ALHMWU v Quality Bakers

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: MARKS J Friday 14 May 2004 Matter No IRC 571 of 2002 AUSTRALIAN LIQUOR, HOSPITALITY AND MISCELLANEOUS WORKERS UNION, NEW SOUTH WALES BRANCH v QUALITY BAKERS AUSTRALIA LIMITED Application under s 11 of the Industrial Relations Act 1996 JUDGMENT NSWIRComm 113

1 The applicant in these proceedings, the Australian Liquor, Hospitality and Miscellaneous Workers Union, New South Wales Branch, has applied to the Commission for the making of an award to be known as the Bread Vendors etc (Quality Bakers Australia Limited) Award 2003. The application is made under s 11 of the Industrial Relations Act 1996 ("the Act"). The respondent to the proposed orders is Quality Bakers Australia Limited ("Quality Bakers").

2 The award is proposed to apply to all persons engaged by Quality Bakers "as bread vendors, who if they were employees, would have been employed under the terms and conditions of the Quality Bakers Australia Limited (NSW) Enterprise Award 2002". The award is also proposed to apply to "all persons engaged either by Quality Bakers or by the bread vendor concerned as a necessary condition of performing the work required under any contract or arrangement between the vendor and by Quality Bakers. Such persons shall include merchandisers and relief vendors".

3 Paragraph four of the proposed award specifies that the vendors engaged by Quality Bakers are to be "treated for all purposes of this award as employees" by reference to the fact that they are deemed to be employees by schedule 1, clause 1(e) of the Act.

4 The proposed award seeks provisions binding Quality Bakers to engage vendors under a written contract consistent with the provisions of the award and to put in place contracts that provide that any merchandisers and relief vendors who are required to be engaged by the contractor as a condition of the work performed under any contract are to be engaged on terms and conditions no less favourable than those provided for under the proposed award and requiring Quality Bakers "to meet the whole costs of such engagement".

5 In order to fully understand what is sought in the proposed award and the background to the debate between the parties, a statement of agreed facts was tendered for the purpose of determination of the jurisdiction arguments. Quality Bakers submitted that the Commission has no jurisdiction to make the award. The jurisdictional question posed by the parties and the statement of facts in support were contained within a document which became Exhibit 1 in the proceedings and which I set out hereunder: 1. Prior to 1992/93 QBA engaged "bread vendors" as independent contractors to sell and deliver bread and baked goods in NSW. The bread vendors were individuals and not companies. Each bread vendor was engaged in respect of a specific bread run under a written vendor agreement. Each bread vendor sold and delivered bread and baked goods to customers of the vendor and/or customers of QBA.

Bread vendors engaged by QBA in NSW were deemed employees under the Industrial Arbitration Act 1940 and the Industrial Relations Act 1991 and were covered by successive NSW awards, the last award being the Bread Vendors Quality Bakers Australia Limited (State) Award published 26 February 1993 (Vol 273 IG 660). A copy of this award is Annexure A. This award was rescinded on and from 2 July 1999 following a Notice of Award Review pursuant to section 19 of the Industrial Relations Act 1996. The order of rescission was published on 23 November 2001 (Vol 329 IG 963). A copy of this order is Annexure B.

In 1992/93 QBA resumed the NSW bread runs from individual bread vendors for consideration, which resulted in the termination of the engagement of all bread vendors.

QBA replaced bread vendors by employing individuals as delivery drivers. These employees have been covered by successive NSW enterprise awards. The current award is the Quality Bakers Australia Limited (NSW) Enterprise Award 2002 published 8 November 2002 (Vol 336 IG 1116). A copy of this award is Annexure C.

Since the expansion of bread sales in supermarkets in the 1970's QBA has employed individuals as merchandisers who perform the work of putting up bread, baked foods and other products onto shelves at supermarkets at the start of a day and the restocking of product onto shelves at supermarkets in the course of a day. Merchandisers are presently covered by the Quality Bakers Australia Limited (NSW) Enterprise Award 2002. Merchandisers are supervised by QBA's supervisors in respect of their day to day work.

The former industrial organisation of employees, The Bread Industry Employees' and Sales Persons' Association of New South Wales (BESA), represented the industrial interests of bread vendors formerly engaged by QBA and employee delivery drivers and merchandisers employed by QBA until 1995 when it amalgamated with the LHMU. Since the amalgamation the LHMU has represented the industrial interests of employee delivery drivers and merchandisers employed by QBA.

Commencing from 22 May 2003 QBA proposes to implement its delivery contractor model in respect of its Sydney Metro operations (which covers Sydney metropolitan, Central Coast, Newcastle and Illawarra regions). Under the delivery contractor model QBA will cease to employ drivers and merchandisers and will instead engage companies as independent contractors to provide sales and distribution services (namely, sales, ordering, delivery and merchandising) of bread, baked goods and other products to customers of QBA and its related entities. Each company would be engaged by QBA under the terms of a standard written delivery agreement for NSW. A copy of this agreement is Annexure D. Each company is required to employ individuals to do the required work. It is expected that each company would need to employ a driver, a relief driver and a merchandiser to do the work presently performed by drivers and merchandisers employed by QBA.

The employees of the third party company will perform the same or substantially the same functions as persons previously employed by QBA as drivers and merchandisers under the Quality Bakers Australia Limited (NSW) Enterprise Award 2002. Former employees of QBA who wish to take up a contract with QBA to provide the sales and distribution services must do so through a company. The employees of the third party company may include, but are not limited to, former employees of QBA, including drivers and merchandisers formerly employed by QBA.

The Bread Industry (State) Award would apply to drivers and merchandisers employed by companies who have a contract with QBA to perform the sales and distribution services. This award has been reviewed pursuant to s19 of the Industrial Relations Act 1996 and published on 10 December 1999 (Vol 319 IG 505).

QBA has implemented its delivery contractor model (including the engagement of companies as independent contractors to provide the sales and distribution services) in NSW as follows: (a) since 1995 in the Northern NSW region; (b) since October 2001 in the Queanbeyan and Southern NSW regions; (c) since March 2002 in the Dubbo region; and (d) since May 2002 in the Tamworth region.

The products that are sold and distributed by companies engaged by QBA as independent contractors to customers of QBA and its related entities are:

Packaged bread Bread rolls Flat breads Hamburger buns

Crumpets Muffins Pikelets Easter buns (ie hot cross buns)

Packaged cakes Sweet slices Christmas cakes 12. In QBA's Sydney Metro operations, the products referred to in paragraph 11 are presently delivered by drivers and handled by merchandisers employed by QBA under the Quality Bakers Australia Limited (NSW) Enterprise Award 2002.

6 I have not reproduced the annexures referred to in the statement of facts but I shall refer to those annexures which are relevant for the purposes of this decision.

7 The substantial matters which have given rise to these proceedings are those contained in paragraphs 7 to 10 in the agreed statement of facts. That is, Quality Bakers has determined to implement a system for the delivery of its bread and other relevant products by engaging corporate entities to undertake that activity. Each corporate entity is required to employ a driver and a merchandiser (being a person who in approximate terms is ultimately responsible for stacking the bread shelves at supermarkets and other places). Put another way, the individuals who at one stage in the history narrated within the agreed statement of facts used to be independent contractors delivering bread and undertaking the work personally are now required to personally undertake that work as employees of or in some other capacity deriving from a corporate entity owned by them or other persons associated in some way with them. What is sought by the applicant union is an award which attempts to ensure that the persons physically carrying out the work of bread delivery and merchandising of Quality Bakers' products are remunerated in a manner which is no less favourable than if those persons had been employees and whose conditions of employment and remuneration had been governed by the Quality Bakers Australia Limited (NSW) Enterprise Award 2002.

8 Quality Bakers has sought to resist the making of the award on two jurisdictional grounds. This decision is concerned only with whether or not the Commission possesses jurisdiction and power to make the award and is not concerned at this early stage with any argument as to whether or not any award should be made on merit grounds, nor as to the terms and conditions of any such award.

9 I should add for completeness that the parties agreed that whilst the position of bread vendors, namely delivery persons, was reasonably clear cut in terms of the relevant legislation (to which I shall shortly refer) there was agreement that I should defer making any concluded decision about the position of merchandisers because the factual matters which apply to merchandisers have not been adequately explored. Accordingly, what follows applies to persons who are clearly engaged in the delivery of bread products.

10 Before considering the submissions made on behalf of Quality Bakers it is necessary to set out some of the relevant statutory material.

11 The application for the Award is made under s 11 of the Act which is in the following terms

(1) An award may be made: (a) on application to the Commission or on the Commission's own initiative, or (b) in the course of an arbitration by the Commission under Chapter 3 to resolve an industrial dispute. (2) An application for an award may be made only by: (a) an employer, or (b) an industrial organisation of employers or employees , or (c) a State peak council. (3) Anyone who can apply for an award may become a party to any proceedings for making an award. (4) An applicant for an award, or to become a party to the making of an award, is required to satisfy the Commission that it or any one or more of its members has a sufficient interest in the proposed award.

12 Section 12 of the Act sets out the persons who are bound by any Award made by the Commission:

12 Persons bound by award (1) An award is binding on all employees and employers to which it relates, whether or not they were a party to the making of the award. (2) An award that applies to a particular industry is, subject to its terms, taken to bind all employees and employers engaged in the industry . (3) An award is, subject to its terms, binding on all industrial organisations that were a party to the making of the award.

13 The power to make awards is contained within s 10 of the Act which is in the following terms:

10 Commission may make awards The Commission may make an award in accordance with this Act setting fair and reasonable conditions of employment for employees .

14 It will be seen, therefore, that the jurisdiction and power of the Commission with respect to the making of Awards is directed to conditions of employment of employees, and the confinement of the subject matter of awards to employment relationships is confirmed by the thrust of the provisions of ss 11 and 12, and in particular s 12(1) and s 12(2).

15 An employee is defined in s 5 of the Act in the following terms:

5 Definition of employee (1) General Definition In this Act, employee means: (a) a person employed in any industry , whether on salary or wages or piece-work rates, or (b) any person taken to be an employee by subsection (3). (2) A person is not prevented from being an employee only because: (a) the person is working under a contract for labour only, or substantially for labour only, or (b) the person works part-time or on a casual basis, or (c) the person is the lessee of any tools or other implements of production, or (d) the person is an outworker, or (e) the person is paid wholly or partly by commission (such as a person working in the capacity of salesperson, commercial traveller or insurance agent). (3) Deemed employees The persons described in Schedule 1 are taken to be employees for the purposes of this Act. Any person described in that Schedule as the employer of such an employee is taken to be the employer. (4) Exclusion A person employed or engaged by his or her spouse or parent is not an employee for the purposes of this Act.

16 Section 5(3) refers to Schedule 1 to the Act which, in turn, is in the following terms:

1 Persons to be treated as employees The following persons are taken to be employees: (a) Any person (not being registered as a milk vendor to sell milk or cream from a vehicle or any other conveyance) who sells or delivers for the purpose of sale milk or cream from any vehicle. (In such a case, the employer is taken to be any person whose milk or cream is so delivered or who supplies the milk or cream so delivered.) (b) Any person (other than the owner or occupier of the premises or a bona fide cleaning contractor employing labour for the purpose) who performs any work of cleaning premises or a part of premises for which work, if performed by an employee , a price or rate is for the time being fixed by an industrial instrument . (In such a case, the owner or, where there is an occupier other than the owner, the occupier of the premises is taken to be the employer.) (c) Any person (other than the owner or, where the owner is not occupying the building or premises, the occupier of any building or premises or a bona fide contractor employing labour for that purpose) who performs carpentry or joinery or bricklaying work upon any building or premises the erection, construction, repair, alteration or maintenance of which is being carried out under a contract between the owner or occupier and a contractor. (In such a case, the last-mentioned contractor is taken to be the employer. This provision does not apply to work of repair, alteration or addition to existing premises used as residences.) (d) Any person (other than the owner or, where the owner is not the occupier, the occupier of any building or premises or a bona fide contractor employing labour for that purpose who has entered into a contract with such owner or occupier or with a bona fide contractor who has contracted to erect, renovate, repair or maintain such building or premises) who performs the work of house or general painting. (In such a case, the owner or occupier is taken to be the employer. This provision does not apply to work of repair, alteration or addition to existing premises used as residences.) (e) Any person (not being a bread manufacturer) who performs the work of delivery of bread or bread rolls on any bread round from a vehicle, conveyance or receptacle. (In such a case, the employer is taken to be the bread manufacturer who manufactured, prepared or baked the bread or bread rolls.) (f) Any person (not being the occupier of a factory) who performs outside a factory any work in the clothing trades or the manufacture of clothing products, whether directly or indirectly, for the occupier of a factory or a trader who sells clothing by wholesale or retail. (In such a case, the occupier or trader is taken to be the employer.) (g) Any person (in this paragraph referred to as "the contractor" ) who, in response to an advertisement or other notification placed by a person (in this paragraph referred to as "the principal" ) requiring the delivery or supply of timber to the principal or as directed by the principal, notifies the principal in writing that the contractor will deliver or supply the whole or part of the timber and who engages in the work of cutting, delivering and supplying timber to the principal or at the principal's direction until the principal by written notice withdraws the offer to accept timber so delivered or supplied. (In such a case, the principal is taken to be the employer.) (h) Any person (other than the owner or, where the owner is not occupying the building or premises, the occupier of any building or premises or a bona fide contractor employing labour for that purpose) who performs the work of plumbing, draining, plastering, fibrous plaster fixing or fixing of gypsum plaster board on any building or premises the erection, construction, repair, alteration or maintenance of which is being carried out under a contract between the owner or occupier and a contractor. (In such a case, the last-mentioned contractor is taken to be the employer. This provision does not apply to work of repair, alteration or maintenance of existing premises used as residences.) (i) Any person (not being a bona fide contractor employing labour for that purpose) who, as a trade or occupation, performs the work of fitting blinds in or on a building (including the work of taking measurements for blinds, or of assembling or selling blinds, in connection with their fitting) if the blinds or component parts have been supplied to the person by the manufacturer or a distributor of the blinds or components under an agreement for their supply for the purpose of being fitted by the person in the course of his or her trade or occupation. (In such a case, the manufacturer or distributor is taken to be the employer.) (j) Any person (other than an excluded person) who performs the work of managing or supervising swimming activities at a swimming centre under the care and control of a local council pursuant to a contract with the local council. (In such a case, the local council is taken to be the employer). (k) Any person who owns or hires a vehicle and drives the vehicle when it is being used for the carriage of ready-mixed concrete (or of materials to be made into ready-mixed concrete on the vehicle) if the concrete or materials have been supplied to the person for their delivery by a manufacturer who carries on the business of manufacturing, supplying or distributing ready-mixed concrete. (In such a case, the manufacturer is taken to be the employer.) (l) Any person (other than an excluded person) who owns a motor lorry and drives the motor lorry when it is being used for road work under a contract between the person and the Roads and Traffic Authority (or between them and others). (In such a case, the RTA is taken to be the employer.) (m) Any person of a class prescribed by the regulations (whether or not of the same kind as the other classes of persons referred to in this clause ). Any such regulation must specify the person who, for the purposes of this Act, is taken to be the employer of any person of a class so prescribed.

2 Definitions (1) For the purposes of: (a) clause 1 (f): "factory" has the same meaning as "Factory" had in the Factories, Shops and Industries Act 1962 immediately before that definition was repealed by Schedule 2.4 [2] to the Occupational Health and Safety Act 2000 , but does not include an office, building or place (whether or not required to be registered as a factory under that Act) in which mechanical power of less than 0.75 kilowatt is used, and "occupier" has the same meaning as "Occupier" had in the Factories, Shops and Industries Act 1962 immediately before that definition was amended by Schedule 2.4 [3] to the Occupational Health and Safety Act 2000 , (b) clause 1 (g): (i) the notice of intention by the contractor to deliver or supply timber must be in the prescribed form and must indicate the nature of the work to be undertaken and the locality where and time within which the work is to be carried out, (ii) the notice may be given personally or by letter posted to the principal at his or her place of business or usual address, (iii) "timber" includes sleepers, piles, poles, girders, logs and pit timber, and "cutting" includes felling, sawing, obtaining, preparing and doing any related work in connection with timber. (1A) For the purposes of clause 1 (j): (a) "excluded person" means: (i) a bona fide contractor employing labour for the purpose of performing the work referred to in clause 1 (j), or (ii) a person who performs that work as a partner in a bona fide partnership (whether or not employing labour for the purpose), or (iii) an employee of any such contractor or partnership. (b) "contract" includes any lease, licence or arrangement. (c) "swimming centre" means any public facility used predominantly for the purpose of swimming. (d) a swimming centre does not cease to be under the care and control of a local council or councils because it is managed on behalf of the council or councils by a committee appointed by the council or councils under the Local Government Act 1993 . (2) For the purposes of clause 1 (l): (a) "contract" includes any agreement or arrangement, (b) "motor lorry" means any motor vehicle (whether or not in combination with ny trailer) that is constructed principally for the conveyance of goods or merchandise or for the conveyance of any kind of materials used in any trade, business or industry , or for use in any work whatsoever other than the conveyance of persons, but does not include a motor cycle or a tractor, (c) "road work" means the carriage of goods or materials for use in (or for the purpose of) the construction or maintenance of roads by or on behalf of the Roads and Traffic Authority, (d) "excluded person" means: (i) a person who employs another to drive or assist in driving a motor lorry when it is being used for road work (except where the person employs another during his or her absence on holidays or long service leave or due to sickness, accident or other reasonable cause), (ii) a person (whether or not a common carrier) who is engaged in the business of transporting for the public generally freight in containers, (e) a person "owns" a motor lorry if: (i) the person alone (or with others) owns the motor lorry, or (ii) a proprietary company owns the motor lorry and the person is a director of the company or owns not less than 20 per cent of the issued shares of the company, or (iii) the person has the use of the motor lorry under a contract, (f) a person "employs" another if that other person is employed: (i) by the person alone (or with others), or (ii) by a proprietary company and the first-mentioned person is a director of the company or owns not less than 20 per cent of the issued shares of the company, (g) a person who has a beneficial interest in a motor lorry or shares is taken to be the owner of the motor lorry or shares, (h) ownership or employment by any one or more members of a partnership is taken to be ownership or employment by all members of the partnership, (i) a contract made with any one or more members of a partnership is taken to have been made with all the members of the partnership.

3 Substitution of employer (1) In any proceedings for a breach of this Act or of an industrial instrument or for the recovery of money under this Act brought against any person taken because of this Schedule to be an employer, it is a defence if the person required to be taken to be an employer joins as a party to the proceedings some other person whom he or she alleges to be the employer and proves that, apart from the operation of this Schedule, that other person was at the relevant time the employer. (2) The other person is to have the right to appear and defend the allegation made by the person taken to be an employer and, if the other person is held to be the employer, the same orders may be made against the other person and the other person is to be in the same position as if the proceedings had been originally instituted against the other person at the time they were instituted against the person required to be taken to be the employer.

17 Obviously, the provisions of clause 1(e) of Schedule 1 are of principal concern for the purpose of these proceedings.

18 It was a primary submission of Quality Bakers that s 5(3) was confined in its operation to persons who were not otherwise employees at law. That is, to persons who were independent contractors. It was then said that the persons involved in the delivery of bread under the arrangements created by Quality Bakers and which have been set out in the agreed statement of facts were employees of the corporate entities which they were required to establish. Because they were therefore employees at law they could not be, and were not, deemed employees under s 5(3) and, therefore, the provisions of Schedule 1 did not apply.

19 In aid of this interpretation the respondent relied substantially on material contained within the relevant second reading speeches when this legislation and relevant amendments were considered by Parliament.

20 The provisions of s 5(3) of the Act have their genesis in s 88B of the Industrial Arbitration Act 1940 which was inserted into that Act by the Industrial Arbitration (Amendment) Act 1943 being Act Number 25 of 1943. In summary s 88B empowered the Industrial Commission or a conciliation committee to declare invalid certain contracts for the performance of work. There was no specific mention of contracts for the delivery of bread. However, when s 88B was repealed by the Industrial Arbitration (Amendment) Act 1957, being Act Number 23 of 1957, specific mention was made of contracts for the delivery of bread or milk and other contracts for the performance of work. Such contracts were not permitted to be entered into unless they had been approved either absolutely or subject to certain conditions by either the Commission or a conciliation committee. The Commission or committee were mandated to refuse to approve such contracts unless it was satisfied that they were bona fide and not entered into for the purpose of avoiding the operation of an award or agreement, that the benefits that might reasonably be expected to accrue under the contracts or in the course of performing them would not be less favourable to the persons carrying out the work than the benefits provided for by any award or agreement applicable to that work, and by the Annual Holidays Act and the Long Service Leave Act.

21 When introducing the Bill into the Legislative Assembly for its second reading speech, the Minister, the Honourable A Landa said that: "The purpose of the Bill is to combat evils that have developed in specific industries involving contracts of personal service." (Hansard 10 April 1957 at 4542). The Minister made specific reference to the creation of independent contractor relationships by certain organisations, especially in the transport industry, for the purpose of avoiding the application of any relevant award and other statutory entitlements. In discussing in particular the distribution of bread products Mr Landa said: "Abuses have also developed in the bread-carting and milk-carting industries where employees are induced by promises of increase of remuneration to enter into arrangements with the master baker or distributor to deliver bread or milk under contract; the carters finding under the terms of the arrangements that they are in many cases required to buy the bread or milk from the registered bread manufacturer or milk vendor and to purchase the vehicle used under a hire-purchase arrangement. What appears to be a favourable arrangement at the outset often turns out to be a harsh contract necessitating long hours of labour without adequate remuneration…. The unions have complained that some men are really employees and should be earning wages, but they purport to enter into contracts to make them appear to be contractors. When that is done the employer is escaping his industrial obligations and he is in unfair competition with other employers who are paying award wages and giving award conditions…. It is admitted that, particularly in the bread-carting industry, some deliveries are carried on under a vendor system which has proved beneficial to both the contractor and the general public. For instance bread is distributed in some districts by reputable vendors whose contracts are made on fair and reasonable terms with the master baker. Such contracts appear to operate on a bona fide basis and there is no intention under the bill to interfere with such contracts. They may well be continued and the bill will provide that if the approval of the Industrial Tribunal is first obtained in accordance with the terms of the bill there will be no interference with this type of contract." (at pages 4544-5).

22 When speaking to the second reading speech in the Legislative Council the Honourable JJ Maloney, Minister for Labour and Industry, made statements to similar effect. The Minister's second reading speech is recorded in Hansard published on 16 April 1957 commencing at page 4730.

23 This legislation was further amended by the Industrial Arbitration (Amendment) Act 1959 being Act Number 29 of 1959. Section 88B was amended and new sections 88E and 88F were inserted. These amendments had the effect of removing reference to the delivery of bread from s 88B, and providing within s 88E that persons who performed the work of delivery of bread or bread rolls on any bread round from a vehicle, conveyance or receptacle were deemed to be employees provided that work was performed within the Counties of Cumberland and Northumberland and the City of Greater Wollongong. The bread manufacturer was deemed to be the employer. However, it seems that this provision within s 88E was not to be applied to any contract which had been approved by the Commission or a conciliation committee.

24 Whilst moving the second reading speech in the Legislative Assembly the Honourable JJ Maloney, Minister for Labour and Industry, said that one of the purposes of the legislation was: "To attempt to close legal loopholes found in existing legislation that enable award provisions to be avoided by contract systems or methods known as the vendor system of employment." (Hansard 26 November 1959 page 2343).

25 With specific reference to the area of bread delivery the Minister said: "In the bread-making industry over recent years there has grown up a system of vendors for bread delivery which changes a bread carter into a bread vendor under agreement with his employer to deliver the bread within certain areas to shops and private homes, thereby enabling the bread manufacturer to avoid all obligations provided in the Bread Carters Award and the Long Service Leave Act, Annual Holidays Act, and Workers' Compensation Act . In some cases large sums of money are paid by the person entering into such contracts with the bread manufacturer and in other cases nominal payments of as low as one shilling per annum are all that is required. In all cases the bread manufacturer keeps a very tight hold over the equity in all bread runs conducted by the vendor, who is prohibited under his contract from carrying the bread of any other manufacturer and is obliged, if he is unable to carry out his work by illness or other reason - including an annual holiday - to pay to the manufacturer the wages of the person whom the manufacturer will have to obtain to do the run in his absence, as well as to accept the responsibility of being the employer of such person. Amendments of this bill are designed to close up the legal loopholes that permit the avoidance of employer-employee relationship and the industrial obligations arising therefrom…" (at 2351-2).

26 It is clear from an explanatory note issued when the Industrial Relations Bill 1991 was introduced into Parliament that it was intended that provisions contained within that legislation would continue the same legislative regime as existed under the 1940 Act. That intention was also manifested in the explanatory note issued when the Industrial Relations Bill 1996 was introduced into Parliament. I observe, however, that there is no mechanism in the Act for approval by this Commission of any contracts applying to bread vendors. The current legislative regime is confined to providing for the deemed employment situation.

27 It is a fundamental principle of the construction of legislation that a construction should be adopted which would promote the purpose of the statute in preference to one which would defeat that purpose, provided that to do so reflects the language of the statute by applying its ordinary and grammatical meaning.

28 The respondent submitted that the purpose of the "deemed employee" provisions contained within s 5(3) is "to redress the mischief of an employer avoiding its award responsibilities to the detriment of an individual bread vendor who would be left without an employer". It was said that there was no question of individuals performing work being left without an employer because the corporation which they were required to create was, in fact, their employer at law.

29 In my opinion this misstates the purpose of this provision. Its purpose, as is abundantly clear from the second reading speeches in the predecessor legislation to which I have referred, is to prevent bread manufacturers from avoiding responsibilities to persons involved in the delivery of bread as employees by means of creating contracts or other arrangements. Indeed, the arrangements which Quality Bakers have put in place are arguably designed to achieve this purpose.

30 In essence there are two possible approaches to the construction of s 5(3) of the Act. The first construction, which the respondent contends for, is to confine the provisions of s 5(3) to persons who are not at law employees so that it applies only to persons who are independent contractors or, perhaps, in some other contractual relationship other than employee. The alternative construction which is contended for by the applicant union is that s 5(3) can apply to independent contractors and persons who are not employees at law as asserted by the respondent but can equally apply to persons who are employees at law but who are not employees of the bread manufacturer by deeming them to be employees employed by the bread manufacturer. That is, s 5(3) is capable, without straining the ordinary English usage meaning of its language, of applying to these two different circumstances. The legal fiction which is created by s 5(3) is one of an employment relationship between a bread manufacturer and a person performing the work of delivery of bread or bread rolls etc. It would matter not, in these latter circumstances, that the person involved in the delivery of bread was in fact an employee at law of a person or entity other than the bread manufacturer. The deeming legal fiction would apply nevertheless.

31 Seen in the context of the mischief to which the legislation contained originally within the 1940 Industrial Arbitration Act was directed, the construction of s 5(3) to operate in this way is within the purpose of the legislation and a construction consistent with the language used. With respect to the contrary position taken by the respondent, that position is confined to the first sentence of s 5(3) but does not properly take into account the significance of the second sentence, namely the creation of the deemed relationship between persons or entities who are not otherwise within that employment relationship.

32 For these reasons I reject the submission made on behalf of the respondent. I should add for completeness that I accept the submissions of the respondent to the effect that the persons referred to in s 5(3) are obviously natural persons and could not be taken to be corporate entities.

33 The conclusion which I have reached might conceivably create the potential for inappropriate complexities applying to the tripartite relationship between the respondent, the bread vendor corporate entity and the individual bread vendor. However these are matters which can be addressed in the context of appropriate award conditions and the potential for any such difficulties is a matter which it is inappropriate to take into account in determining the correct construction of s 5(3) of the Act.

34 The respondent also submitted that the award application was beyond the constitutional power of the applicant union because its eligibility rules did not cover the individuals who are involved in the delivery of bread as employees of the corporate entities.

35 Relevantly the constitution of the applicant union consists of "persons who are engaged wholly or partly, in or in connection with the delivery of bread or bread rolls…". There is also eligibility extended to other persons who are "by virtue of the Industrial Relations Act 1991, deemed to be employees in or in connection with the aforesaid industry…," which, for present purposes, may be taken to include persons engaged in the delivery of bread.

36 The respondent submitted that the eligibility rule was to be confined in some way to persons who are employees at law. In addition it was said that in some way persons who are deemed employees are ineligible for membership because the reference in the rules is to the corporate entity performing the work for the bread manufacturers.

37 I reject these submissions. The eligibility rule of the union is clearly directed to individuals who perform work of the kind described in that rule including persons who are deemed to be employees under the Act. Once an individual is engaged in connection with the delivery of bread or bread rolls then that person is eligible to be a member of the applicant union under its eligibility rule. It matters not whether the person is an employee at all and if that person is an employee, the identity of the employer. What is significant for the purposes of the eligibility rule is the occupation or avocation in which they are engaged.

38 Finally, it was submitted by the respondent that the award sought by the applicant union seeks to regulate contractual relationships between the respondent and third party companies and that in doing so the subject matter of the award is beyond the scope of industrial matters as defined in the Act. A number of objections were taken to a number of individual clauses within the proposed award. A principal objection was to the making of an award which would regulate contractual arrangements between the respondent and third party companies who were not parties to the proceedings.

39 The union submitted in response that these are matters which should be dealt with within the process of hearing the matter, once the Commission commences to consider the application. In written submissions it was said "it may be that the claims or some of them cannot be granted in the form claimed. This does not, however, prevent the Commission from dealing with the claims and making an appropriate award which flows from the subject matter(s) of the dispute."

40 These matters have not been debated in any detail before the Commission and for these reasons I decline to determine this aspect of the matter at this stage of the proceedings.

41 For the reasons advanced I therefore reject the submissions made on behalf of the respondent as to jurisdiction and power. The proceedings are stood over to enable the parties to consider the reasons for this decision. I grant liberty to apply which may be exercised by either party on reasonable notice.

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