Workplace Law For Employment Contract Or Relationship

Employment relationships

Discuss about the Workplace Law for Employment Contract or Relationship.

The major issue arising in this case study is the type of employment contract or relationship is in place. That is, whether the contracted engagement is one of a contract of service or a contract for services. The answer to this question will ascertain whether the worker is an employee or an independent contractor. Additionally, based on the facts provided, it is also important to discuss the possibility of the existence of a sham arrangement among the parties involved. This constitutes the second legal issue that the paper will seek to analyse. Furthermore, the analysis is incomplete without an examination of the contractual obligations of employers as provided by law. This discussion will dwell specifically on the obligations with regard sick and carer leaves, injury, taxation and superannuation payments and finally termination of employment. An analysis of the available remedies to aggrieved parties, should a breach of either obligation arise, will also be provided. 

A contract of service establishes an employee and employer relationship while a contract for services creates that of a client and an independent contractor (Marshall, 2006). The essence of the rights and obligations owed in a contract of work for pay is dependent on whether the contract is of services or for services (Marshall, 2006). However, courts, relevant parties and administrative bodies have faced great difficulty over the years in identifying the nature of contractual relationships based on these simple statements (Hopgood Ganim, 2011). For an identification and distinction of employment relationships, legislation has greatly relied on common law (Workplace Law Lecture 2, n.d.). As no single test is conclusive, various tests have been established with the aim of providing a criterion against which relationships are tested to determine employment (Hopgood Gamin, 2011). These tests include; the control test, the organisation test, the multi-indicia test, and the economic reality test. The focus of this paper, however, will be the control test and the multi-indicia test.

Tests for Employment

Historically, the ‘control test’ was considered as the most effective test for employment relationships (Hopgood Gamin, 2011). The significant elements under this test were the ‘degree’ of control and the ‘actual exercise’ of control (Marshall, 2006). These went hand in hand with the questions regarding the activity to be performed, the place of performance and the time it was performed (Marshall, 2006). McCardie J established the test in Performing Right Society Ltd v Mitchell & Booker Ltd (1924), where he stated that the nature and degree of control exercised on an alleged servant determined whether they were an employee or an independent contractor. This point was reiterated in Federal Commissioner of Taxation v J Walter Thompson (Australia) Pty Ltd (1944) where Latham CJ stated that if a skilled worker was subjected to extensive control with regard to how they perform their duties then they qualified to be employees.

Tests for Employment

Over time, the ‘control’ test surpassed its usefulness based on the fact that in some cases the skill of the employee exceeded that of the employer thus reducing the level of control applied (Marshall, 2006). Courts then adopted the ‘multi-indicia’ or ‘multi-factor’ test which considers various factors, including control, in establishing employment relationships (Fair Work Building & Construction, 2013). The test was outlined in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) where the High Court established that although the control test was significant it was no longer a sufficient and factors such as the mode of payment, working hours, tax deductions, delegation of duties among others also had to be considered (Sewerynski, 2003). In Ace Insurance Ltd v Trifunovski (2011), the courts determined that agents, previously thought to be independent contractors, were employees based on the mode of payment, training and assignment of duties by the ‘host’ company (Wood & Groch, 2013).

Workers who are employed by a labour agency, that later contracts them to work for another company, are known as labour-hire workers (Workplace OHS, n.d.). Labour hire workers are entitled to the relevant modern awards as well as National Employment Standards (NES) regardless of the standing arrangements at the host company and it is the duty of the labour hire organisation to ensure that they receive these entitlements (Fair Work Ombudsman, 2013). According to ATO (2016), labour hire businesses are also obligated to withhold tax and make superannuation payments for their employees. The host organisation has no obligation to the employees in this regard. However, the Work Health and Safety Act 2011, imposes on both the host company and the agency a duty to ensure the working environment is safe and well maintained. In Drake Personnel Limited v WorkCover Authority of New South Wales (1999), it was held that in as much as the host company owes a duty to the employee, the labour hire agency has an obligation to ensure that the premises are safe for their employee (Employee Relations the International Journal, 2006)

A sham contracting arrangement is created when an employer, in order to avoid certain obligations, purports to pass off an employer-employee relationship as a contract for service (Fair Work Ombudsman, 2013). An example would be where the employee is required to have an ABN and submit invoices and a contractor agreement is relied on to make the working relationship appear legitimate (Emery & Associates, n.d.). The Fair Work Act 2009 prohibits employers from; claiming an employee is an independent employer, misleading the employee to convince them to become an independent contractor, terminating employment for reluctance to become an independent contractor and also terminating employment to rehire a worker as an independent contractor. According to Wheelright (2004), Damevski v Guidice (2003), is a case that illustrates how shrewd and knowledgeable employers can take advantage of the contrast in common law between employees and independent contractors to their workers’ disadvantage. In Re Porter; ex parte Transport Workers Union of Australia (1989), Gray J stated that parties could not make something resembling a rooster and purport to masquerade it as a duck. All in all, sham arrangements are illegal under Australian law.

Labour Hire Workers

The determination of Marion’s employment relationship is not a straightforward one. This is because there are three parties involved in the contract for labour. Marion was first hired by Technicalities Ltd, which later contracted with Innovative Storage for Marion’s services. This three-party arrangement brings about the concept of labour hire employees. It is stated that Marion worked for other companies when she could and also registered an Australian Business Number as per Technicalities requirements. These facts provide characteristics that are normally unique to independent contractors. However, having an ABN number among other specifications does not automatically make one an independent contractor (Hills, 2015). It is important to test Marion’s circumstances under various factors to determine her employment relationship.

In the case study, it is seen that Marion took her daily work instructions from Innovative Storage. The company informed her of when her working hours were, what she would be doing and with whom she would be working. This allocation of duties and supervision constitutes a degree of control that under Federal Commissioner of Taxation v J Walter Thompson would be said to prove employment. Marion also received training from IS in an account system once a week; in Ace Insurance Ltd v Trifunovski this would be a factor distinguishing as an employee. Marion did not use her own equipment, she wore the IS uniform while at work and fell down the stairs while carrying IS office equipment. Marion also had an ‘ongoing expectation to work’, that is she had not been contracted for a specific task at a specific time. All these factors serve to prove that Marion was indeed an employee.

As it has been established that Marion was an employee based on a multi-indicia test, the next issue to determine is who her employee was. As per the facts, Marion received her remuneration from Technicalities who paid her at a flat hourly rate. This would automatically, under normal circumstances, make Technicalities her employer. However, Marion did not take her instructions from Technicalities but rather received them from Innovative Storage who also determined her hours. In FP Group Pty Limited v Tooheys Pty Limited (2013), the Full Bench of the Fair Work Commission stated that under labour hire agreements, the labour hire organisations assumed the role of employer regardless of the degree of control exercised by the host company (Hall & Gallop, 2015). With this in mind, it is clear that Technicalities Ltd was Marion’s employer.

Sham Contracting Arrangements

At this juncture, it is essential to consider the issue of sham contracting arrangements. Technicalities Ltd. had requested Marion to register an Australian Business Number so as to be able to receive her pay. This statement can be said to be a misrepresentation that led Marion to enter into without her knowledge. This misrepresentation allowed Technicalities Ltd to avoid responsibilities such as paying superannuation and taxes on Marion’s behalf. She was also not paid sick as well as carer leave and her medical expenses after her injury at Innovative Storage’s premises were reimbursed by the host company. Therefore it is evident that Technicalities Ltd was in breach of various NES requirements as an employee with regard to Marion’s entitlements. It is also their contractual obligation, together with the host company, to ensure that the workplace is safe for Marion and compensate her for any injuries suffered.

In conclusion, therefore, Marion was an employee of Technicalities Ltd who owed her a contractual duty of care to ensure her safety, withhold her taxes, make her superannuation payments and allow her paid sick and carer leave. 

References

Cases:

Performing Right Society Ltd v Mitchell & Booker Ltd (1924) 1 KB 762

Federal Commissioner of Taxation v J Walter Thompson (Australia) Pty Ltd [1944] HCA 23

Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1

Ace Insurance Ltd v Trifunovski [2011] FCA 1204

Drake Personnel Limited v WorkCover Authority of New South Wales (1999) 90 IR432

Damevski v Guidice [2003] FCAFC 252

Re Porter; ex parte Transport Workers Union of Australia (1989) 34 IR 179

FP Group Pty Limited v Tooheys Pty Limited [2013] FWCFB 9605

Sources:

Australian Taxation Office. (2015). Super for Employers. Retrieved from https://www.ato.gov.au/Business/Super-for-employers/#

Australian Taxation Office. (2016). PAYG Withholding and Labour-hire Firms. Retrieved from https://www.ato.gov.au/business/PAYG-withholding/in-detail/labour-hire/PAYG-withholding-and-labour-hire-firms/

Emerald Group Publishing. (2006). Health and Safety at Work and its Relevance to Employment Relations Research. Employee Relations the International Journal, 28(3).

Fair Work Building & Construction. (2013). Employee or Independent Contractor? Retrieved from https://www.fwbc.gov.au/sites/g/files/net666/f/Employee%20or%20Independent%20contractor_0.pdf

Fair Work Ombudsman. (2013). Understanding On-hire Employee Services: A Guide for On-hire Businesses and Host Organisations. Retrieved from www.fairwork.gov.au

Hills, S. (2015). Independent Contractor, Labour-hire Worker or Employee?. Wine & Viticulture Journal, November/December. Retrieved from https://www.winesa.asn.au/_r4569/media/system/attrib/file/992/Independent%20contractor,%20labour%20hire%20worker%20or%20employee.pdf

Hopgood Ganim Lawyers. (2011). Contractors v Employees: The Differences and Why it Matters. Retrieved from https://www.mondaq.com/australia/x/125432/Contractors+v+Employees+The+differences+and+why+it+matters+Part+3

Marshall, B. (2006). Working it Out- Employee or Independent Contractor?. The National Legal Eagle, 12(2), 14-19. Retrieved from https://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1102&context=nle.

Murdoch University. Workplace Law Lecture 2 slides.

RP Emery & Associates. (n.d.). Sham Contracting- The Facts You Need to Know. Retrieved from https://www.findlaw.com.au/articles/5706/sham-contracting–the-facts-you-need-to-know.aspx.

Sewerynski, M. (2003). Collective Agreements and Individual Contracts of Employment. Kluwer Law International.

Snedden Hall & Gallop Lawyers. (2015). Labour Hire Workers- Who is the Employer?. Retrieved from https://www.shglawyers.com.au/news/legal-news/article/?id=labour-hire-workers-who-is-the-employer.

Wheelright, K. (2004). Roosters, Ducks and Labour-hire Arrangements: Damevski v Guidice (2003) 202 ALR 494 (FCA Full Court). Southern Cross University Law Review, 8, 190-200. Retrieved from https://www.austlii.edu.au/au/journals/SCULawRw/2004/8.pdf.

Wood, A., & Goch, D. (2013). The Differences Between Employee and Contractor. Retrieved from https://www.charteredaccountants.com.au/News-Media/Charter/Charter-articles/Business-management/2013-03-The-differences-between-employee-and-contractor.aspx.

Workplace OHS. (n.d.). Labour-hire Workers. Retrieved from https://workplaceohs.com.au/responsibilities/contractors/labour-hire-workers.