WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES’ COURT

PARTIES TERENCE WILLIAM MILES

CLAIMANT

-v-

Brendon Penn Nominees Pty Ltd

RESPONDENT

CORAM INDUSTRIAL MAGISTRATE W.G. TARR

HEARD Wednesday, 26 April 2006, Thursday, 27 April 2006, Wednesday, 17 May 2006

DELIVERED Monday, 15 May 2006

CLAIM NO. M 238 OF 2004

CITATION NO. 2006 WAIRC 04417

CatchWords Breach of award; Alleged failure to pay accrued annual leave; notice and redundancy; Whether employee or sub-contractor; Flat hourly rate in excess of award entitlement.

Legislation Workplace Relations Act 1996 – Mobile Crane Hiring Award 2002

Cases referred to in decision

 Massey v Crown Life Insurance Co. (1978) 2 ALL ER 576

 Federal Commissioner of Taxation v Krakos Investments Pty Ltd 133 ALR 545

 Sharrment Pty Ltd and Others v Official Trustee in Bankruptcy (1988) 18 FCR 449.

 The Western Australian Builders” Labourers, Painters and Plasterers Union v RB Exclusive Pools Pty Ltd trading as Florida Exclusive Pools 77 WAIG 4.

Cases also cited Australian Mutual provident Society v Allen (1978) 18 ALR 385; 52 ALJR 407

Narich Pty Ltd v Commissioner of Pay-Roll tax [1983] 2 NSWLR 597.

Stevens v Brodribb Sawmilling Co Pty Ltd (1985-1986) 160 CLR 16

Hollis v Vabu Pty Limited [2001] 207 CLR 21

Peters v James Turner Roofing 81 WAIG 3093

James Turner Roofing Pty Ltd v Peters 83 WAIG 427

Result Claim dismissed

Representation 

Applicant Mr P Brunner (of Counsel) instructed by Kott Gunning Lawyers appeared for Claimant

Respondent Mrs C McKenzie (of Counsel) instructed by McKenzie Lalor, Barristers and Solicitors appeared for the Respondent

REASONS FOR DECISION

Claim and Response

1         The Claimant in these proceedings is claiming that the Respondent is in breach of the Mobile Crane Hiring Award 2002 (the Award).  He particularised his claim in Further and Better Particulars of claim filed in these proceedings as follows:

1. On or about 26 November 1999 the Claimant was engaged by the Respondent to undertake crane operating duties.
2. On or about 15 November 2002 the Claimant’s position was made redundant by the Respondent due to a downsizing of the Respondent’s business.
3. On the termination of his services, the Claimant was not paid entitlements to:

3.1 accrued annual leave

3.2 notice; and

3.3 redundancy

4. At all material times the Claimant was an employee of the Respondent.

5. At all material times the provisions of the Mobile Crane Hiring Award 2002 (AW816842CRV) (the Award) applied to the employment relationship between the Claimant and the Respondent.
6. Pursuant to Clause 25 of the Award the Claimant was entitled to a period of 28 consecutive days leave annually (25.1.1) and 17.5% leave loading (25.8), with such accrued leave and loading being payable on the termination of the employment.
7. Pursuant to Clause 11.2 of the Award the Claimant was entitled to a minimum of 4 weeks notice.
8. Pursuant to Clause 11.3 of the Award the Claimant was entitled to retrenchment pay of 3 weeks per year of service and a pro rata payment, based on 3 weeks pay per year of service, for any uncompleted year.
9. As a consequence of these particulars the Claimant claims accrued annual leave, notice and redundancy pay.
10. The Claimant reserves the right to amend these particulars or raise further claim against the Respondent in relation to any underpayment of wages, overtime, penalties, shift loadings or allowances that may have been applicable during the Applicant’s employment pursuant to the provisions of the Award.

2         THE Claimant now seeks:

1.  Payment in the sum of $15,189.66, representing

1.1  accrued annual leave of $7,289.08;

1.2  notice of $2,446.00, and

1.3  redundancy of $5,454.58

2. Costs.

3. Interest.

4 Imposition of a Penalty

3         The Respondent denies it has an obligation under the Award and asserts that the Claimant was employed as a sub-contractor and was paid as one pursuant to an agreement made prior to the Claimant commencing employment.

The Agreement

4         It is not in issue that the parties entered into an agreement that the Claimant be employed on a sub-contract arrangement and I find that was initiated by the Claimant.

5         The Claimant gave evidence of responding to a newspaper advertisement of the Respondent seeking a Hydraulic Slewing Crane Operator which I understand to be a type of mobile crane.  During a telephone conversation with Mr Brendon Penn (Mr Penn) the Respondent’s sole director and proprietor, the Claimant said he made it clear he would not work for award rates and wanted “something extra or a sub-contract”.

6         After calculating the costs involved Mr Penn agreed to pay the Claimant $25.50 per hour on a sub-contract basis.  This amount was $8.50 per hour more than was being paid to other crane drivers employed by the Respondent.  The Claimant accepted that offer of $25.50, “a flat rate on a sub-contract basis”.  He said Mr Penn told him he would not be paid for holidays and would only be paid for hours worked.  The Claimant agreed to that.  In cross-examination the Claimant confirmed he had discussed sick pay and holiday pay and agreed that he did not expect to be paid overtime or other penalty rates.

7         Queanbeyan Crane and Rigging Services was a business name used by the Claimant and tax invoices were created each week from which the Claimant was paid.  Those invoices were initiated by the Claimant who provided the invoice book which had been used by him when working in Queensland.  An Australian Business Number (ABN) was issued to the Claimant and tax was withheld at a rate of 20% under the Australian Taxation Office Prescribed Payment System, a system used for other than employees.

8         have no doubt on the evidence that the parties intended to enter into an agreement, albeit oral and limited in details, where the Claimant would be employed as a sub-contractor by the Respondent and the expectation by them was that the hourly rate agreed was accepted as full payment under the contract.

Employee or Sub-Contractor

9         Notwithstanding the foregoing it has long been held that the test as to whether or not the relationship of an employee and its worker is not determined by the label they use to describe it.  In Massey v Crown Life Insurance Co (1978) 2 ALL ER 576 at 579 it was said:

“…if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label on it.” 

10      The case goes on to say, following the above passage:

 “On the other hand, if their relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another.” 

11      The relationship question often arises where there is an issue with the bone fides of the agreement that led to the relationship.

12      In Federal Commissioner of Taxation v Krakos Investments Pty Ltd 133 ALR 545 the Full Court of the Federal Court of Australia held per Hill J (Von Doussa and O’Loughlin JJ concurring) that:

 “The parties cannot determine the proper characterisation of a relationship by the label which they choose to attach to it.  However, where a transaction is not a sham, and it is not suggested that the label used is not a genuine statement of the parties’ intention, that label will be given its proper weight.”

Australian Mutual Provident Society v Allen (1978) 18 ALR 385; 52 ALJR 407; Narich Pty Ltd v Commissioner of Pay-Roll tax [1983] 2 NSWLR 597, applied.

13      In Sharrment Pty Ltd and Others v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 454 His Honour Lockhart J said:

 “A ‘sham’ is therefore, for the purpose of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be.  It is a spurious imitation, a counterfeit, a disguise or a false front.  It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not.  It is something which is false or deceptive.”

14      There is no suggestion in this case that the agreement between the parties was a sham.  Although the agreement was oral and lacked detail I am satisfied that both parties understood what was agreed and this is demonstrated by the performance and expectation of each.  The Claimant, as I have said, initiated and accepted the arrangement and willingly accepted the conditions agreed.  He was prepared to work as many hours at the agreed rate as was required.  The rate commenced at $25.50 per hour for the first two weeks increasing to $26.50 per hour and later to $27.50 per hour with an hourly rate of $30.00 on weekends.

15      It was accepted by the Claimant that those rates were for hours worked and that the hourly rate was all that he expected from the Respondent.  In fact, during the period of employment the Claimant was not paid for public holidays or for the days he had off as either leave or sick leave.

16      There was no expectation by the Claimant that he would be given notice should his employment with the Respondent terminate or that he would be paid in lieu of notice.  He was surprised when he was given two weeks pay along with the other employees.  Nor did the Claimant have any expectation that he would receive any redundancy as provided by the Award.

17      It has been argued on behalf of the Claimant that I should find that he was an employee and not a sub-contractor and that the Award applies and binds the Respondent.

18      The Award was negotiated by the Construction, Forestry, Mining and Energy Union and those respondent employers who took an interest in the negotiations or were members of the Australian Industry Group which represented those employers.  It was an award made and reviewed pursuant to the Workplace Relations Act 1996, as amended.  The legislation provides for the making of awards which generally provide protection for the employee by recording the agreed conditions of employment and other related matters and, at the same time, provide the employers some certainty in relation to their contracts of employment with their workplace covered by the Award. 

19      It was the Claimant in this case who said to the Respondent he did not want to work for the wages provided under the Award and required the Respondent to offer a more attractive hourly rate.  It was the Claimant who also suggested he be paid as a sub-contractor. 

20      The Respondent, through Mr Penn, gave evidence that all his employees were employed under the Award conditions, although at an above-award hourly rate, and it was his preference that the Claimant be employed likewise but it was because he needed a crane driver that he agreed to engage the Claimant as a sub-contractor.

21      I am aware of the authorities which have set out and followed the consideration of various indicia to determine the true nature of a relationship between an employer and employee.  This approach was adopted in Stevens v Brodribb Sawmilling Co Pty Ltd (1985-1986) 160 CLR 16 and followed in The Western Australian Builders’ Labourers, Painters and Plasterers Union v RB Exclusive Pools Pty Ltd trading as Florida Exclusive Pools 77 WAIG 4 and again this approach was adopted by the High Court of Australia in Hollis v Vabu Pty Limited [2001] 207 CLR 21.  My brother, Industrial Magistrate Cicchini, in Peters v James Turner Roofing 81 WAIG 3093 followed the afore-mentioned authorities on the issue of whether or not Peters was an employee or a sub-contractor and his finding on that issue was not disturbed by the Western Australian Industrial Appeals Court (see 83 WAIG 427).

22      Notwithstanding those decisions, is it fair to an employer who agrees to conditions, initiated by an employee, that he be employed as a sub-contractor and accepts the agreed conditions for approximately three years until being made redundant to then claim to be an employee and claim entitlements under an award?

23      The issue of estoppel was considered by the Full Bench of the Western Australian Industrial Relations Commission in Florida Exclusive Pools (Supra).  It was there said at pages 7-8:

“Three elements must be demonstrated in order to establish an estoppel (see “The Laws of Australia”, Volume 35.6, paragraphs [2]-[5] and see paragraph [79]-Estoppel by Convention)-

“First, the party claiming the estoppel must have adopted an assumption as the basis of an act or omission: see [41-52].

Secondly, the claimant, upon the basis of assumption, must have so acted or abstained from acting that a detriment will be suffered if the person against whom the estoppel is asserted is afterwards allowed to set up rights inconsistent with it: see [53-60].

Thirdly, the party against whom the estoppel is alleged must have played such a part in the adoption of, or persistence in, the assumption that freedom to act otherwise than in a manner consistent with it would be unfair or unjust: see [61-96].”

24      In this case there was clearly an assumption by both parties that their relationship was based on a contract for service and not a contract of service.

25      The Claimant acted upon the basis of that assumption and a detriment will be suffered by the Respondent if the Claimant is now allowed to succeed with his claim that the Award has application.

26      On the third point, it is not in dispute that the Claimant “played such a part in the adoption of, or persistence in, the assumption” that freedom to act otherwise (or be considered otherwise) than in a manner consistent with it would be unfair or unjust.

27      I find therefore that the Claimant was a sub-contractor as a result of his initiated contract of service with the Respondent and his claim must fail.  Accordingly the claim is dismissed.

W G Tarr

Industrial Magistrate