[2018] FWC 7396
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009

s.394—Unfair dismissal

Samuel Selvakumar
v
Accountants and Tax Agents Pty Ltd T/A Northcity Accountants
(U2018/5792)

COMMISSIONER HARPER-GREENWELL

MELBOURNE, 4 DECEMBER 2018

Application for an unfair dismissal remedy – not an employee.

[1] On 5 June 2018, Mr Samuel Selvakumar made an application to the Fair Work Commission (Commission) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for a remedy in respect of his dismissal by Accountants and Tax Agents Pty Ltd T/A Northcity Accountants (Respondent)(Northcity Accountants).

[2] Mr Selvakumar submitted that he was dismissed from his employment on 17 May 2018 at the initiative of the employer. He submits that the dismissal took effect immediately and that the dismissal was unfair.

[3] Northcity Accountants submitted that Mr Selvakumar was an independent contractor and not an employee and that he advised them on 17 May 2018 that he was no longer going to subcontract from them.

Procedural Background

[4] This matter was conciliated on 10 July 2018 and was unable to be resolved. The matter was subsequently listed for arbitration before me on 12 September 2018.

[5] Mr Selvakumar appeared and gave evidence on his own behalf.

[6] Mr Julius Mather (Mr Mather), Director, appeared and gave evidence on behalf of Northcity Accountants, along with Mr Jeffrey Mather (Mr J Mather), General Manager – Mortgage Broker.

Preliminary Matters

[7] In order to establish if Mr Selvakumar is a person protected from unfair dismissal as per section 382 of the Act, it is necessary for me to first determine if he was an “employee” of the Respondent. Section 15 of the Act provides that the definition of “employee” for this purpose is the ordinary meaning of the term.

[8] Therefore, before I can consider whether Mr Selvakumar was dismissed by Northcity Accountants and if so, whether that dismissal was harsh, unjust or unreasonable, I must first determine whether Mr Selvakumar was an employee within the meaning of the Act.

Consideration

[9] The approach of the Commission has been summarised by the Full Bench in Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario 1 (French Accent) 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.” (endnotes not reproduced)

[10] Mr Selvakumar’s evidence was that in late 2014 he approached Mr Mather in their church to discuss Mr Mather’s upcoming new business venture. Mr Selvakumar submitted that in January of 2015 Mr Mather advised him that he could not provide him with work as an employee, however he could work as a subcontractor. Mr Selvakumar’s evidence was that after he was trained, Mr Mather advised he would see if they could make him an employee. 2

[11] Mr Mather’s evidence was that Mr Selvakumar approached him to set up a meeting and that he advised that he was performing insurance work under a subcontract agreement with a few insurance companies. Mr Mather’s evidence was that he asked Mr Selvakumar if he would like to continue on that same basis with the Respondent under the same ABN, and when Mr Selvakumar agreed he drafted the service agreement that after some negotiation both parties signed. 3 Mr Selvakumar conceded that he had been operating his own business at the time this conversation occurred.4

[12] It is not in dispute that Mr Selvakumar signed the contracting agreement in 2015. However, it was Mr Selvakumar’s submission that he worked as a servant of the Respondent’s business. As such, I will now consider the indicia as outlined in French Accent to determine the nature of Mr Selvakumar’s engagement.

Control over the manner in which work is performed, place or work, hours of work and the like

[13] Mr Selvakumar submitted whilst he was initially recruited by the Respondent in March on a subcontract basis within a month of this arrangement commencing he was instructed by the Respondent to work at his office from 9am to 5pm on weekdays and 9am to 1pm on Saturdays irrespective of the work assigned to him. He submitted that he was treated as a permanent employee and was required to comply with all staff requirements regarding discipline, training and control of employees and the completion of timesheets. 5

[14] Mr Mather gave evidence that whilst it was in the subcontracting agreement that Mr Selvakumar was to work 9am to 5pm Monday to Wednesday and 9 to 1 Saturdays 6, Mr Selvakumar would often arrive to work at 10am, leave at 11 and return at 2pm. Mr Mather’s evidence was that he had no control over the times that Mr Selvakumar attended the office.7 His evidence was that Mr Selvakumar would take overseas holidays and came and went as he saw fit. He submitted that Mr Selvakumar would state that he was a subcontractor and could come and go at any time.8

[15] Mr J Mather gave evidence that Mr Selvakumar would usually arrive at around 9.30-10am, and sometimes did not attend the office at all. 9 He also gave evidence that occasionally Mr Selvakumar would not return from his lunch breaks.10

[16] Mr Selvakumar disputed this evidence and submitted that he attended the Respondent’s offices from 9am to 5pm Monday to Friday and 9am to 1pm Saturday. He submitted that he may have been late once or twice. 11

[17] The hours worked by Mr Selvakumar were part of the contract arrangement he had entered into with Mr Mather. Mr J Mather was a convincing witness and I accept his evidence that Mr Selvakumar did not always attend the office at his own discretion. There was no evidence of any disciplinary action taken put before me nor did any performance discussion occur when he failed to attend work.

[18] Further, it is not uncommon for a contractor to submit time sheets for billing purposes and this alone does not establish that Mr Mathers had control over Mr Selvakumar.

[19] Mr Selvakumar submitted that work was performed at the Respondent’s directions and the final output of his work was subject to the Respondent’s approval. He also submitted that the responsibility for the work performed by himself was borne by the Respondent. 12

[20] Mr Selvakumar’s evidence was that the Respondent was also in control of his work in that he was required to use their taxation portal and be trained by Mr Mather as he had no earlier training in Australian taxation and accounting matters. 13

[21] Mr Mather’s evidence was that he was in control of all lodgements, 14 however this was because Mr Selvakumar was not a registered tax agent and could not market or provide any tax services under his own name.15

[22] Mr Selvakumar also submitted that he was required to seek approval prior to taking leave and produce medical certificates when he took sick leave. 16

[23] Mr Mather gave evidence that Mr Selvakumar could take leave whenever he wanted to, however just had to inform him prior to leaving. He submitted that Mr Selvakumar would advise them when he would be unavailable, sometimes for a single day, sometimes for two to three months. 17 His evidence was that he had never denied Mr Selvakumar leave and only required him to notify him of his leave as he needed to manage their clients.18 Mr Mather conceded that emails had been filed in which he advised Mr Selvakumar that he had taken leave without approval and that leave would not be granted if certain work was not done.19

[24] The evidence establishes that Mr Mather had not exercised overall control over how Mr Selvakumar performed his work. Mr Mather did not have ultimate authority over Mr Selvakumar’s day to day activities. The evidence supports a finding that Mr Mather seldom met with Mr Selvakumar and that Mr Mather who worked predominately at another site did not perform any direct supervision over the work of Mr Selvakumar. Mr Selvakumar was not required to have his work reviewed or supervised by either Mr Mather or Mr J Mather.

[25] This weighs against a finding of an employment relationship between the parties.

Whether the worker performs work for others (or has a genuine and practical entitlement to do so)

[26] Mr Selvakumar’s evidence was that he could not perform work for others as he did not have the authority to lodge any tax returns or BAS returns. He submitted that every account that he prepared was done with the Respondent’s software and would need to be lodged by Mr Mather. 20

[27] Mr Selvakumar gave evidence that he did not bill anybody directly. 21 He also submitted that he could not perform any work for others as he was required to be in the Respondent’s office.22

[28] Mr Selvakumar conceded that he had been operating his business as a sole trader in the insurance industry. 23 His evidence was initially that he ceased seeing his other clients within three or four months of commencing work with the Respondent24, and subsequently that he had last performed work for another client five months after commencing with the Respondent.25

[29] Mr Mather gave evidence that Mr Selvakumar was performing contract work for others, and that whilst he was not aware of what the work was and who it was for, he was aware of Mr Selvakumar coming and going to meet other clients and perform work. Mr Mather advised that he was aware of this as, when following up with Mr Selvakumar as to how many clients he had generated, Mr Selvakumar would advise that he had been performing insurance work or had other things that he had to do. 26

[30] Mr Mather gave evidence that Mr Selvakumar had also told him he was performing insurance work as the income he was getting from the Respondent was not sufficient. 27

[31] Mr Mather also gave evidence that Mr Selvakumar was able to utilise the room at his premises to see other clients, and that he knew this to be the case as he would recognise the clients that were his and notice those that were not. 28

[32] Whilst I’m not satisfied based on the evidence before me that Mr Selvakumar was performing work for others, I am satisfied that he had a genuine entitlement to do so. This weighs against a finding of an employment relationship between the parties.

Whether the worker has a separate place of work and or advertises his or her services to the world at large.

[33] Mr Selvakumar performed work out of the Respondent’s premises. 29 The Respondent submitted that Mr Selvakumar rented two rooms in their office, one of which he himself rented out to a lawyer.30

[34] Mr Selvakumar gave evidence that whilst he was initially asked to pay rent, Mr Mather later advised that he would treat the money as having been paid for his training. Mr Selvakumar submitted that he was advised that there was no need for him to pay rent after July of 2015. 31

[35] Whilst there was a dispute between the parties as to whether Mr Selvakumar paid rent or whether he received training in lieu of paying rent, the evidence establishes Mr Selvakumar elected to lease two offices from Mr Mather, one of which he sublet to a lawyer. There is no evidence before me that would lead me to believe that Mr Selvakumar was obliged to do so. This weighs against a finding of an employment relationship between the parties

[36] The Respondent submitted that Mr Selvakumar operated as a business. They submitted that he advertised and letter dropped in Bundoora with his contact details in order to generate more revenue. 32

[37] However, the Respondent provided no evidence that this had been done and I am not satisfied that I can conclude that Mr Selvakumar advertised his services to the world at large on the basis of the evidence before me. This weighs in favour of a finding of an employment relationship between the parties.

Whether the worker provides and maintains significant tools or equipment.

[38] Mr Selvakumar’s evidence was that all tasks processed by him were done so on the Respondent’s laptop with accounting software provided by the Respondent. 33 He gave evidence that the Respondent had set up a security server and gave laptops to him and all employees so that they could access the security server.34 Mr Selvakumar also submitted that he was provided with a company car.35

[39] The Respondent submitted that the Applicant had initially provided his own laptop and car, however when his laptop broke down he requested to borrow one of the company laptops. 36 Mr Mather’s evidence was that Mr Selvakumar used his own laptop for a year before borrowing one from the company.37

[40] Mr Selvakumar denied that his laptop had broken and gave evidence that it was still operational. 38

[41] Similarly, the Respondent submitted that the Applicant’s car had been written off, and consequently he had utilised one of the company cars with an agreement to pay the lease payments. 39

[42] Mr Mather’s evidence was that in the second year that Mr Selvakumar was working for the Respondent he was not meeting the targets they had set in developing clients. He submitted that they had a discussion as to how this could be improved and Mr Selvakumar advised that he needed a car in order to go and meet clients, however he couldn’t afford to buy a new one. Accordingly, Mr Mather submitted that they provided Mr Selvakumar with a company car and that Mr Selvakumar would reimburse him for the lease payments. 40

[43] I prefer the evidence of Mr Mather in this regard and I am satisfied on the evidence before me that Mr Selvakumar had operated using his own equipment when he was first engaged by the Respondent however subsequently, due to Mr Selvakumar’s financial circumstances, was aided by the Respondent to ensure the continued operation of his services. This weighs in favour of a finding of an employment relationship between the parties.

Whether the work can be delegated or subcontracted

[44] Mr Mather gave evidence, and I accept, that Mr Selvakumar was not able to delegate or subcontract out his work. 41 This weighs in favour of a finding of an employment relationship between the parties.

Whether the putative employer has the right to suspend or dismiss the person engaged

[45] Mr Mather gave evidence that he could not take any disciplinary action against Mr Selvakumar. 42 Whilst Mr Selvakumar filed emails in which Mr Mather or one of his subordinates had warned that the Respondent may take disciplinary action in the form of financial penalties, there was no evidence before me that they ever did so or that these emails were anything more than company-wide threats that did not eventuate.

[46] This weighs against a finding of an employment relationship between the parties.

Whether the putative employer presents the worker to the world at large as an emanation of the business

[47] Mr Selvakumar submitted that during his time with the Respondent the Respondent provided testimonials to third parties that Mr Selvakumar was an employee. 43

[48] Mr Mather gave evidence that as Mr Selvakumar was not meeting his targets, they decided to advertise his services. He submitted that they ran Google ads and produced brochures with the company name and logo but with Mr Selvakumar’s name and contact number. His evidence was that the Respondent paid for this advertising as Mr Selvakumar was unable to, however reduced the percentage he received from the amounts he invoiced and collected from clients. 44

[49] Mr Selvakumar’s evidence was that he was required to wear a uniform when working for the Respondent. 45

[50] Mr Mather’s evidence was that whilst the Respondent has a t-shirt with the company logo as a uniform Mr Selvakumar was not required to wear it. He submitted that some of his employees would and some would not, however it was an option for them to wear when they did not wish to wear a full suit and tie. 46

[51] Mr J Mather gave similar evidence, stating that staff were not required to wear clothing with the company logo and that Mr Selvakumar would usually attend work in a suit. 47

[52] On further cross-examination, Mr Selvakumar conceded that he was permitted to wear a suit and tie or the company t-shirt, and submitted that the suit and tie was a uniform as it was a specific necessity. 48

[53] I do not accept that Mr Selvakumar was required to wear a uniform, however I am satisfied that through their advertising the Respondent presented Mr Selvakumar to the world at large as an emanation of the business. This weighs in favour of a finding of an employment relationship between the parties.

Whether income tax is deducted from remuneration paid to the worker

[54] Mr Selvakumar submitted that the Respondent provided him with payment summaries for the financial years 2016 and 2017 which showed the income earned and tax deducted. He submitted that they also paid superannuation on his behalf, deducting it from his dues. 49

[55] The Respondent submitted that Mr Selvakumar submitted tax invoices with his ABN from 1 April 2015 to 13 May 2018. They submitted that he was not subject to PAYG taxation and submitted his Business Tax Return as a sole trader. 50

[56] Mr Mather submitted that Mr Selvakumar had brought him the payment summaries, already completed, and asked him to sign them. He submitted that Mr Selvakumar advised that he wanted to pay some superannuation for his retirement and requested that he take it out of his payments. Mr Selvakumar denied that this had occurred and submitted that he prepared the payment summary in accordance with the Respondent’s instructions. 51

[57] The PAYG payment summary filed by Mr Selvakumar for 2016 stated that gross payments to Mr Selvakumar had been $2,150 and the summary for 2017 stated $8,172. However, the invoices for the 2017 financial year indicate that Mr Selvakumar’s total earnings were $25,190.25, with $8,172 as salary and $15,025.29 as a net amount to be declared under his ABN. Without making comment as to whether the creation of these payment summaries were part of a legitimate tax minimisation strategy or an attempt at tax avoidance, I am not satisfied that the evidence before me demonstrate that income tax was consistently deducted from the remuneration paid to Mr Selvakumar.

[58] This weighs against a finding of an employment relationship between the parties.

Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks

[59] Mr Selvakumar’s evidence was that he was not paid on a weekly basis and was instead paid a percentage of the amount he invoiced and collected from the Respondent’s clients. 52

[60] The Respondent submitted that Mr Selvakumar issued them with tax invoices under his own ABN from 1 April 2015 to 13 May 2018 which were paid as per the subcontracting agreement. 53 Mr Mather’s evidence was that Mr Selvakumar already had his ABN as he had been completing some insurance work from 2011.54 Mr Mather gave evidence that the invoices from Mr Selvakumar were issued irregularly when the Applicant had collected payments.55

[61] This weighs against a finding of an employment relationship between the parties.

Whether the worker is provided with paid holidays or sick leave

[62] Mr Selvakumar submitted that he was on leave from 31 August 2017 until 1 November 2017. His evidence was that he was not paid during this time and was not paid even after collecting monies from his clients upon his return. 56 Mr Selvakumar gave evidence that he was not paid during any period of leave that he took.57

[63] The Respondent submitted that every year the Applicant had taken two months of overseas holidays which he had not been paid for. They also submitted that he had not received any sick leave. 58

[64] This weighs against a finding of an employment relationship between the parties.

Whether the work involves a profession, trade or distinct calling on the part of the person engaged

[65] Mr Selvakumar was working for the Respondent as a Senior Accountant. 59 This is the type of distinct profession, trade or calling that could readily provide services as a contractor, however I consider this to be a neutral consideration.

Whether the worker creates goodwill or saleable assets in the course of his or her work

[66] Mr Selvakumar’s submission was that he was regularly advised in meetings with the Respondent that he was expected to generate more income by bringing in additional clients. 60

[67] The Respondent submitted that Mr Selvakumar had generated goodwill with their clients for his own benefit and had taken them with him when he left the business. 61

[68] I consider this to be a neutral consideration.

Whether the worker spends a significant portion of his remuneration on business expenses

[69] The parties did not make any submissions in relation to this consideration. Accordingly, I consider this criterion to be neural.

Conclusion

[70] I have considered the matters set out above and, on balance, am satisfied that Mr Selvakumar was engaged by the Respondent as an independent contractor and not as an employee. Accordingly is it not necessary for me to consider whether Mr Selvakumar was dismissed by Northcity Accountants and if so, whether that dismissal was harsh, unjust or unreasonable.

[71] Mr Selvakumar is not a person protected from unfair dismissal and is unable to pursue his application. An order 62 dismissing the application will be issued with this decision.

COMMISSIONER

Appearances:

S. Selvakumar on his own behalf;

J. Mather for the Respondent.

Hearing details:

2018

Melbourne

September 12

Printed by authority of the Commonwealth Government Printer

<PR702869>

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