CATCHWORDS Termination of employment - preliminary question as to whether employment relationship exists - independent contractor - Application dismissed Industrial Relations Act, 1988 Secs. 4, 170 CB, 170 EA Termination of Employment Convention Stevens v. Brodribb Sawmilling Pty. Limited 160 CLR 16 STOJANOVIC V. REALTY WORLD PTY. LIMITED NO. AI 170 OF 1994 LINKENBAGH J.R. CANBERRA 15 FEBRUARY 1994 INDUSTRIAL RELATIONS COURT OF AUSTRALIA No AI 170 of 1994 AT CANBERRA BETWEEN WILLIAM VOJISLAV STOJANOVIC Applicant and REALTY WORLD PTY LIMITED Respondent REASONS FOR JUDGMENT EDITED FROM EXTRACT OF TRANSCRIPT OF PROCEEDINGS THE COURT: Judicial Registrar Linkenbagh DATE OF JUDGMENT: Wednesday, 15 February 1995 PLACE: Canberra This is an application under section 170EA of Industrial Relations Act 1988 in which the applicant seeks to assert that he is an employee and that he has the right to apply to the Court for a remedy in respect of the termination of his employment by the respondent. The matter has proceeded today on the basis of determination of the preliminary issue as to whether or not the applicant was an employee within the meaning of the Act. Pursuant to Section 170 CB of the Act an expression has the same meaning in Division 3 of part VIA of the Act as that expression has in the Termination of Employment Convention. There is no definition of the word "employee" in the Convention which is Schedule 10 to the Act. That is probably because the Convention does not use the word "employee." The Convention is very careful to use the words "worker" to refer to the employee and the word "employer" to indicate the person providing the employment. So the Convention is no help as to the definition. Section 4 of the Act, one might think, as the interpretation Section for the whole of the Act might be helpful, but when one looks at the definition of "employee" in Section 4(1) it is that "the word `employee' includes any person whose usual occupation is that of an employee," and the effect of that is to throw the definition question very clearly back on to the common Law. The position at Common Law was very carefully stated by the High Court in Stevens v Brodribb Sawmilling Pty Ltd 160 CLR 16 that there are various indicia of employment, one of which is the existence of control of the alleged employee by the putative employer, but the Court went on to say that there are other matters in addition to the significant element of control which indicate whether or not a relationship is one of employment. The Court said at page 24: Those other relevant matters include but are not limited to the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee. This hearing has raised several other factors which might be said in this day and age to be other indicia of employment, not least of which is the contributions made under the Superannuation Guarantee Fund legislation. The applicant in this matter has been unable to overcome, in my view, a hurdle presented by the existence of a document which is exhibit 2 and called a Commission Agreement. That document came into existence at some stage after the applicant's employment with the respondent commenced and that agreement, as was conceded by both the witness for the applicant and the witness for the respondent, fairly states the arrangements as they were in practice between the parties. The agreement recites at recital B: The salesperson is a person in business of their own account. And at clause 4H of the body of the agreement it provides: The parties agree that the relationship between them is confined to that defined in this agreement and is not one of master/servant. The applicant entered into the agreement freely and voluntarily. He says that at the time he signed it he was told by the respondent that it was a mere formality and that things would continue as they had been, and that is exactly what happened. Things continued as they were and things as they were are very well described in the agreement. The court cannot ignore the agreement. It is an agreement which is binding between the parties. It sets out what their relationship was. It goes on to provide that it may be terminated by either party on the giving of one week's notice. It provides for the method of remuneration and various other matters. The agreement provides very clearly for the basis of the relationship as that of what would be seen at common law as an independent contractor. I must say that it is very close to the line and one would have to say that this arrangement, which is apparently on the evidence of the respondent's witness, a common arrangement both within this particular firm and other real estate firms and particularly in Canberra is an arrangement which certainly has benefits for both parties. One of those benefits is that it avoids by its very nature the coming into existence of the obligations and rights which exist if the relationship is that of employer and employee. The parties opt out of that relationship to their mutual advantage. If it appeared to the Court that this agreement was designed by the employer to take advantage of the putative employee and to work against his interests to disguise an attempt to avoid an employment relationship then the Court may look at this agreement in a different light. But that is not the case. The agreement is very clear in its terms. Mr Stojanovic agreed that it did provide him with a benefit, being the long term increase in his financial well being, and he conceded that he was prepared to accept lesser benefits than he may have had if he had been an employee, initially in his relationship with the employer, in the hope that down the track in the fullness of time he would become more expert in the field of selling real estate and that his income would therefore increase accordingly so that in the long term he would be better off than he would have been if he had been in an employer/employee relationship from the outset. This Court can see no reason why the agreement should be seen as anything other than a commercial agreement entered into freely and willingly by the parties and in the complete understanding by each party as to the meaning of the words in the agreement. There are other factors in this matter which, on the balance, confirm that the arrangement was an independent contract arrangement. Some of those matters are covered in the terms of the agreement itself. The arrangement did not provide for holiday pay or long-service leave. Those entitlements were forgone in this agreement and therefore what may otherwise have been an indicator of an employer/employee relationship, is not present. The agreement does not provide for the payment of anything by way of regular salary or wages or, in fact, any regular payments. It provides for payment of commission as jobs are done and the applicant conceded that he was quite prepared to be without income during the initial period of his employment under this arrangement, again, because of the hope of better things to come in the future. The amount that he received by way of commission would vary from time to time. There was no fixed amount and no guaranteed minimum or anything of that kind. The agreement provided for a method of termination of the relationship which did not provide, in effect, for any consequences of termination. It is hard to see what rights could arise on termination of this agreement when the agreement itself does not guarantee any payments and it is all related to the improvement in performance in the long run. The parts of the evidence that might work against the inference that there is a contractual relationship are essentially the PAYE deductions which were made from the income of the applicant and the superannuation guarantee levy payments which were paid on his behalf by the respondent. However, given the extended definitions of the word "employee" in the appropriate legislation there is no inference that those payments may have meant that there was an employment relationship. On the issue of control, certainly the respondent provided the framework in which the applicant was able to do his work. The respondent provided the office, the support staff, the supervision, the knowledge of more senior people and it is in that framework in which a person working under the commission agreement, as was the applicant, was given the opportunity to work. That does not, in my view, indicate the degree of control which is necessary to establish an employment relationship. The matter comes very close to the line, as I have said, and one might say that it is about as close as you could get to the line between employment and independent contract. We must also remember that persons who enter into these agreements are people who, by the very nature of their work as real estate sales people, are people who have some degree of commercial expertise and commercial awareness and I am sure that that is the case with this applicant and I am also sure that he knew at the time that he signed the agreement exactly what the arrangement would be. For all of those reasons I am of the opinion that this is not a matter in which the applicant has established, to my satisfaction, that he is a person who is able to bring an application under section 170 EA of the Act and the application therefore fails. I make an order that the application be dismissed. I certify that this and the preceding three pages are a true copy of the Reasons for Judgment of the Court Maria Linkenbagh Judicial Registrar 21 February, 1995 The Applicant appeared in person Counsel for the Respondent: Mr. S. Gath Solicitors for the Respondent: Blake Dawson Waldron