Employer argues they agreed to share in profits
The Fair Work Commission (FWC) recently dealt with a case involving a worker who brought an application seeking a remedy for unfair dismissal from a massage business.
The employer raised a jurisdictional objection, arguing that the worker was an independent contractor and not an employee, and therefore not protected from unfair dismissal under the Fair Work Act 2009.
In this case, the FWC had to determine whether the worker was an employee or an independent contractor. This distinction is crucial, as employees are entitled to protections under the Fair Work Act, including the right to bring an unfair dismissal claim, while independent contractors are not afforded these same protections.
The FWC's decision would ultimately determine whether the worker's application could proceed or if it would be dismissed due to lack of jurisdiction.
Background and context
The worker started his engagement with the employer on 26 April 2022, initially working three days a week. The worker was paid a base rate of $150 regardless of how many clients he performed massages for, and he would receive a 55% commission if he earned above the $150 threshold.
The worker had control over the days he worked, which was agreed upon with the employer at the start of the engagement.
The employer provided some evidence regarding the worker's duties when he was not performing massages, along with store regulations.
These duties included folding and washing towels, maintaining a clean work environment, and supplying disposable water cups. The store regulations covered various aspects such as maintaining a quiet environment, arriving on time, and tidying up rooms after use.
The test for determining employment status
The FWC referred to the High Court of Australia's decisions in Jamsek and Personnel Contracting, which provide the test for characterising whether a person is an employee or contractor.
The primary source for determining the parties' legal rights and obligations is a comprehensive written contract, unless the contract is a sham, has been varied, or post-agreement conduct demonstrates that a term is legally ineffective.
In the absence of a comprehensive written contract, a multifactorial approach is adopted, considering multiple indicia to determine the nature of the relationship between the parties. The FWC quoted the Full Court of the Federal Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation:
"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."
Examining the worker’s circumstances
In this case, there was no comprehensive written contract in place. The advertisements indicated that the role was intended to be a “partnership” with a share in profits, suggesting that the worker was an independent contractor.
However, the worker contended that this was not reflective of the actual working arrangement. The FWC examined various indicia to determine the nature of the working relationship.
The worker had sufficient control over his working hours and the days he worked, which slightly favoured a finding that he was an independent contractor. The worker was also able to work for others and was not constrained by the employer in this regard.
"Upon the evidence provided before me, it appeared the worker was not constrained by the employer to work for others if he wished. This factor indicates that the worker was an independent contractor."
The FWC also considered the worker's ability to work for others. The employer stated that the worker had mentioned working at another massage business between April and June 2022, which coincided with the start of his engagement with the employer. This further supported the finding that the worker was an independent contractor.
The FWC’s conclusion
After considering the indicia and the evidence provided, the FWC was satisfied that the arrangement between the worker and the employer was an independent contracting relationship rather than an employment relationship.
The FWC noted that the worker was not provided with annual leave, his income tax was not deducted from his remuneration, and he was required to provide an ABN and his own insurance.
"In considering the indicia above and the evidence that has been provided [to] the Commission, I am satisfied that the reflection of the arrangement between the worker and employer is an independent contracting relationship rather than an employee."
Consequently, the FWC found that the worker was not a person protected from unfair dismissal under the Fair Work Act. The employer's jurisdictional objection was upheld, and the worker's application was dismissed.
"Therefore, the worker is not a persons protected from unfair dismissal under s. 396 of the Act. The employer's jurisdictional objection is upheld, and the application is dismissed."
This decision highlights the importance of correctly classifying workers as either employees or independent contractors, as this classification determines their rights and protections under the Fair Work Act.
