STATEMENT

Fair Work Act 2009
Section 394 - Application for unfair dismissal remedy

Robert McCrae
v
Perth 178 Backpackers and Convenience Store
(U2019/10017)

Application for an unfair dismissal remedy – jurisdictional issue – whether guest of hostel performing cleaning work was an employee – Statement expressing provisional view to assist parties – matter referred to Member-assisted conciliation

[1] In order to facilitate conciliation, this Statement expresses a provisional but not concluded view on whether Mr Robert McCrae (Mr McCrae) was, for the purposes of Part 3-2 of the Fair Work Act 2009 (the FW Act), and employee of the respondent business.

[2] On 6 September 2019 Mr McCrae applied to the Fair Work Commission (the Commission) under section 394 of the FW Act for an unfair dismissal remedy against Perth 178 Backpackers and Convenience Store (Perth Backpackers).¹ He claims to have been unfairly dismissed on 9 August 2019 effective 16 August 2019.

[3] Perth Backpackers oppose the application.

[4] A preliminary issue arose for determination. Perth Backpackers contend that Mr McCrae was not employed under a contract of employment. It says that he was a guest of the hostel who performed some domestic work. It says that the business was not Mr McCrae’s employer and there was no dismissal “from employment” within the meaning of section 386 of the FW Act.

[5] Mr McCrae’s application has not been the subject of conciliation. Perth Backpackers exercised its right to have the jurisdictional issue heard before conciliation was conducted.

[6] Directions were issued by the Commission on 15 and 31 October 2019.

[7] I heard the jurisdictional issue by video link on 21 and 28 November 2019. I heard oral evidence from five persons:

•  Robert McCrae (Applicant);

•  Kim Meng Hon (Mr Hon Snr) (Owner);

•  Yueh Chih Chiang (Cindy or Mrs Hon) (Owner);

•  Paul Scott (Guest); and

•  Chih-Chieh Huang (Zac or Mr Huang) (Guest).

[8] I also received written submissions and documents from both parties, including a limited Statement of Agreed Facts.

[9] Mr McCrae was self-represented. Perth Backpackers was represented by Mr and Mrs Hon’s son, Mr Hon Jnr (Alan). Mr and Mrs Hon, as well as Mr Huang, gave evidence in the Mandarin language, via an interpreter.

[10] At the conclusion of proceedings, I reserved my decision.

This Statement

[11] At this stage of my decision-making, I have formed a provisional but not yet concluded view on the jurisdictional issue.

[12] I consider it appropriate via this Statement to inform the parties of my provisional view and provide each the opportunity to participate in Member-assisted conciliation.

[13] Such a course will enable the parties to reflect on the evidence and my provisional view, and given that no conciliation has yet taken place, retain some degree of control over the outcome of these proceedings.

[14] The provisional view I have formed is in the context of an unfair dismissal application under Part 3-2 of the FW Act, and the statutory concept of “dismissed” for the purposes of that Part. Aside from my view being provisional, it does not necessarily apply more broadly to characterise the relationship for other legal purposes.

Provisional View

[15] I make the following findings, on a provisional basis.

[16] Perth Backpackers operate a small accommodation hostel with an adjacent convenience store in inner Perth. It is owned and operated by Mr and Mrs Hon.

[17] In 2017 Mr McCrae, who at that time was in financially distressed circumstances, came to be a resident of the hostel.

[18] After Mr McCrae had been a guest for a few months, and out of concern for his financial plight, two fellow residents (Mr Scott and a Mr Bourke) approached the owners suggesting that more could be done to help Mr McCrae, who was going through a difficult time in life.

[19] A suggestion was discussed between the two guests and Mr and Mrs Hon that the owners could offer Mr McCrae free accommodation in return for performing cleaning work in the hostel.

[20] An oral agreement was subsequently reached between Mr Hon and Mr McCrae to this effect. The precise circumstances in which that agreement was reached and its terms are in dispute. Whether the agreement was varied during its life to add or vary hours of work, duties or benefits is also in dispute.

[21] What is not in dispute is that there was an agreement between Mr McCrae and Perth Backpackers for him to perform regular cleaning work in exchange for free accommodation. It is also not in dispute that this was not a written agreement. To the extent there was an agreement, it was in oral form only.

[22] Suffice for the purposes of this Statement, over the next two years Mr McCrae performed regular cleaning work on most (but not all) days in the hostel under the supervision of Mr and Mrs Hon. For the purposes of this Statement, I make no findings beyond what I observe below as to specific frequency or duration of times worked. 2

[23] Mr McCrae cleaned using buckets, mops and cleaning products supplied by the hostel. Mr McCrae had no prior expertise in cleaning. Although he was not asked to do the most arduous of cleaning duties, it was not ‘light duties’. Although Mr McCrae’s work was criticised from time to time by Mr and Mrs Hon, it was usually (especially initially) to an adequate minimum standard. Although Mr and Mrs Hon did not cease doing cleaning work and sometimes had to ‘go over’ Mr McCrae’s work or ask for it to be re-done, Mr McCrae’s cleaning work had the effect of lessening the overall cleaning burden on the owners. Mr McCrae did some hours of cleaning (often two or three hours) on most, but not all days of the week. He was not provided a uniform but usually cleaned in his day clothes. He was required by Mrs Hon to look neat, after once being criticised for cleaning in his pyjamas.

[24] In return for cleaning work, Mr McCrae did not pay for his accommodation which, for paying guests was approximately $19 per day.

[25] Very occasionally Mr and Mr Hon applied a similar approach to other backpackers who arrived in Perth seeking accommodation but with no money. Those guests were short stays. No person other than Mr McCrae did cleaning or hostel work for free accommodation for any lengthy period.

[26] McCrae had no other business or work outside of the hostel. He was free to leave the hostel at any time (on a daily, permanent or temporary basis) and secure alternate or additional work. Mr Hon actively encouraged Mr McCrae to look for an external job.

[27] Mr McCrae contends that during his time at the hostel, his cleaning hours were increased, then subsequently decreased. He also contends that he was, for months on end, given additional duties such as security in the convenience store, and assisting guests with check-out or linen requests. I do not need to definitively determine those issues for the purposes of this Statement. Suffice to observe that no such positions in the business were created by the owners or held by others, and that the description Security Officer and Assistant Accommodation Manager referred to by Mr McCrae in his evidence were self-designated appellations.

[28] For the purposes of this Statement, I only take account Mr McCrae’s cleaning work as it is that work which I provisionally consider was the subject of an agreement. Other work performed was of an incidental character.

[29] For the first year of the agreement, the arrangement was mutually beneficial and amicable.

[30] However, in the second (and final) year of the agreement, problems emerged and the relationship strained. The owners believed Mr Hon’s cleaning work became sub-standard and required regular oversight and remediation. The owners started to receive complaints about Mr McCrae, not just in relation to his cleaning work but also his personal hygiene and conduct.

[31] Mr and Mrs Hon debated what to do with Mr McCrae, and this put strain on their relationship. They felt conflicted between a desire to help Mr McCrae and what they believed to be a seemingly unending arrangement that they believed was having adverse repercussions for their business. In short, they believed that Mr McCrae had overstayed his welcome. In the midst of this, Mr Hon suffered a serious health condition.

[32] In February 2019 Mr Hon and Mr McCrae exchanged emails about the work Mr McCrae was doing, its impact on Mr McCrae’s health and wellbeing, concerns about Mr McCrae’s personal hygiene and certain guest complaints. In one of these exchanges, Mr McCrae said that he “will have to review whether I continue to make a contribution at 178 and whether I continue as a guest at 178.”³ Mr McCrae made enquiries of Mr Hon to establish under what terms he could leave the hostel (“stand down from all my responsibilities at 178”), and whether the bond he initially paid as a guest would be repayable. His right to leave (with 9 days remaining as a guest) was confirmed by the owners.⁴

[33] A consensus was reached to revert to the original agreement (2 hours cleaning per day).

[34] In March 2019 Mr Hon believed Mr McCrae had been rude to his wife. He told Mr McCrae to apologise to her, or “pack all your stuff and leave my property”. Mr McCrae apologised by email but defended his conduct.⁵

[35] The situation came to a head in August 2019 after a guest, Mr Huang, complained about what he considered to be conduct by Mr McCrae that made him feel uncomfortable and Mr McCrae made reciprocal complaints about the residential habits of some guests.

[36] On 9 August 2019 Mr Hon sent Mr McCrae an email. It read, in part:⁶

“Robert, please read carefully as a staff/worker of 178…

Robert, I have read through the complaints letter feedback by those who stayed at 178…I want you go down the store read by yourself tomorrow.

With all these reason list below I don’t think why I should keep you anymore. Despite I have given you so many chances to instruct you but you still doing your way not listening, Robert…

So this is to notify you that Perth 178 backers and convenience store sack you from the day of 16^th August 2019 please note that from the day you have terminated no more as a exchange accommodation worker with 178 backpacker any more.

Please be aware the amount of $60 you borrowed from 178 to be paid back before you move out.

The management”

[37] Mr McCrae replied shortly thereafter by email which read, in part:⁷

“I dispute the series of disrespectful claims you have made against me (in response to the quality of my cleaning day in and day out).

Out of courtesy I acknowledge that you want me to leave as of the 16th August!

Please! Beware that I am owed a $100 Bond.”

[38] On 14 August 2019 Mr McCrae sent Mr Hon an email and letter of demand. He claimed unfair dismissal. He sought immediate reinstatement as a guest. He sought his $100 bond. He sought that the business classify a $60 payment made to him as a “gift”. He sought that the business immediately evict two guests from the hostel. Finally, he sought that Mr and Mrs Hon “immediately relinquish ownership” of Perth 178 Backpackers, issue a statement to that effect, put in place temporary management arrangements and agree to restitution over the next 8 years.⁸

[39] Based on the above, I express the following provisional conclusions on the jurisdictional issue.

[40] An oral agreement can form a contract of employment under Australian law. An employment contract is not required to be an agreement in writing.

[41] For a contract of employment to exist, there must, at law, be a contract. The elements that comprise a contract must exist. This involves a meeting of minds in which there is a legally binding exchange of promises in return for some mutually agreed benefit. In legal terms the elements include:

•  An offer;

•  An acceptance of the offer;

•  Valuable consideration; and

•  An intention to create legal relations on agreed and enforceable terms.

[42] Even where these elements exist, a contract can be void if it is made for an illegal purpose or by persons without capacity or without genuine consent.

[43] Further, not all contracts for the performance of work are employment contracts. An employment contract is a contract of service. It differs from a contract for the performance of services.⁹ A contract for services involves a service provider who is working as an independent contractor, not an employee. There are characteristics that differentiate an employment contract from a contract with an independent contractor. Often an independent contractor is self-employed, operating their own business. In contrast, an employee is usually working under the control of others.¹⁰

[44] Whether an employment relationship exists is a question of fact. The question whether an employment relationship was created does not depend upon the parties’ subjective intentions or understandings. Rather, it depends upon what a reasonable person in the position of the parties would have understood was the objective position.

[45] Each case turns on its own facts. As the Commission said in Re McDonald:¹¹

“For example, a worker may receive board and lodgings or reimbursements for expenses and still be considered a volunteer provided that this was the fundamental nature of the relationship. In other situations, a worker who performs work for non-monetary benefits, such as rent free accommodation, can be considered to be an employee rather than a volunteer if the underlying relationship is objectively intended to be a legal contract of that nature.”

[46] For Mr McCrae’s application to fall within the jurisdiction of the Commission I need to be satisfied that:

1. There was an agreement between Mr McCrae and Perth Backpackers that formed a contract at law; and

2. The contract at law was a contact of employment; and

3. Mr McCrae was dismissed from the contract of employment (within the meaning of section 386 of the FW Act).

[47] On issue 3 (above), my provisional view is that there was an agreement between Mr McCrae and Perth Backpackers to do cleaning work in exchange for free accommodation and that this agreement was terminated by Perth Backpackers on 9 August 2019 effective 16 August 2019. That termination was capable of being a dismissal within the meaning of section 386 of the FW Act as it was conduct at the initiative of the business.

[48] On issue 2 (above), my provisional view is that the weight of evidence points against Mr McCrae having been an independent contractor under a contract for services. He was not operating his own business. He was using equipment supplied by Perth Backpackers. He was under the supervision and control of Mr and Mrs Hon as to the quality and general frequency and timeliness of his work.

[49] Issue 1 (above) involves more difficult questions. There was an offer, an acceptance and (in my provisional view) valuable consideration in the form of an exchange of promises for mutual benefit. However, whether there was, in an objective sense, an intention to create legal relations on agreed and enforceable terms is a more problematic issue.

[50] If there was, my provisional view is that Mr McCrae’s application would be within jurisdiction.

[51] If there was not, Mr McCrae’s application would fail for want of jurisdiction.

[52] I express no concluded view on this question, other than to indicate that there is some force in Mr McCrae’s contentions that the agreement was not a mere domestic arrangement or voluntary work. While allowance must be made for Mr Hon’s poor English and use of terms in his email of 9 August 2019 that he did not intend to be taken as a “sacking” or “termination” from “staff”, the subjective intention of a party is not a proper basis to determine this matter. The length of the arrangement, the context in which the work was performed, the regularity of the work and the formality of the manner in which the arrangement was brought to an end point in favour of the conclusion sought by Mr McCrae.

[53] Against that conclusion, however, is the fact that Mr McCrae was free to leave at any time to secure a job, referred to himself as a “guest” in some of his emails to Mr Hon and was told by other guests and the owners not to hold himself out as a staff member (let alone an ‘assistant accommodation manager’).

[54] Should I be required to deliver a concluded decision on the jurisdictional issue, I will further consider whether there was an intention to create legal relations.

Next Steps

[55] I consider it appropriate to provide, in light of this Statement, the opportunity for Mr McCrae and Perth Backpackers to participate in Member-assisted conciliation, which has not occurred to date.

[56] Such a course will enable the parties to reflect on the hearing I conducted and my provisional view expressed in this Statement. It will allow the parties to retain some degree of control over the outcome of these proceedings.

[57] It is not appropriate for me to conduct Member-assisted conciliation given that I am determining the jurisdictional issue and may (depending on the outcome of that question) need to conduct further proceedings and determine the merits of the unfair dismissal application.

[58] I will direct the parties into Member-assisted conciliation to be conducted by another member of the Commission. This will be conducted by Commissioner Platt, in person, in Perth on 16 or 17 December 2019.

[59] The precise time and date for the conciliation will be confirmed in advance to the parties by the Commissioner’s chambers.

[60] The Member-assisted conciliation will be conducted in private and not form part of the record of proceedings.

[61] If the file is returned to me by Commissioner Platt with the matter unresolved, I will publish a concluded decision on the jurisdictional issue.

[62] I add one final observation as the parties approach the conciliation, given their self-represented nature.

[63] The parties should consider not only my provisional view but also the prospects of the application as a whole, and the time, cost and effort associated with its prosecution and defence.

[64] If my concluded view was that Mr McCrae’s application falls within jurisdiction then it does not follow that his application before the Commission would succeed. There are many instances where unfair dismissal applications that are within jurisdiction fail on the merits. Where an Applicant fails on the merits, a decision setting out the grounds on which the application has failed is usually published. Equally, there are many (but proportionally fewer) applications within jurisdiction that are arbitrated and succeed. In those instances, remedies are able to be ordered at the discretion of the Commission. The scope of those remedies are limited by statute. Many of the outcomes sought by Mr McCrae in his letter of demand appear beyond the Commission’s jurisdiction.

[65] I have not heard the merits of Mr McCrae’s application and express no view on those questions.

[66] I issue a Direction referring the parties into conciliation in conjunction with the publication of this Statement.

DEPUTY PRESIDENT

Appearances:

R. McCrae, on his own behalf, with C. Polaine

A. Hon, for the Respondent

Hearing details:

2019.

Adelaide; Perth.

21 and 28 November.

Printed by authority of the Commonwealth Government Printer

<PR714839>

1 The correct legal description of the Respondent is The Trustee for the Hon Family Trust trading as Perth 178 Backpackers and Convenience Store: F3 Employer Response 5 October 2019

 2   Attachment 5 to Mr McCrae’s witness statement, which purports to be a record of days and hours worked from July 2018 to August 2019 was said to be typed by Mr McCrae from undisclosed personal handwritten notes that Mr McCrae says he kept but considers confidential and were not produced to the Commission. For the purposes of this Statement, and in the absence of the original notes being produced, I do not have regard to that document

3 R6

4 R7

5 A1 Attachment 6

6 A1 Attachment 10

7 A1 Attachment 10

8 R9 and R10

9 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Hollis v Vabu Pty Ltd (2001) 207 CLR 21

10 Abdalla v Viewdaze Pty Ltd t/a Malta Travel PR 927971, 14 May 2003

11 [2016] FWC 300 at [32] per Hampton C citing Cudgegong Soaring Pty Ltd v Harris (1996) 13 NSWCCR 92