T9377 - 20 June
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Construction, Forestry, Mining and Energy Union, Tasmanian Branch and Cool or Cosy Natural Insulation
Industrial dispute - alleged breach of the Building and Construction Industry Award - threshold issue - employee/contractor - found that an employment contract existed - preliminary application rejected REASONS FOR DECISION - PRELIMINARY APPLICATION [1] On 17 January 2001, the Construction, Forestry, Mining and Energy Union, Tasmanian Branch (CFMEU) applied to the President, pursuant to Section 29(1) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with Cool or Cosy Natural Insulation arising out of the alleged breach of the Building and Construction Industry Award in respect to Mr Michael Houstein and Mr Ross Flakemore. [2] On 23 January 2001 the President convened a hearing before myself at "Lyndhurst", 448 Elizabeth Street, North Hobart, Tasmania to commence at 9.30am on Wednesday 21 March 2001. [3] When this matter came on for hearing Mr W White appeared for the CFMEU. Mr S Chopping, a solicitor, sought and was granted leave to appear for the employer. [4] Following preliminary submissions the hearing was adjourned until 1 May to facilitate further discussions between the parties. Upon resumption Mr Chopping indicated that his client wished to raise a threshold issue, that being, that there was no employer/employee relationship. The Commission then proceeded to hear evidence and argument on the preliminary issue alone. [5] The application had been lodged by the CFMEU on behalf of Mr Michael Houstein and Mr Ross Flakemore who had previously been engaged [to use a neutral term] by the Company to install insulation material. In both cases the relevant period of engagement appears to be from approximately mid June to early August 2000. Mr White submitted that both gentlemen were "employees" and were covered by the Building and Construction Industry Award. He further contended that the award had been breached in a number of material respects. Evidence was heard from both Mr Houstein and Mr Flakemore during the proceedings. [6] Mr Chopping contended that Mr Houstein was an independent contractor. Mr Flakemore "was unknown to the company ..." 1 and, if anything, he was an employee of Mr Houstein. [7] Evidence was also heard from Mr Harvey Hogg, the recently appointed State Manager of the Company. The manager at the relevant time, a Mr Steve Johnson, had retired in the interim period. It is acknowledged that this absence of first hand evidence posed some difficulty for Mr Chopping. [8] Mr Chopping described the operations of the Company "as the selling of insulation products".2 He explained that "sales consultants" approach prospective purchasers. The Company manufactures the product in its factory and the product is installed. Mr Chopping said:3
[9] The following is a summary of the evidence as it relates to the preliminary question. [10] Mr Houstein responded to a newspaper advertisement which read as follows:4
[11] I conclude that this advertisement is unhelpful in deciding the preliminary question. [12] Mr Flakemore said he was telephoned at home by Mr Johnson on a Saturday afternoon asking him to start at 7.00am on the following Monday. His evidence was that he believed he was working for Cool or Cosy.5 [13] Neither had any prior experience in this type of work. In both cases all relevant training was provided by the Company, essentially through on site observance of other experienced installers. [14] The vehicle and associated equipment was provided and maintained by the Company. [15] There was no evidence of any document purporting to be a subcontractor agreement and neither Mr Houstein nor Mr Flakemore were specifically aware that they had a status other than that of an employee. [16] Mr Hogg said he believed the practice in June 2000 was to require subcontractors to complete a "subcontractors information sheet" but he had not sighted one in the case of Mr Houstein. [17] In respect of taxation, Mr Houstein said that he had signed a "tax declaration to take out tax".6 He stated that the previous manager had told him that there was a group certificate, but that it was never handed on to him. Mr Flakemore did not sign a tax declaration. The evidence of Mr Hogg was that the Company had no record of tax declarations, taxation deductions, group certificates or wage records for either gentlemen. [18] It was common ground that both Mr Houstein and Mr Flakemore had obtained an Australian Business Number [ABN]. The evidence was that the motivating factor in both cases was advice from the Company that tax would be withheld at the rate of 49% of earnings if the ABN was not obtained. Apart from this neither Mr Houstein nor Mr Flakemore demonstrated any real understanding of the ABN system. Mr Hogg said that he believed that tax invoices and GST were provided after 1 July 2000.7 There was however no evidence of this provided to the Commission. [19] Mr Chopping submitted that the Company had not taken out workers' compensation or other insurance in respect of Mr Houstein and Mr Flakemore. [20] The method of work can be summarised as follows. [21] Following completion of the sales agreement, the office administration arranges the dates and times for installation. The office also arranges a "run" to minimise unproductive travelling time. This schedule is provided to the installer. Mr Hogg said the times are "not set in stone but it can depend on the length of a job and we rely on the installer to work around it."8. On this question Mr Houstein said:9
[22] Mr Houstein was required to complete a document titled "INSTALLERS WORKSHEET".10 Of note is the fact that Mr Houstein's name appears in the space for "Subcontractors Name". This document also shows with some clarity the method of payment. [23] The amount of payment was very much based on an amount per square metre of product installed. There was also provision for additional task based payments for jobs such as "raking" and "top up". In the event that something unusual was encountered on the job, there was provision for the payment of "Labour" at the rate of $40 per hour. [24] There was also provision for extra payment for jobs beyond "30 km inclusion zone". When Mr Houstein and Mr Flakemore were required to stay away from home overnight, accommodation and meal expenses were met by the Company. [25] There was also provision for a retention by the Company against possible future maintenance claims. This is progressively repaid to the installer over a period of months, less the cost of any maintenance.11 [26] It was common ground that two persons were required to perform the installation task. [27] The evidence of Mr Hogg was that it was not open to Mr Houstein to substitute someone else in the event that he was unable to carry out the work.12 Similarly, it was not open to Mr Houstein to promote alternative competitor products.13 [28] It is apparent that Mr Houstein worked at least six days per week. The amount of payment per day varied considerably depending entirely on the amount of work done. After deducting certain travel allowances, it would appear that the average payment per day was in the order of $290, albeit with a wide range. [29] The evidence of Mr Houstein was that the Company adopted a "hands on" quality control supervisory role, particularly in response to complaints. The following exchange illustrates this point:14
[30] The relationship between Mr Houstein and Mr Flakemore is worthy of examination. The following exchange between Mr White and Mr Houstein provides a good summary of the position:15
[31] And later:16
[32] The engagement of Mr Houstein and Mr Flakemore came to an end in early August following a workplace injury suffered by Mr Houstein. According to Mr Houstein he was relegated to the "number three driver" for which there was no work. The Authorities [33] Mr Chopping referred the Commission to a publication titled Law of Employment.17 This publication provides a comprehensive review of the leading judgements on this question. [34] The question of control is invariably uppermost in any consideration of the facts relating to a particular circumstance. Macken states that the "control test" is not a rule of law but is rather the vital factor that:18
[35] Macken emphasises that a series of High Court decisions make it clear that "control is but one of a number of factors, albeit the most important, in discerning the existence of the relationship."19 [36] And later:20
[37] The judgement in Narich v Commissioner of Payroll Tax states:21
[38] On the question of written instructions Lee J. in Barone v Olympic Industries Pty Ltd commented:22
Findings [39] There can be no doubt in my mind that the Company intended that its relationship with Mr Houstein be one of principal and contractor. I am also equally satisfied that both Mr Houstein and Mr Flakemore considered that they were in an employment relationship, not that they had in all likelihood given the question any serious consideration at the time. Neither, it would appear, had any previous experience with the concept of contracting and the arrangements with Cool or Cosy were simply accepted as the way things were done in that business. Their only concern was to work and get paid. [40] There was no evidence of a written agreement pointing to a subcontractor arrangement. Whether that was an oversight on the Company's part is unclear, but is, in any event, immaterial as this application can only turn on the facts applicable to Mr Houstein and Mr Flakemore. [41] Mr Chopping submitted that Mr Houstein did not necessarily need to understand himself as being a subcontractor for that to be the situation:23
[42] Whilst that might well be so in a legal sense it does raise some interesting questions. For example, how can an individual make arrangements for appropriate insurance cover [which a subcontractor should presumably carry] if he or she has no awareness that this is a requirement or expectation? [43] There are a number of aspects of the relationship which tend to point to a contract for services rather than a contract of service. They are:
[44] Mr Chopping submitted that the existence of an ABN was a "very significant indication that he was a subcontractor ..." [45] As I understand the position, a person may apply for an ABN if they are undertaking an activity which is classed as an "enterprise". This is generally regarded as being engaged in business or trade with an expectation of profit. An "employee" would not be eligible for an ABN if the employment contract constituted the sole source of income. [46] However ABN applications are essentially self assessment and the issuing of an ABN does not necessarily mean that a person is carrying on a business for income tax purposes. The Australian Taxation Office (ATO) makes it clear that responsibility for ensuring that the activities constitute an "enterprise" rests with the applicant. An ABN may be cancelled if a subsequent review by the Registrar determines that an "enterprise" does not exist. [47] In the instant case the evidence does no more than show that both Mr Houstein and Mr Flakemore successfully applied for an ABN. It should not be viewed in the context of a considered decision by the ATO following a review of the business activities of Mr Houstein and Mr Flakemore. [48] No evidence was presented that Mr Houstein submitted tax invoices to the Company for GST purposes following 1 July 2000. [49] Mr Chopping argued that the method of payment strongly supported a subcontractor finding. Whilst I accept that there is some force in this argument, it must be acknowledged that the payment is almost totally volume based, i.e. cents per square metre, and such payments are not uncommon in "piece work" and "payment by results" type clauses frequently found in awards. I also note that the "Labour" rate for "unusual" work is a straightforward dollars per hour. [50] The piece work style of payment in the instant case can be contrasted with an amount for a job, e.g. a house frame, which is often performed under genuine subcontract arrangements. I conclude that the method of payment for Mr Houstein could equally be found in a contract of service as it could in a contract for services. [51] I do accept that the arrangement relating to the retention for faulty workmanship does point strongly to a contractor relationship. [52] Factors which point towards an employment relationship include the following:
[53] I turn now to the control test. [54] Mr Houstein responded to a newspaper advertisement, presumably in the Employment Section, for an "Insulation Installer". Apart from a requirement to work long hours, the only qualification specified was a medium rigid licence. Mr Houstein had no previous experience in this field. All the training he received was provided by the Company. The specification as to how to do the job was very clearly laid down by the Company. On the face of it at least, the specification for the installation of the product was unique to Cool or Cosy and presumably not transferable. Mr Houstein did not bring this skill and knowledge to the Company. It was instilled in Mr Houstein by the Company through the training program. [55] On a daily basis Mr Houstein was provided with a "run" which had been pre-arranged by the Company. This run specified the date and within reason the time of each installation, together with the name and address of each customer. [56] It is also clear that the Company maintained a relatively close supervisory role, particularly when it came to responding to complaints. This included on-site correction of faulty workmanship. [57] There was evidence of some limited flexibility in relation to weekend work so as to accommodate family commitments but this was no more than could reasonably be expected in an employment relationship. [58] In summary the evidence points very clearly to a situation whereby Mr Houstein was instructed by the Company both as to when the work was performed and as to how the work was to be undertaken. In my view the degree of control exercised by the Company was close to absolute and it is difficult to envisage the circumstances whereby Mr Houstein was required to exercise the discretion and/or judgement normally attaching to a genuine contractor relationship. [59] The authorities make it clear that in examining the totality of the relationship, the issue of control will usually be paramount and often decisive. There are certainly some elements of this relationship which point to a contractor arrangement and they have been identified. In my view, however, these elements are at the fringe of a total relationship which has overwhelmingly the characteristics of an employment contract. [60] I turn now to the relationship between the Company and Mr Flakemore. [61] Mr Chopping summarised the Company view as follows:24
[62] I accept that the Company had no record of Mr Flakemore. This was clearly by design. However to suggest that Mr Flakemore was "unknown" to the Company, even in a legal sense as submitted by Mr Chopping, is completely at odds with the evidence. [63] The unchallenged evidence is that Mr Flakemore was telephoned at home by the then manager and offered "work" on a trial basis commencing on the following Monday. The initial training was provided by the Company. Mr Flakemore was directed as to which driver he would "offside to" on a daily basis. Mr Houstein had no say in the engagement of Mr Flakemore as his "offsider" for the final six weeks of the engagement. [64] The method of payment bordered on the bizarre. All payments were made to Mr Houstein as would be expected in a genuine contractor arrangement. The evidence is that Mr Houstein was in turn directed by the Company to pay Mr Flakemore in accordance with a predetermined formula which was apparently common to all drivers and offsiders. [65] I am unable to accept that an employment [or any other] relationship existed between Mr Houstein and Mr Flakemore in circumstances whereby Mr Houstein had no control over the engagement, termination or remuneration of Mr Flakemore. [66] I further conclude that the control exercised by the Company over Mr Houstein applied with equal force to Mr Flakemore. [67] I therefore determine that the relationship between the Company and both Mr Houstein and Mr Flakemore was that of an employment contract. It follows that the preliminary application of Mr Chopping is rejected. [68] I would emphasise that this is a finding in relation to the facts as they apply to Mr Houstein and Mr Flakemore alone and should not be viewed as a finding on any arrangements the Company may have in place in a wider sense. [69] I would also observe in passing that I suspect it would be quite feasible to create a genuine subcontractor arrangement for the installation of insulation product and I would understand why the parties to such an arrangement would find it mutually satisfactory. [70] Having dealt with the preliminary application, the parties are directed to confer. The matter will be relisted at the request of the applicant.
Tim Abey Appearances: Date and Place of Hearing: 1 Transcript p. 5 |