WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2018 WAIRC 00419

DELIVERED : MONday, 16 July 2018

FILE NO. : U 121 OF 2017, B 155 OF 2017

Applicant

AND

Paul Lothar Ralf MEYER c/o Thames Legal Office

Respondent

Catchwords : Industrial Law (WA) – Preliminary issues – Whether Commission has jurisdiction - Whether the applicant is an employee or an independent contractor – Whether a restricted legal practitioner under s 50 of the Legal Profession Act 2008 (WA) can be an independent contractor - Principles applied – Claim within Commission’s jurisdiction – Commission satisfied that “restricted legal practice” under s 50 of the Legal Profession Act 2008 only includes employees at common law

Legislation : Industrial Relations Act 1979 (WA)

  Legal Profession Act 2008 (WA), s 50

  Minimum Conditions of Employment Act 1993 (WA)

Result : Application to be re-listed

Representation:

Counsel:

Applicant : Ms M Saraceni of counsel

Respondent : In person

Case(s) referred to in reasons:

Building Workers’ Industrial Union of Australia v Odco Pty Ltd (1991) 29 FCR 104

Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41

Phillip Digney v The Black Cockatoo Preservation Society of Australia [2014] WAIRC 01285; (2014) 95 WAIG 562

Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395

Hollis v Vabu Pty Ltd (2001) 207 CLR 21

Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210

Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313

On Call Interpreters & Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366

Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers (2004) 85 WAIG 5

Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539

Roy Morgan Research v Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448

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

United Construction Pty Ltd v Birighitti [2003] WASCA 24

Zuijs v Wirth Brothers (1955) 93 CLR 561

Reasons for Decision

1         There are two applications before the Commission. The first is a claim by the applicant Mr Sampson, that he was unfairly dismissed by the respondent, sole legal practitioner Mr Paul Meyer, trading as Thames Legal. The second is an application by Mr Sampson for denied contractual benefits that he alleges Thames Legal denied to him during what he maintained was an employment relationship with the firm, from October 2015 to September 2017.

2         Mr Sampson maintained that he commenced employment with Thames Legal as a restricted legal practitioner under the terms of s 50 of the Legal Profession Act 2008 (WA). Despite this, Mr Sampson maintained that Thames Legal treated him as a subcontractor and paid him by way of remuneration, 40% of the fees charged to and received by clients of the firm, when Mr Sampson performed the work charged to the client.

3         Mr Sampson claimed that events leading to his dismissal included a letter from him requesting that Mr Meyer pay monies owed to him, in terms of outstanding pay and entitlements. Mr Sampson seeks compensation for loss. As to the denied contractual benefits claim, Mr Sampson claimed $42,974 in salary or wages.  Whilst in the particulars of claim the basis for this was not clear, it subsequently emerged that it is founded on the application of relevant provisions of the Minimum Conditions of Employment Act 1993 (WA). Additionally, Mr Sampson seeks recovery of an amount in respect of leave and some other alleged contractual benefits.

4         Thames Legal opposes the claim of Mr Sampson. Moreover, it was contended that his applications are not within the Commission’s jurisdiction, because at all material times the parties were in a relationship of principal and independent contractor and not one of employer and employee for the purposes of the Industrial Relations Act 1979 (WA). As a question of the Commission’s jurisdiction has been raised, the Commission is obliged to satisfy itself that it has the jurisdiction to enquire into and deal with Mr Sampson’s claims. This matter was listed for hearing as a threshold issue.

Legal principles

5         The issue of whether a person is an employee or an independent contractor involves the consideration of the totality of the relationship between the parties.  This principle is referred to and relied upon by the Industrial Appeal Court in Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers (2004) 85 WAIG 5. In Philip Digney v The Black Cockatoo Preservation Society of Australia [2014] WAIRC 01285; (2014) 95 WAIG 562 I set out the relevant principles at par 23, in the following terms:

23 The relevant principles as to whether a person should, as a matter of fact and law, be regarded as an employee or an independent contractor, have been dealt with by the Industrial Appeal Court. In Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers (2004) 85 WAIG 5, Steytler J dealt with this issue at pars 20-28, EM Heenan J at pars 50-52 and Simmonds J dealt with the issue at pars 98-100. In particular, Simmonds J said at pars 95-101 as follows:

95 The common law test for distinguishing a relationship of employer/employee, on the one hand, and principal/independent contractor, on the other, has recently been reviewed in some detail in the judgment of Hasluck J of this Court in Birighitti (supra), at [57] to [67]. The other members of the Court (Anderson J, who dissented on the jurisdictional issue in the case, and Scott J) did not find it necessary to enter into the question in as much detail because of the case's particular facts.

96 In this case, where it seems to me the matter is rather more evenly balanced than in Birighitti , I consider it is necessary to review the matter again, particularly as it was contended in this case that there had been a shift in the law not entered into in Birighitti . I review the matter again without meaning to depart from the view of Hasluck J there in any way, but to emphasise matters of first principle particularly relevant to this case.

97 The most recent High Court authority in point, for the purposes of vicarious liability for the negligence of a bicycle courier, is Hollis v Vabu Pty Ltd (supra). There was a clear majority on the issue of the application of the test, that of Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ, with McHugh J dissenting, and Callinan J not expressing a concluded view on the matter. As to the test itself, however, I see no clear difference between all of the members of the Court who expressed a concluded view.

98 The test set out in Vabu by the majority is expressed in terms of the difference between a person (an employee) whose work serves another, and is done in that other's business, on the one hand, and a person whose work is likewise for the benefit of another's business, but is done in the course of the carrying on of a trade or business of the person doing the work, on the other. The majority referred (Vabu, at 39) for this purpose to Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41, at 48, per Dixon J, and to Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210, at 217 per Windeyer J, where language of this sort is used. The Vabu majority also referred to Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313, at 366 per McHugh J, where the distinction is expressed in terms of the independent contractor as a person who does the work not as "the representative of the employer".

99 For the application of the test, and particularly for the relevance of the matter of "control" of the work done, the Vabu majority refer to the dicta in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, at 29 per Mason J. There, his Honour acknowledges the historical significance of the "control test" and the difficulties in using it in the historical ways in modern working conditions, where he says

"The common law has been sufficiently flexible to adapt to changing social conditions by shifting the emphasis in the control test from the actual exercise of control to the right to exercise it, 'so far as there is scope for it', even if it be 'only in incidental or collateral matters': Zuijs v Wirth Brothers [(1955) 93 CLR 461, at 571]. Furthermore, control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered."

100 What his Honour meant by the reference to the factors, including but not limited to control, subsumed by the "totality of the relationship" is indicated by an earlier passage in his judgment in Stevens (supra), which is not referred to in Vabu, but which is a passage quoted in Odco as setting out the law on this point ((supra) at 754):

"The approach of this court has been to regard it [control] merely as one of a number of indicia which must be considered in the determination of the question: Queensland Stations Pty Ltd v FCT (1945) 70 CLR 539 at 552; Zuijs' case [supra]; FCT v Barrett (1973) 129 CLR at 401; 2 ALR 65; Marshall [supra] at 218. Other relevant factors 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."

101 As these dicta tend to indicate, the application of the test is a matter of some difficulty, as this case illustrates. I need to consider that question separately.

24 His Honour then went on to apply the test set out in the various decisions of the High Court referred to, and took into account a number of factors including control, 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, the delegation of work, indicia of a separate business, integration in the organisation, and the language of the parties’ written contract: see pars 108-150 inclusive.

25 The “multi factor” test referred to and applied by Simmonds J, as set out above, was referred to and applied by the High Court in Hollis v Vabu Pty Limited (2001) 207 CLR 21.

6         In Hollis the High Court set out what is known as the “multi-factor” test. The case of Hollis was discussed in detail by the learned authors in Sappideen, C O’Grady, P and Riley, J in Macken’s Law of Employment 8th ed at [2.200] to [2.350]. Without setting out the summary of these principles in any great detail, the key points to consider include whether a person carries on a business in their own account; the extent to which the putative employer exercises detailed control over the employee; whether the person performs work for others, has a separate place of work and advertises services; whether significant tools and equipment are provided; the capacity to sub-contract and delegate work; whether a person is represented as part of the employer’s business; taxation issues; the method of payment; the right to suspend or dismiss; whether leave entitlements are provided; the existence of a profession, trade or calling; whether goodwill or saleable assets are involved; and whether there is any significant business expenditure.

7         Furthermore, the learned authors in Macken’s Law of Employment refer to the issue of incorporation at par [2.360]. They state that:

[2.360] It is assumed in the Australian authorities that incorporation automatically prevents an employment relationship with the other contracting party even if the person is sole owner and shareholder of the company and is providing personal services.291 A court could not "lift the corporate veil" and treat the contractor as an employee: "an employer does not usually have employee corporations" .292 This does not, however, address the difficulty that workers are frequently in an unequal bargaining position and are effectively forced to incorporate in order to get work.293 Occasionally courts have been prepared to decide that there is an employer-employee relationship.294 So that interviewers employed by a market research company were held to be employees for purposes of superannuation despite the fact that they were able to incorporate. The Full Federal Court accepted that:

[T]he ability of an interviewer to incorporate as a factor entitled to little weight because the entity selected to do the work (conduct interviews) was the individual interviewer, and the company featured only as the recipient of the fees that would otherwise have been paid to the interviewer. 295

On this same principle, insurance representatives were held to be employees despite the fact that contracts of appointment were nominally with their companies.296 Despite the existence of the corporate structure, the insurance representatives were still required to personally provide services and sell insurance; they could not employ others to undertake this work for them. The company structure allowed the diversion of income but did not amount to an agreement under which the company contracted to provide the services of its employee to the insurance company.297

8         However, it is not in all cases where there is the interposition of a corporation, that this will be fatal to a finding that a person was an employee rather than an independent contractor. Whilst the existence of a corporation will be a relevant consideration, where the evidence supports a finding that a company was only used as a vehicle to receive fees or payment and the relevant work was otherwise undertaken by an individual, this factor may be outweighed by others: Roy Morgan Research v Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448 at par 43 (as referred to in Macken above).

9         Ultimately, in applying these principles, each case will turn on its own facts.

10      A further issue to be considered in this case, is the terms of s 50 of the LP Act.  This provides for a period of supervised legal practice for an admitted legal practitioner, that is required before a person may practice law on an unrestricted basis. Section 50 of the LP Act is as follows:

50. Restricted legal practice

 (1) In this section –

required experience means —

(a) 18 months supervised legal practice, in the case of a person who, to qualify for admission to the legal profession, completed practical legal training —

(i) principally under the supervision of an Australian legal practitioner, whether involving articles of clerkship or otherwise; or

(ii) involving articles of clerkship principally under the supervision of a person other than an Australian legal practitioner in accordance with the admission rules;

 or

(b) 2 years supervised legal practice, in the case of a person who, to qualify for admission to the legal profession in this or another jurisdiction, completed other practical legal training;

restricted legal practice means legal practice by a person who is an Australian legal practitioner —

(a) as an employee of a law practice if —

(i) at least one partner, legal practitioner director or other employee of the law practice is an Australian legal practitioner who holds an unrestricted practising certificate; and

(ii) the person engages in legal practice under the supervision of an Australian legal practitioner referred to in subparagraph (i);

or

(b) as a partner in a law firm if —

(i) at least one other partner is an Australian legal practitioner who holds an unrestricted practising certificate; and

(ii) the person engages in legal practice under the supervision of an Australian legal practitioner referred to in subparagraph (i);

or

(c) as a WA government lawyer; or

(d) as an interstate government lawyer; or

(e) as an employee of a body that carries on a business other than the practice of law if the person engages in legal practice under the supervision of an Australian legal practitioner who holds an unrestricted practising certificate; or

(f) in a capacity approved for the purposes of this paragraph under a legal profession rule.

 (2) In determining whether a person has the required experience regard can only be had to a period of supervised legal practice that the regulations permit to be taken into account for the purposes of this section.

 (3) The required experience may be made up of separate periods of supervised legal practice.

 (4) A local legal practitioner who does not have the required experience must engage in restricted legal practice only.

 (5) A person contravening subsection (4) is taken to contravene a condition of the person’s local practising certificate.

 (6) A condition of a local practising certificate may require the holder to engage in supervised legal practice even though the holder has the required experience.

 (7) The Board may exempt a person or class of persons from the requirement of subsection (4) or may reduce the required experience for the person or class of persons, if satisfied that the person or persons do not need to be supervised or need to be supervised only for a shorter period, having regard to —

(a) the length and nature of any legal practice previously engaged in by the person or persons; and

(b) the length and nature of any legal practice engaged in by the supervisors (if any) who previously supervised the legal practice engaged in by the person or persons.

 (8) An exemption under subsection (7) may be given unconditionally or subject to such conditions as the Board thinks appropriate.

11      An issue arising in the context of the present case, is whether somebody can be an independent contractor who is also a restricted legal practitioner for the purposes of s 50 of the LP Act, being subject to close supervision and, by implication, further training, which restricted legal practice requires. At first blush, the close supervision and oversight which is required to be exercised by a legal practitioner in respect of a restricted practitioner under s 50 of the LP Act may be argued to be inconsistent with the notion of independence inherent in the relationship between a principal and an independent contractor. This was the contention of Mr Sampson in this case. Allied to this, the requirement in the decided cases, for an independent contractor to be in business on his or her own account, as opposed to being part of and being seen to be a part of, the other person’s business, may also be relevant in this context. Furthermore, the provision of training may point towards employment: On Call Interpreters & Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 at 288.

The evidence

12      Mr Sampson studied law as a mature aged student, after being in business for some 30 years as a sailmaker and conducting a windsurfing enterprise.  Mr Sampson was admitted to the Supreme Court of Western Australia as a legal practitioner on 5 June 2015. He outlined how he came to be engaged by Thames Legal as a restricted practitioner. Mr Sampson testified that he met Mr Grauaug, who was then an unrestricted legal practitioner engaged in legal practice with Thames Legal, at a CPD function in September 2015. Both Mr Sampson and Mr Grauaug had known one another through sailing circles, many years prior.  Mr Grauaug testified that Mr Sampson informed him that he was looking for a restricted practitioner position. Mr Grauaug said that Mr Meyer, from Thames Legal, may be interested.

13      One thing led to another and a meeting took place at Thames Legal’s premises on 15 October 2015. Present at this meeting were Mr Sampson, Mr Grauaug and Mr Meyer. These discussions led to an arrangement where Thames Legal offered and Mr Sampson accepted, a position as a restricted legal practitioner, on the basis that he be paid a percentage commission. The arrangement was the same as apparently applied to other staff members, where Mr Meyer would receive 60% and Mr Sampson would receive 40% of fee income received from firm clients, when Mr Sampson performed the work charged to the client. Mr Sampson did not dispute Mr Meyer’s evidence that because of Mr Meyer’s prior health issues, Mr Meyer said the level of work at the firm had been reduced. Mr Meyer said that he told Mr Sampson in the meeting that he was unable to engage employed solicitors on a PAYE basis. Mr Sampson did not agree that the reference to employment on a PAYE basis was referred to in the meeting.

14      Some discussion took place between Mr Sampson and Mr Meyer as to the requirements of s 50 of the LP Act in relation to restricted practitioners.  Mr Sampson was to work for the firm at the firm’s offices under close supervision of Mr Meyer. The firm would provide an office, computer and telephone. Staff of the firm were not permitted to use their own mobile telephone.  The system of work and the office/client management process was outlined in the evidence and was not essentially in dispute. It was common ground that Thames Legal had strict file management systems in place and all staff were required to strictly comply with them. Mr Sampson initially commenced on a part time, three-day per week basis. He started working on a full-time basis in early January 2016.

15      Mr Meyer allocated matters, set fees and met all firm clients. The firm used a “blended” billing rate of $300 per hour plus GST. This rate was charged to clients regardless of the fee earner who may have worked on a matter. All work performed on a matter was recorded on the matter file. All advice prepared for clients was settled and signed by Mr Meyer. Court documents were settled and signed by Mr Meyer also. Legal staff were expected to work from 9 am to 5 pm.  Each morning at about 8.30 am Mr Meyer and the legal staff had a meeting in a local coffee shop to discuss and plan the day’s work ahead. Mr Sampson was to inform Mr Meyer if he wanted to take any time off. As for all legal staff, a business card for Mr Sampson was produced, tendered as exhibit A7. The card had Mr Sampson’s name and the firm name “Thames Legal” on it, along with the relevant signage.

16      Photos were taken at the Supreme Court of Mr Meyer and the firm’s legal staff which were then placed on the firm’s website. All legal staff of the firm, including Mr Sampson, were presented as the “Thames Legal team”. None of the promotional material tendered or referred to in evidence made any reference to Mr Sampson’s company, Sampson Investments Pty Ltd. As to this company, Mr Sampson testified that when he sold his former business, he did intend to wind it up. However, on advice provided to him, he needed to keep the company on foot because it was a corporate trustee for his superannuation fund.

17      Mr Sampson testified that he had to approach Mr Meyer in about December 2015, as he had not been paid for any work performed since his commencement.  Whilst there was some dispute on the evidence as to at whose request this was done, the upshot was that Mr Sampson was only to be paid if he provided an invoice from his company and used the business ABN. As a part of this arrangement, the firm was also to produce a “remittance advice” in respect of work done by Mr Sampson on any matters. Examples of both types of documents were tendered as exhibits A10 and A14. As a part of his engagement, Mr Sampson did not receive any paid leave or worker’s compensation cover.

18      Bills for legal services performed for clients of the firm, examples of which were tendered as exhibit A8, made no reference to Mr Sampson’s company as a disbursement or otherwise. Mr Sampson was identified on bills to clients, as a fee earner with the initials “IGS”. As to the day to day time management of the firm, a calendar system was used.  It was common ground that Thames Legal had strict protocols for its use. Each member of the legal staff was required to record all office and court attendances, so each staff member knew where, when and what other staff members were doing. Colour codes were used as a part of this calendar system.

19      Furthermore, correspondence between Thames Legal and the Legal Practice Board, Law Mutual in relation to indemnity insurance, Legal Aid of Western Australia in relation to legal aid panel work, and the Law Society of Western Australia, all referred to Mr Sampson as an employed solicitor of Thames Legal.  None of this correspondence made any reference to Sampson Investments Pty Ltd or that Mr Sampson was engaged by the firm as an independent contractor.  Copies of such correspondence were tendered as exhibits A17, A18 and A19.

20      I find accordingly.

Consideration

21      For the following reasons, which I can relatively shortly state, I have no hesitation in concluding that at all material times, Mr Sampson was an employee of Thames Legal and was not an independent contractor.

22      First and foremost, the requirements of close supervision and control, underpinning the engagement of a restricted legal practitioner, as set out in s 50 of the LP Act, are entirely at odds with the independence and autonomy that is associated with a person engaged as an independent contractor. Secondly, as a matter of construction of s 50(1) of the LP Act, “restricted legal practice” as defined in the presently relevant pars (a) and (e), in my view, only contemplates legal practitioners who are employees at common law. As to par (e), whilst it refers to persons who practice “as an employee of a body that carries on business other than the practice of law”, in my view, this contemplates a person working as, for example, in-house counsel for a corporation under supervision of an unrestricted Australian legal practitioner. It may also encompass a legal practitioner working as an employee for an employer or industry body or a trade union, as further examples. It also seems intended from the terms of par (e), that the person who holds an unrestricted practising certificate as an Australian legal practitioner and who is to supervise the restricted legal practitioner, is also to be employed by the body carrying on the business.

23      Construed as a whole and in context, for the purposes of pars (a) and (e) of the definition of “restricted legal practice” in s 50(1), a restricted legal practitioner must be an employee of a law practice or of a body conducting a substantive business or enterprise, and which business or enterprise also engages the Australian legal practitioner who holds an unrestricted practicing certificate, and who is responsible for the supervision of the restricted practitioner concerned. There was no evidence before the Commission, or any submission made, referring to an approval in a legal profession rule, for the purposes of par (f), that would support the arrangement between Mr Sampson and Thames Legal. 

24      In conclusion on this point, I do not consider that an independent contractor can be a restricted legal practitioner for the purposes of s 50 of the LP Act. This also seemed to be view of the Legal Practice Board, on the evidence of its Executive Director, Ms Fulham.

25      Whilst the combined issues of the requirements of s 50 of the LP Act and the indicia of control are sufficient to dispose of the jurisdictional argument, I will, as evidence was led on some of them, consider other indicia relevant to the threshold point.

26      As to whether Mr Sampson was engaged in business in his own account, in this case, I am not persuaded to any extent that this factor is satisfied. On the evidence, it was clear that Mr Sampson worked as part of and was represented to clients and to the outside world, as part of Thames Legal as a firm. At all times the firm promoted the Thames Legal “team”, which included Mr Sampson.  At no stage was Mr Sampson’s company, Sampson Investments, identified or promoted as engaging in legal practice or any other business for that matter. As I have already mentioned, the only role that the company played was to be a conduit to issue invoices to Thames Legal and receive payments from the firm. All work performed by Mr Sampson was done by him as an individual legal practitioner, who was integrated into and formed part of Thames Legal. For these reasons too, the use of an ABN is of no material weight.

27      On the question of the interposition of Mr Sampson’s company generally, as I have already outlined above, this is not a matter of any significant weight where, as here, the only role that the company played was to receive payment for work performed by an individual: Roy Morgan Research.

28      There was no evidence that Mr Sampson performed any work for others and as a restricted legal practitioner, nor could he really do so. There was no separate place of work for Mr Sampson and he did not promote himself as a business independently of the firm. Nor was there any evidence of the right to delegate work or to engage others to perform it. And as I have already mentioned, this is not something that in any event, could occur having regard to s 50 of the LP Act.

29      As to payment by percentage reward, this is somewhat neutral as both employees and independent contractors may be paid by results or by commission and piecework rates. The same goes for the factor of the existence of a profession in this case. It may go either way. The absence of paid leave and workers’ compensation cover would tend to indicate independence, all other things being equal, which they are far from so in this case.

Conclusion

30      The Commission has concluded that Mr Sampson was, as a restricted legal practitioner under the LP Act, an employee of Thames Legal for the purposes of the Act. The Commission will so declare. Mr Sampson’s substantive claims will now be listed for hearing.