship.

[12] There are some factual disputes which are, in part, ordinary differences in recollection and others involve more direct conflict, particularly surrounding the detail of the discussion leading to the initial engagement. I have resolved these having regard to the consistency and overall probability of the evidence when considered in the context of the evidence more generally.

3. The formation and practical conduct of the relationship between the parties

[13] Before dealing with the detail of the relationship and the various indicia that shed some light upon its characterisation, I will outline my findings about the formation and conduct of that relationship based upon the evidence that is before the Commission.

[14] Mr Mitchell is a very experienced Physiotherapist who has, and continues to, run his own physiotherapy practice and work in other practices. That work has included (other) engagements which he contends involved an employment relationship. This continued during the term of the relationship with Uraidla Physio.

[15] Ms Schultz is also an experienced Physiotherapist and prior to starting Uraidla Physio in October 2013, has been employed in Physiotherapy practices, and owned and operated various such practices either as a sole practitioner or in partnership. In October 2013, Ms Schultz sold her ownership of another Physiotherapy practice in order to concentrate upon the Uraidla Physio business and thereafter only worked in her capacity as a Physiotherapist in that business.

[16] The structure of physiotherapy practices in Australia involves a number of large practices that most commonly employ additional physiotherapists whereas the smaller practices tend to operate more informally and involve either loosely categorised contractual arrangements or employment. Most often in the case of sole practitioners or small partnerships, the principal will own or rent rooms and cover expenses and be responsible for practice administration, bringing in additional practitioners if there is sufficient demand. As will become clear, it is this scenario that occurred at Uraidla Physio. 2

[17] Based upon the evidence that is before the Commission, considerable variation in payment methods for both “contractors” and “employees” exists within the physiotherapy industry. This includes various forms of billings sharing for “contractors” and hourly rates, percentage of billings and combinations of different bases to calculate payments for “employees”. 3

[18] Uraidla is a relatively small country town in the Adelaide Hills. Uraidla Physio is conducted under an arrangement with the Uraidla Family Practice (UFP), which is a General medical practice. Uraidla Physio rents a serviced furnished room from UFP which also involve the provision of cleaning and reception support services, including taking phone calls and bookings.

[19] In May 2014, Ms Schultz placed an advertisement in a professional magazine seeking the services of a Physiotherapist. This occurred in the context of strong demand for services and Ms Schultz’s desire to work less than full-time in the practice. The advertisement 4 was very general in nature and did not specify any details about the nature or extent of the proposed engagement.

[20] Mr Mitchell, who was at that time running his own Physiotherapy practice in an Adelaide suburb, applied for the position. In due course, Ms Schultz and Mr Mitchell discussed the nature of the Uraidla Physio practice and their general expectations about the opportunities that existed to enable Mr Mitchell to provide service at additional times and to supplement his income.

[21] Mr Mitchell raised the question of the nature and level of payments that would be involved and the prospect that he could become a partner in the practice. Ms Schultz declined the proposal but did indicate, in effect, that she was happy for Mr Mitchell to work in his own right as a fellow professional and that he could do so as either an employee or a contractor. The discussion about the implications of that choice went only to the notion that if he wished to be an employee, Mr Mitchell would be paid an hourly rate, or as a contractor, he would be paid a percentage of his billings. Mr Mitchell opted to be treated as a “contractor” as this would suit him better. It was subsequently agreed that the percentage of billings would be 60 per cent less overhead costs.

[22] It was understood by Mr Mitchell at that time that as a “contractor” being paid a percentage of billings, there would be no deduction of taxation, no leave entitlements and no deduction for or payment of superannuation. 5 There was no discussion about workers’ compensation obligations or entitlements.

[23] There was no written contract made to reflect any agreed terms. It was understood that both would work flexibly using the electronic diary (booking system) to undertake available sessions. In practice, this generally meant that Mr Mitchell could elect to fill the session times which were not utilised by Ms Schultz but within that constraint could fill all or only some of the sessions as he desired. It is also evident from the communications between them that these arrangements were subject to some negotiation and at various times Ms Schultz changed or reduced her hours to assist Mr Mitchell. Indeed, Mr Mitchell acknowledged that at least to some degree the hours represented a choice based upon mutual circumstances. 6 It is however clear that the ultimate decision on the extent of available hours rested with Ms Schultz.

[24] Bookings would generally be made through the reception and booking system provided by Uraidla Physio through its arrangement with UFP. It is a reasonable inference from the evidence that such bookings either involved patients requesting one of the two Physiotherapists by name or by booking a time slot and being allocated by the system to either Ms Schultz or Mr Mitchell depending upon who was to be there at that time.

[25] In general terms, between October 2014 and February 2015 Mr Mitchell worked Monday afternoons and all day Fridays at Uraidla Physio. During the period between June 2015 and May 2016 Mr Mitchell generally worked Monday afternoons, school hours on Wednesdays, and all day Fridays.

[26] In the case of sickness or other commitments, Mr Mitchell could cancel or not make sessions times available through the booking system and did not need to advise or seek consent from Ms Schultz about these matters. Mr Mitchell was also free to offer services on Saturdays if he wished, and did so on the same basis. Extended periods of absence were however generally discussed between them on the basis that additional sessions might be offered by the other to provide some coverage.

[27] In October 2016, Mr Mitchell requested that 20 minute appointments for “WorkCover” patients be facilitated. This was declined by Ms Schultz due in part to the electronic diary system and the implications for the reception service provided by UFP. Fundamentally, the decision was based upon Ms Schultz’s view about the appropriate services to be provided within the practice and this was confirmed by reference to the mission statement found on the Uraidla Physio website. 7

[28] Mr Mitchell sought and obtained a Medicare provider number as was required for any new location in which he provided services. Mr Mitchell’s provider number was attached to the system used by Uraidla Physio to claim benefits from health insurance providers and money from this system was deposited directly into the Uraidla Physio’s bank account.

[29] Both Mr Mitchell and Ms Schultz also provided services to private patients through the Uraidla Physio system and other patients connected with WorkCover, third party motor accident and Veterans Affairs’ claims. Accounts for these services were invoiced using Uraidla Physio letterhead with the Uraidla Physio bank account details provided; but the invoices also included the provider number of the Physiotherapist involved. At the end of some sessions, private patients may pay either Ms Schultz or Mr Mitchell as appropriate and this would be paid into the Uraidla Physio bank account.

[30] Ms Schultz generally undertook the invoicing and administration for the practice. However, work associated with the direct administration of patients and any professional correspondence or associated activities undertaken by Mr Mitchell were done by him without additional payments being made to him by Uraidla Physio beyond the agreed proportion of the fees charged to the clients.

[31] In terms of charges, this was discussed by the parties and it was agreed that Mr Mitchell would be charged out at the same rate as Ms Schultz in light of the fact that Uraidla Physio had an arrangement with a large health insurance provider and given the joint preference to avoid influencing the choice of Physiotherapists based upon differences in rates.

[32] There were some discussions about the provision of tax invoices to Uraidla Physio by Mr Mitchell. On balance, I find that Ms Schultz requested that these be provided early in the relationship. Further, in both July and October 2016, Ms Schultz formally requested that Mr Mitchell provide invoices in relation to his period at Uraidla Physio. The October 2016 request led to the following email exchange on 10 October 2016:

“From: Nadine Schultz

To: Mark Mitchell

‘PS am just chasing up tax invoices for you have done for me also. I will need them from when you started as haven’t received one as yet. Thanks Nadine’

From: Mark Mitchell

To: Nadine Schultz

‘Ok.

How do you want that set out, as it should then include gst or make it gst inclusive?

What is best as I am wondering if we have taken that into account with BAS.

Happy to set it out however you want.

Is there anything on the computer that would help?

Cheers mark’

From: Nadine Schultz

To: Mark Mitchell

‘I can’t answer that question, depends on your circumstances of your business as to whether GST is included. N’

From: Mark Mitchell

To: Nadine Schultz

‘Do you just want acknowledgment of monies so like a reverse receipt?

I will run a list of monies received and forget gst and see if that looks ok to you.

I haven’t been declaring gst on money earnt.

I should be able to generate that off bank statements.

Will try to leave if for you Thursday.

Cheers mark’” 8

[33] A further request for invoices was made by Ms Schultz on 20 December 2016. I note that after the end of the relationship Mr Mitchell agreed to provide “a receipt for all the pays”. 9

[34] In part, these requests were motivated by concerns apparently arising from an audit that was conducted on another business in which Ms Schultz was involved. However, tax invoices were not ultimately provided and payments, based upon the agreed percentage of billings arising from the sessions provided by Mr Mitchell, were simply made by Uraidla Physio. Payments to Mr Mitchell did not rely upon the payment of the invoices by the clients and any unpaid accounts were “worn” by Uraidla Physio.

[35] The payments that were made to Mr Mitchell by Uraidla Physio were indirectly confirmed through the provision of “billings reports”, generally on a fortnightly basis. These were initially supplied in hard copy but after October 2014 were made available to Mr Mitchell through his access to the Uraidla Physio computer system. The billings reports confirmed the service item number, a brief description, the fees involved and any discount, and the net fees payable to Uraidla Physio arising from the services provided by Mr Mitchell.

[36] During the relationship, Mr Mitchell raised with Ms Schultz the prospect of signing up to an electronic system for the payment of Medicare and other Commonwealth claims. It became apparent that for this system to work, Mr Mitchell would be required to link his provider number to that used by Ms Schultz and despite being advised of this, Mr Mitchell did not do so and the paper claim forms continued to be used. I note that in evidence, Ms Schultz considered that she had no power to direct that the change be made; however, this was not tested in practice.

[37] No uniform was used by Uraidla Physio and Mr Mitchell was not provided with corporate clothing. Mr Mitchell used appointment cards and letterhead provided by Uraidla Physio. This was agreed between Ms Schultz and Mr Mitchell and Ms Schultz considered that this was part of the general overhead costs allowed for in the payment arrangements.

[38] The physio room contained, amongst other furniture, a treatment table, couch, desk, filing carousel, and computer with relevant software. These were supplied by Uraidla Physio through its arrangements with UFP. Mr Mitchell provided a Chinese cupping set, a foam roller and a heat gun for use on orthotics.

[39] During the course of the relationship, Mr Mitchell arranged and paid to attend a Pilates training course.

[40] In terms of insurance, Mr Mitchell maintained professional insurance as part of his membership of the relevant professional association and also had income protection insurance. Ms Schultz also had professional insurance in place however there was no “workplace insurance” for Uraidla Physio.

[41] At some point, in the context of concerns by Mr Mitchell about the number of patients he was seeing at Uraidla Physio, he instigated an advertisement in the local paper. This was undertaken without any discussion with Ms Schultz and promoted Mr Mitchell rather than the Uraidla Physio practice, which was not mentioned. Ms Schultz subsequently paid half of the costs of the advertisement.

[42] During the relationship, Mr Mitchell undertook physiotherapy work at his business in an Adelaide suburb, advised Ms Schultz that he was considering buying another practice in a nearby Adelaide Hills town (which did not proceed) and did start a further practice in a Doctor’s surgery in the Adelaide Hills.

[43] In early 2016, the parties discussed the payments being made. It was ultimately agreed that the payments would be increased to 70 per cent of the billings. In the course of those discussions, Mr Mitchell sought details about the rental and other costs associated with each session and made a proposal that he would sacrifice a fixed fortnightly rate to cover the rental costs in the context of a higher billing payment. I note that this proposal would sit more comfortably with the existence of an independent contractual arrangement. The rental component of the proposal did not proceed.

[44] In August 2016, the parties again discussed the arrangements in the context of an indication that Mr Mitchell had been approached to work in a large Physiotherapy practice. Whilst Ms Schultz was initially happy to accommodate this, the new arrangement led to concerns about Mr Mitchell’s availability. Ms Schultz advised Mr Mitchell that she would be advertising for a third Physiotherapist and Mr Mitchell provided the names of two potential candidates.

[45] Ms Schultz subsequently appointed an additional, relatively inexperienced, Physiotherapist as an employee, and although there are no details before the Commission, this apparently involved the normal benefits associated with such an engagement. However, with the additional appointment, Mr Mitchell became concerned that he was being replaced and although there were up to six sessions per week made available, Mr Mitchell generally continued to work the 2 sessions previously undertaken.

[46] As part of the August 2016 discussions, Ms Schultz clarified her understanding of the existing arrangements and some future options in the following terms:

“Thank you for your note today. Unfortunately as mentioned 70% is the maximum percentage the business is viable at. I am unable to move on this by increasing the percentage or increasing business takings, as I am passionate about affordable, quality physio, keeping rates at BUPA advised and 30 minute appointments. Due to varying ongoing business costs to maintain the quality I am after, the only employment options I am interested in is the model we are using now, a set percentage of invoiced worked, or coming on board as an employee on an hourly rate. This is clean and neat with one person being responsible for all invoicing and debt collecting and myself being the business representative with respect to relations with Uraidla Surgery.” 10

[47] Although reference is made to “employment” in the above communication, when read in context it is clear enough that this is used in a generic sense.

[48] In the latter part of 2016, the working relationship between the parties deteriorated and the tone and nature of the communications was also impacted. The foreshadowed and actual commitments of Mr Mitchell to the new practice, and the engagement of the new Physiotherapist at Uraidla Physio, were both significant contributors to, and exacerbations of, this decline.

[49] I note that payments made to Mr Mitchell did not involve any deduction for PAYG or other taxation. In addition, no ABN was sought from Mr Mitchell by Uraidla Physio until after the relationship had concluded. Further, for most of the period, superannuation was not paid in relation to Mr Mitchell’s earnings. However, in October 2016 Ms Schultz proposed that in relation to “pay” there were two options:

“Firstly either continue as contracting but the fortnightly pays will be in two sections, 64% contracted out work, with 6% of the 64% super payment. Still made directly to your account for you to them move to your super. Or secondly change to be a casual employee…” 11

[50] The proposal from Ms Schultz arose from arrangements apparently agreed with the new Physiotherapist who had joined the practice as an employee.

[51] The parties agreed on option one and payments into Mr Mitchell’s bank account were then labelled as being “earnings” and “super”. No other paperwork was exchanged in relation to these terms.

[52] On 5 December 2016 Ms Schultz wrote to Mr Mitchell and advised as follows:

“I am writing to officially notify you that Uraidla Physio will no longer be requiring your services as of the 1^st of January 2017.

As we have discussed your availability was significantly reduced in May 2016. That has adversely affected our clientele numbers. There has been an increasing declined in doctor referred clients that are happy to see you, as well as a decline in clients prepared to transfer onto your list. As I do not think this is an issue that can be resolved Monday afternoon and Saturday morning sessions are increasingly not viable or being utilised to their full potential.

Thank you for your support over the past two and a half years. I wish you well in your new adventure at (name of major Physiotherapy practice).” 12

[53] I note that after the letter of 5 December 2016 and before the end of the relationship, Ms Schultz advised Mr Mitchell in relation to one of his patients that she had let the patient know that Mr Mitchell would not be working at Uraidla Physio as of the New Year and that this client should contact him via email if she wished to continue physiotherapy with Mr Mitchell and was happy for this to occur. To that extent, this is indicative of the fact that Ms Schultz considered that it was not unreasonable for at least some of the patients to follow Mr Mitchell. That correspondence 13 also confirmed that it was Uraidla Physio who followed up on some outstanding accounts relating to the services provided by Mr Mitchell and that it was the respondent that controlled access to continued services. That is, Uraidla Physio required that the account be settled prior to further sessions with Mr Mitchell being booked.

4. The approach required of the Commission in determining the nature of this relationship

[54] The required approach is conveniently summarised by the Full Bench of the Commission in Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario 14 (Cai v Da Rozario) as follows (footnotes omitted):

“[30] The general law approach to distinguishing between employees and independent contractors may be summarised as follows:

(1) In determining whether a worker is an employee or an independent contractor the ultimate question 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 of which the work in question forms part? This question is concerned with the objective character of the relationship. It is answered by considering the terms of the contract and the totality of the relationship.

(2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant indicia and the relative weight to be assigned to various indicia and may often be relevant to the construction of ambiguous terms in the contract.

(3) The terms and terminology of the contract are always important. However, the parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract.

(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context. For ease of reference the following is a list of indicia identified in the authorities:

• 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.”

• 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, working for others (or the genuine and practical entitlement to do so) suggests an 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.

It should be borne in mind that no list of indicia is to be regarded as comprehensive or exhaustive and the weight to be given to particular indicia will vary according to the circumstances. 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.

(5) Where a consideration of the indicia (in the context of the nature of the work performed and the terms of the contract) points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. However, a consideration of the indicia is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The ultimate question remains as stated in (1) above. If, having approached the matter in that way, the relationship remains ambiguous, such that the ultimate question cannot be answered with satisfaction one way or the other, then the parties can remove that ambiguity a term that declares the relationship to have one character or the other.

(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.” 15

[55] The extracts from the High Court decision in Hollis v Vabu referred to above, are as follows (footnotes omitted):

“[41] In Bazley v Curry, the Supreme Court of Canada saw two fundamental or major concerns as underlying the imposition of vicarious liability. The first is the provision of a just and practical remedy for the harm suffered as a result of the wrongs committed in the course of the conduct of the defendant’s enterprise. The second is the deterrence of future harm, by the incentive given to employers to reduce the risk of accident, even where there has been no negligence in the legal sense in the particular case giving rise to the claim.

[42] In general, under contemporary Australian conditions, the conduct by the defendant of an enterprise in which persons are identified as representing that enterprise should carry an obligation to third persons to bear the cost of injury or damage to them which may fairly be said to be characteristic of the conduct of that enterprise. In delivering the judgment of the Supreme Court of Canada in Bazley v Curry, McLachlin J said of such cases that “the employer’s enterprise [has] created the risk that produced the tortious act” and the employer must bear responsibility for it. McLachlin J termed this risk “enterprise risk” and said that “where the employee’s conduct is closely tied to a risk that the employer’s enterprise has placed in the community, the employer may justly be held vicariously liable for the employee’s wrong”. Earlier, in Ira S Bushey & Sons, Inc v United States, Judge Friendly had said that the doctrine of respondeat superior rests:

“in a deeply rooted sentiment that a business enterprise cannot justly disclaim responsibility for accidents which may fairly be said to be characteristic of its activities”. 16

[56] I also note that the following extract from Hollis was relied upon by the earlier Full Bench of the AIRC in Abdalla v Viewdaze Pty Ltd t/as Malta Travel 17 (Abdalla) to illustrate the import of the High Court decision:

“[47] In classifying the bicycle couriers as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories. Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might, for example, be appropriate where the investment in capital equipment was more significant, and greater skill and training were required to operate it. The case does not deal with situations of that character. The concern here is with the bicycle couriers engaged on Vabu’s business. A consideration of the nature of their engagement, as evidenced by the documents to which reference has been made and by the work practices imposed by Vabu, indicates that they were employees.” 18

5. The indicia concerning the relationship

[57] Without detracting from the overall assessment of the relationship that is required, it is convenient to initially consider the various indicia under general headings adapted from those used by the Full Bench in Cai v Do Rozario. These also inform that overall assessment.

Control over how work is performed and the hours of work etc.

[58] This indicia is concerned with the exercise, or the right to exercise, control over the manner in which the work is performed including the place of work, hours and the like. This must be considered in the light of the nature and circumstances of the work in question. In this case, those circumstances include that Mr Mitchell (and Ms Schultz) was an experienced, professional Physiotherapist with earlier, and ongoing, business interests. This impacts, in particular, upon the nature and level of supervision that might be expected in any such working relationship.

[59] There was no direct supervision of the work undertaken by Mr Mitchell and the two parties, in practice, generally passed like ships in the night with each using the room at different times. Indeed, even allowing for the professional nature of the work and the circumstances of the parties, the almost complete absence of oversight for the actual work is an important consideration.

[60] There were, however, some elements of control evident in the conduct of the relationship. Although Ms Schultz consulted about these matters and there were sound business reasons associated with the decisions, it was evident that ultimately, she had the right to determine the length of the sessions that were to be offered. Further, although Ms Schultz was very accommodating of Mr Mitchell’s circumstances, I find that the outer extent of sessions that were available to Mr Mitchell was ultimately a decision that Ms Schultz could make. Ms Schultz also on occasions booked out sessions for Mr Mitchell (that would otherwise be available for physiotherapy sessions) so that the two of them could catch up and discuss matters.

[61] On the other hand, it is also evident that Mr Mitchell could choose to take up some, all or none of the available sessions and was genuinely free to determine those matters. I have also found that the extent of the fee to be charged was the subject of an agreement between the parties and this was influenced by arrangements already in place. However, a finding that Mr Mitchell could set his own fees independent of the agreement with Ms Schultz is not open, given the evidence that is before the Commission.

[62] Accordingly, there are some important elements of control more consistent with employment. However, the capacity for Mr Mitchell to control when and if he intended to be available for the sessions within the broader business constraints and the lack of any sense of direct supervision for the work must also be taken into account.

A separate place of work and the advertising of the services

[63] The location of the work should be considered in the context of the nature of the services provided. Mr Mitchell provided services using the room rented by Uraidla Physio and the room operated under the banner of that practice.

[64] Written records, accounts, business cards and exchanges with patients took place using the letterhead and banner of Uraidla Physio. Accordingly, the services were provided under the umbrella of the relevant trading name of Uraidla Physio and were generally advertised and delivered in that context. This is more consistent with an employment relationship.

[65] The fact that Mr Mitchell did place an advertisement in his own name in the local paper, without separate reference to the Uraidla Physio practice, is a contrary factor; albeit one that needs to be considered in the context of a Physiotherapy practice where there was a direct incentive for Mr Mitchell to gain additional patients due to the remuneration method adopted by the parties.

The provision and maintenance of tools and equipment

[66] The nature of Physiotherapy is that the substantive service is a personal one primarily supplied using the expertise of the professional concerned.

[67] There is, however, the need (in the case of a practice of the nature evident here) for there to be consulting rooms and relevant treatment and administrative equipment and associated software. With a few exceptions, these were all supplied by Uraidla Physio and covered, at least notionally, by an administration fee that was taken into account in determining the payments made to Mr Mitchell.

[68] The exceptions were minor personal equipment which represented a very small investment by Mr Mitchell.

[69] This consideration is more consistent with an employment relationship.

The entitlement to delegate or sub-contract work

[70] Given the absence of any real formality in the relationship, this entitlement is difficult to ascertain. It is, however, apparent that the arrangement was a personal one and it would be a reasonable inference that Mr Mitchell could not delegate or sub-contract the work at Uraidla Physio.

[71] The need for the work to be undertaken by Mr Mitchell personally is an indicator more consistent with that of an employment relationship.

The right to suspend or dismiss

[72] There is no indication of a right to suspend the contract in any traditional sense. The arrangements were also very flexible and the parties did not appear to contemplate how any performance concerns were to be addressed.

[73] There was at least an implied capacity for either party to end the relationship. However, the existence of a right to end a contract due to non or poor performance is not of itself a strong indicator of the nature of the relationship. All contracts have obligations and either expressly or impliedly allow for termination as a consequence of failing to meet the service obligations in the contract. The termination in this case appears to be a business decision based upon different expectations about availability and there is no suggestion of the exercise of any “right” that would be indicative of the nature of the relationship.

The public presentation of the workers (uniforms and other badging)

[74] The service was provided under the banner of Uraidla Physio. There was no uniform and the patients were seen by a professional Physiotherapist and accounts were issued under the letterhead and accounting system of Uraidla Physio whilst referencing (where relevant) Mr Mitchell and his provider number.

[75] On balance, this consideration is more consistent with an employment relationship.

Deduction of income tax

[76] Uraidla Physio did not deduct income tax and Mr Mitchell was responsible for the payment and administration of his tax liabilities and affairs. This was understood by Mr Mitchell to follow from the decision to elect to be paid under the “contractor” option.

[77] This is more consistent with an independent contractual relationship. However, care must be taken not to attribute undue weight to taxation arrangements beyond shedding light on the understanding of the parties. 19

The provision of invoices/periodic payment of “wages”

[78] At some stage during the relationship, invoices were sought from Mr Mitchell by Uraidla Physio. The requirement for invoices, if such represents a bona fide business transaction expected by the parties, is more indicative of an independent contractual relationship. However, invoices were not provided by Mr Mitchell and ultimately were not required as the payments continued to be made based upon the billings issued for work performed by Mr Mitchell. The provision of invoices was not therefore a fundamental element of the arrangement and it could, and did, readily operate without such. In the absence of invoices, the proper treatment of any GST is unclear and the evidence tends to support the notion that neither party took GST into account as part of their transactions.

[79] There was, in general terms a fortnightly payment to Mr Mitchell, however, this was generated based upon the performance of actual services and billings issued arising from his work in that period. This is not generally consistent with the notion of a wage, however I note that subject to any minimum award conditions to the contrary, there would be no reason that an employee could not be paid on such a basis. The fact that these payments were based upon billings, and not upon payments actually received by Uraidla Physio, is more consistent with the work being performed for the practice rather than Mr Mitchell.

Paid holidays and leave

[80] There were no paid holidays, leave or other provisions that would be consistent with an employment relationship. This was also understood by Mr Mitchell to follow from the decision to elect to be paid under the “contractor” option. This is more consistent with an independent contractual relationship.

The nature of the work (profession, trade or special calling)

[81] The work in question here is that of a professional. This has informed many of the other indicia and is itself a relevant consideration.

[82] The authorities 20 suggest that a professional calling may be an indicator of an independent contractual relationship. However, this consideration is not conclusive and it is the overall relationship that must be assessed.21

The creation of goodwill and other saleable assets

[83] I have found that after the termination, Mr Mitchell could continue to provide services to at least one or more of the clients that he saw whilst at Uraidla Physio. Indeed, Ms Schultz facilitated such and this is a factor indicative of the personal nature of the services and that the work had some personal ongoing value for Mr Mitchell. This is an indicator more consistent with the notion that Mr Mitchell was working for himself, at least to some degree.

[84] However, the fact that the services also took place under the umbrella of Uraidla Physio, and involved bookings being made by and with that practice, is a factor that tends to militate against the capacity for Mr Mitchell to generate any form of goodwill, in the sense that it could be valued or sold to another person or business. This aspect is more consistent with an employment relationship.

The proportion of remuneration on business expenses

[85] There is no direct evidence about the proportion of remuneration that Mr Mitchell spent on business expenses. This would also be somewhat problematic given that Mr Mitchell was clearly conducting a business with respect to the other practices in which he was involved as the proprietor. In relation to the work performed with Uraidla Physio, other than the small investment made in bringing some minor equipment with him, he did not need to expend money to undertake any real administration of his business affairs as he was using the system provided by the respondent and being paid as a result of the billings generated through that system.

Other indicia

[86] There are also some other factors that may be represent relevant indicia given the circumstances evident here. These include:

● Insurance - where Mr Mitchell was covered by his own professional insurance; and
● Medicare Provider number – where Mr Mitchell obtained a separate provider number for his work at Uraidla Physio.

[87] In some circumstances, these elements would be important considerations consistent with an independent contractual relationship. However, given the nature of the Physiotherapy profession and the regulatory and funding environment in which it operates, these elements are neutral and would arise under either scenario.

[88] Mr Mitchell had the right to, and did, continue with his own practice, start an additional practice, and take up employment with a large city practice during the course of the engagement with Uraidla Physio. This suggests a significant degree of independence.

[89] However, the significance of this factor is also limited to some degree given the professional nature of the work and the fact that the engagement with Uraidla Physio was well less than full-time.

[90] Mr Mitchell had no expectation that he would be covered for workers’ compensation purposes given the understanding reached and this is a factor more consistent with the notion of an independent contractual relationship.

[91] The non-payment of superannuation for most of the contract, and more importantly, the absence of any expectation that this would be done under the arrangements agreed by the parties, is also more consistent with the notion of an independent contractual relationship.

6. Was Mr Mitchell an employee?

[92] At the outset, I observe that Ms Schultz did not seek to evade the obligations that would flow from the treatment of Mr Mitchell as an employee. Rather, she gave Mr Mitchell the choice of arrangement and he elected to be paid the percentage of billings and to be treated as a “contractor” at least in the limited sense in which that dichotomy was discussed and considered by the parties at that time. However, it is the substance of the relationship that must be considered in light of the facts and the approach required by the relevant authorities.

[93] There was no written contract between the parties and little by way of formally agreed elements. The label applied to the arrangement was that of a “contractor” and the parties did have some limited understanding as to what that meant. The pursuit of invoices by Ms Schultz was, at least notionally, consistent with that concept and the nature of the various email exchanges that occurred during the relationship also tended to adopt, or be more consistent with, this label. Further, some, but certainly not all, elements of the email transactions between the parties were more consistent that notion. In Abdalla, the Full Bench observed that:

“The terms and terminology of the contract are always important and must be considered. However, in so doing, it should be borne in mind that parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: that is, the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract. If, after considering all other matters, the relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they make with one another.” 22

[94] This should also be considered in light of the decision of the Federal Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation 23 which considered the fact that in that matter the parties had entered into a written contract which expressly stated the relationship to be that of an independent contractor. The Full Court, in effect, endorsed the approach taken by the relevant Tribunal that this was “a matter which must yield in its significance to the nature of the whole relationship”.24

[95] In the circumstances here, the label of “contractor” is of some assistance in clearing up uncertainty about the relationship but cannot be decisive. The discussions about the consequences of being treated as a contractor were somewhat superficial and no detailed arrangements were agreed to confirm those implications. It is also the whole of the relationship that must be assessed.

[96] The indicia discussed above involve competing considerations, they are not exhaustive, and they also need to be weighed according to their relative importance in the circumstances being considered.

[97] In Cai v Do Rozario, the Full Bench also confirmed the following:

● The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. 25

● The ultimate question remains whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business on his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could objectively be said to be conducting a business of his or her own of which the work in question forms part? 26

● If the result is still uncertain then the determination should also 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. 27

[98] Both Ms Schultz and Mr Mitchell were professional colleagues and it is conceivable that a joint venture arrangement or other independent contractual relationship could have been formed. However, and without detracting from the range of competing indicia outlined earlier, I find that fundamentally, Mr Mitchell was working within the business environment, workplace and various operational systems established by Uraidla Physio and the services were also provided as part of the business of the respondent. This included that it was Uraidla Physio that had the right to make the important business decisions, it set and could change the context in which the services were to be provided, and the respondent took the risks associated with the payment for the provision of those services. Further, the absence of some of the kinds of business transactions between the parties (including for example the actual reliance upon invoices for transactions and payments and the consideration of GST in that context) that would be expected as part of an independent contractual relationship of the nature contended by Uraidla Physio, is also an important consideration. The other contrary indicators set out earlier in this decision are relevant, but not sufficient to impact upon the overall characterisation of the relationship.

[99] Having regard to the totality of the relationship when viewed as a practical matter, I am on balance satisfied that in relation to the work undertaken at Uraidla Physio Mr Mitchell was not conducting a business of his own within the meaning and contemplation of the authorities, but rather, was an employee within the meaning of the FW Act. That employment was akin to a casual arrangement where, in the context of some ongoing expectation of continuing work, the extent of that work was dependent upon the mutual availability of opportunities (room availability, patient booking and Mr Mitchell wanting to work) with payment linked to actual performance of the work without additional entitlements.

[100] I also consider that the fundamental concerns underlying the doctrine of vicarious liability as extracted from Hollis v Vabu and set out earlier in this decision are also marginally more consistent with this finding.

7. Conclusions

[101] I am, on balance, satisfied that Mr Mitchell was an employee for present purposes. Accordingly, there is jurisdiction to hear and determine this application. I will shortly convene a directions conference to make the necessary arrangements for that to occur.

COMMISSIONER

Appearances:

C Evans of Kit Legal, with permission, for Mr Mark Mitchell.

P Young, with permission, for Uraidla Physio.

Hearing details:

2017

Adelaide

4 May.

 1   S.15 of the FW Act.

 2   This is drawn from the uncontested evidence of Ms Schultz and to some degree, Mr Mitchell.

 3   Ibid with particular note given to the evidence of Mr Mitchell about these practices.

 4   Attachment 6 to exhibit R2.

 5   Record of hearing at 10.27am.

 6   Record of hearing at 10:40 am.

 7   Communicated via email - Part of attachment P to exhibit A1.

 8   Attachment R3 to exhibit R2.

 9   Text message 3 January 2017.

 10   Attachment H to exhibit A1.

 11   Attachment 2 to exhibit R2.

 12   Attachment R to exhibit A1.

 13   Attachment L to exhibit A1.

 14   [2011] FWAFB 8307. This decision considered an earlier approach in Abdalla v Viewdaze Pty Ltd t/as Malta Travel (2003) 122 IR 215, 14 May 2003 in light of a decision of the Full Court of the Federal Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation (2010) 184 FCR 448.

 15   Ibid at [30].

 16   Per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ.

 17   (2003) 122 IR 215, 14 May 2003.

 18   Ibid.

 19   ACE Insurance Limited v Trifunovski [2011] FCA 1204 as cited in Cai v Do Rozario.

 20   Summarised in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 63 ALR 513.

 21   Ibid at 525-526.

 22   Abdalla at 228, 34. This approach is also reflected in Cai v Do Rozario.

 23   (2010) 184 FCR 448.

 24   Ibid at [27].

 25   Cai v Do Rozario at [30](5).

 26   Ibid at [30](1).

 27   Ibid at [30](6).

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