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[2020] FWC 6519
General information, not legal advice.
Fair Work Commission
2020-12-03
Original judgment source is linked above.
s.739 - Dispute resolution
Association of Professional Engineers, Scientists and Managers Australia
Application under s 739 - calculation of redundancy pay - whether applicants were employees or contractors of the company in 1990s and early 2000s - dispute relates to extraneous question of law - not a dispute arising under the Agreement - application dismissed
[1] This decision concerns an application made by the Association of Professional Engineers, Scientists and Managers Australia (APESMA) under s 739 of the Fair Work Act 2009 (Cth) (Act) and the dispute resolution procedure in clause 3 of the GM Australia Engineering Operations Enterprise Agreement 2018 (Agreement). The application is made in respect of two named, and a number of unnamed, members of APESMA (affected members) who for many years were employed by GM Holden Pty Ltd (Holden), and whose employment ended on 26 June 2020 for reason of redundancy.
[2] APESMA contends that there is a dispute about the affected members' redundancy entitlements under clause 4.12 of the Agreement. It submits that the affected members have not received their correct redundancy entitlements, because Holden failed to include certain periods of service with the company from the mid-1990s to the mid-2000s ('the disputed periods'), during which times they were ostensibly engaged as contractors or employees of labour hire companies and deployed to work for Holden, but were at law employees of Holden. APESMA frames its dispute with particular reference to the two named members but contends that the circumstances of the unnamed members are similar to those of the named members.
[3] Holden submits that it did not employ the named members during the disputed periods and that those periods therefore do not count as service. It contends that, during the disputed periods, the named members were engaged by a labour hire company as contractors or employees and that the labour hire company then provided their services to Holden.
[4] Holden objects to the Commission arbitrating the dispute under the dispute resolution procedure in clause 3.1 of the Agreement, on the basis that the dispute concerns a question of law that is extraneous to the Agreement, namely whether the named members were employees of Holden, and that this is not a dispute that relates to 'a matter arising under the Agreement' for the purpose of clause 3.1. Holden further contends that there is no legitimate dispute about the unnamed members, because it does not know who these members are and the union has provided no particulars about them.
[5] The background to this matter is as follows. On 25 February 2020, the affected members received from Holden an 'exit balance estimate', setting out the payments which they would receive upon the termination of their employment for reason of redundancy in June 2020.
[6] The first named member, Mr M[1], received an estimate that recorded a date of commencement of employment with Holden (start date) of 25 May 2004. Mr M considered that his start date ought to have been recorded as 29 August 1996. He approached APESMA with his concern. He says that on or about this date, he commenced working as a contractor for a labour hire company, but that in substance he was hired as an employee of Holden. He says that he was interviewed and engaged by an employee of Holden and reported to a Holden supervisor. He says that Holden set his start and finish times and approved his overtime, absences and timesheets, and that Holden conducted his performance reviews, paid for work-related travel and provided his tools and equipment. Mr M says that he ostensibly worked for several labour hire companies providing work to Holden, but that he performed the same work as Holden employees, and that when he formally commenced permanent employment with Holden in 2004, he noticed no change in how he performed his role. The disputed period for Mr M is the period from 29 August 1996 to 25 May 2004.
[7] Documents relevant to the position of Mr M were provided to the Commission by APESMA pursuant to an order to produce. They comprised a 'sub-contractor agreement' between Mr M and Invenio Pty Ltd (Invenio) under which Mr M agreed to provide services to Invenio's client, Holden, in accordance with Holden's attached 'contract house requisition' document; a similar agreement dated 16 January 2001 between Mr M and Vikand Consulting Pty Ltd; and several contracts of employment from 2003 and 2004 between Mr M and Edag Future Pty Ltd (Edag), under which Mr M agreed to provide services to Edag's client, Holden. Also attached is a letter from Edag dated 7 June 2004 congratulating Mr M on being offered employment with Holden and confirming that his employment with Edag would end on 21 May 2004. Holden produced to the Commission a copy of its offer of employment to Mr M dated 19 May 2004. The contract, which is signed by Mr M, contains an acknowledgement that Mr M has read and understood the letter, and that he warrants that all particulars given in support of his application for employment with Holden are true and correct.
[8] The second named member, Mr W, received an estimate that indicated a start date of 10 March 1998. Mr W considered that this date ought to have been recorded as August 1994 and took his concern to APESMA. He says that from August 1994 to September 1995 he was engaged as an employee of a labour hire company to provide services to Holden, and that from September 1995 to March 1998 he was engaged as a contractor by a labour hire company to work at Holden. Mr W's account of his working arrangements during this time is similar to that of Mr M, and he too says that, upon commencing 'permanent employment' with Holden in 1998, he noticed no change in how he undertook his role. The disputed period for Mr W is the period from August 1994 to 10 March 1998.
[9] Documents relevant to the position of Mr W were provided to the Commission by APESMA pursuant to an order to produce. They comprised an employment agreement dated 30 August 1994 between Mr W and Future Transport Pty Ltd (FT) under which Mr W agreed to undertake work for FT's client, Holden, and a sub-contractor agreement between Mr W and Radial Pacific Pty Ltd (Radial) dated 17 August 1995, under which he agreed to undertake work for Radial's client, Holden.
[10] In correspondence to Holden in June 2020, APESMA stated that, during the disputed periods, the affected members had purportedly been engaged as and represented to be employees or contractors of labour hire companies and assigned to provide services to Holden, but that at law they were employees of Holden. APESMA sought for Holden to recognise the disputed periods for the purposes of calculating the affected members' redundancy payments. The company declined to do so, on the basis that the affected members had not been employed by the company during the disputed periods.
[11] APESMA's application was lodged on 25 June 2020, one day before the termination of the affected members' employment. A conciliation conference occurred on 23 July 2020 but the matter remained unresolved. On 3 August 2020, APESMA advised the Commission that it wished the application to be arbitrated. On 7 August 2020 the company confirmed that it objected to the application on the jurisdictional ground that the dispute did not relate to a matter arising under the Agreement for the purpose of the dispute resolution procedure in clause 3 of the Agreement. The jurisdictional hearing took place before me on 19 November 2020.
[12] Clause 3.1 contains a dispute resolution procedure. Clause 3.1.1 states:
this term sets out procedures to settle the dispute."
[13] Clauses 3.1.3 prescribes how a dispute will be dealt with in the first instance. It requires the parties to endeavour to resolve the dispute at the workplace level, by discussions between employees and relevant managers. Clause 3.1.4 provides that if the dispute remains unresolved, a party to the dispute may refer the matter to the Commission.
[14] Clause 3.1.5 deals with the role of the Commission. It states:
"The Fair Work Commission may deal with the dispute in 2 stages:
(a) the Fair Work Commission will first attempt to resolve the dispute as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation; and
(b) if the Fair Work Commission is unable to resolve the dispute at the first stage, the Fair Work Commission may then:
(i) arbitrate the dispute; and
(ii) make a determination that is binding on the parties."
[15] Clause 4.12 of the Agreement concerns compulsory redundancy and relevantly states:
"Before any compulsory redundancy is initiated, the provisions of clause 4.13 Voluntary Separation program will have been exhausted. In the instance of any compulsory redundancy the following provisions shall apply:
[16] Holden's jurisdictional objection is that the present dispute does not 'relate to a matter arising under the Agreement'. It submits that the dispute concerns the question of whether the affected members were employees of Holden in the mid-1990s and early 2000s, and that this matter does not concern the Agreement. Holden submits that it is clear that it did not have a contractual relationship with the affected members prior to the dates on which they commenced employment with Holden in 1998 and 2004 respectively and that there is simply no merit in the suggestion that the affected members were employees of the company during the disputed periods. It notes that APESMA's correspondence acknowledges that the affected members were in fact variously employed by, or engaged on contracts for services with, labour hire companies which provided services to Holden. It says that, to the extent that there might be any question about the legal status of the affected members during the disputed periods, it is a question that concerns their relationship with the labour hire companies, not with Holden.
[17] Holden submits that, having entered into and taken the benefit of their contractual relationships with the labour hire companies many years ago, the affected members now seek to derive an additional benefit from a different party by claiming to have been employees of Holden during the disputed periods. It says that, given the admitted legal relationships between the affected members and the labour hire companies, and the absence of any evidence of a legal relationship between them and Holden, the application has no reasonable prospects of success, and that therefore the Commission should exercise its discretion under s 587(1)(c) to dismiss the application.
[18] In this regard, Holden submits that the labour arrangements that were in place during the disputed periods, commonly referred to as an 'ODCO' structure, are commonplace and that in a recent decision that considered such a tripartite labour structure, a Full Court of the Federal Court in CFMMEU v Personnel Contracting Pty Ltd[2] (Personnel Contracting) dismissed an appeal from a decision that had held the parties to their bargains. Holden submits that in Personnel Contracting, like in the present matter, there was no evidence of fraud or a sham. Holden further contends that in Personnel Contracting, as in many other cases, the legal challenge was to the status of the relationship between the worker and the labour hire company, not the relationship between the worker and the recipient of the labour, which was plainly not a legal relationship. The labour recipient was joined to the proceedings only as a putative accessory to the alleged contravention committed by the labour hire company in its capacity as the employer. There was no contention that the recipient had been the employer of the persons in question. Holden submits that the claim against it is misconceived.
[19] APESMA contends that the dispute is one that relates to a matter arising under the Agreement, because it concerns the redundancy entitlements of the affected members under clause 4.12 of the Agreement. It submits that the dispute is about whether all of the affected members' years of service were taken into account in the calculation of the redundancy benefits under clause 4.12. It says that the Act defines service as a period of service by an employee with an employer, and that there is no dispute that clause 4.12 of the Agreement has the same meaning. APESMA submits that there is however a dispute about how clause 4.12 of the Agreement applies to the affected members in respect of the disputed periods in circumstances where there is evidence to substantiate the existence of an employment relationship between the affected members and Holden during the those periods.
[20] APESMA submits that, although the dispute does not concern the interpretation of the terms of the Agreement, which are clear, it would be wrong to conclude that private arbitration of a dispute arising under an enterprise agreement was confined to determining the meaning or application of the agreement, without reference to the terms of employment of relevant employees. It submits that, in order for the Commission to be authorised to deal with a dispute, there need only be a 'sufficient link' between the terms of the Agreement and the relevant disagreement, as was suggested in the decision of Transport Workers' Union of Australia v PFD Food Services Pty Ltd [2020] FWC 515 at [95]. APESMA contends that there is a sufficient link in this case, and that the Commission may examine the disagreement regarding the contractual terms of engagement during the disputed periods and determine whether there was an employment relationship between the affected members and Holden and then apply that determination to the consideration of whether clause 4.12 has been complied with.
[21] APESMA submits that the Commission frequently considers the question of whether a person is an employee in the course of determining whether it has jurisdiction to deal with an application, and that there is no reason why the Commission would not have jurisdiction here to consider whether the affected members' previous years of work constituted service with Holden.
[22] The dispute resolution procedure in clause 3 of the Agreement does not apply to all disputes relating to the employment of employees covered by the Agreement. It applies only to a dispute that relates to a matter arising under the Agreement or the NES, and it is only such a dispute that the Commission is authorised to arbitrate. The role of the Commission is one of private arbitration, defined by the terms of the Agreement. Because the parties to the Agreement have confined the scope of the dispute resolution procedure to disputes of a particular kind, it is necessary to characterise the present dispute and determine whether it is one that falls within the clause.
[23] The immediate cause of the dispute was the company's calculation of the redundancy entitlements of the affected members under clause 4.12 of the Agreement. I appreciate therefore that on one view, and as the union contends, it could be said that the 'matter' to which the dispute relates is whether each of the years in the disputed periods is a 'completed year of service' for the purpose of clause 4.12 of the Agreement. However, I do not consider this to be the true character of the matter to which the dispute relates.
[24] In my view, the matter to which the dispute relates is a question of law, namely whether the affected members were employees of Holden during the disputed periods. That matter does not arise under, nor does it relate to, the Agreement. The relationship between the affected members and Holden was formed outside of the Agreement, many years before the Agreement was created. This situation can be contrasted with a dispute concerning the status or character of the relationship between an employer and an employee under an enterprise agreement, such as might arise in relation to an employee's correct classification under an agreement, or a dispute about whether an employee falls within the coverage of an agreement. There is no dispute about the character of the affected members' relationship with Holden under the Agreement, during its period of operation. In the present case, the disputed matter concerns the application of the common law of Australia to facts that existed in the distant past. The determination of that disputed matter has an implication for the application of the Agreement, because it affects the length of service. But it is extraneous to the Agreement. That matter does not arise under the Agreement.
[25] APESMA says that there are some 15 other persons in a similar position to that of the affected members and that there is a collective dispute about the quantum of the redundancy payments to which they are entitled. However, the above analysis of the disputed matter, as it concerns the named members, applies equally to the dispute in respect of these other persons. Through their union, they contend that at times long ago, they were at law employees of Holden. This is not a dispute about a matter arising under the Agreement. Moreover, nothing is known about these other persons, other than that their circumstances are said to be similar to those of Mr M and Mr W. Further, I am not satisfied that the alleged dispute, insofar as it is said to involve the unnamed members, has progressed through the first stage of the dispute resolution procedure, which involves discussions between the employees and managers (clause 3.1.3) - the company does not know who these people are. In order for there to be a dispute, there must be an identifiable and disputed subject matter. I cannot be satisfied that there is a dispute about the redundancy entitlements or historical service of persons whose identity is not known to the employer or the Commission.
[26] I note for completeness that the disputed matter does not relate to the interpretation of the Agreement. The meaning of 'completed year of service', and other relevant provisions, is perfectly clear. It is not contended, for example, that 'service' includes previous service with labour hire companies that provided services to Holden. Nor does the dispute relate to the application of the Agreement to contested facts. Based on the union's submissions and the evidence that it proposes to adduce, there does not appear to be any factual dispute between the parties, whether arising under the Agreement or otherwise.
[27] As to the contention of the union that there is a 'sufficient connection' between the dispute and the Agreement such as to authorise the Commission to arbitrate the dispute, I do accept that this is the relevant 'test' that determines the role of the Commission under a disputes procedure. The role of the Commission is one of private arbitration. It depends on the terms of the Agreement. Section 739(4) provides that 'if, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so'. However, the Commission 'must not exercise any powers limited by the term' (s 793(3)), and 'must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties' (which includes an enterprise agreement) (s 793(5)).
[28] The affected members may bring proceedings in a court to prosecute their contention that they were employees of Holden during the disputed periods and that therefore Holden has breached clause 4.12 of the Agreement by incorrectly calculating the amount of redundancy pay to which they are entitled under that clause. The Act affords them a six year period to bring proceedings for breach of s 50 of the Act. Unlike a court however, the role of the Commission is confined to the one conferred upon it by the terms of the Agreement. In my view, the present dispute falls outside those terms.
[29] I note that clause 3.1.5(b) of the Agreement provides that if the Commission is unable to resolve a dispute by mediation, conciliation or expressing an opinion or recommendation, it 'may then arbitrate the dispute'. In my opinion, this term confers a discretion on the Commission. At the hearing, the parties agreed that this was the case. Had I concluded that the dispute fell within clause 3.1, I would nevertheless have declined to exercise the discretion to arbitrate the dispute in this case, because I do not believe the application discloses a prima facie case that the affected members were employees of Holden during the disputed periods. Based on the contentions and the summary of the evidence that the union proposes to adduce at a merits hearing, the working arrangements that applied to the affected members during the disputed periods appear to me to be entirely consistent with a genuine tripartite contracting relationship with Holden being the recipient of the affected members' labour, not their employer.
[30] It is one thing to contend that a worker, ostensibly contracted by a principal and then deployed to a third party, is at law the employee of the principal. The true legal nature of the relationship between those parties might, depending on all of the circumstances, be the subject of debate. However, it is quite another matter to contend that, although there was an employment or contracting relationship between a worker and the labour hire company (which is admitted in the present case), there was also concurrently a contract of employment between the worker and the third party client. This is an ambitious contention. I find it difficult to see how a worker could, at the same time and in respect of the same work, be an independent contractor or employee of one entity, and also an employee of another entity.
[31] Contrary to APESMA's contention, I do not consider that there is evidence to substantiate the existence of a contract of employment, or any other legal relationship, between the affected members and Holden prior to the start dates referred to earlier. The evidence that the union proposes to adduce in support of its contention that the affected members were employees of Holden is consistent with the members' services being provided to Holden by a labour hire company. There is nothing about this case that appears to differentiate it from an ordinary labour hire situation, save that eventually, the affected members were offered employment by the client. It is unremarkable that a contractor or employee of a labour hire company who is deployed to work for a client would be interviewed and approved by that client, report to the client's supervisor and have working hours and timesheets approved by the client. Nor is there anything unusual about contractors or employees of a labour hire company working side by side with employees of the client company, using the same tools and equipment, and even having certain expenses paid directly or reimbursed by the client. At the jurisdictional hearing, the union submitted that the evidence would also show that the affected members had little contact with the labour hire companies. It also became clear that the affected members had worked for several different labour hire companies. However I do not consider that these matters are indicative of the existence of a contract of employment existing between the affected members and Holden during the disputed periods. By contrast, the evidence proposed to be adduced clearly bears out the existence of contractual relationships between the named members and the labour hire companies.
[32] Further, it is common ground that the affected members expressly agreed to become employees of Holden on the start dates referred to earlier, and that at no point over the many years that followed up until 2020 did the affected members claim to have been employed by Holden before the start dates. It seems to me an unlikely proposition that in these circumstances the affected members and Holden could have had the intention to create a contract of employment prior to the start dates referred to above. In this regard, it must be remembered that, in order for the union's contention to succeed, it would be necessary to demonstrate that there was an implied contract of employment between the affected members and Holden during the disputed periods. In Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd and Oths, (Quest)[3] the Full Federal Court observed:
"There will be limited scope for the implication of an employment contract between a worker and an end-user in a triangular setting, where the provision of a worker to the end-user is explained by the presence of a genuine labour-hire arrangement evidenced by the existence and performance of the hallmarks that such arrangements commonly bear."[4]
[33] APESMA relied on the decision in Quest as an example of a case where the client in a tripartite labour arrangement was held to be the employer and sought to draw factual analogies with the present case. But the circumstances in Quest were very different from those of the present case. There, the workers in question had originally been employed by Quest for a number of years. Quest and a labour hire company then purported to enter into an arrangement whereby the workers were engaged by the labour hire company as contractors, and the labour hire company provided their services back to Quest, where they performed the same work that they had previously undertaken. The court concluded that the workers had not become contractors of the labour hire company and had remained employees of Quest. Thus in Quest, the 'client' was the original employer of the workers in question. In the present case, various labour hire companies engaged and employed the workers over a number of years, before the workers were eventually offered employment by Holden. There was clear evidence in Quest of a contract of employment between the client and the workers. But the evidence proposed to be adduced in this matter does not point to the establishment of a contract of employment between the affected members and Holden during the disputed periods.
[34] Moreover, the evidence that is proposed to be adduced is in no way suggestive of fraud or a sham. The union acknowledges that the affected members were party to employment contracts and contracts for services with labour hire companies. The employment and contractor agreements between the affected members and the labour hire companies all prescribed rates of pay and benefits that were provided to the workers in consideration for their agreement to undertake work for the relevant companies' client, Holden. It is not contended that the payments prescribed by these contracts were not made. It is not said that the labour hire companies that engaged the affected members were not real and legitimate businesses. There is no indication of contractual obfuscation. There does not appear to be anything about the 'ODCO' or tripartite structure of the arrangements in this matter that warrants an apprehension that the relationships between the parties were anything other than what they purported to be.
[35] A final discretionary consideration supporting a conclusion that it would not be appropriate for the Commission to arbitrate the dispute is the fact that the Commission would not be able to issue a decision that was necessarily determinative of the dispute. Ordinarily, where the Commission is authorised by the terms of a dispute settlement provision in an enterprise agreement to arbitrate a dispute, the decision would be binding on the parties under the Agreement, and the dispute would be resolved. The losing party could not then seek a different outcome in a court by bringing proceedings for declarations or breach of agreement. In the present case however, because the affected members are not parties to the proceeding, they would not be bound by the determination of the Commission. And as former employees, to whom the Agreement no longer applies, they could not be so bound (see s 51). Nor can they become parties to the proceeding now because their employment with Holden has ceased. Therefore, irrespective of the outcome of any arbitration in the present matter, the affected members would retain the right to bring proceedings in a court seeking declarations that they were employees of Holden during the disputed periods, and that Holden has contravened clause 4.12 of the Agreement by not including the relevant periods of service in its calculation of their redundancy payments. In other words, arbitration of the dispute by the Commission would not necessarily resolve the dispute, because the affected members would still be able to take their claim to a court.
[36] It is not necessary for me to deal with the company's application under s 587. It suffices to say that, had I dismissed the jurisdictional objection, I would nevertheless have declined to exercise the discretion granted to the Commission under clause 3.1 to arbitrate the dispute.
[37] I consider that the dispute does not relate to a matter arising under the Agreement for the purpose of clause 3.1 of the Agreement. The jurisdictional objection is upheld and the application is dismissed.
P. Kelly for the Association of Professional Engineers, Scientists and Managers, Australia
[1] The two named members asked not to be identified in the decision and I am content to grant this request.
[4] At 387, per North and Bromberg JJ. Note that the decision of the Full Court was overturned on appeal to the High Court on a different point, which concerned the construction of the sham contracting provision in s 357 of the Act.
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Association of Professional Engineers, Scientists and Managers Australia
GM Holden Pty Ltd [2020] FWC 6519
(2015) 228 FCR 346