PR957819 PR957819 Download Word Document AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION Workplace Relations Act 1996 s.170CE application for relief in respect of termination of employment John Jaworski and NSD Homes (U2004/7593) COMMISSIONER SIMMONDS MELBOURNE, 5 MAY 2005 Termination of employment. DECISION [1] Mr John Jaworski lodged an application for relief in relation to the termination of his employment by NSD Homes (NSD) of Hallam, Victoria, on 6 December 2004. By notice filed on 20 January 2005, the employer moved for the dismissal of the application for want of jurisdiction before the matter was referred to conciliation. The grounds for that motion were: The applicant was engaged under a contract of employment for a specific task - s.170CBA(1)(b). The applicant was engaged under a contract of employment for a specific period of time - s.170CBA(1)(a). The applicant was not an employee, but was self employed. [2] The jurisdictional objection was initially listed for hearing before his Honour, Senior Deputy President Kaufman on 11 February 2005. However, prior to the hearing, Mr Jaworski sought an adjournment for two weeks to allow him to obtain representation. NSD consented to the adjournment. [3] The file was subsequently reallocated to the Commission, as presently constituted, and listed for hearing on 21 March 2005. In those proceedings, the primary ground advanced was that Mr Jaworski was not an employee but a contractor of NSD. No submissions were advanced in support of the other two grounds of objection. [4] Evidence was given by Mr Jaworski and by Mr Travis Arthur, the marketing and sales manager of NSD Homes. [5] In summary, Mr Arthur testified: NSD is a domestic home builder. It owns and operates display homes to allow potential customers to view the quality and appearance of sample NSD houses. Sales consultants are engaged by NSD to work at the display homes to market and obtain sales. About June 2004, he negotiated with Mr Jaworski to enter a contract for supply of sales and marketing services. There was no discussion that he would be employed, the basis of the negotiations being that he would be a contractor. On 11 June 2004, the parties entered into a written agreement. A copy of that agreement was tendered in proceedings. 1 The agreement set out the duties and tasks to be performed by Mr Jaworski, and provides for remuneration based on a commission on the value of unconditional contracts of sale. It further provided that he was to be paid a retainer of $1000.00 per week for the first ten weeks of employment, to be offset against the other conditions. A sales target of four per month was set, to be reviewed and assessed each three months. Mr Jaworski commenced providing services to NSD on 10 July 2004. Prior to commencing, he was provided with brochures, sales forms, an NSD procedure and policy book, and a receipt book. He was assigned to two display homes, one at Berwick, the other at Narre Warren South. Supervision was minimal. He operated from a display home, either on his own or with another sales consultant. However, they would conduct their services and sales separately. The obligations on Mr Jaworski were to: Supply his services on the days the display homes were open; Provide the services in accordance with the obligations in the agreement and the policy and procedure folder; Report weekly in writing to Mr Arthur by facsimile about sales achieved and other queries received about sales. Mr Jaworski was required to provide and use his own motor vehicle and mobile phone. He was paid his retainer on rendering tax invoices. This was done on the letterhead of "J&J Consulting", ABN 25 179 846 883, in which a retainer of $1100.00 per week was claimed, including $100.00 of Goods and Services Tax (GST). Copies of the invoices and a summary of payments were tendered in proceedings. 2 While engaged by NSD, an electrical goods supplier, E&S Trading, also retained Mr Jaworski. NSD purchased goods from the supplier through Mr Jaworski - a copy of the relevant purchase order was tendered in proceedings. 3 [6] Mr Arthur also tendered a letter from E&S trading, stating, relevantly: "John Jaworski provided professional services for our company for approximately two years on a Tax Invoiced, time worked basis until Friday 6 th August 2004. He was not exclusively bound to work solely for E. & S. Trading during this period." 4 [7] Under cross-examination, Mr Arthur testified: That it was never discussed that Mr Jaworski could organise somebody else to do his work. In negotiations with Mr Jaworski, the standard contract was amended to accommodate Mr Jaworski's desire not to work weekends. He denied that there was any requirement for Mr Jaworski to work full-time, Monday to Friday. [8] Mr Jaworski's evidence was to the following effect: He did not recall any discussions that he would be engaged as a contractor, and had always assumed he would be an employee. He confirmed the evidence of Mr Arthur regarding the terms of the agreement. He also confirmed that there was no provision for leave or superannuation. It was originally agreed that he would work Monday to Friday and NSD would provide a hostess for weekends. However, that arrangement was never put in place. He agreed to temporarily work on Sundays. There were no set hours, but he was effectively required to work when the display homes were open, generally from 11.00 a.m. or 12.00 noon to 5.00 p.m. Additionally, he attended the head office in Hallam either before or after these hours to complete administrative tasks, report to Mr Arthur, and liaise with the drafting and estimating departments. NSD provided the use of telephones at the display homes and at head office, forms, photocopiers, letterhead, business cards, and support of the estimations and drafting department staff. He used his own motor vehicle, mobile telephone and lap top computer. Sales were to be conducted in accordance with the agreement and the NSD policy and procedure book. He had no authority to complete a sale without the approval of management. He worked under the direction and control of NSD, to whom he was accountable. He was held out to be a "New Home Co-ordinator" on business cards supplied by NSD. 5 [9] Cross-examined, Mr Jaworski testified: That his previous employment with E & S Trading was for two and a half years, and he was an employee. He gave them a week's notice of his termination, but agreed to finalise some matters for them while engaged by NSD. He did this with the approval of NSD. He was paid by them on presentation of an invoice. He was entitled to leave and commission of one per cent of sales, less Goods and Services Tax. He invoiced them in the name of J & J Consulting. He was unable to confirm whether he claimed business expenses as taxation deductions, or confirm whether his taxable income for the previous year was equivalent to the money he received from E & S Trading, as these matters were left in the hands of his accountant. Quarterly instalments were remitted to the tax office for Goods and Services Tax, but he was unable to provide detail as this was also left to his accountant. He could not recall receiving purchase orders addressed to E & S Trading after 6 August 2004. He agreed that he was never advised by NSD that he could not provide his services to anybody else. On occasions he worked alongside another sales consultant. There was no agreement about sharing conditions, although he could recall one occasion when Mr Arthur decided that the two should "go halves" if a sale became unconditional. It was not an agreement reached before the sale was made. The other sales consultant was not there in a supervisory capacity, and apart from the guidelines laid down, there was no supervision of his work. He confirmed that he did not have authority to finalise a sale. [10] In response to questions from the Commission, Mr Jaworski stated: That the initial offer of commission on sales was 1.2 per cent, and following his approaches in correspondence, it was increased to 2 per cent. The mobile telephone he supplied was used by customers to contact him. His motor car was used to travel to the office and other homes that customers may have been interested in apart from the display home at which he was based. There was no reimbursement for the use of the car, and it would be used for the latter purpose about three times per week, on average. Submissions [11] Mr Biviano, appearing for NSD, referred, in particular, to the decision of the Full Bench in Abdalla 6 and the summary of the law on distinguishing employees from independent contractors set out at paragraph 34 of that decision. [12] The evidence in this matter is largely not in dispute. Mr Jaworski worked in providing services as a sales consultant; he provided tax invoices; the terms of the agreement are provided; payment is on the basis of commission; the invoices provide for remittance of GST by Mr Jaworski. He was predominantly working on his own. It was a matter for him to generate his own sales, subject to guidelines. He had no authority to enter into a sale without the approval of NSD. There is no evidence that there was a high degree of control. He was not closely supervised. He had no set hours. For at least four weeks of his engagement he was also providing services to E & S Trading. He used his own lap top computer, mobile phone and his motor vehicle. He was unable to recall his accounts in answer to a question as to whether he would claim a taxation deduction for those items. The inference should be drawn that those expenses would be so claimed. [13] Reference was also made to the Full Bench decision in Donatacci . 7 In particular, reference was made to the following: "Taxation records and business activity statements should not be lightly disregarded, particularly when other evidence suggests they represent the true situation. In this case the appellant provided his own ladders, tools and other equipment for the purpose of his work for the respondent, as well as a vehicle in relation to which he had claimed $12,000 as a tax deduction in one year. It was not suggested that the records were incorrect in any relevant respect." 8 [14] Thus, many of the indicia of a contractor relationship and many of the other factors support the proposition that Mr Jaworski was a contractor; that he knew he was a contractor by reason of the way he structured his operation with a business name, a business number, that he was told when he commenced that he was a contractor and he effectively provided services on his own. [15] Mr McNab, appearing for Mr Jaworski, claimed that the agreement which purports to found the relationship between Mr Jaworski and NSD does not make reference to the claim that Mr Jaworski is an independent contractor. The real issue is whether or not he was carrying on an independent business. [16] Reference was made to the decision of the South Australian Supreme Court in Roy Morgan. 9 In that case, the court adopted the reasoning of the Victorian Court of Appeal in Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) 10 where the reasoning was that the employees could not be said to be conducting a business on their own account, were required to closely conform with instructions given by the putative employer, and that, in that case, the degree of control exercised, both as to the nature and manner of the task, is a significant criterion pointing towards the relationship of employer/employee. 11 [17] It is clear in this case that Mr Jaworski is doing the work as representative of the principal, and not conducting an independent business. His business number is not determinative of the matter. He represents NSD and not his consulting firm. There is no evidence that he is conducting a business on his own behalf. Other indicia of employment are present: there is a degree of control over how he performs the work, where he performs the work and when he performs the work. The non-payment of superannuation is irrelevant because of the legislative requirement to pay superannuation where a person works under a contract that is wholly or principally for the labour of the person. 12 This could have been avoided if there was no relationship of employment, as in the case of Mr Arthur, where he has incorporated a company to provide services to NSD. However, there was no such requirement of Mr Jaworski. [18] The fact that Mr Jaworski did work for E & S Trading while engaged by NSD was done with the knowledge and consent of NSD, consent that could have been given irrespective of whether he was an employee or a contractor. The use of his motor vehicle did not amount to a major use, especially in the context where he received a retainer of $1000.00 per week, while others received $500.00. It was not a fitted out van. Conclusion [19] The task before me was "perceptively" 13 described by Gray J: "A court determining whether a particular relationship is that of employment or of some other kind can therefore only resort to the process of balancing all of the factors, or as they are called in Stevens v Brodribb Sawmilling Co Pty Ltd [(1986) 160 CLR 16] and other cases, the `indicia'. In truth the result may be a matter of impression. It is unfortunate that this is so. It should not be necessary for people to obtain a decision of a court, in order to know the true nature of their relationship. Unfortunate or not, that is the case." 14 [20] In Abdalla, the Full Bench summarised the law on distinguishing employees from independent contractors. Further summarised, it provides the following guidance: 15 1. Can the worker be said to be conducting a business of his own considered in the totality of the relationship? 2. The nature of the work and the manner in which it is performed. 3. The terms and terminology of the contract. However, parties cannot deem the relationship between them to be something which in reality it is not. 4. The indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd. 16 5. If the indicia do not yield a clear result, then, as a practical matter, was the individual running his or her own business or enterprise with independence in the conduct of its operations, as distinct from operating as a representative of another with little or no independence? 6. If the result is still uncertain, then guidance should be taken from " 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. [21] Considering the totality of the relationship in this case, I do not believe it can be said the worker was conducting a business of his own. Whilst he invoiced NSD for his retainer, that has all the hallmarks of an arrangement of convenience. He was, as appears from my analysis below, subject to significant control by NSD in when, how, and where he conducted his work. [22] The nature of the work was that of a sales person, and the manner in which it was performed, although not subject to direct supervision. This matter is also further discussed below in considering the "Brodribb indicia". [23] The terms of the contract, with one possible exception, do not resolve the issue. The agreement, 17 as it is called, sets out a list of eleven "duties" in some detail, it requires confidentiality, provides for renumeration (sic) on the basis of commission on sales together with a retainer, and provides target sales of four unconditional sales each calendar month. The possible exception is the cover sheet to the agreement, which describes it as an "Agreement for Supply of Sales and Marketing Services Between NSD Developments Pty Ltd and John Jaworski" . It is not clear if the cover sheet is part of the agreement for the purposes of interpretation. However, that is the only matter in the agreement that supports an interpretation that there was an intention to have Mr Jaworski as an independent contractor. [24] That conclusion is supported by the evidence of Mr Arthur to the effect that it was explained to Mr Jaworski before he entered into the agreement that he would be a contractor. Mr Jaworski was unable to recall the comment. However, Mr Arthur's evidence was tested and uncontroverted and I accept it on this point. [25] I turn now to a consideration of the indicia referred to in Abdalla. Is there control or right of control over the manner, place, hours of work and the like? On the evidence of the witnesses and the terms of the agreement, there was a high degree of control or right of control of Mr Jaworski by NSD. That matter must be given substantial weight in favour of him being an employee. Does he work for others or have a genuine and practical entitlement to do so? Plainly, Mr Jaworski had this right, at least as far as it concerned E & S Trading. However, I consider this indicia to be less relevant in the contemporary setting where it is notorious that many employees have more than one employer. It is a matter of minor weight in support of him being a contractor. Does the worker have a separate place of work and/or advertise services to the world at large? There is no evidence of this in this matter. Is there provision and maintenance of significant tools or equipment? The only evidence in this case is the provision of a lap top computer and mobile phone and the incidental use of a private motor vehicle. It does not amount to a substantial investment. However, there was no reimbursement of expenses, and it weighs in favour of him being a contractor. Can the work be delegated or subcontracted? On the available evidence, it would appear not. This weighs in favour of him being an employee. Has the putative employer the right to suspend or dismiss the worker? It would not appear so from a reading of the agreement. Otherwise, there is no evidence on this matter. This weighs in favour of him being a contractor. Is the worker presented to the world as an emanation of the business by the putative employer? Although not required to wear a uniform, he was provided with a business card describing him as an NSD "New Home Co-ordinator". This is a minor matter weighing in favour of him being an employee. Is income tax deducted from remuneration? No. Furthermore, Mr Jaworski invoiced, and the employer paid, Goods and Services Tax on the retainer. Additionally, Mr Jaworski invoiced through his business that had an appropriate registered business number. He certainly represented to the Australian Taxation Office that his work was that of an independent contractor. I give this matter substantial weight in favour of him being regarded as a contractor. Is the worker remunerated by periodic wage or salary or by reference to completion of tasks? Primarily, he was remunerated by commission based on completion of the sales task. It is clear that the retainer was to be deducted from any commission. I consider this matter to be neutral. Is the worker provided with paid holidays or sick leave? No. This weighs in favour of him being a contractor. Does the work of the worker involve a profession, trade or distinct calling? He was engaged as a sales person - this is not the kind of calling that would tend to be engaged as an independent contractor. This weighs in favour of him being regarded as an employee. Does the worker create goodwill or saleable assets in the course of his or her work? There was no evidence on this point. However, any goodwill created would be the property of NSD. This matter is neutral. Does the worker spend a significant portion of his remuneration on business expenses? There was no direct evidence on this point. However, apart from incidental motor vehicle usage, depreciation, and running costs of the lap top computer and mobile phone, there would not appear to be significant business expenses. This matter is neutral. [26] Taking the above matters into consideration, I am satisfied that they do not adequately resolve the issue, in that the available evidence points in both directions. As a practical matter, Mr Jaworski cannot really be seen to have been running his own business enterprise. Rather, he was representing NSD, with very little independence in the conduct of his operations. This is borne out by the requirements to operate in accordance with written policies and procedures, and the detailed list of duties set out in the agreement. [27] In view of that conclusion, it follows from the application of the summary of the law in Abdalla to the facts in this matter, that Mr Jaworski was an employee of NSD Homes. Accordingly, the objection to jurisdiction on the ground that he was not an employee is dismissed. [28] The other two grounds of objection were not pursued in proceedings and are also dismissed. [29] An order giving effect to this decision is published separately as PR957820 . The matter will be referred to the Registry for allocation for conciliation. BY THE COMMISSION: COMMISSIONER Printed by authority of the Commonwealth Government Printer <Price code C> 1 Exhibit B1, Attachment R1. 2 Exhibit B1, Attachment R2. 3 Exhibit B1, Attachment R3. 4 Exhibit B2. 5 Exhibit M2. 6 Abraham Abdalla v Viewdaze Pty Ltd t/as Malta Travel Lawler VP, Hamilton DP and Bacon C, 14 May 2003, PR927971. 7 J Donatacci v Czapp Pty Ltd t/as Airport Doors, Giudice J, Lacy SDP and Simmonds C, 18 October 2004, PR952519. 8 Ibid, Para 17. 9 The Commissioner of State Taxation v The Roy Morgan Research Centre Pty Ltd, [2004] SASC 288. 10 (1997) 37 ATR 528. 11 Ibid, 538. 12 Superannuation Guarantee (Administration) Act 1992 (Cth) s.12(3) 13 Abraham Abdalla v Viewdaze Pty Ltd t/as Malta Travel Lawler VP, Hamilton DP and Bacon C, 14 May 2003, PR927971, PN24. 14 (1989) 34 IR 179, 184. 15 Taken from Joseph Donatacci v Czapp Group Pty Ltd, Hingley C, 2 June 2004, PR947415. 16 (1986) 160 CLR 16. 17 Exhibit B1, Attachment R1.