Case highlights potential misclassification issues
The Fair Work Commission (FWC) recently dealt with a case involving a worker who claimed unfair dismissal against his former employer, a real estate company.
The worker argued that despite being labelled as an independent contractor in his latest agreement, he was, in fact, an employee.
He said that the company had terminated his employment unfairly, citing issues of racial discrimination and retaliation for complaints about pay.
Background of the case
The worker started working for the real estate company in October 2023 as a casual employee. His job involved inspecting rental properties, writing inspection reports, and letting third parties into rental properties. He was paid an hourly rate that included a casual loading.
In late 2023, the worker said he complained about not being paid penalty rates and overtime. He claimed that after these complaints, he was treated differently, experienced racial abuse, and had his work hours cut. He also said another person was hired to do his work.
In March 2024, the employer offered the worker a new contract that described him as an independent contractor. The worker said he was told to sign the contract or he wouldn't get any more work.
At first, he didn't sign. He complained again to the company's management. In April 2024, he was offered another contract. This time, the worker signed after being told he would lose his job if he didn't.
The April 2024 contract
The new contract was called a 'Service Retainer Agreement'. It described the worker as a 'Contractor' and set out his duties. The contract said:
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"[The worker] must:
(1) promote our interests and those of our Related Bodies Corporate;
(2) use your best endeavours to protect and promote our reputation and that of our Related Bodies Corporate;
(3) not act in conflict with our interests and those of our Related Bodies Corporate;
(4) be honest and diligent and perform the duties assigned to you to the best of your knowledge and abilities; and
(5) devote the whole of your time, attention and skill during normal business hours, and at other times as reasonably necessary, to your duties."
The contract also said the employer could "direct [the worker] to perform or not to perform any part of [his] duties at any time."
The dispute and termination
A disagreement arose about paying the worker's invoice for May 2024. On 6 June 2024, the employer wrote to the worker saying they would pay the invoice but didn't "believe that the ongoing relationship is tenable and (he) would remove [the worker] from systems today."
The worker replied that he also didn't feel comfortable working with the company anymore. He asked for his invoice to be paid in full.
The employer said the worker wasn't dismissed because he wasn't an employee, but an independent contractor. They said they changed to contractor arrangements because they needed more capacity for their services.
The employer also said that even if the worker was an employee, the email on 6 June 2024 wasn't a dismissal when considered in context.
FWC’s determination
The FWC looked at the contract between the worker and the employer. It found several things that suggested an employment relationship:
The employer had a lot of control over the worker's duties and how he did them. The contract said the employer could direct the worker to do or not do any part of his duties at any time.
The worker couldn't work for anyone else without the employer's permission. The contract said: "[The worker] must not, without our prior written consent... take up any other position with any other corporation, firm, or organisation (whether paid or unpaid)."
The worker had to do the work himself and couldn't get someone else to do it for him. He also said he had to promote the employer's interests and not act against them.
The FWC said:
"[The employer] has very substantial control over when [the worker] performs his work. These are the kinds of obligations that commonly flow from a contract of service between an employer and an employee."
The FWC decided that the worker was an employee of the real estate company, even though the contract called him a contractor. The FWC said:
"[The worker] was, in my view, an employee of [the employer] because of the rights and obligations created by the April contract."
About the termination, the FWC said:
"The correspondence of 6 June 2024 where [the employer] said that they did not believe the relationship with [the worker] was tenable and that he would be removed from their systems, was, on any view, a termination on the initiative of the employer within the meaning of s.386(1)(a) of the Act."
The FWC rejected the employer's argument that they didn't have the power to hear the case:
"[The worker] was dismissed by [the employer] on 6 June 2024. [The employer's] jurisdictional objection to the application is dismissed."