Philip Garth v Innerspace Wardrobes [1995] IRCA 495

INDUSTRIAL RELATIONS COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1116 of 1995 B E T W E E N : PHILIP GARTH Applicant AND INNERSPACE WARDROBES Respondent Before: Judicial Registrar Murphy Place: Melbourne (heard in Hobart) Date: 22 September 1995 REASONS FOR RULING In this proceeding under Division 3 of Part VIA of the Industrial Relations Act (the Act) the parties sought a ruling from the Court on a jurisdictional issue. The issue is whether the Applicant was an employee of the Respondent, or was an independent contractor and thus outside the coverage of the Act. Findings on the Evidence The Respondent is in the business of the supply, manufacture and installation of built-in wardrobes, and shower screens. The Applicant is a qualified carpenter/joiner. In the eighteen months prior to May 1993 he was self-employed plying his trade. In May 1993 he was advised that an advertisement had appeared for a position with the Respondent. The Applicant, I find, did not see the actual advertisement which appeared in the Mercury. He obtained from the Respondent a printed "Employment Application" and completed it. He also wrote a letter "In response to your advertisement for the position of carpenter/joiner". The letter detailed his previous experience and recorded that "he had his own work van and all my own tools which I use for my business" (His evidence was that this was something of a white lie in order promote his chances of obtaining the position). The actual job advertisement read that a "sub-contract carpenter (was) required for 1-2 days/week to install built-in wardrobes". The Applicant was interviewed for the position by Mr De Jong (De Jong). He was the managing director of the Respondent. At the interview De Jong said that the term "sub-contractor" was mentioned. He said that the Applicant did not request to be an employee. The Applicant said that he expected to be working 1-2 days per week. He said that he was told that the position would be working "fitting wardrobes and then helping in the workshop". He said that he did not understand the difference between sub-contractors and employees. The parties agreed that the Applicant would be paid piece-work rates for the installation of wardrobes and an hourly rate for work in the factory. In the first week the Applicant worked three days and subsequently worked a full week, including work on Saturdays. Initially the Applicant was working 60% in the factory and 40% installing. The Applicant was trained in the installation of wardrobes and shower screens by another employee and by De Jong. The training took a little over a week. In the early stages the Applicant was also involved in supervising other employees in the factory and training other employees. When the existing installer of the Respondent left the Applicant concentrated on installation and in the period before the relationship between the parties ceased in June this year he was spending 95% of his time doing installation. The business arrangements of the Respondent were that De Jong was involved in selling of the Respondent's services. He would give the customer a quotation. The particular job would then be cut to size in the factory. Jobs were scheduled for the Applicant and another installer. The jobs to be performed were listed on two whiteboards in the Respondent's factory. Each day the Applicant would arrive at the factory between 7.30-8.00am. He would then collect the pre-cut material, load it into his van, and proceed to install the jobs as scheduled for that day. The Applicant was "not encouraged" to alter the schedule that had been set by the office. The Applicant was paid a piece-work rate for each job calculated on the basis of the number of shelves, doors, etc. There was provision for a loading for "difficulty". The Applicant would be supplied with all materials and could also collect additional fittings from hardware shops on the Respondent's account. The Applicant would collect from the customer any balance due for the job and remit the monies to the Respondent. If the Applicant finished work before 5.00pm be would usually return to the factory and work there. He kept a diary and was required to surrender it to the office each Thursday. The Applicant was paid $15.00 per hour for factory hours which he recorded in the diary. The Applicant upgraded his van soon after he commenced with the Respondent and, I find, at the Respondent's suggestion had the Respondent's name affixed to it. He was issued with the Respondent's T-shirts which he wore on a fairly regular basis. The Applicant was requested to obtain a stamp with his name and phone number on it. He did this and handed it to the Respondent. On a weekly basis the Respondent would calculate the amounts due to him for the jobs which he had completed in the previous week. These jobs would be listed, together with any factory hours, and the invoice would then be stamped with the Applicant's stamp. He would then be paid the money by the Respondent less deductions. At the time the Applicant commenced with the Respondent he had his own workers compensation insurance. Subsequently the Respondent was advised that it should have a policy covering the Applicant. Thereafter the Respondent deducted $75.00 per week from the Applicant's earning for workers compensation. The Respondent also deducted 3% statutory superannuation from monies due to the Applicant. The Applicant was subject to the prescribed payment scheme. At first 20% of his earnings were withheld, but this was increased, at the Applicants request, to 35%. Subsequently it was unilaterally reduced by the Respondent. It was the Respondent's evidence that it only recovered from its customers the actual cost of installation of the wardrobe. A number of invoices which were produced in evidence indicated that the amounts charged to the customer were slightly higher than the amounts actually paid to the installer. On the basis of this evidence I find that, in general, the Respondent only sought to recover the approximate cost of installation from customers. Customers were, however, only quoted a lump sum for the supply and installation of the wardrobe. The Applicant gave evidence, contested by the Respondent, that he was requested to open the factory. From the records produced it is clear that at least a third of the time over one three month period the Applicant was the first to arrive at the factory. The Applicant, when he arrived, would load his van with the days jobs and if there were no queries, proceed to leave the factory in order to be at the first job at 9.00am. If there were queries he would wait until De Jong arrived to clarify the matter. The actual job sheets gave quite detailed instructions as to the installation of each particular job. The time at which the Applicant would finish work depended on the amount of work for that day and often he said he finished between 6-7.00pm. The Respondent required the Applicant to repair any faulty work. Monies were deducted from the Applicant's earnings if other employees of the Respondent were required to repair a job performed by the Applicant. Generally the Applicant worked alone. On occasions other employees of the Respondent, including De Jong himself, would assist the Applicant. The Applicant also on occasions had the assistance of family members to "carry the tools". I find that this assistance was not paid for by the Applicant and was to provide experience for those family members. I find that at no time did the Applicant delegate his work to another tradesperson. From time to time the Applicant would perform work outside the Hobart area. On these occasions he would be paid $20 or $30 petrol money. On a number of occasions the Applicant would drive the Respondent's vehicle with a trailer to the Northwest coast to work for two or three days on jobs. I find that on no occasion did the Applicant refuse to perform any jobs proposed by the Respondent. On a couple of occasions he advised De Jong that due to prior commitments he was unable to work on particular Saturdays. The Applicant was not paid any holiday or sick pay. The Applicant, however, advised the Respondent when he was to be absent for any reason, including holidays. Was the Applicant an employee? There is a plethora of first instance and appellate authority dealing with whether particular relationships are to be characterised as that of employer/employee. Previous decisions are of limited assistance as they only illustrate that "the legal criteria by which the two (employee/independent contractor) are to be distinguished are themselves indeterminate in the sense that the application of them to the facts does not produce a plain and obvious result. The result of the application of the tests applied by the courts leaves a good deal to the judgment or discretion of the individual judge." Articulate Restorations and Development Pty Ltd v Crawford (1994) 57 IR 371, 381 per Mahoney JA. The ultimate result may be "a matter of impression": Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179, 184 per Gray J. The first task is to identify the actual agreement between the parties. Here I am satisfied that the true nature of the agreement was not determined at the initial interview between De Jong and the Applicant. Rather this is a case where "the real character of the relationship...only emerged over time as the terms of the relationship were clarified and agreed.": Connelly v Wells (1994) 55 IR 73, 85 per Kirby P; Barone v Olympic Industries Pty Ltd (1984) 8 IR 439, 441 per Lee J. The decision of the High Court in Stevens v Brodribb Sawmilling Company Pty Ltd (1985) 160 CLR 16 requires the Court to weigh the various indicia to ascertain whether the real nature of the relationship is one of employment. This requires regard to be had to the totality of the relationship. The first criteria traditionally considered is that of control. The reservation and assertion of control over the putative employee is seen as a significant indicia of an employment relationship. Here the evidence revealed a detailed job sheet for each installation. Further the scheduling of the work was done by the Respondent and the Applicant was "not encouraged" to alter the schedules. The Applicant gave evidence that he was not in a position to refuse to do any particular job. He said "I had no doubt that I had to do the jobs otherwise...(De Jong) would get upset." The Applicant had not refused any job during weekdays. When he refused a job on a Saturday he was not paid until the following week. It is significant that the Applicant notified the Respondent in advance of days that he was to take off. All these matters are consistent with, at the least, a high level of control exercised over the Applicant by the Respondent. Another relevant indicia is the mode of remuneration. Here, payment by piece work is not consistent with an employment relationship. The way that the payment was made, however, shows that many features of an employment relationship existed. First, all the accounting was performed by the Respondent. The stamp and invoice did not reveal an arms length transaction of the nature that would be expected were the Applicant a true sub-contractor conducting his own business. Next the payment was on a weekly basis. Further the provision of "factory hours" is consistent with an employment relationship, although there was no detailed obligation that they be performed. The Applicant's evidence, however, that in the initial stages he was performing 60% of his time in the factory is consistent with him working as though he was an employee. So is his unchallenged evidence about supervising employees in the factory, and actually opening the factory a significant proportion of the time. Another indicia is whether or not the employee is carrying on a business. The Applicant claimed, in his taxation returns, substantial business expenses. The bulk of those expenses, however, related to his motor vehicle. The Applicant also provided his own tools. To an extent this suggests a business. The way that the Respondent utilised the Applicant's services, however, is such that it is difficult to characterise the Applicant as carrying on a business. The Respondent was the Applicant's only customer. The Applicant was fully integrated in the Respondent's operations, his van carried its signage and he wore its T-shirt. I reject the Respondent's assertion that it was not in the business of installing wardrobes. The Respondent was in the business of the manufacture, sale and installation of wardrobes. The fact that the Respondent may only have recovered costs on this aspect of its operation does not mean that this aspect of its business was carried on by the Applicant. Further, the Applicant was part of the Respondent's enterprise, he collected the money and operated to the Respondent's schedule. The Applicant could not generate any goodwill nor could he delegate his duties. It is also inconsistent with the status of conducting his own business that the Applicant worked 60% of the time in the factory in the initial stages, trained and supervised the Respondent's staff, and, on "numerous occasions" drove the Respondent's vehicle to the Northwest coast. There are some similarities between this case and the case of Barone (above). There the erectors travelled to the site and supplied their own tools and materials to erect pre-fabricated garages supplied by the principal. The decisive consideration as far as Lee J was concerned was, however, a detailed set of instructions issued by the principal to the erectors. Those instructions tipped the scales in favour of an employment relationship over factors such as payment by results. Here I am satisfied that the detailed job sheet, and the training provided by the Respondent, were virtually equivalent to the circumstances of the instruction sheet in Barone's case (above). Further there are features of the integration of the Applicant into the Respondent's business to which I have referred that make this case even stronger than the position in Barone. In Barone (above) Lee J also provided an important comment about the other traditional criteria such as hours of work, deduction of taxation and lack of provision of holiday and sick leave. These matters, he said at 441, can be traced to a common source, namely payment by results. Here the Applicant was paid by results. In fact he was also to be paid for "factory hours" and had to abide by the schedule laid down by the Respondent. These additional considerations lessen the weight to be accorded in this case to the mode of remuneration. The issue of workers compensation insurance is, I find, a neutral indicia. There was no evidence that the matter was discussed when the relationship commenced. Later, on advice from an insurance broker, the Respondent obtained a policy to cover the Applicant and deducted the premiums. This arrangement cuts both ways because it is well known that independent contractors may be covered by workers compensation legislation and the Respondent was merely acting on advice that it so cover itself. Similarly the deduction of PPS taxation is a neutral indicia. That arrangement followed from the piece work method remuneration and does not assist in determining the essential nature of the relationship between the parties. Conclusion - an employment relationship As a matter of impression the Applicant here was an employee. What he was doing met the test that "the essence of a contract of service is the supply of the work and skill of a man:" Humberstone v Northern Timber Mills (1949) 79 CLR 389, 404. The Applicant may have provided his own van and tools. The reality was, however, that he provided his labour. He did this within an arrangement where control was in many different ways, asserted by the Respondent. He did it in a way where he was not conducting his own business in any real sense and where he was part and parcel of the Respondent's operations. The economic considerations affecting the Applicant's position vis a vis the Respondent which are discussed in Connelly (above, at 85-87 per Kirby P) and Re Porter (above, at 185-187) point strongly to the conclusion that the Applicant was an employee. This was not, like Connelly (above) and Crawford (above), a marginal case. Considerations in favour of the conclusion that the Applicant was an employee are stronger here than in those two cases and in cases such as Barone (above) and Re Porter (above). There are no written documents to which recourse may be had which are inconsistent with the impression as in Builder's Workers Industrial Union of Australia v Odco Pty Ltd (1991) 29 FCR 104 and City Motors (1981) Pty Ltd v Commissioner of State Taxation (Supreme Court ofWestern Australia, White J, 3 September 1993). There are no formal arrangements inconsistent with the conclusion of an employment relationship as existed in cases as Climaze Holdings Pty Ltd v Dyson (1985) 58 IR 260 and Wason v ACT Waterproofing and Maintenance Pty Ltd (1991) 40 IR 279. The weight of considerations is in favour of the conclusion that the Applicant was in an employment relationship with the Respondent and I so find. The Court has jurisdiction under s.170EA of the Act to determine the matter. This proceeding will be referred to the District Registrar for further directions. MINUTES OF ORDERS THE COURT ORDERS: 1. This proceeding be referred to the District Registrar for further directions. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding twelve (12) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy. Associate: Dated: 22 September 1995 Solicitors for the Applicant: Mr A G Mellick of Gunson Pickard & Hann Solicitors for the Respondent: Mr S Gates of Tasmanian Chamber of Commerce and Industry Date of hearing: 1 September 1995 Date of judgment: 22 September 1995