CONSIDERATION
124 In my view it is clear that, at all material times, the employer of the relevant employees was the first respondent, Eastern Colour.
125 The respondents submit, in summary, that:
There is evidence before the Court as to the commercial purpose of the arrangements adopted wherein SB and NB were incorporated as labour hire companies, and employees would work up to 40 hours for one of those companies and then work additional hours for the other.
SB and NB were substantial business structures in their own right with tiers of management.
126 That the respondents operate in an industry where profits are low, where persons in the Stanthorpe area are keen to work in the fruit industry and indeed to work as many hours as possible, where the work is seasonal and an employee may be required to work more than 40 hours per week, where the respondents are required to take prices offered to them by the major supermarket chains, and where farms may otherwise take employees from labour hire companies and impose a maximum of 40 hours per week, are facts which are not in dispute. Indeed, the difficulties faced by primary producers in this country are of daily report in the media. However these facts do not detract from the legal position under the Act, which this Court is required to apply.
127 Principles relevant to the identification of an employer in circumstances of ambiguity were considered by the Full Court in Damevski v Giudice (2003) 133 FCR 438. In that case in particular Marshall J observed, in summary, that:
the existence of a contractual relationship and employment relationship, in any given set of circumstances, is ultimately a question of law (at 450).
Payment of wages by a third party is not fatal to the existence of a contract of employment between a worker and a putative employer (at 451).
control over a worker did not merely relate to the on-the-job situation, but rather the ultimate or legal control over the worker (at 451).
Contact between the putative employer and employee is an indicator of an employment relationship (at 452).
contracts of employment may be entered into with a minimum of formality (at 452).
It is necessary to look "beyond and beneath the documents" and not reach a decision concerning the existence of an employment contract on the basis of construing the correspondence (at 453, cf Lord Mummery in Franks v Reuters Ltd [2003] IRLR 423).
Even where the work relations are documented, it is necessary to examine not only the correspondence, but also the circumstances surrounding it, the subsequent conduct of the parties, and the way in which the parties operated and understood the situation (at 453).
128 In this case the evidence demonstrates that each of the relevant employees signed (or had signed for them) weekly time sheets under the heading of either SB or NB. Similarly, each of the employees received payment advices under the name of either SB or NB. However in my view the arrangements whereby the relevant employees were identified as working for SB or NB were, effectively, a sham. That the true employer was Eastern Colour is clear from the evidence before the Court. In particular I note the following:
The fact that all relevant employees considered that Mr and Mrs Baronio were "the bosses" who could hire and fire employees, and that this did actually appear to be a correct perception.
The evidence of each of the relevant employees that they believed that they were working for Eastern Colour. Indeed employees on the farm wore shirts bearing the name "Eastern Colour", on the basis that this was their employer. Similarly, the only Workplace, Health and Safety Guidelines applicable at the farm were in the name of Eastern Colour (transcript 23 October 2012 p 84 ll 9-19). This may be compared with the absence of evidence of any employees having any direct separate involvement with SB or NB in the employment environment.
The fact that the employees performed the work in the same location, namely on the farm owned by Eastern Colour, and by packing fruit in boxes labelled as produced by Eastern Colour.
The fact that the relevant employees had limited knowledge of SB or NB other than as entities whose name appeared on pay slips. Indeed, there is clear evidence before the Court that there was no practical difference in their work environment or practice after an employee had worked 40 hours.
The lack of awareness of the relevant employees of the arrangements whereby they worked up to 40 hours for one of the respondents and any additional hours for another, notwithstanding evidence of Ms Caruso and Mrs Baronio that they had informed them of the arrangements.
The directors of SB and NB had no involvement in employing staff.
The clear fact that SB and NB existed only to provide services to the first respondent.
Notwithstanding the existence of time sheets and pay slips, the absence of any contract of employment between either SB or NB, and the relevant employees.
Mrs Baronio repeatedly gave evidence to the effect that there was no overtime available in the system, and that no farms paid overtime rates to their harvesting and packing staff. However while this may have been the practice, it is very clear that Mrs Baronio was aware of the legal obligation on employers to pay overtime once an employee had worked 40 hours. Indeed, it was for this very reason that SB and NB were created - namely to be entities who could be the nominal employers of employees on the farm to obviate the legal requirements of Eastern Colour as employer to pay overtime for more than 40 hours work. That the directors of SB and NB were the children of Mr and Mrs Baronio simply supports the inference that SB and NB functioned in the context of the family business.
129 The respondents relied on comments of Buchanan J in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174, in particular the following observations of his Honour:
76. There may be many reasons why companies, businesses or enterprises associated with each other might wish to organise their affairs in a way where one legal personality employs labour for the ultimate use and benefit of other legal personalities. Such arrangements will often not be characterised or accompanied by the apparent profitability or identified reward which might be necessary in order to regard an arms-length arrangement as a genuine one.
77. In such intra-group arrangements there may be overlapping, or even common, directorships, interlocking shareholdings (either cross-ownership or through ultimate ownership) and there is frequently a system of cross-guarantees in place. Little of this may be apparent to outsiders. The details may not be discoverable through the public records system. Arrangements between or amongst companies related in this way where one company (or more) operates to engage labour while others are concerned with management, operations, marketing or sales are by no means unusual. They are certainly not illegal. Arrangements along these lines may even be indispensable for some forms of business activity e.g. joint ventures. Although more than mere lip service must be paid to the separation of legal personality provided by individual incorporation, the tests applied to other labour hire arrangements, of independence and separate business, are either not relevant or are much less readily applied in such a circumstance.
78. Nevertheless, it must be possible to identify a rational explanation for the arrangement and the explanation must be satisfactorily related to an intelligible business objective. That is so because otherwise, doctrines of agency, at least, may operate to defeat a bare claim of independence and isolated liability, supported only by a bare reference to separate incorporation. That is particularly likely to be the case when: the separate employing company is completely reliant upon a company to which it purportedly supplies labour; it has no assets and no management structure of its own; and it exists only as a corporate shell to protect another company, which does have assets, from liability to employees. In such a case a court might not hesitate long before pronouncing the arrangement ineffective or, in a more serious case, a sham.
130 In my view these observations do not assist the respondents. Indeed the concluding comments of Buchanan J at [78] concerning circumstances where the Court would not hesitate long before pronouncing an arrangement ineffective or a sham are squarely applicable here. While there may have been a rational explanation for the arrangements put in place by the respondents, to adopt comments of Marshall J in Damevski v Giudice at 450, it was to effectively to:
attempt to exploit difficult areas of law and create vehicles designed, inter alia, to enable employers to avoid their award and statutory obligations.
131 As Marshall J observed in Damevski v Giudice there is no legitimacy in such arrangements.
132 It follows that the FWO has substantiated its claim that the first respondent was the employer of Mr Gordon Falconer, Mr Lachlan Falconer, Ms Di Betta and Ms Donges.
133 Finally I am satisfied that any contravention by the first respondent involving underpayment of entitlements to these employees involved the second, third and fourth respondents within the meaning of s 728 of the Act. As the High Court explained in Yorke v Lucas (1985) 158 CLR 661 at 670:
There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.
134 It is clear from the material before the Court that these three respondents aided and abetted the contravention, and/or were knowingly concerned in the contravention, in that:
The second and third respondents were party to the arrangements whereby the relevant employees were allegedly employed by one of them for up to 40 hours per week and then by another respondent for additional hours.
Each of the second and third respondents made payments to the relevant employees which were in breach of the provisions of the Act.
The second and third respondents had knowledge of the essential facts constituting the contravention of the Act by the first respondent.
The fourth respondent, who had detailed knowledge of the arrangements, had knowledge of the essential facts constituting the contravention of the Act by the first respondent.