PATERSON v THE STATE OF SOUTH AUSTRALIA [1997] IRCA 195

DECISION NO:195/97 CATCHWORDS INDUSTRIAL LAW - unlawful termination - person regularly engaged in carting roadmaking materials in own truck - work carried out in conjunction with a road gang - payment on hourly rate plus kilometre allowance - percentage of time spent in labouring duties assisting weekly hire labourers in the road gang - whether independent contractor or employee Workplace Relations Act 1996 (Cth) Matter No. 1733 of 1995 BARRY WILLIAM PATERSON v THE STATE OF SOUTH AUSTRALIA von Doussa J Adelaide 13 June 1997 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA SOUTH AUSTRALIA No. 1733 of 1995 DISTRICT REGISTRY BETWEEN: BARRY WILLIAM PATERSON Applicant AND: THE STATE OF SOUTH AUSTRALIA Respondent MINUTES OF ORDER JUDGE MAKING ORDER : VON DOUSSA J WHERE MADE : ADELAIDE DATE ORDER MADE : 13 JUNE 1997 THE COURT ORDERS THAT: 1. The decisions of the Judicial Registrar made on 19 July 1996 and 13 August 1996 be set aside. 2. The application pursuant to s.170EA of the Workplace Relations Act 1996 be dismissed. 3. There be no order as to costs. Note: Settlement and orders are dealt with by Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA SOUTH AUSTRALIA No. 1733 of 1995 DISTRICT REGISTRY BETWEEN: BARRY WILLIAM PATERSON Applicant AND: THE STATE OF SOUTH AUSTRALIA Respondent REASONS FOR JUDGMENT Coram : von Doussa J Place : Adelaide Date : 13 June 1997 The respondent seeks a review pursuant to s.377 of the Workplace Relations Act 1996 (Cth) ("the Act") of decisions of a Judicial Registrar made on an application pursuant to s.170EA of the Act. The review has been conducted on the papers without further evidence in addition to that before the Judicial Registrar. From October 1978 the applicant, Mr Paterson, was engaged as a "hire truck operator" by the Department of Transport, formerly the Highways Department. The Department is an agency of the respondent. In the application pursuant to s.170EA, Mr Paterson alleged that he had been employed by the respondent since that date as an employee, and that his employment was unlawfully terminated on 3 November 1995. At trial the parties agreed that it would be convenient if the Judicial Registrar were to determine as a preliminary issue whether Mr Paterson was an employee for the purposes of Part VIA Division 3 of the Act. The respondent contended that Mr Paterson was at all times engaged as an independent contractor and therefore excluded from the operation of the Act. The Judicial Registrar directed that this issue be determined as a preliminary one. The Judicial Registrar, after reviewing evidence led before her, concluded that several factors pointed to the relationship between Mr Paterson and the respondent being more akin to a relationship of employer and employee than principal and contractor. The preliminary issue was therefore determined in favour of the applicant. At a subsequent hearing the Judicial Registrar held that Mr Paterson was paid as a casual, but he was nevertheless a full-time employee. As he was paid as a casual the Judicial Registrar held that Mr Paterson was not entitled to a severance payment, or compensation in lieu thereof. However, as he was a full-time employee he was not excluded from the operation of s.170DB pursuant to regulation 30BC (which excludes "casuals" from certain provisions of the Act). Accordingly the applicant was awarded a payment in lieu of five week's notice pursuant to s.170DB. The payment was calculated by allowing five week's remuneration at the hourly rates which Mr Paterson had received under his contract with the respondent. The amount calculated was $4,725. In addition it was held that Mr Paterson's employment had been terminated in circumstances that were harsh, unjust or unreasonable in that he was not given specific advice regarding his position in advance of the termination, and no attempts were made to lessen the impact of that event on him. Compensation was awarded for the lost opportunity for Mr Paterson to prepare himself for his employment being terminated. On this score the compensation was assessed at $4,000. Upon the review the respondent contends that Mr Paterson was engaged as an independent contractor, and that the relationship of employer and employee at no time existed between the parties. In the alternative, the respondent contends that if Mr Paterson were an employee, in the circumstances which occurred in November 1995 his employment was not terminated. Further, it is contended that Mr Paterson's employment was "casual" within the meaning of regulation 30BC so as to exclude him from the notice provisions of s.170DB. Finally it is contended that in light of the decision of the High Court in State of Victoria v Commonwealth of Australia (1996) 138 ALR 129, the award made under s.170DE(2) based on the finding that there was a termination which was harsh, unjust or unreasonable should be set aside. I did not understand counsel for the applicant to resist this final submission. The major question which has been canvassed between the parties throughout is whether the engagement of Mr Paterson was as an employee pursuant to a contract of service, or whether he was engaged as a contractor pursuant to a contract for services. As King CJ observed in Lenzoot Haulage Pty Ltd v Sinclair (1986) 42 SASR 506 at 510, the question whether a person is an employee or an independent contractor has arisen in many contexts and under many statutes. The criteria by reference to which the question is to be determined are well settled although often difficult of application. In this case there are aspects of the relationship between the parties which point in favour of the relationship being one of employer and employee, and there are other aspects which suggest that Mr Paterson was engaged as an independent contractor. In the result it is necessary to consider and weigh these factors, and for the Court to make up its mind into which category the case should be put. The Judicial Registrar identified a number of features of the relationship which she set out in her reasons for decision. As I understood the submissions made on the review, the parties do not challenge that these factors were correctly identified. Indeed there was little dispute about most of them in the evidence. The respondent contends that upon a proper consideration of these factors the Court should determine that Mr Paterson was an independent contractor. I propose to list the factors identified by the Judicial Registrar, adding to some of them additional information which appears in the evidence. The factors are as follows: · The applicant operated a business as a self employed truck driver prior to the relationship commencing with the respondent. I add that he had operated that business in partnership with his wife from 1963 until 1973. · The applicant's relationship with the respondent commenced in 1978 soon after he approached an employee of the respondent seeking work. The relationship continued without a break (other than the usual breaks of the road gang or because of illness of the applicant) until late in 1995. · Initially the applicant's duties mostly involved driving his truck to assist with various road building projects around Adelaide. Over the years the applicant was required to perform labouring duties for the respondent. There is some discrepancy between the applicant's evidence and that of Mr Vogelsang, his supervisor, as to the actual amount of labouring work. However it is clear that by 1995 the amount of labouring work being performed by the applicant was in the vicinity of fifty percent of his duties. I add that the applicant made available a single axle truck, and worked in conjunction with a road gang. He was required to use his truck to cart roadmaking materials and equipment, many of the journeys being short ones. It will be necessary to say something more about the labouring duties after completing the summary of factors identified by the Judicial Registrar. · The applicant was paid an hourly rate regardless of what duties he performed as well as a daily variable amount for mileage. · The hourly rate he was paid was more than double that of labourers engaged on the road gangs. I add that the rate paid to hire truck operators was negotiated between the Department and the Tip Truck Operators Association of South Australia Limited, a body that represented hire truck operators engaged by the Department. The rates negotiated from time to time were reflected in determinations published by the Commissioner for Public Employment. Many hire truck operators were, at least in early years, employed by the Department. There were two types of engagement. The first type related mainly to large trucks where payment was made on a tonne per kilometre rate. The second type related to smaller, single axle, trucks where payment was primarily based on hourly rates. Historically hourly rates had been adopted as the smaller trucks were engaged in metropolitan work where traffic light and traffic congestion problems extended journey times, and many of the trips were so short that remuneration on a tonne/kilometre rate would not produce a realistic return to the operators. From the contract rates, a hire truck operator was required to pay all outgoings in respect of the operation of the truck. · The applicant could be sent home after 2 hours if there was no work. I add that this could occur if wet weather prevailed. · He was not paid sick leave or annual leave. · He was provided with some safety equipment. I add that the safety equipment involved a red vest, safety boots and a hard hat. The Department required all persons present on road work sites to wear such items, whether they were employees, contractors or visitors. · He used his own truck whilst performing carting duties, but used the respondent's equipment when performing labouring duties. I add that the equipment involved in the labouring duties was no more than a shovel, a broom or a wheelbarrow. · He paid insurance premiums on his truck. He did not self insure his labour. · Taxation deductions were made from his pay in accordance with the Prescribed Payments System. · He was covered by the respondent, at least since the introduction of the Workers Rehabilitation and Compensation Act 1986 (SA), for any compensable injury. · He held himself out to the Australian Taxation Office as an independent contractor operating a business and claimed deductions for expenses that were very much higher than would have been expected for an employee. I add that these expenses were almost exclusively related to the operation of trucks owned by the applicant. The extent of the deductions claimed by him varied over the years from between about 20 per cent to in excess of 50 per cent of his annual gross income received from the operation of the trucks. · The applicant worked the same hours that the road gangs worked. He did not work when the gangs were on a rostered day off. · The applicant owned a number of trucks, however at any given time he only used one truck in performing his duties for the respondent. · The applicant was subject to the control of the supervisor of the road gang. I add to this reference to control later in these reasons. · There was a difference between what the applicant actually did, and what he was required by the respondent to do. He worked for no one except the respondent, but the respondent did not require it of him. He did not operate as a partnership, although the respondent was indifferent as to whether he did. He did not send anyone to work in his place if he was sick or unavailable, although the respondent has allowed that to occur in relation to other truck drivers. I add that the majority of the hire truck operators engaged by the respondent did operate in partnership or through a company. The Judicial Registrar observed that much of the evidence on these topics led by the parties in support of their respective positions did not actually go towards proving anything about the relationship between the respondent and the applicant. With that comment I agree. The Judicial Registrar went on to express her conclusion that she considered the following three factors determined the issue in favour of the applicant: · The way in which the roadworks are conducted. · The lack of breaks and length of the relationship between the respondent and the applicant. · The regular, close and consistent nature of the relationship between the respondent, through its road supervisor, and the applicant. I am unable to share the view of the Judicial Registrar that these three factors, alone or in combination, are determinative of the issue. In my view these three matters are largely neutral. I do not consider that the length of the relationship between the respondent and Mr Paterson to be an important factor. Numerous relationships which are truly contracts for service continue for long periods where it is in the mutual interests of the parties for this to occur. The length of the relationship may prove nothing more than that it was an advantageous one to both sides. The first and last of the matters relied on by the Judicial Registrar are aspects of the question of control. The question of control is often an important criterion in determining the nature of a disputed relationship. However it is but one of a number of issues which must be considered and is not in itself determinative: Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 per Mason J at 24. The hire truck operators were required to operate their trucks in conjunction with the activities of the road gang. Even if a hire truck operator were plainly an independent contractor (for example, in the case of a truck owned by a company) the operator would inevitably be subject to close control from the supervisor as to what was done and when. Moreover, the operator would obviously have to work at hours which fitted in with the activities of the road gang. Control in such matters as the hours of work, the place of work, and the activities to be performed with the truck in my opinion do not assist in determining the nature of the relationship. Of more significance in the present case is the fact that Mr Paterson was himself in control of the maintenance and operation of his truck. It was up to him whether he had a new truck or a secondhand truck. It was up to him whether he maintained it himself, or had it maintained by others. It was up to him to determine where he purchased fuel and parts. It is necessary to discuss in more detail the fact that Mr Paterson was required to perform an amount of labouring work. The picture conveyed by the evidence is that in the late 1970's and the early 1980's there was much road building activity being undertaken by the Highways Department. There were many road gangs, and numerous hire truck operators paid on hourly rates. The hire truck operators were not expected to perform any work other than to drive their trucks. However they were dependent for the assignment of work upon the supervisor of the gang, and a practice grew up whereby drivers, when not actively driving, would offer assistance in such matters as shovelling, sweeping, or directing traffic to keep onside with the supervisor. In about 1983 the amount of roadworks being undertaken by the Department diminished. The Department reduced its workforce, and the work available to hire truck operators also diminished. There was not enough work for those who had previously been engaged. The Department considered it was uneconomic to engage a hire truck operator for an eight hour day when there was insufficient truck work to occupy that period. To encourage their continued engagement, the hire truck operators spent more of their time assisting the construction workers in the road gang. Demarcation issues then arose as to the work that should be performed by full-time employees, who were members of unions, and the hire truck operators. In 1984 a tripartite agreement was reached between the Australian Workers Union, the Transport Workers Union and the Highways Department. That agreement was recorded in a letter dated 21 June 1984 (Exhibit A1). The evident purpose of the agreement was to resolve the demarcation issues, to determine the coverage of the two unions, and to preserve the continued engagement of hire truck operators. The letter of 21 June 1984, from the Highways Department to the unions, commences: "Further to our recent discussions on the conditions of hire and use of contract truck owner/drivers in the Department, I set out below the general and specific conditions agreed upon for continued engagement of owner drivers and undertake to uphold Highways Department's continued compliance with them..." Item II of the letter reads: "UTILIZATION Owner/drivers in category (2) with Urban construction gangs usually only have sufficient cartage to occupy their trucks for up to 50% of the week. CONDITIONS Continued engagement of a contract truck owner/driver is dependent on the Department's ability to make use of the truck and/or the driver to the extent that it costs the Department to hire him and his truck. To this end, the Department needs to use the services of the category 2 owner/driver in the same manner as it uses the services of employed construction workers paid at driver's award rates in it's construction gangs. These employees perform all the duties permitted of a construction worker. NECESSARY FOR ON- Anything less than this will create the situation in which the Department cannot use either truck or driver for extended periods (assessed at about 50%) forcing their lay off as contractors (recognising that they are not weekly paid wage earners). There is a strong possibility that this will create hardship to the point at which truck ownership and operation is not viable." GOING CONTRACTUAL ENGAGEMENT