Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd

Federal Court of Australia|2013-06-14|Before: McKerracher J

THE APPLICANT'S submissions as to eFFect of the evidence 205 The purpose of both the proposal prepared by Mr Konstek for Contracting Solutions of 7 October 2009 (submitted to Mr Luchmaya for QSP) and the contract between QSP and Contracting Solutions of 14 October 2009 was to procure the conversion of certain of QSP's existing employees into independent contractors. 206 The applicant contends and I accept, that on the evidence, as a result, the employment of those employees was to terminate and they would instead, after that time, perform the same work for and under the control and direction of QSP as independent contractors or purportedly independent contractors under contract of services. The applicant says the evidence shows that Contracting Solutions was to procure and manage the conversion on behalf of QSP. Following the conversion, although the employees would perform the same work under the control and direction of QSP, they would be paid by Contracting Solutions on behalf of QSP as its agent. This also does not appear to be in dispute. 207 However, the applicant contends that Ms Best and Ms Roden were constructively dismissed by QSP. The respondents on the other hand argue that Ms Best and Ms Roden were not and could not be dismissed because they were simply engaged by QSP as casual employees. The applicant says that this makes no difference. Ms Best and Ms Roden were shown on the evidence, the applicant says, to have been engaged by QSP as regular casuals and it was that capacity from which they were dismissed. The applicant relies on Maclean Bay (at [14]-[15]) which, again, was undisturbed on that point on appeal. 208 In relation to Ms Buttrum-Virco, the applicant relies upon the evidence that in November 2009, Mr Luchmaya told her that if she did not execute the contractor application she would not be paid. The applicant contends that if that evidence is accepted, as it should be (Mr Luchmaya did not participate in the trial), then his statement which was clearly on behalf of QSP constituted a threat to dismiss Ms Buttrum-Virco in order to engage her as an independent contractor which would be a contravention by QSP of s 358 of the FW Act. Mr Luchmaya would be accessorily liable for that contravention. I accept this submission. 209 The proper construction of the evidence, the applicant says, is that immediately after Ms Buttrum-Virco had executed the Contractor Application, Contracting Solutions purported to terminate its contract with her. As a result she never actually worked pursuant to the Contractor Application. The respondents however, correctly, note that she did receive one payment from Raykon or Contracting Solutions. But, in my view, this does not have a bearing on the making of the threat. 210 In summary, the applicant argues that each of the three employee witnesses, Ms Best, Ms Roden and Ms Buttrum-Virco were constructively dismissed. Thereafter, Ms Best and Ms Roden only continued to perform work for QSP in precisely the same way as they had before. The only difference in their conditions was that they were now paid by Contracting Solutions. In making payments to Ms Best and Ms Roden, Contracting Solutions was acting as QSP's agent. 211 The applicant argues that for all these reasons the correct position was that Ms Best and Ms Roden were actually working for QSP under a contract with QSP implied by their conduct. It followed that the contracts were, in fact and in law, contracts of employment. It is common ground, however, that QSP, through Mr Luchmaya, Mr Konstek and Contracting Solutions represented to each of those three employees that they were or would be engaged under a contract for services as independent contractors. This was the point of the process of conversion. These representations, the applicant says, constituted a contravention by QSP of s 357 of the FW Act. In respect of that contravention, Mr Konstek and Contracting Solutions were accessorily liable. Although s 357(2) of the FW Act may excuse QSP if it can establish absence of knowledge without recklessness, it has the onus on that issue. Given that it has led no evidence, the applicant says that QSP has not discharged the onus and none of the other respondents can do so for it. 212 The applicant emphasises that the only extent to which there was an increase in payment was that the workers had previously been underpaid. The correct casual rate under the then prevailing award rate was $19.26 per hour which was exactly what Contracting Solutions' rate. In other words, Contracting Solutions was paying the correct rate whereas QSP was slightly underpaying the employees. However, as a result of the change, they would not get penalty and overtime rates to which they may otherwise have been entitled while employed with QSP. The applicant emphasises that the case in relation to Ms Buttrum-Virco was not that she had been constructively dismissed (which is the applicant's case in relation to Ms Best and Ms Roden). Rather, the case concerning Ms Buttrum-Virco was that she was the only receptionist singled out for conversion. 213 Additionally, the applicant emphasises that under the contracting agreement the work which is to be carried out by the new independent contractors is by virtue of cl 6 the 'work that the contractor agrees to do through the agency of Contracting Solutions'. This, it says, is entirely artificial as none of the workers ever agreed to do any work through the agency of Contracting Solutions. The applicant suggests that there was no evidence and it should be inferred that it was not the case that Contracting Solutions ever discussed with QSP when the workers would be required to work or even knew when they would be working. The workers just worked as required by QSP with nothing changing in any practical sense. I would accept that this was established on the evidence. 214 Further, the Hiring Agreement was entirely unambiguous in saying that no contractor would be paid until Contracting Solutions was paid.

ISSUES RAISED IN THE SECOND AND FOURTH RESPONDENT'S CONTENTIONS 215 The appearing respondents have consistently asserted that the nature of the business engaged in by Contracting Solutions is one of providing a service to both business and workers; it is not a system designed to allow employers to disguise an employment relationship as an independent contracting relationship as the applicant alleges. Nor is it a system designed to deprive workers of the benefits of employment relationship or to otherwise undermine legislation. The respondents point to the fact that Contracting Solutions has the responsibility for provision of workers compensation insurance, superannuation contributions, payroll tax, PAYG withholding tax and public liability insurance. The respondents stressed that workers were paid rates set by reference to applicable modern award rates for casual employees and received a higher rate than they had received as employees of QSP. Additionally, Contracting Solutions provided services to the workers themselves such as preparation of tax returns at no cost to the worker. It was intended that Contracting Solutions would assist workers to find additional work if required. However, this is immaterial to my conclusions. 216 The argument for these respondents is that Contracting Solutions and Mr Konstek committed no accessorial breach as there was no breach of s 357 of the FW Act by QSP in the first place. The reason for this is that in the case of Ms Best and Ms Roden, once they entered into new contracts with Contracting Solutions there were no longer any contracts of employment between, on the one hand, Ms Best and Ms Roden and, on the other, QSP. In the case of Ms Buttrum-Virco, these respondents contend that she determined on her own if she was to become a contractor with Contracting Solutions and once she did so there was no longer any contract of employment between Ms Buttrum-Virco and QSP. 217 They also contend that even if it is found that there was a breach of s 357(1) of the FW Act by QSP, QSP did not know and was not reckless as to whether the contract was a contract of employment rather than a contract for services within the meaning of s 357(2) of the FW Act. 218 They argue that each of Ms Best and Ms Roden voluntarily ceased their employment with QSP and there was therefore no repudiation of the employment contracts by QSP. After they ceased employment with QSP, each of them was not engaged as independent contractors by QSP but rather entered into a contractual relationship with Contracting Solutions. QSP did not engage those persons as independent contractors. QSP contracted with Contracting Solutions to provide workers. 219 In any event, Contracting Solutions argues that there was no breach of s 358 of the FW Act by QSP in relation to Ms Buttrum-Virco as she had already completed most of the Contractor Application on or about 15 November 2009. She had commenced her engagement with Contracting Solutions on or about 2 November 2009 for which dates she was earning the contractor rates. She had therefore ceased her employment with QSP prior to the alleged threat to dismiss or the alleged dismissal on 29 November 2009. 220 As to the threat, those respondents also argue that, in any event, Contracting Solutions could not be accessorily liable in that it did not know of the words allegedly spoken by Mr Luchmaya. It was not part of the Hiring Agreement or any arrangement between Contracting Solutions and QSP that any employee be dismissed. It follows, these respondents say, that they cannot be accessorily liable under s 550 of the FW Act for the alleged contravention by QSP of s 357 as there was no breach by QSP of that section. Further, they cannot be accessorily liable under s 550 of the FW Act if there was no breach of s 358 by QSP for the reasons advanced. 221 In relation to those two provisions, these respondents raise further specific submissions. 222 The respondents also argue that in a real sense, aside from contractual documents, there was a benefit to the employers as independent contractors. Specifically the respondents argue: the workers were free to refuse work and work elsewhere; the workers genuinely had the right to work on a number of different projects with different principals; the workers would receive benefits such as free tax returns; Contracting Solutions met all regulatory requirements in respect of workers; the workers had no right to employee entitlements such as paid leave but, in any event, as they were employed on a casual basis, Ms Roden and Ms Best had not received those entitlements, nor were they entitled to receive those entitlements from QSP. 223 Although in fact the supervision came from QSP after the engagement of the workers as independent contractors, that is not the relevant test. The respondents rely upon Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561 where Dixon CJ, Williams, Webb and Taylor JJ held (at 571) that 'what matters is lawful authority to command so far as there is scope for it'. In this instance, QSP did not have lawful authority to command the workers after they became independent contractors but, rather, simply had an obligation to supervise. Accordingly, there was no employment relationship or any other contractual relationship between QSP and each of those workers once they became contractors with Contracting Solutions, apart from the requirement to maintain a safe working environment.

9.1 What was the purpose of the conversion? 224 The evidence reveals and I find that in September 2009, Mr Luchmaya commenced discussions with Mr Konstek. On 22 September 2009, he wrote to Mr Luchmaya to confirm that 'with our system we will convert all the current staff'. He explained that the 'benefits' of using the services included that [QSP] would no longer 'be governed by IR law' and would 'no longer need to worry about … employment related issues' including penalty and overtime rates, 'unfair/unlawful dismissal', 'industrial relations legislation' and sick leave. While this may be an accurate description of the benefits, it raises and highlights the very issues underlying the purpose of the sham contracting legislation. 225 Confirmation of these benefits in a summary form was contained in a letter of 2 October 2009 from Mr Konstek again to Mr Luchmaya. Six days later, he provided Mr Luchmaya with a proposal for the introduction of Contracting Solutions' system to QSP (the Proposal). Mr Luchmaya provided a copy to Mr Haayema, together with the Hiring Agreement. The Proposal was prepared by Mr Konstek using a template provided to him for the purpose by Contracting Solutions. 226 In my view, the circumstances in this case stand in the same category as those in ODCO (per Wilcox, Burchett and Ryan JJ) by which I am of course bound. Their Honours noted (at 114) in that case, on the evidence, there was no promise of payment of periodical sums by the builder to the worker, and no agreement between the builder and the worker as to what those sums should be. The builder's only obligation was to pay Troubleshooters. The workers' only entitlement was against Troubleshooters, and in accordance with a different measure.

9.2 Who was to control converted staff? 227 There was no suggestion in the discussion between Mr Konstek and Mr Luchmaya that the arrangements should be other than those contained in the Proposal. The discussions between them were directed to ensuring that those of QSP's existing staff who were 'converted' from employees into independent contractors were to continue to work at Quest South Perth doing the same job in the same manner as they had done before. The only practical change was that they would receive their changed income from Contracting Solutions rather than from QSP. 228 Mr Haayema read the Proposal and following this, on 14 October 2009 on behalf of QSP, he decided to enter into the agreement with Contracting Solutions. He signed the Hiring Agreement and it was witnessed by Mr Konstek.

9.3 What independent inquiries were conducted by Mr Haayema? 229 The applicant submits and I accept that Mr Haayema of QSP did not otherwise undertake any inquiries about the accuracy and lawfulness of the content of the Proposal. He was content to rely upon the advice and experience of Mr Luchmaya and the contents of the Proposal itself. He was given an opportunity in cross-examination by senior counsel for the applicant to explain everything that he relied on in order to understand the terms of and consequences of both the Proposal and the Hiring Agreement. He made it clear that what he relied upon was the understanding of Mr Luchmaya following the discussions with Contracting Solutions.

9.4 Who would be converted and why? 230 After execution of the Hiring Agreement, a letter was sent to QSP from the Raykon Group welcoming QSP to Contracting Solutions and identifying contact personnel from that date onwards including Mr Konstek. The contents of Mr Konstek's letter to Mr Luchmaya on 2 October 2009 taken with the Proposal accurately portrayed the arrangement between QSP and Contracting Solutions for the conversion of QSP staff and employees into independent contractors. Their legal status would be changed but little else. Contracting Solutions would arrange or procure the conversion and then would manage the conversion on behalf of QSP. After this had been achieved, QSP and Contracting Solutions would make sure that those of QSP's employees who had undergone the conversion would nevertheless still perform the same work for, and under the control and direction of, QSP as they had performed as employees but they would be paid by Contracting Solutions on behalf of QSP, in reality, as its agent. 231 Not all of QSP's employees were to be the subject of conversion. At some stage a decision appears to have been made that only its housekeepers together with only one of its several receptionists, Ms Buttrum-Virco, would actually be part of the conversion. The applicant argues that in the absence of any explanation, available inferences are that: the housekeepers were selected for 'conversion' because the fact that they ordinarily work with very little supervision would make their conversion more plausible; and Ms Buttrum-Virco was singled out for conversion from the rest of QSP's receptionists because, in her case, QSP did not have to worry about unlawful dismissal and industrial relations legislation as outlined in the letter from Mr Konstek on 8 October 2009. It was clear by this stage that Mr Haayema was not satisfied with Ms Buttrum-Virco's work. I accept the second point.

9.5 Were any representations or threats made to achieve conversion? 232 There is an issue in relation to whether or not any of the employees was threatened with loss of employment if she did not complete the Contractor Application. It is central to the appearing respondents' case that the employees were given a clear choice. Evidence from Mr Konstek and Mr Buiks supports this conclusion. This topic was of importance to all concerned. To conclude a threat of that nature was made, it would be inappropriate to disregard the express denials of witnesses whose evidence I accepted generally. 233 In contrast, Ms Best's evidence was that she attended a meeting at which it was expressly said that 'there won't be any job' if the Contractor Application was not signed. The applicant says she was not seriously challenged on this evidence. 234 In relation to Ms Roden, the applicant now does not contend that she was told she had no choice but to submit to conversion. The applicant does contend that she was not confident that she would still have a job at Quest South Perth if she did not sign a Contractor Application. The applicant submits that such insecurity was natural. 235 I can accept that the insecurity may be natural but I find that the evidence falls well short of any threat in relation to either Ms Roden or Ms Best. I do accept the applicant's submission that both Mr Konstek and Mr Buiks were trying to 'sell' conversion to QSP's employees. However, it is inherent in this submission itself that there was a choice as to whether or not to, in effect, buy what was on sale. 236 The applicant says that if Ms Roden's evidence is accepted, this does not necessarily require that the evidence of Ms Best be rejected as there is no evidence that they were in attendance at the same meeting. The applicant argues that Ms Best was a credible witness with no interest in the proceedings and obviously firm on her recollection on the point. However, on the other hand, this requires rejection of the evidence on this key issue as given in the denials of Mr Konstek and Mr Buiks. I did not form the view that Mr Konstek and Mr Buiks gave untruthful evidence. I believe that under oath they were giving their testimony to the best of their ability. Equally I think that Ms Best gave evidence to the best of her ability and recollection, but in a relatively charged environment such as it was, her interpretation of what she was told may well have been coloured with the passage of time.

9.6 Was there real choice? 237 The applicant submits that if its primary submission (preferring Ms Best's evidence to that of Mr Konstek and Mr Buiks) is not accepted: [T]he alternative submission is that Ms Best was so impressed by [QSP's] obvious commitment to conversion, and the zeal with which it was sold by Mr Konstek and Mr Buiks to the exclusion of the possibility of continuing to work at [Quest South Perth] as an employee, as to carry away from the meeting she attended a firm impression that she had no real choice, and that if she wanted to continue to work at [Quest South Perth] she had to sign a Contractor Application. 238 Once again, I can accept that this may have been the conclusion Ms Best reached but I am not prepared, on the evidence, to reach a conclusion against the sworn evidence of Mr Konstek and Mr Buiks that she was neither expressly or implicitly told she would have no job unless she signed the Contractor Application. 239 I do accept the applicant's submission that Ms Best and Ms Roden at least believed that they had no or little option, if they wanted to continue working at Quest South Perth, other than each to sign a Contractor Application. But I do not accept that their belief was caused by threats or representations made to them.

9.7 What changes were there after conversion? 240 It is also quite clear on the evidence that thereafter Ms Best and Ms Roden performed precisely the same work at Quest South Perth in exactly the same way as they had always done. QSP regarded them as being no longer employed by it but performing work at Quest South Perth as independent contractors engaged by Contracting Solutions. Equally, Contracting Solutions regarded Ms Best and Ms Roden as having entered into independent contracts and treated them accordingly.

9.8 Was there constructive dismissal? 241 On this basis, the applicant says that Ms Best and Ms Roden were constructively dismissed. It submits that they did not voluntarily resign. 242 In support of the constructive dismissal contention, the question is whether having regard to everything that was said and done, Ms Best and Ms Roden were left without any real option if they wanted to continue to work at Quest South Perth they should sign a Contractor Application. The applicant says that explicitly or implicitly, depending on the evidentiary finding, signing was their only real option. 243 As an alternative submission, the applicant says that Ms Best and Ms Roden were constructively dismissed as a consequence of QSP's conduct in purporting to treat them as no longer being employed by it. In this regard, the applicant says that whatever legal effect the Contractor Applications may have, it is clear that they were not in terms or implicitly instruments of resignation on the part of Ms Best and Ms Roden. I accept there was no such express term but, as I have observed, that can be the only purpose and effect of the choice that they exercised to sign the Contractor Application and become independent contractors. 244 The applicant goes on to contend that the evidence excludes the possibility of any other instrument or act on their part by which it could be said that they terminated their employment with QSP. As such, it follows that the determination that they would no longer be employed by QSP must have been made by QSP. By that determination, they were therefore constructively dismissed. 245 I cannot accept this submission. The applicant's submission requires a conclusion that Ms Best and Ms Roden did not make a conscious decision. It is not apparent to me this is the only conclusion. I accept the fact that they were persuaded by 'sales talk'. I accept the possibility that, notwithstanding the content of that sales talk, it was their belief that this was the only choice open to them. But this still falls short of the reality of conversion being the only available course. Having found, as I do, that there is no evidence that these two employees were expressly told that they would be without employment if they did not sign the Contractor Applications, it seems to me that the applicant's case in the case of Mr Roden and Ms Best cannot succeed.

9.9 Was there a threat to Ms Buttrum-Virco? 246 In the case of Ms Buttrum-Virco, she did not initially execute a Contractor Application. Her evidence is that Mr Luchmaya told her that if she did not do so, then she would not be paid. I accept her evidence that that statement was made to her. 247 The applicant argues that this statement constituted a threat to dismiss her in order to engage her as an independent contractor to perform the same work. I accept it was a threat. Even if she was thinking of finishing and going to Melbourne in any event, she was given a Contractor Application in case she returned to Western Australia, which she duly signed. 248 The applicant's construction of these events, however, is that immediately after she executed the Contractor Application, Contracting Solutions, on the instructions of Mr Luchmaya, initiated a process whereby she was told prematurely that she would have no more work at Quest South Perth. I consider that the contravention of s 358 is established.

9.9.1 Sham? 249 The applicant's argument that the process by which Ms Best, Ms Roden and Ms Buttrum-Virco were converted from employees to independent contractors was, in truth, a sham and legally ineffective is based on the submission by the applicant that each of the three employees was constructively dismissed. 250 I am unable to reach the conclusion that this was so given my conclusion that the employees did, in reality, have choices as to whether or not they signed the Contractor Applications. Sections 357 and 358 of the FW Act are civil penalty provisions. In my view, the applicant has not established a dismissal as it contends. 251 In relation to Ms Buttrum-Virco, Contracting Solutions cannot be held to have been involved in QSP's alleged contravention of s 358 of the FW Act, according to these respondents. That involvement is said to arise as a consequence of the conversion agreement between QSP and Contracting Solutions and the fact that a representative of Contracting Solutions provided Ms Buttrum-Virco with a copy of a Contractor Application. That cannot be sufficient for accessorial liability as the alleged threat made by Mr Luchmaya to Ms Buttrum-Virco was not demonstrated to have been within the knowledge of Contracting Solutions, nor was it part of the arrangement between Contracting Solutions and QSP constituted by the Hiring Agreement. In order to attract accessorial liability, it is common ground that a person must have knowledge of the essential facts constituting the contravention, be knowingly concerned in the contravention, be an intentional participant in the contravention based on actual not constructive notice of the essential facts and need not know that the matters in question constituted a contravention: Yorke v Lucas (1985) 158 CLR 661 and Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 2) (2010) 201 IR 234 (at [198].

SUMMARY AND CONCLUSION 252 The applicant contends (ASOC at [7]) that QSP, by Mr Luchmaya, on 29 November 2009 threatened to dismiss Ms Buttrum-Virco in order to engage her as an independent contractor to perform the same work as a receptionist and (ASOC at [8]) that this threat was a contravention of s 358 of the FW Act in which Mr Luchmaya was involved within the meaning of s 550 of the FW Act. Although Ms Buttrum-Virco had completed most of the Contractor Application and had been paid once by Contracting Solutions, the obvious purpose of the threat was to ensure that she was properly 'converted'. Thus it was made at the time when she was an employee. It is unnecessary therefore to consider the further question of whether this constituted or could constitute a constructive dismissal (of a casual employee). 253 I consider that the entire conversion process in her case was an arrangement designed, amongst other purposes, and for whatever reasons, to make it easier to dispense with the services of Ms Buttrum-Virco. To that extent only I consider that the claim succeeds against QSP and Mr Luchmaya as its voice. There was no evidence that the appearing respondents were even aware of this threat let alone participated in it. The case against them fails. 254 In my view, the contention that QSP dismissed each of the three employees to engage them as independent contractors to perform the same work fails. 255 The applicant also pleads various representations. By ASOC at [11], it pleads that on various occasions in November 2009 QSP, by Mr Konstek acting for and on behalf of QSP and Contracting Solutions, represented inter alia to Ms Best and Ms Roden that if they underwent the conversion, they would thereafter be engaged under a contract for services under which they would perform work for QSP as independent contractors. The representations were said to be oral at meetings conducted by Mr Konstek in November 2009 and in writing in a document 'Quest - System Changes' signed inter alia by Mr Konstek and by the 'Contractor Application' each furnished to Ms Best and Ms Best by or at the direction of Mr Konstek and executed by them and finally, in the case of Ms Roden, by a letter addressed to her under the letterhead of Contracting Solutions dated 30 November 2009. The problem with this plea is that it does not set up any contravention of the FW Act. Assuming those representations were made, they only breach the FW Act if they are misleading on the basis that the employees concerned remain in truth employees and never became independent contractors. But the applicant's primary case was that they did become independent contractors yet by force or threat rather than voluntarily. I have found they did become independent contractors but voluntarily. 256 As requested by the parties, I will refrain from making any further substantive orders until receiving written submissions from the applicant (within 14 days) and from the represented respondents within a further 14 days. 257 The following orders are made:
1. Within 14 days the applicant file and serve submissions on final orders.
2. Thereafter within 14 days the represented respondents file and serve submissions on final orders.
3. The final orders be determined on the papers. I certify that the preceding two hundred and fifty-seven (257) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate: Dated: 14 June 2013 ANNEXURE A Submission prepared by Mr Konstek for Mr Luchmaya dated 7 October 2009 Contracting Solutions belongs to the Raykon Group of companies and manages a contracting system that has been in operation nationally in a variety of industries since the late 1970's (sic) and in WA for over a decade. Our main objective is to provide businesses with a superior system of worker engagement and workforce management which assists them to attract, retain and reward their workforce. Our tried and tested system of worker engagement removes the risk associated with direct business/worker relationships, removes industrial relations legislation and provides many additional benefits. Some businesses make the mistake of spending valuable time on worker administration to the detriment of their core business activities. Contracting Solutions manages the engagement of workers, ensures all statutory requirements are met and performs the vast majority of worker related administration. By doing this we assist businesses to work "on their business" rather than "work in it". THE ODCO SYSTEM Contracting Solutions is an agency licensed under the ODCO system to engage workers as independent contractors who are on-hired to work with a specific client. (See http://www.ODCO.com.au) In simple terms: workers sourced by you are registered as ODCO independent contractors and are on-hired to work exclusively with your business. By using this system, you retain 100% control over how and when contractors work without breaching legislation such as the Australian Tax Office 80/20 rule and Personal Services Income ruling. The ODCO model is akin to a system of labour-hire, however, commercial contracts ("rather than contracts of employment") govern the 'tri-partite' relationship between Contracting Solutions, the client and the contractor. Our system of contracting is not only useful for contractors. Offering the ODCO system to existing employees assists businesses to attract, retain and reward their workforce with remuneration packages that legally can't be offered via employment and industrial relations legislation. Contracting Solutions removes the uncertainty and risk associated with direct contractor engagement and direct employment. Workers engaged as ODCO independent contractors operate outside state and federal industrial relations systems and gain validity through the Independent Contractors' Act 2007 and Federal and High Court decisions. (see:1) The High Court Judgment Accident Compensation Commission v ODCO Pty Ltd Fl.C.l 90/40 of 22 October 1990 and (2) ODCO P/L v Building Workers' Union of Aus (1989) No VG 15 of 1988) These judgements have been challenged on occasion, however, when administered correctly have always been fond to be a legal method of contractor engagement. Contracting Solutions has a 100% success rate in this area which is further strengthened by its partnership with Workplace Relations & Management Consultants, the largest privately owned industrial relations firm in Western Australia. Contracting Solutions contractors: ■ are bona fide independent contractors; ■ will not be deemed employees; ■ are not subject to industrial relations legislation, awards or other employment entitlements; ■ will have no contractual connection to your business; ■ are recognised by the ATO as contractors who are not required to obtain an ABN, register for GST or submit BAS Statements regardless of how much they earn; ■ are subject to the Australian Superannuation Guarantee Levy and must have their contributions paid into a superannuation fund. CONTRACTING SOLUTIONS SERVICES How are your staff are signed up with Contracting Solutions? Contracting Solutions can attend your business premises to conduct an on-site information session, contractor sign-up and safety induction for your workers. This provides workers the opportunity of having questions answered by a Contracting Solutions consultant face-to-face. Alternatively, you have the option of requesting contractors to complete this process over the phone, or at our premises, with a Contracting Solutions consultant. On completion of the contractor sign-up, contractors are directed to your appropriate representative for their workplace induction. What instrument are contractors engaged up under? You'll no longer have to worry about awards, agreements or contracts and making sure they comply with ever changing legislation in various jurisdictions. Contracting Solutions contractors are engaged under a commercial contract which has been tried and tested to the High Court of Australia. Total Payroll Management Contracting Solutions will perform all payroll functions and develop a tailored electronic timesheet for you to record the number of hours (or units) worked by each contractor weekly, fortnightly or monthly. At the end of end (sic) pay period, you need only input the number of hours (or units) worked by each contractor into the timesheet which can be faxed, emailed or submitted via our online portal to our payroll office for processing. Contracting Solutions will manage all changes to your timesheet including changes to contractor rates of pay, adding new contractors and removing old ones. Following each pay run, Contracting Solutions will issue you with an 'all inclusive' invoice based on the relevant timesheet. Our invoices including all statutory costs (for contractors) plus our management fee which will assist you with budgeting as you will know your total costs for each unit of labour. Contractors will be issued remittance slips, end of financial year payment summaries, have PAYG tax withheld and can request specific deductions to be made on their behalf (e.g. insurances and child support payments). Our payroll and administration centre can be contracted for payroll queries during business hours via a 1800 toll free number. What happens in the event of a Workers Compensation claim? Contracting Solutions removes all workers compensation liability in relation to all contractors registered under our system. Contracting Solutions holds the workers compensation insurance policy for contractors (along with the risk), manages all claims and assists with worker rehabilitation. You and Contracting Solutions will jointly be responsible for OSH obligations and must assist any injured contractors in their return to work as soon as medically fit to ensure workers compensation costs and premiums are minimised. Our client charge includes workers compensation insurance and blanket principals' indemnity for joint and several action under section 175 (2) of the Workers Compensation and Injury Management Act (excluding common law claims due to your, or your business representatives', negligence). Contacting Solutions ensures all statutory responsibilities are covered Directly engaging contractors to work primarily for you is a relationship of risk. The same risks could exist for contractors offering their services through another sub-contractor. Contracting Solutions will ensure the following contractor statutory requirements are met for all contractors registered under our system: ■ Public liability insurance ■ Workers compensation insurance ■ Superannuation contributions ■ Payroll tax ■ PAYG tax withholding ■ Industrial Relations & Common Law obligations Payment and administration of the above statutory requirements are including in your management fee. You must simply provide a safe working environment and day-to-day supervision of contractors whilst they are on your site. Discounted Occupational Safety and Health (OSH) Consultancy Contracting Solutions will conduct OSH inductions for contractors on their engagement and assist you with site safety reviews free of charge. Occupational Safety & Health consultancy, assessments and accident investigations (in cases of reportable incidences) will be offered at discounted member rates via our sister company Workplace Relations & Management Consultants (WRMC). Discounted Industrial Relations and Human Resource Consultancy WRMC possesses experienced industrial relations and human resource specialists who will provide consultancy at discounted member rates in relation to all industrial relations and human resource issues. Online Portal You (and contractors) will gain secure access to our 'Online Portal' via a username and password. In addition to being an effective means of communication for all parties, the portal may be used to store, submit and view all your business and contractor information online. (E.g insurance policies and certificates of currency, client and contractor terms and conditions, taxation and superannuation information, pay slips and submit time sheets) CONTRACTING SOLUTIONS SERVICES FOR CONTRACTORS Worker entitlements are paid 'up front'. Our system enables your workers to be paid higher rates of pay then they would as employees due to the legal 'casualisation' of all paid leave entitlements. No ABN's (sic), BAS Statements or Invoicing Due to a ruling by the ATO, ODCO contractors are not required to possess an ABN, register for GST or submit quarterly BAS statements. Contractors also have no need to invoice either you or Contracting Solutions. Free Taxation Advice Contactors administered by Contracting Solutions on a regular and systematic basis for a qualifying period of 6 months will have unlimited access to free tax advice (in 30 minute blocks) via a registered tax accountant. Completion of Income Tax Returns Contractors administered by Contracting Solutions on a regular and systematic basis for a qualifying period of 6 months may elect to have their annual tax return completed free of charge by a registered tax accountant who is familiar with the specific needs of independent contractors. Eligibility for the Entrepreneurs Tax Offset The Australian Tax Office currently offers 'eligible' contractors a tax discount known as the Entrepreneurs Tax Offset which can reduce the tax liability of a contractor by up to 25%. For example, contractor's earning $50K per annum may be entitled to a discount of $2,793.00 per annum or $54.00 net per week. Option to Select Tax Rates Contractors will have their PAYG tax withheld and submitted to the ATO on their behalf. They may elect a marginal or flat tax rate (of either 20% or 25%) depending upon their financial position and individual requirements. Business Tax Deductions ODCO Contractors have access to business tax deductions subject to appropriate validation. Product & Public Liability Insurance Comprehensive product and public liability insurance is included for all contractors which is tax deductible. Remittance Slips & Payroll Hotline Contractors will be issued pay slips, have PAYG tax withheld and can request specific deductions to be made on their behalf (e.g. insurances and child support payments). Contractors will have access to our payroll and administration centre for payroll queries during business hours by calling our 1800 toll free number. Multiple Bank Accounts Contractors may elect to have their remuneration paid into multiple bank accounts to assist with financial planning. This may be extremely helpful if they wish to allocate funds to a separate account to cover sickness, holidays or unplanned expenses. Guaranteed Payments Contractors will receive a guarantee from Contracting Solutions that they will be paid for all work they perform and you verify. THE CONTRACTING SOLUTIONS CLIENT FEE Payments to contractors will generate an invoice inclusive of the following: Statutory Fee: Management Fee: ■ Superannuation ■ Total payroll administration ■ Workers compensation insurance ■ Workers compensation claims administration ■ Public liability insurance ■ Workers compensation injured worker rehabilitation management ■ Payroll tax; and ■ Contractor inductions and sign up's (sic) ■ ODCO licence fee ■ IR, HR and OSH advice via WRMC We offer a commitment to provide the highest level of service at a cost effective price. You can operate with peace of mind as to the legitimacy of your workers and offer the most competitive remuneration packages which will help you attract, retain and reward your staff. You'll no longer need to worry about the following worker issues: 1. Confusion about legitimacy of contractors (i.e. contractor vs employee) 2. Confusion bout employment status (i.e. full-time, part-time or casual) 3. Award conditions 4. Penalty / overtime rates 5. Annual leave 6. Sick leave 7. Public holidays 8. Workers compensation 9. Payroll tax 10. Superannuation 11. Redundancy / severance entitlements 12. Unfair / unlawful dismissal 13. Industrial relations legislation 14. Union intervention Engaging our services will relieve you from the burden of worker administration and remove the risks associated with direct worker engagement. Apart from occupational safety & health, your only requirement will be to set worker tasks, update timesheets and pay our all inclusive invoices. I'm confident you'll find our services to be valuable and look forward to further discussions with you. Regards, Paul Konstek - Workplace Relations Manager …

Fair Work Act 2009(Cth)ss 357, 358, 360, 361, 550, 793(2)

STATUTORY FRAMEWORK 21 The reasons for the rules against sham contracting are discussed in the Introduction. 22 The proceedings are instituted pursuant to provisions contained in Div 6 of Pt 3-1 the FW Act. Section 357 of the FW Act deals with representations. Under s 357, an employer who proposes to employ an individual must not represent to that individual that the contract of employment under which the individual is to be employed by the employer is a contract for services under which the individual performs or would perform work as an independent contractor. However, this does not apply (by virtue of subs (2)) if the employer proves that when the representation was made, the employer did not know and was not reckless as to whether the contract was a contract of employment rather than a contract for services. Absence of recklessness is one of the alternative defences raised in this proceeding. 23 While s 357 of the FW Act deals with misrepresentations, s 358 concerns the situation of an employer dismissing an employee in order to engage the employee as an independent contractor. It provides that the employer must not dismiss, or threaten to dismiss, an individual who is an employee of the employer and who performs particular work for the employer in order to engage the individual as an independent contractor to perform the same or substantially the same work under a contract for services. 24 Division 6 of the FW Act is completed by s 359 which also concerns misrepresentations by an employer. It provides that an employer who employs, or has at any time employed, an individual to perform particular work must not make a statement that the employer knows is false in order to persuade or influence the individual to enter into a contract for services under which the individual will perform as an independent contractor the same or substantially the same work for the employer. 25 Each of the three sections is a civil remedy provision under Pt 4-1 of the FW Act. The standard of proof in relation to such a provision was discussed recently in Fair Work Ombudsman v Maclean Bay Pty Ltd (2012) 200 FCR 57 by Marshall J (at [7]-[8]) as follows: Standard of proof 7 In examining each aspect of this proceeding the Court proceeds on the basis that it is dealing with a civil proceeding in which civil penalties are sought for contraventions of provisions of the WR Act and of the NAPSA. In accordance with s 140 of the Evidence Act 1995 (Cth) the applicant is required to make out his case on the balance of probabilities. In deciding whether the Court is satisfied that any aspect of the applicant's case is made out on the balance of probabilities the Court will take into account the nature of each cause of action and the defence to it. It will also take into account the nature of the subject matter of each aspect of the proceeding and the gravity of the matters alleged; see s 140(2) of the Evidence Act. 8 For reasons which follow, I am satisfied that all the allegations made by the applicant against the respondents are made out on the evidence before the Court. Apart from those alleging breaches of the NAPSA, the allegations are particularly serious ones. Nonetheless, the evidence in support of each such contravention is strong and in many aspects uncontradicted. This approach is consistent with that approved of by the Full Court in Qantas Airways Ltd v Gama (2008) 167 FCR 537; see at [110] where French and Jacobson JJ said: "The so-called Briginshaw test does not create any third standard of proof between the civil and the criminal. The standard of proof remains the same, that is proof on the balance of probabilities. The degree of satisfaction that is required in determining that that standard has been discharged may vary according to the seriousness of the allegations of misconduct that are made. In our opinion, however, there was no indication in his Honour's reasons that the application of the Briginshaw test made any difference, adverse to Mr Gama, in his conclusions. We agree generally with what her Honour Branson J has to say about the Briginshaw test in her separate reasons for judgment. We would add that the observations of the New South Wales Court of Appeal in Amalgamated TV Services Pty Ltd v Marsden [2002] NSWCA 419 at [54]-[61], concerning the application of s 140(2)(c) of the Evidence Act are consistent with her Honour's reasons." See also at [139] where Branson J said: As I have already indicated, I agree with the conclusion of French and Jacobson JJ that the federal magistrate's reasons for judgment do not disclose any error in the application of the applicable standard of proof to Mr Gama's allegations. However, in my view, for the reasons given above, references to, for example, 'the Briginshaw standard' or 'the onerous Briginshaw test' and, in that context, to racial discrimination being a serious matter not lightly to be inferred, have a tendency to lead a trier of facts into error. The correct approach to the standard of proof in a civil proceeding in a federal court is that for which s 140 of the Evidence Act provides. It is an approach which recognises, adopting the language of the High Court in Neat Holdings 67 ALJR 170; 110 ALR 449, that the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved - and, I would add, the circumstances in which it is sought to be proved. (emphasis added) (Although the orders in Mclean Bay were varied slightly on appeal in Wells v Fair Work Ombudsman [2013] FCAFC 47 by the Full Court (North, Cowdroy and McKerracher JJ), these observations at first instance were unaffected.) 26 By reason of s 360 of the FW Act, the applicant's case will be established if only one of the reasons QSP dismissed the employees was in order to engage them to perform as independent contractors doing the same work that they had performed as employees. 27 The applicant also relies upon s 361 of the FW Act which relevantly provides as follows: 361 Reason for action to be presumed unless proved otherwise (1) If: (a) in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and (b) taking that action for that reason or with that intent would constitute a contravention of this Part; it is presumed, in proceedings arising from the application, that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise. (emphasis added) … 28 The applicant contends that applying s 361, QSP has the onus of proving that its reasons for dismissing Ms Best and Ms Roden did not include engaging them to perform as independent contractors the same work that they had performed as employees. QSP, however, has ceased to take any effective part in the proceedings and has filed no evidence. That being so, the applicant says, it is impossible for QSP to discharge its onus. The applicant argues that none of the other respondents can discharge QSP's onus on its behalf.

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Judgment (14 paragraphs)

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