EMPLOYEE OR INDEPENDENT CONTRACTOR
10 A computer program is a literary work for the purposes of the Copyright Act 1968 (Cth) (the Act). Section 35(2) provides:
Subject to this section, the author of a literary … work is the owner of any copyright subsisting in the work by virtue of this Part.
Sub‑section (6) provides:
Where a literary … work … is made by the author in pursuance of the terms of his or her employment by another person under a contract of service …, that other person is the owner of any copyright subsisting in the work by virtue of this Part.
It was that sub‑section which gave rise to the first issue: whether the respondent was an employee of the appellant or an independent contractor when he wrote the program.
11 The parties were basically in agreement as to the law to be applied in answering this question. In Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24 Mason J said:
A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter …. But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question …. Other relevant matters 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.
12 In Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Victoria) (1997) 37 ATR 528 at 533 the Victorian Court of Appeal said that the determination of the employee/independent contractor question involves identifying factors or indicia that are capable of pointing in one direction or another, none of which is conclusive, and weighing or balancing them in order to reach a conclusion.
13 The cases have identified many indicia, in addition to those to which Mason J referred, that are relevant to the inquiry. See, for example, Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 at 538 and D & D Tolhurst Pty Ltd v Commissioner of State Revenue (1997) 38 ATR 1001 at 1013‑1014.
14 The Magistrate first instructed herself in accordance with the relevant authorities, including those referred to above. She then noted various indicia relevant to the characterisation process. They included that the respondent was a sole operator, had an ABN, sent invoices which included GST, used his own motor vehicle and secretarial facilities without expenses or allowances from the appellant, was at liberty to take other work, worked at home without supervision, and attended meetings with the appellant's clients without the appellant being present. Her Honour also recorded that the appellant did not advise the Tax Office that the respondent was its employee and did not deduct PAYE. Nor was the respondent provided with sick leave, annual leave or superannuation. The Magistrate referred to other indicia, pointing one way or the other. See [16] to [54].
15 The appellant summarised its complaints about the Magistrate's characterisation of the respondent's work status in three propositions:
(a) her Honour was incorrect in deciding that the indicia she relied upon were the correct set of indicia and were exhaustive of the determination of that issue;
(b) her Honour ignored or gave little or no regard to concrete written expressions by the respondent of his intentions as to the nature and terms of "the employment";
(c) her Honour gave no weight or no sufficient weight to
(i) the nature of the relationship between the parties, including industry practice, and
(ii) "implications that should arise as a consequence of the need to give business efficacy to the agreement".
16 In a comprehensive and detailed set of reasons on this issue, covering sixteen pages, the Magistrate dealt with many matters other than those to which she ultimately accorded particular weight, including those the subject of particular complaint in pars (b) and (c) at [15]. Having done so, her Honour announced her conclusion as follows:
Taking into account all of the matters mentioned above and considering the matter as a whole, it is clear to me that the respondent worked for the applicant as an independent contractor. The respondent had his own ABN. He charged the applicant GST. The applicant claimed an input tax credit for the GST. The applicant did not [deduct] pay as you go income-tax instalment deductions from the amounts paid to the respondent. The respondent charged the applicant a fixed price for the work. The respondent was given no holiday pay, sick pay, superannuation or workers compensation insurance. The respondent was free to take other work and did including other work from the Salvation Army. The respondent, in my view, was clearly in business on his own account. Notwithstanding that Mr Roberts exercised some control over the overall direction of the project, and the respondent was doing a major job for the applicant, the respondent was not an employee.
17 The Magistrate did not treat the matters recorded in the second to seventh sentences of that passage as a "correct set of indicia". They were the matters that appealed to her as determinative after weighing and balancing a much larger range of indicia, including those relied on by the appellant. On a fair reading of the Magistrate's reasons, it cannot be said that the list of specific matters recorded in the passage quoted at [16] was propounded as "exhaustive of the determination of that question".
18 For the same reason I do not accept Counsel's oral variation of the "correct set of indicia" submission. This was that the Magistrate ticked off the matters on her check list and thus reached the wrong result because the list was incomplete.
19 For the foregoing reasons there is in my view no substance in complaint (a) at [15].
20 The "concrete written expressions" of the respondent's intentions as to the "nature and terms of his employment" in complaint (b) at [15] were twofold. The first was that in his "Proposal to Develop a Call Centre Application" sent to Mr Roberts on 20 May 2004, he described himself as "Centre Stage Management Development Manager (Tony Riedle)". As to the significance of this title, the Magistrate said:
The applicant says that this means that the respondent acknowledged that he was not an independent contractor but that he occupied a position as a designated employee of the applicant. In my view, that reads too much into the title the respondent gave himself. The proposal was to be provided to the Salvation Army. As between the applicant and the Salvation Army, the respondent was on the applicant's team. That was sufficient to explain the respondent's description of his position. The description does not seem to me to indicate that the respondent was holding himself out as an employee. In any event, it would only be evidence of his view at the time. As previously stated, I do not consider the views of the parties, or even their solicitors, to be of significant weight in the context of this case.
21 It is thus wrong for the appellant to say that the Magistrate ignored or "gave no regard" to the title the respondent had bestowed on himself. The alternative, namely that she "gave little … regard" to it is a fair rendering of her reasons if "regard" means "weight". However, in a balancing and weighing context such as that in question here, the very process is evaluative and involves matters of impression, perception and degree. That task is for the Magistrate. On an appeal, the Court does not proceed as if trying the case at first instance. It must accord proper weight to the Magistrate's views. The appellant must demonstrate error on the part of the Magistrate. That another view may have been open in relation to the significance of the respondent's title does not show error. In contexts such as the present, different minds might assess the significance of a particular indicium in different ways, and therefore might not reach the same ultimate conclusion after the weighing and balancing process. See generally Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 425 at [28] to [30].
22 No error has been shown in the passage set out at [20]. In particular, it seems to me to have been entirely appropriate for the Magistrate to have treated the respondent's use of the title, in a proposal to the Salvation Army, as a way of indicating that he was part of the appellant's team, and that it was not his intention thereby to indicate that he was the appellant's employee.
23 Another indicator that the respondent saw himself as an employee is said to lie in the words used on the front of the proposal to the Salvation Army: "The information in this proposal is [proprietary] and is for the sole use of Centre Stage Management in conjunction with the Salvation Army Family Stores". This was said to demonstrate "his view of the terms of the agreement and it was not that he owned the copyright". The Magistrate said this did not greatly assist in determining the employee/independent contractor issue. She said that at most, it might indicate what one of the parties might have thought the relationship was, and that in this case that was not a matter of significant weight.
24 There was no error in the Magistrate's observation that in any event no significant weight attaches to a party's view that he is an employee. As with other indicia, it would be no more than a consideration to be taken into account, and susceptible of being submerged or overwhelmed by other considerations. The authorities support the Magistrate's approach. Thus Chitty says:
While the expression of the parties' intention may be a relevant factor, it is not a conclusive factor in deciding what is the true nature of the contract, and where there is no written contract, the court is entitled to find contractual terms by implication.
See Chitty on Contracts - Specific Contracts 29th ed (2004) 39‑025. Chitty then quotes a passage from the reasons of Ackner LJ in Young & Woods Ltd v West [1980] IRLR 201 at 208:
It is by now well settled that the label which the parties choose to use to describe their relationship cannot alter or decide their true relationship; but in deciding what their relationship is, the expression by them of their true intention is relevant but not conclusive. Its importance may vary according to the facts of the case.
25 See also Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389 (Privy Council), Narich Pty Ltd v Commissioner of Pay‑roll Tax (1983) 50 ALR 417 (Privy Council) and Buildings Workers' Industrial Union v Odco Pty Ltd (1991) 99 ALR 735 at 755‑756 (Full Court of this Court).
26 The Magistrate accorded both the so called indications of intention in [20] and [23] some, but not significant, weight. As Ackner LJ said in the passage quoted at [24], the importance of an expression of a common intention will vary according to the facts. In the present case, not only are the matters relied on directed to the intention of the respondent alone; they struggle, in my view, to be accounted indications of his intention at all. However, I need not pursue this particular line, because the Magistrate did take both indications into account. Her Honour doubtless thought they were not entitled to significant weight because they were so indefinite and uncertain as indicators of relevant intention, and in any event indicated the intention of one party alone.
27 Accordingly I reject complaint (b) at [15].
28 The first part of complaint (c) at [15] is that the Magistrate gave no or insufficient weight to "the nature of the relationship between the parties including industry practice". The Magistrate recorded the appellant's argument that the nature of the programming industry in boutique operations is that the programmers are taken on for specific jobs, they work agreed hours and they work from their homes "as employees". Her Honour rejected the evidence on which this contention was based. She said at [42]:
I do not accept Mr Roberts' evidence on this issue because I do not accept that he appreciates the difference between an employee and independent contractor. Similarly, I do not give any significant weight to Mr Boyle's evidence that the respondent was an employee. He said, for example, that the respondent at all times took instructions from the applicant and worked under the immediate direction and scrutiny of Mr Roberts. That is, at best, a gross overstatement. The respondent generally worked at home alone or at the Salvation Army premises at times when Mr Roberts was at work some kilometres away at Eastern Ocean.
29 The Magistrate had earlier (at [41]), in another connection, said that Mr Roberts displayed a very loose understanding of the notion of being an employee. She gave the example of a photographer who was paid for producing a series of photographs. Mr Roberts said the photographer would be an employee of the person who commissioned the photographs. That forms a sufficient basis for the Magistrate's rejection of his evidence on the present issue. Her Honour had the advantage, which this Court does not have, of hearing and seeing Mr Roberts give evidence, and thus of forming a view of the utility of his evidence. No error has been shown in her treatment of this issue. Mr Roberts' characterisation of the photographer, almost a paradigm of an independent contractor, illustrates the lack of worth of his evidence on this point. A further indication of Mr Roberts' failure to understand the difference between an employee and an independent contractor appears in his affidavit. He says that "IT employees … are employed as employees on limited and often job specific tasks. They are not employed as independent contractors specialising in some specific field".
30 The appellant also complains that her Honour ignored the evidence about industry practice. That is not correct. At [43] her Honour said:
… general evidence that the industry practice is that computer programmers are generally employees, where the actual terms of the arrangements between the programmers and the alleged employers are not in evidence, is not particularly useful. The question of whether a particular person is an employee often involves a consideration of a large number of factors and a careful balancing exercise. The opinions of people in the industry about whether programmers in general are employees do not significantly assist with the question of whether the respondent is an employee.
31 The appellant drew attention to the evidence of Adam Dennis, an IT consultant. Mr Dennis said that while some companies that employ IT employees, especially large companies, have a standard employment agreement which includes a clause stating that the employer retains copyright in any IT work undertaken by the employee, "that is not the norm in this industry". That evidence is of no present relevance. Mr Dennis also said that in his dealings with clients of every size, unless it is otherwise clearly stated, the intellectual property arising from the project belongs to "the client". That is the industry norm and reflects the "master‑servant relationship between the client and the consultant". That evidence is unhelpful. The relationship Mr Dennis posits is one where he, as a consultant, does work for a client. His claim is that that relationship is one of servant and master. That says nothing about the facts of the present case, where the relationship in question is not between the appellant and its client, the Salvation Army, or between the respondent and the Salvation Army, but between the appellant and the respondent.
32 The second part of complaint (c) at [15] ‑ that the Magistrate gave no weight or no sufficient weight to "implications that should arise as a consequence of the need to give business efficacy to the agreement" ‑ was explained by Dr Dean, who appeared for the appellant. He said that
to allow Riedle to control the copyright and therefore - and the source code, should I say and all those things that go from it, would have such catastrophic consequences on the relationship between CSM and the Salvation Army that no officious bystander, looking at the common sense business relationship could possibly say that, yes, it was intended that Mr Riedle would have that control.
33 The catastrophe argument was dealt with by the Magistrate at [20] to [21] of her reasons. At [20] she said:
The first argument put by the applicant is that the respondent must have been an employee because the consequences of the respondent owning the copyright in the program to the exclusion of the applicant and the Salvation Army were so great as to negate any suggestion that the parties intended the respondent to be an independent contractor. The applicant argues that, '[B]usiness efficacy dictates that the parties could not have intended for the relationship to be such that it divested CSM and the Salvation Army of control over the very program they were creating'. The applicant relies on the officious bystander test and says that, if it had been suggested that the respondent would own the copyright in The Program, the parties would have said, "of course not" and therefore the respondent must be an employee.
34 Her Honour rejected this argument at [21]. After noting that the location of ownership of the copyright in the program depended on whether the respondent was an employee or an independent contractor, and that whether he is one or the other depends on various indicia, including control, integration and whether he is in business on his own account, she concluded:
The copyright consequences of a person being an employee or an independent contractor are not one of the established indicia for determining whether a person is an employee or an independent contractor.
35 Her Honour returned to the catastrophe argument at [48] to [50]. She referred to the Copyright Law Review Committee's 1995 Report on Computer Software Protection (the 1995 Report), and noted that, despite the Committee's earlier view to the contrary, it now recommended against any change to s 35(6) of the Act in its application to computer programs. Her Honour then said:
even if there were unsatisfactory consequences for at least some parts of an industry if the authors of computer programs were not employees, that would not mean that the respondent was an employee. It would simply mean that thought should have been given at the outset of the project to the ownership of the copyright in The Program and an appropriate agreement should have been negotiated.
36 The catastrophic consequences asserted by counsel, if they exist, are a result of the application of s 35(6) of the Act to the facts of the case. Those consequences cannot themselves produce a different result.
37 Later in these reasons (at [53] to [62]) the provisions of Division 4A of the Act are examined. It is apparent from those provisions, especially ss 47D and 47E, that whatever plausibility the characterisation of the consequences of the Magistrate's decision as catastrophic may have had before the enactment of Division 4A, it has since evaporated.
38 No error has been shown in the Magistrate's reasons. Although I need not go this far, in my view a finding that the respondent was an employee would have been perverse.