Darren Andrew Powell v Monier PGH Holdings Limited Richard John Narracott v Monier PGH Holding Limited Frank Ortolan v Monier PGH Holdings Limited [1995] IRCA 688

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY TI-1221 of 1995 B E T W E E N :

DARREN ANDREW POWELL Applicant AND

MONIER PGH HOLDINGS LIMITED Respondent TI-1227 of 1995 B E T W E E N :

RICHARD JOHN NARRACOTT Applicant AND

MONIER PGH HOLDINGS LIMITED Respondent TI-1228 of 1995 B E T W E E N :

FRANK ORTOLAN Applicant AND

MONIER PGH HOLDINGS LIMITED Respondent Before: Judicial Registrar Ryan Place: Hobart Date: 15 December 1995 REASONS FOR JUDGMENT (Delivered Ex Tempore) THE CLAIMS Each applicant claims 1. he was an employee of the respondent as at 1 August 1995 2. on 1 August 1995 the respondent terminated his employment by refusing to give job allocations 3. the respondent refused to give job allocations from 1 August 1995 because each applicant refused to complete a sub-contract declaration form 4. the refusal to sign the forms did not constitute a valid reason for termination of employment connected with capacity or conduct or based upon the operational requirements of the respondent's undertaking, establishment or service and accordingly each applicant seeks reinstatement and/or compensation 5. in the alternative, if the applicant's refusal in each case to complete the form was a valid reason connected with the applicant's capacity or conduct or based upon the operational requirements of the respondent's undertaking, establishment or service then the termination was harsh, unjust or unreasonable. THE RESPONSE The respondent asserts the applicants' were not employees as at 1 August 1995 and that the relationship between two applicants and the respondent was that of principal and independent contractor and that a similar relationship existed between the partnership business of the applicant Frank Ortolan and the respondent. If the respondent's assertion is found to be correct the Court does not have jurisdiction under S170EA of the Industrial Relations Act 1988. PART VIA Part VIA of the Industrial Relations Act 1988 was inserted into that Act by the Industrial Reform Act 1993 and came into operation on 30 March 1994. Amendments were made to Part VIA by the Industrial Relations Amendment Act (No.2) 1994 which came into operation on 30 June 1994. As Northrop J. pointed out in Johns v Gunns Ltd, (1995) 60 IR 258, Part VIA has changed dramatically the relationship that exists between an employer and employees of that employer. The right (if that is now the correct word) of an employer to dismiss, or to use the expression which is now common, to terminate the employment of an employee, has been restricted by statutory provisions. In broad terms the right is limited to cases where the employer is able to satisfy the Court of valid reasons for terminating the employment connected with the employee's capacity or conduct or based on the operational requirements of the employer. Even if one of these reasons is established, the employer may be unable to terminate the employment of the employee. These statutory provisions, with minor exceptions, override the terms of any contract of employment existing between an employer and an employee. The statutory provisions are different in nature from the terms of an Award under the Act and binding upon an employer and the employees of that employer. Again in Johns at 4 Northrop J. points out that the objective of Division 3 of Part VIA, which comprises Sections 170CA to 170EH, is to give effect to, among other things, to the Termination of Employment Recommendation 1982, which the General Conference of the Industrial Labour Organisation adopted on 22 June 1982. This Recommendation is also known as Recommendation No. 166, a copy of the text of which is set out in Schedule 11 of the Act. Prior to 30 March 1994 there was no general remedy in respect to a termination of employment which was harsh, unjust or unreasonable ( i.e. unfair). Some States provided for a remedy where a dismissal was found to be unfair. More recently many Federal awards contained a prohibition on unfair dismissals in a clause commonly known as a "Termination Change and Redundancy Clause". Division 3 now gives most employees the right to bring an application in the Industrial Relations Court alleging their dismissal was not for a valid reason or was harsh, unjust or unreasonable. Section 4 of the Act defines an employee as including any person whose usual occupation is that of employee. The status of the applicants is left to be determined by the application of tests used by the Courts at common law to identify the existence of an employer/employee relationship. However, employers and sole traders working entirely alone, cannot claim remedy for unlawful termination of employment. Employers as employers and sole traders as sole traders are not employees. Only an employee can found a claim for remedy under Division 3 of Part VIA. EMPLOYEES OR CONTRACTORS The three applicants in these cases claim that the respondent terminated their employment as employee roof tilers and that this was done without valid reason and was harsh, unjust and unreasonable. However, an abundance of documentary evidence in about sixty exhibits indicates that whatever these three applicants thought, and whatever these three applicants wanted in terms of a working relationship, they were not in mid 1995 employees of the respondent. Two of them, Darren Powell and Richard Naracott, were sub-contractors in a contractual relationship with the respondent as principal and each of them as a sole trader. One of the applicants, Frank Ortolan was a partner in F. & B. Ortolan, a partnership business with a very long history as a sub-contractor performing roof tiling work for the respondent as principal. Mr Parry for the respondent asserts that Mr Ortolan had no relationship with the respondent and that the relationship was with the partnership. In a legal sense he is correct. Of course, in a personal and practical sense, Mr Frank Ortolan and the respondent had a long relationship and the Court has no reason to believe that the respondent had done other than benefit to a very considerable degree from that relationship. The Court can and does relate to Mr Ortolan's expression of concern and disappointment that "after 27 years work (the respondent) was prepared to let me go after not signing a form". This is, of course, a reference to Mr Ortolan's unwillingness (and Messrs Powell and Naracott) to sign declarations in mid 1995 undertaking to meet "all legal obligations of a sub-contractor trading as a partnership, business or company" and, more particularly, an unwillingness to nominate existing employees (if any) in such declarations. Whatever might be the history behind the agreement between the respondent and for and on behalf of Tasmanian Roof Tilers (Exhibit R3) and whatever might be the grievances entertained by the applicants, and no matter how genuine those grievances might be, that history and those grievances cannot convert a sub-contractor relationship into a relationship of employer and employee. No matter what pressure may have been applied by the respondent and no matter how much that pressure may have been resented and perhaps resisted by the applicants, a relationship of sub-contractor and principal is not and cannot be that of employer and employee. The distinction between an employee and an independent contractor is the subject of many reported cases. In terms of recent authority the Court needs to go no further than the unanimous decision of the High Court of Australia in Stevens and Gray v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16. Indeed, as Counsel for the respondent has noted, the facts in Brodribb bear considerable similarity to those in these three applications before the Court. At 24 in Brodribb Mason J. referred to: (i) extensive experience in the industry (ii) engagement to carry out similar functions over a period of years (iii) provision and maintenance of equipment by those carrying out the work (iv) determination of hours of work by those carrying out the work. (v) fortnightly payments determined by volume (I pause to note that in these three cases the fortnightly payments were determined by volume and by the nature of the work and payment was made on the basis of invoices) (vi) no deduction by the principal of income tax instalments from these payments Wilson J. and Dawson J. refer to the classic test of employee or contractor and the more modern approach in Brodribb at 35 as follows: "... The classic test for determining whether the relationship of master and servant exists has been one of control, the answer depending upon whether the person engaging him has control not only as to what he shall do in the course of his employment but as to how he shall do it: Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd. (1924) 1 KB 762. The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances." Indeed as Dean J. pointed out at 49 the equal division of opinion between four members of the Victorian Supreme Court in Brodribb's case demonstrates how finely balanced is the question whether Mr Stevens and Mr Gray were, in all the circumstances, employees of the respondent Brodribb Sawmilling Company Pty Ltd. Wilson J. and Dawson J. continue at 36 as follows: "In many, if not most, cases it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. That is not now a sufficient or even an appropriate test in its traditional form in all cases because in modern conditions a person may exercise personal skills so as to prevent control over the manner of doing his work and yet nevertheless be a servant: Montreal v Montreal Locomotive Works (1947) I.D.L.R.161 at 169. This has led to the observation that it is the right to control rather than its actual exercise which is the important thing (Zuijs v Wirth Bros. Pty Ltd (1955) 93 CLR 561 at 571) but in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552, a case involving a droving contract in which Dixon J. observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract. The other indicia of the nature of the relationship have been variously stated and have been added to from time to time. Those suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or distinct calling on the part of the person engaged, the provision by him of his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of remuneration without deduction for income tax. None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance. Having said that, we should point out that any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance." In the case of each applicant there are many indicia pointing to a contractual relationship, a contract for services with the respondent. Conversely, there are few indicators, and no persuasive indicators, of a contract of service, a relationship of employer and employee. The directory, demanding, almost carping tone of some of the respondent's communications, especially the "red book", the Fixing and Roof Appearance Standards (Exhibit A6) are more redolent of a patriarchal employer than a principal using sub-contractors, but I will return to that later. CONTROL Taking first what is described as the classic test of control, the Court notes as Mason J. said at 24 in Brodribb that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. There cited is Dixon J. in Humberstone v Northern Timbermills (1949) 79 CLR 389 at 404: "The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resides in the employer so that he was subject to the latter's order and direction." These three applicants were not subject to the respondent's orders and directions in the day to day performance of their work as roof tilers. I have no doubt that they believe they were subject to orders and directions. In a practical sense the applicants were expected to comply with a number of requirements associated with the standards which the respondent wanted achieved in terms of rooves tiled with Monier products. Examples of such quality issues were the respondent's memos on leaching, clipping, sarking and stillage. (Exhibits A8, A9, A20 and A27 are examples). There seems to have been some varying degrees of resentment to, and resistance of, such quality requirements but those requirements are a far cry from "ultimate authority over the applicants in the performance of their work". The applicants in their actual work as roof tilers were not subject to real direction and control from the respondent. Of course, the respondent exercised very considerable influence, perhaps even pressure, because the bulk of the work performed by the three applicants was for the respondent. While no direct evidence was tendered, it is easy to envisage that unco-operative or unsatisfactory roof tilers would lose the opportunity to do work for the respondent and would thus lose a significant but not sole source of income. There is sufficient evidence in the plethora of exhibits to suggest that the respondent was fairly demanding in terms of standards and quality but that is not control or supervision by an employer in day to day work in terms common with and sometimes expected by employees. In my view, Ms Mackey for the applicants, rightly and understandably drew attention to the Monier Fixing and Roof Appearance Standards (Exhibit A6). That document begins with an admonition to adhere to what are described as "the following standards so as to ensure that a Monier roof exceeds the expectations of our customers". A document which seeks in the first sentence to ensure that the expectations of third parties are more than met by roof tilers unlikely to have much direct contact with the third parties, let alone an ability to divine the expectations which are to be exceeded, is a document which has to be considered in that light. Nevertheless, paragraph 1.2.2 reads: "Where applicable "Safety Induction Cards" are to be available for inspection at all times." Paragraph 2 seeks to impose high standards of site care and cleanliness. 2.1.2 reads: "Avoid damage to gutters when standing battens; lift battens inside frame where possible." Paragraph 2.1.3 reads: "Tile cuts, batten cut-offs and other roof cover debris are to be removed from within the building and slabs cleaned of debris." Paragraph 2.1.4 reads: "Roof cover debris to be, where practicable, placed in two heaps, clear of the building, one at the front and one at the rear or as designated." Paragraph 16.1.3 reads: "Surplus tiles and materials to be left in tidy stacks and recorded on check list." Paragraph 16.1.4 reads: "Stillages to be stacked neatly for collection." While, as I have already indicated, the red standards book is patriarchal and demanding in tone, it is a statement of standards which the respondent would like to achieve to the extent those standards are achievable. It is not, despite the somewhat offensive tone, an actual, implementable and implemented, set of directions controlling the day to day work of the tilers. My finding distinguishes these applications from Barone & Ors v Olympic Industries Pty Ltd (1984) 8 IR 439 at 422 where Lee J. found a circular to erectors convincingly demonstrated a reservation by a company of the right to control a Mr Davidson in the manner of performance of his work. I make my findings, as I must, on the facts before me. I cannot assess the facts in Barone but I have read the erector's circular in the case as reported. I consider that that circular reserves control in the actual erection quite different to the respondent's attempts to impose standards via Exhibit A6. Furthermore, the applicants are in some difficulty in seeking to rely on the standards described in Exhibit A6 as evidence that those standards are in fact directions of control applied to by an employer to employees and at the same time avoiding the specific injunctions in paragraphs 1.1.1. and 1.1.3 which read: "1.1.1 Roof Tilers must have: