JOSEPHCATANZARITI ANDYASEENSHARIFF*
I
n their review of the major tribunal decisions, the authors review the significant cases of the previous year. These decisions touch upon newly contested terrains of industrial conflict such as employee entitlements and the ongoing use of the provisions of theWorkplace Relations Act to thwart outsourcing strategies. To that end, the authors first analyse the Federal Court decisions arising from the controversial Manusafe employee entitlements trust fund and the Greater Dandenong City Council’s decision to outsource home care services. Secondly, the authors proceed to provide a considered review of the High Court’s assessment of the elusive distinction between employee and independent con-tractors. Thirdly, the authors reflect upon an interesting decision of the Australian Industrial Relations Commission which specifically exposed the interconnectedness of the Air New Zealand and Ansett Group of companies. The authors comment that the decisions reviewed are symptomatic of the evolving nature of industrial relations and indus-trial conflict.
On reflection, the year 2001 was one in which industrial Courts and Tribunals were confronted with legal issues covering the spectrum of old and new. The breadth of new issues reviewed by industrial Courts and Tribunals during 2001 could be considered to be symptomatic of the evolving nature of industrial rela-tionships. Indeed, this was most notably demonstrated by the industrial disputes relating to the protection of employee entitlements. In the wake of some very high profile corporate collapses, it was not surprising that the matter of protecting employee entitlements in the event of insolvency became one of the most con-tested industrial matters during 2001, especially in the manufacturing industry. However, there was an apparent lack of consensus between various employers, governments and unions as to the appropriate method for the protection of employee entitlements. Much debate gravitated around whether industry trust funds, such as the Manusafe Trust Fund (Manusafe), would be suitable to the interests of all parties. In the manufacturing sector, employees engaged in wide-spread industrial action in order to advance claims for the inclusion of contri-butions to Manusafe in certified agreements. Litigation ensued on the grounds that the making of contributions to a trust fund such as Manusafe was not an industrial matter and therefore could not be included in a certified agreement, nor could it be the subject of protected action. Whilst the decisions of Justice Moore in Transfield Pty Ltd v. Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union1and the decision of Justice Merkel in Electrolux Products Pty Ltd v. Australian Workers Union2 appeared to have resolved the issue for
the moment, further disputation on the matter during 2002 is not out of the question.
On a related matter, the structures of corporate governance amongst the related entities of the Ansett and Air New Zealand Group, which were so closely scrutinised by the public following the disastrous corporate collapse of the domes-tic airline were also the subject of scrutiny in Jusdomes-tice Boulton’s decision to join Air New Zealand Limited to a dispute initiated by unions against Ansett and its related entities. In a significant judgement, his Honour found that despite the limited evidence before him there was nevertheless sufficient material to suggest that Air New Zealand may have been in a position to affect the severance entitlements of Ansett’s employees due to the interlinked relationship between the two entities. The decision relied on a consistent line of authority and demon-strated the pragmatic approach taken by the Australian Industrial Relations Commission to the piercing of the ususally impenetrable corporate veil.
The year 2001 also saw a continuation of the trend of employees and unions creatively invoking the provisions of the Workplace Relations Act 1996(Cwlth) (the WRA) in order to thwart outsourcing decisions made by employers. However, whereas in previous years decisions to outsource had confronted legal hurdles as a result of the application of the transmission of business provisions, during 2001 there was a shift toward the use of section 298L(1)(h) of the WRA which osten-sibly prevents any person or entity from engaging in prohibited conduct because an employee is entitled to benefits under an industrial instrument. The parameters of the section were tested in the decision of the Full Bench of the Federal Court in Greater Dandenong City Council v. Australian Municipal, Clerical and Services Union,3however, given the differing views of the Full Bench it would appear, as
was the case with the transmission of business provisions, that uncertainty will prevail until the High Court considers the scope of the provisions.
The High Court also featured in the industrial landscape once again during 2001, when it delivered its judgement in Hollis v. Vabu Pty Ltd (t/as Crisis Couriers).4
Whilst the High Court affirmed the primacy of the ‘multiple indicia’ test, in prac-tice it would appear that the element of control remains a primary touchstone. However, in practice, the common law distinction remains elusive and will undoubtedly continue to vex practitioners.
These issues and cases are the subject of the following review of the major decisions of 2001.
PROTECTION OF EMPLOYEE ENTITLEMENTS: AN INDUSTRIAL MATTER
FOR THE PURPOSES OF PROTECTED ACTION?
action in order to advance claims for the inclusion of matters relating to the pro-tection of employee entitlements in certified agreements, the question arose whether such matters were ‘industrial’ in nature and, if they were not, whether such action could be taken as protected action.
Transfield Pty Ltd v. Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union
On 23 May 2001 the Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union (AMWU) gave Transfield notice pursuant to section 170MI of the WRA in order to initiate a bargaining period for the negotiation of a certified agreement. In accordance with section 170ML the union particu-larised a list of matters which included provision for monthly payments by Transfield to Manusafe. On 16 August 2001, following strikes by workers at its Seven Hills site, Transfield applied under section 127 of the WRA for an order requiring the cessation of industrial action. Transfield claimed that the AMWU’s industrial action in support of a new certified agreement was unlawful because it advanced claims which were not relevantly industrial matters, namely the pro-vision for employer contributions to Manusafe. In doing so, Transfield sought to rely on sections 170MJ and 170LI which together stipulate that during a bar-gaining period matters which are included in a claim for inclusion in a certified agreement must be industrial matters which pertain to the relations between an employer and its employees.
The primary issue for consideration in the decision of Transfield Pty Ltd v. Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union5was
whether claims for the inclusion of Manusafe in the proposed agreement per-tained to the relationship between the employer, Transfield, and its employees as required by section 170LI. Justice Munro reviewed authorities concerning superannuation funds, which were considered to be analogous to this case, and stated:
[F]or a duty to pertain to the relevant employment relationship, it must generally be bound up with either the performance of work or the receipt of reward by the employee from the employer. The inclusion of a third party, for instance a payee, as a participant in the operation of any such duty is not inconsistent with the duty pertaining to the relevant relationship. But the character of that third party must sustain the connection between, or be within, the employer and employee relation-ship to which the duty applies.6
Justice Munro, whilst accepting that some matters establishing rights and duties that secure employee entitlements do pertain to the relationship between an employer and employees,7 ultimately held that for a number of reasons, the
employee, with the employee’s entitlement therefore being contingent on that trustee’s discretion. On this basis, Justice Munro found that it was difficult to ascertain the nature and content of the duty sought to be procured from the employer in order to establish the relevant connection with the employment rela-tionship. Secondly, in addition to its objective to preserve employee benefits, Manusafe also had broader investment objectives. As a result, employer contri-butions could potentially be directed to or applied for hybrid purposes, such as the generation of an investment income. According to Justice Munro this ‘plurality of objectives’ detracted from the identification of the fund with a simple duty on the employer to contribute payments for employee entitlements as they fell due.8Thirdly, Justice Munro stated that the Manusafe claim required
contributions to be made to Manusafe as the payee, making Manusafe the ‘per-sonification, or icon’ of the employees’ benefits. His Honour stated that whilst approved superannuation funds are perceived as icons for the delivery of super-annuation benefits to employees as rewards for service, Manusafe had not yet achieved a similar status. Thus the necessary identification of Manusafe as a payee bound up with the receipt of reward by the employee from the employer was not yet established, nor did Manusafe possess the legislative and systemic sup-porting infrastructure available for superannuation funds and which have assisted such funds in overcoming the issue of portability of benefits.9Finally,
his Honour stated that as Manusafe had not been erected from foundations within particular employment relationships as were superannuation schemes, the Manusafe trustee represented a participant outside of the relationship between employers and employees.10
Consequently, his Honour held that the AMWU’s claim requiring Transfield to make monthly contributions to Manusafe for the protection of workers’ entitle-ments was not a matter pertaining to the relations between an employer and employee. Accordingly, the industrial action directed at advancing the Manusafe claim was not protected and a section 127 order was issued ordering its cessation.11
Following this finding, the AMWU revised its bargaining claim, and once again commenced industrial action, claiming this action was protected because the new claim did not demand the establishment of Manusafe. Rather, it particularised monthly payments to a trust fund approved by the AMWU for the protection of workers’ entitlements, and/or allowing for benefits to be portable. In response, Transfield sought a Federal Court interlocutory injunction restraining its employees from continuing to engage in this industrial action pending a final hearing. Transfield sought relief primarily on the basis that the industrial action contravened Justice Munro’s previous section 127 order and that the claims advanced for inclusion in the certified agreement were sufficiently similar to the previous ones.
Justice Moore heard the application and in considering whether there was any material difference between the initial and revised claims, his Honour stated in respect of the revised claims:
same subject matter . . . However those latter claims are not, in terms, demanding the establishment of the Manusafe scheme. Indeed . . . the claim of the Manufacturing Workers Union contemplated the approval of a trust fund by that union which fairly clearly implies the establishment of a new and different trust in the future as part of the settlement of the claim.12
Justice Moore further considered Justice Munro’s finding to be referable only to the specific arrangements proposed for Manusafe and therefore denied Transfield’s request for interlocutory relief, allowing protected industrial action on the mat-ter to continue.13
Electrolux Products Pty Ltd v. Australian Workers Union
The more recent decision of Electrolux Products Pty Ltd v. Australian Workers Union14involved the same issue and a very similar factual scenario to the
deci-sions in Transfield. In this case, the Australian Workers Union (AWU) included as a matter particularised under section 170MJ, a claim that employers provide for the protection and portability of employee entitlements by contributing reg-ular payments into Manusafe. The AWU also included in their claims a demand for the inclusion of a union bargaining fee clause. Electrolux argued that the AWU’s claim in relation to Manusafe was for payment to a particular scheme, being Manusafe, which conferred an unfettered discretion on the trustee whether or not to pay an accrued entitlement. Thus, Electrolux claimed the payment of contributions was for the benefit of the trust, which was removed from the employment relationship, and therefore outside the requisite relationship of employer and employee.15
Rejecting Electrolux’s submissions, Justice Merkel found that the trustee’s dis-cretion to refuse payments in the present case would be subject to the applica-bility of the proposed certified agreement, which would confer an entitlement on the employee to receive payment of the accrued entitlements pending enti-tlements of the employee becoming unconditional. Therefore, in the present case, the trustee would not have a discretion to refuse payment in circumstances where the amount would be payable under the relevant certified agreement.16
Referring to Mettoy Pension Trustees Ltd v. Evans17and Lock v. Westpac Banking Corporation,18Justice Merkel noted that a practical and purposive approach must
be taken to the interpretation of the Manusafe Deed. According to his Honour:
A practical and purposive construction of the Manusafe deed would be one which construes the ambit of the trustee’s discretions by reference to the Deed’s object of securing payment of employees’ entitlements by enabling payment to the employee when the entitlement to payment becomes unconditional.19
Justice Merkel further relied on the authority in Re Baden’s Deed Trust,20and
found that the discretion of a trustee regarding an employees’ benefit fund is a fettered one. Justice Merkel also relied on the decision in In re Pauling’s Settlement Trusts21and stated that a trustee’s discretionary powers must be exercised with
particular facts of the case, Justice Merkel held that the trustee did not have an unfettered discretion under the Manusafe Deed to refuse to pay an entitlement. His Honour also rejected several additional contentions by Electrolux, includ-ing the contention that the entitlement of the trustee to earn interest on con-tributions indicated that the payments are primarily for the benefit of the trust fund rather than employees.23His Honour ultimately held, in contrast to Justice
Munro’s earlier findings,that:
[T]he substance of the employee entitlement claim, the central and critical aspects of it, and its subject matter, relate to payments by the employers, as such, for the benefit of the employees, as such. The payments relate to particular aspects of the remuneration to be received by employees for service to their employer . . . and belong to and are within the sphere of the relationship between Electrolux and its employ-ees, as such. In so far as there may be some circumstances where amounts paid on account can accrue to the benefit of the trust fund, and interest earned on payments made by the employer is to be paid to the trustee for its services, such provisions are ancillary or incidental aspects of the matter to which the claim relates and do not alter the substantive characterisation of the matter.24
However, Justice Merkel went on to hold that although the AWU’s claims in respect of employee entitlements pertained to the employment relationship, the AWU’s claims in respect of bargaining fees did not. As a result of Justice Merkel’s finding in relation to the AWU’s bargaining fees claim, his Honour found that no industrial action supporting or advancing the claims in respect of the pro-posed agreement were protected. Whilst Justice Merkel conceded that section 170LI does not require that all the terms of the proposed agreement pertain to the requisite relationship,25 his Honour was of the view that if a substantive
matter advanced in respect of claims for a proposed certified agreement did not pertain to the employment relationship, and that matter was discrete and signi-ficant, it was unlikely that the legislature had intended to permit protected action to be taken to advance any claims in respect of that proposed agreement:
The claim by the unions for payment of a bargaining agent’s fee is substantive, dis-crete and significant . . . It follows that that action was pursued for the purpose of supporting or advancing claims made in respect of an agreement about matters that did, and a substantive, discrete, and substantial matter that did not, pertain to the requisite relationship. Accordingly, the agreement proposed by the unions is not an agreement about matters pertaining to the requisite employment relationship.26
PIERCING THE CORPORATE VEIL OF GROUP STRUCTURES
Following the collapse of Ansett Airlines, on 12 and 13 September 2001 the Australian Municipal, Administrative, Clerical and Services Union (ASU) and the Transport Workers’ Union of Australia (TWU) respectively notified the Australian Industrial Relations Commission under s.99 of the WRA of the exist-ence of an industrial dispute with Ansett Australia Limited, Air New Zealand Limited and other companies, which related to disputes regarding consultation of impending redundancies and the payment of severance entitlements.27At the
time, a group of Ansett companies including Ansett Australia Limited, Hazelton Airlines Limited, Kendell Airlines (Aust) Pty Limited and Traveland Pty Ltd (the Ansett Group) had been placed in voluntary administration.
On 14 September, the administrator decided to end the operations of the air-line and consequently the employment of approximately 16 000 Ansett workers was under serious threat.
The ASU submitted that a dispute should be found to also exist between the union and Air New Zealand Limited because Air New Zealand Limited was intimately involved in the operation of the Ansett Group as it owned 100 per cent of Ansett Holdings Limited which in turn owns 100 per cent of the Ansett Group. All these businesses were part of the Air New Zealand and Ansett Group with the ultimate holding company being Air New Zealand Limited. It was sub-mitted that because of its position as the holding company in the group, Air New Zealand Limited was in a position to control the decisions of the boards of direc-tors of the Ansett companies and to influence and affect the relationship between those companies and their employees. Air New Zealand Limited opposed the finding of an industrial dispute with the unions. It was submitted that Air New Zealand Limited was merely a shareholder in the Ansett Group and not in a posi-tion to control the boards of directors of those companies. It was further sub-mitted that the directors were obliged under the corporations law to act in the companies’ interests and not those of the shareholders. Air New Zealand Limited was not therefore in a position to control or direct the relationship between the Ansett Group and their employees. In any event, it was submitted that Air New Zealand Limited was not in a position to influence the relationship between the Ansett Group and its employees because the companies were in voluntary admin-istration. It was submitted that as a result of the administrator’s role, as estab-lished under the corporations law, Air New Zealand Limited was not in a position to control the administrator.
Justice Boulton stated that as this was a matter which had proceeded with expedition, the Commission was required to make findings on the basis of the limited evidence and material before the Commission at the time. Justice Boulton stated that in the event that more detailed evidence and material is presented in the course of conciliation and/or arbitration proceedings or upon application, the Commission has power to vary or revoke any of the findings made in the light of that material consistent with the scheme of section 101(1) of the WRA.
Ex parte the Shell Company of Australia Ltd28(the Shell Case), his Honour found
that the dispute was ‘about’ matters pertaining to the relationship between employers and employees and the definition of industrial dispute in the WRA extended to ‘a situation likely to give rise’ to an actual, threatened, impending or probable dispute of that kind. In the Shell Case, a majority of the High Court found that the definition of ‘industrial dispute’ was wide enough to encompass a dispute with a holding company that was not an employer, but which was in a position to directly affect the relationship between an employer and its employ-ees as a result of the relevant corporate structure and its powers with respect to a superannuation fund. His Honour also referred to a number of other authorities where a non-employer related company has been found to be a party to an industrial dispute.29
Having regard to those authorities, Justice Boulton considered that even though Air New Zealand Limited was not the employer of the employees, it was or could be in a position to directly affect the relationship between the employees and their employers with respect to severance entitlements and other matters (see the Shell Case). His Honour found three reasons for adopting this view. First, Justice Boulton found that despite the limited evidence, the corporate structure of the Air New Zealand and Ansett Group suggested that Air New Zealand Limited, as the ultimate holding company, played a significant ‘hands-on’ role in the operation of the Ansett Group. The evidence also suggested that Air New Zealand was, and is, in a position to control the decisions made by the Ansett Group and could thereby influence and affect the relationship between those com-panies and their employees. Secondly, his Honour found that the human resources functions of the Air New Zealand and Ansett Group had been centralised and were managed by the Senior Vice President of Air New Zealand Limited. Further, as there was also a centralisation of financial information within the group, it was found that computer records and information relating to Ansett employees which would be essential to calculating employee entitlements were held within the group and not by individual companies. Thirdly, his Honour found that there were suggestions that Air New Zealand Limited had responsibilities in relation to the payment of debts of the Ansett companies and as the unions had sought the production of such undertakings, further evidence may be furnished shortly that demonstrated Air New Zealand Limited’s obligations to pay the severance entitlements of Ansett Group employees.
Justice Boulton further stated that the appointment of the administrator had an important impact on the relationship between the Ansett Group and Air New Zealand Limited. This was evident from a consideration of the provisions of the
Corporations Act 2001and the role and powers of an administrator under that Act. Nevertheless, his Honour stated that it seemed to him that Air New Zealand Limited remained in a position directly to affect the relationship between the Ansett Group and their employees in relation to severance entitlements and job prospects.
to a dispute. Given the ever changing nature of corporate and employment struc-tures, it is reasonable to expect that other industrial tribunals will continue to adopt a similarly pragmatic approach in finding an industrial dispute to exist and/or making orders against related bodies corporate.
OUTSOURCING AND FREEDOM OF ASSOCIATION
Although not always the case, decisions to outsource are often motivated by, amongst other things, a desire to reduce the labour costs involved in operating a particular business or function. However, the question of whether such con-duct is legitimate has become the source of contention given the application and interpretation of sections 298K(1), 298L(1)(h) and 298V of Part XA of the WRA. The relevant part of section 298K(1) states that an employer must not, for a pro-hibited reason, or for reasons that include a prohibited reason, do or threaten to
dismiss an employee, injure an employee in his or her employment or alter the position of an employee to the employee’s prejudice. Section 298L(1)(h) states that a prohib-ited reason includes conduct which is carried out because an employee is entitled to the benefit of an industrial instrument or an order of an industrial body. Importantly, section 298V creates a rebuttable presumption that any con-duct which is impugned pursuant to those provisisions is considered to have been carried out for the prohibited reason alleged and the alleged perpetrator is required to prove that the conduct was not engaged in for a prohibited reason. The case of Greater Dandenong City Council v. Australian Municipal, Clerical and Services Union30concerned the decision made in 1999 by the Greater Dandenong City Council (the Council) to dismiss 75 employees after outsourcing its home and community care (HACC) services. In accordance with new regulations, the Council invited tenders for the provision of its HACC services. The Council received two tenders: one from its in-house bid team and one from an entity named Silver Circle. The in-house tender was valued at a price of $7 770 665, and Silver Circle quoted a price of $6 610 429.31An evaluation committee was
established to assess the bids. Whilst the Silver Circle bid was assessed more highly in all criteria,32the committee’s report stated that the difference contributing most
to Silver Circle’s higher rating was its lower price.33The primary reason for this
price differential was that labour costs under the Council employees’ award and certified agreement34 were higher than those under the award binding Silver
Circle employees.35Prior to receiving the tenders, Council management had
recommended that the in-house team enter an agreement in order to reduce employee labour costs; however, this recommendation was refused.36Based on
the committee’s evaluation, a deliberative body comprising Council management met and resolved to accept the Silver Circle tender, with the result that the Council’s HACC workers were made redundant.37 Some were subsequently
offered employment with Silver Circle, the terms and conditions of which were governed by the Silver Circle award, so they were paid significantly less for doing virtually identical work to that they had previously done.38
tender was to avoid the more generous terms and conditions of the Council employees’ agreement and therefore it had breached sections 298K(1)(a), (b) and (c) of the WRA.39In response, the Council contended that the reason for the
dismissal of the HACC employees was grounds of redundancy, and that at no time was their entitlement to the benefit of an award or agreement a motivating factor.40Moreover, the Council asserted in accepting the lowest priced tender,
it was merely obeying State laws regarding competitive tendering.41
At first instance, Justice Madgwick of the Federal Court found that the price differential between the bids was a reason for the Council’s acceptance of the Silver Circle bid.42Although Justice Madgwick stated that price alone does not
constitute a prohibited reason, his Honour found that in this case, the only sig-nificant factor contributing to the price differential was the Council employees’ entitlements under their respective agreement and this constituted the operative reason for the Council’s acceptance of the Silver Circle bid and the subsequent dismissal of its in-house HACC employees.43His Honour stated:
The major and decisive factor in the Silver Circle bid’s acceptance was its price. The major and decisive factor in the difference in price was that, as everyone conceived it, Silver Circle would remunerate the workers doing HACC work under the Silver Circle Award and not the Council’s industrial instruments.44
Justice Madgwick then turned to the meaning and scope of sections 298L(1)(h) and 298K. His Honour identified two ways of interpreting section 298L(1)(h). First, the section could be read as meaning that an employer cannot dismiss an employee, injure an employee in his or her employment or prejudicially alter an employee’s position because of the fact of the existence of an entitlement, such as the fact that an award or agreement merely exists. Alternatively, under the second view the section could be read as meaning that an employer cannot engage in that same conduct because of the level, degree or extent of the entitlement, such as particular benefits under an award or agreement. The Council submit-ted that the first approach was correct and for that reason said they had not engaged in prohibited conduct because they did not dismiss the HACC employ-ees because of the mere fact that they were subject to an award or agreement. The ASU, however, submitted that the second approach was correct and that the Court was required to consider not whether the Council acted because an award or agreement existed, but whether the Council acted because of the benefits received by the employees pursuant to the award or agreement. The first interpretation fixes on the mere fact of an entitlement, the second on the nature of the entitlement.45Justice Madgwick preferred the second approach.46Justice
Madgwick proceeded to find that the Council had breached both sections 298K(1)(a) and (c) and that the Council had failed to discharge its onus under section 298V. That is, the Council failed to show that it had dismissed the HACC employees for reasons other than that the HACC employees were entitled to more beneficial entitlements under their agreement.47Based on these findings,
The Council appealed the decision of Justice Madgwick on the grounds that the first interpretation of section 298L(1)(h) was the correct approach.49The
Council also submitted that even if Justice Madgwick’s interpretation of section 298L(1)(h) was correct, his Honour erred by not focusing on the fact that any alteration of the HACC workers’ position and their dismissal was not effected by the intentional act of the Council, but rather by the consequences of it.50
Interpretation of Section 298L(1)(h)
The Full Bench of the Federal Court51 unanimously agreed that Justice
Madgwick had correctly found that section 298L(1)(h) does not prohibit only that action which has been taken because of the mere fact of an entitlement, but extends to conduct engaged in because of the content of an entitlement. Justice Wilcox undertook a historical analysis of the legislative antecedents of section 298L(1)(h), before concluding that the provision had never been considered to be restricted to considerations of an employer’s ideological objection to the existence of an award.52In his Honour’s view, such an interpretation would give
too narrow a view to the concept of freedom of association.53Justice Merkel also
made similarly salient findings by holding that the ambit of an entitlement under an industrial instrument is so broad that no legislative purpose or policy would be served by confining section 298L(1)(h) to the fact of the entitlement. Further, in his Honour’s opinion, the fact of an entitlement is of no relevance until linked to its content.54Justice Finkelstein took a different approach by stating that the
provision covers both a situation where the relevant conduct is motivated by the mere fact that an employee is entitled to an industrial instrument as well as one where the conduct is motivated by the level, degree or extent of that entitlement.55
Justice Finkelstein stated that in either situation the dismissal occurs because of the benefit of an award.56
Was the operative reason for the council’s decision to outsource a prohibited reason?
Justice Wilcox stated that Justice Madgwick had not erred in his decision. Justice Wilcox rejected the Council’s argument that dismissal and prejudicial alteration of the workers’ positions was not the intentional act of the Council. In his Honour’s view, the Councillors who voted to outsource were aware that the inevitable result of their acceptance of Silver Circle’s tender would be the dis-missal of the Council’s HACC employees. The Council’s decision directly and immediately caused the employees’ position to be altered to their prejudice.57
His Honour considered it unproblematic to infer from the facts that the prin-ciple reason why they took that course was the HACC employees’ entitlement to the benefit of the award and certified agreement.58
Although Justice Merkel agreed with Justice Madgwick that the position of the Council’s employees was altered to their prejudice within the meaning of sec-tion 298K(1)(c),59his Honour did not agree that the operative reason for the
a circumstance that led to the Council accepting the lower price was the higher award and agreement entitlements of the Council’s employees. His Honour stated that whilst the higher entitlements under the agreement may have been causally linked to the Council’s acceptance of the Silver Circle tender, the evidence did not support the conclusion that they were the operative reason for the Council’s acceptance of the tender. Justice Merkel found that Justice Madgwick had failed to distinguish between the operative reason for the Council acting and the circumstances that led to the price of the in-house bid being higher than the price of the Silver Circle bid. The fact that the Councillors were aware of those circumstances did not make them an operative reason for their decision.60
In line with Justice Merkel’s analysis, Justice Finkelstein relied on an ‘unbro-ken line of authority’ from both the NSW and Federal jurisdictions to hold that it is necessary to draw a distinction between the reason or motive underlying the dismissals and what produced that reason or motive.61By way of example, his
Honour stated that if there was a legitimate reason for the dismissal, such as the desire to avoid bankruptcy or the need to maintain a profitable operation, the dismissal would be lawful, even if the cause of the impending bankruptcy or the unprofitable trading is high award or agreement entitlements. Although the benefits under an industrial instrument may have caused the employer to dismiss the relevant employees, that does not necessarily make them the reason or motive for the act.62Consequently, in Justice Finklestein’s view, whilst the facts
supported the findings that the Council’s decision was based on the lower price and that the Council knew the reasons for the difference in lower price between the in-house tender and the Silver Circle tender, the evidence did not justify the conclusion that the Council was motivated because of the HACC employees’ superior entitlements. According to Justice Finkelstein, Justice Madgwick had failed to distinguish between the immediate reason and the proximate reason for the dismissals. According to Justice Finkelstein, the finding that price was a ‘major and decisive factor’ was correct, but Justice Madgwick erred in describing the price differential due to different award rates as the other major and decisive factor motivating the decision.
Section 298V Onus of Proof
Only the judgments of Justices Merkel and Finkelstein discussed the operation of section 298V. Justice Merkel dismissed the Council’s appeal because his Honour agreed with Justice Madgwick that the Council had failed to discharge its onus of proof that its conduct was not motivated by the fact the HACC employees were entitled to benefits under the Council’s agreement which were superior to those available to Silver Circle’s employees.63 Justice Merkel concluded that
although the Council demonstrated that Justice Madgwick had erred by draw-ing an incorrect inference, the Council had not demonstrated that Justice Madgwick had erred in ultimately concluding, in reliance upon section 298V, that the Council breached sections 298K(1)(c) and 298L(1)(h).64Consequently,
Justice Merkel dismissed the appeal.
evi-dence to enable a judge, upon review, to determine the true facts. In that situ-ation, the judge cannot resort to section 298V as an alternative to finding facts.65
Justice Finkelstein stated that as Justice Madgwick was satisfied that there was sufficient evidence to find that the relevant conduct had been engaged in for a prohibited reason, it was inappropriate for Justice Madgwick to place any reliance on section 298V.66Although Justice Finkelstein was of the view that the evidence
was sufficient to discharge the onus imposed by section 298V, he found it inappropriate for the Full Court to decide the matter for itself upon appeal, and therefore recommended the matter be remitted to the trial judge for recon-sideration.67
An unresolved issue
Decisions to outsource are invariably and inextricably linked to questions of cost and efficiency. It is not unusual then that decisions to outsource may be moti-vated by a desire to cut labour costs. The question arises whether such decisions to outsource are prohibited. If the approaches of Justice Merkel and Justice Finkelstein are adopted, then the operative reason for the outsourcing is the desire to reduce the overall costs, even if one of the reasons for reducing costs is that certain employees are entitled to benefits under an industrial instrument. However, it remains unresolved whether an underlying reason, such as an employer’s desire to avoid the application of an industrial instrument, can in some circumstances become an operative reason even though other genuinely com-mercial reasons exist. Indeed, the decisions of the Full Bench demonstrate the difficulties a court may face when called upon to infer the reasons underlying a decision to outsource, especially where various justifiable explanations for the decision exist. In any event, it is apparent that at present the legal tests in rela-tion to these matters remain nascent and will require further development and judicial elaboration in the future.
EMPLOYEE OR INDEPENDENT CONTRACTOR?
The common law distinction between an employee and an independent contractor has proved to be an amorphous one in practice, even despite the seminal deci-sion of the High Court in Stevens v. Brodribb,68which established the primacy of
the ‘multiple indicia’ test. This point is most notably reflected in the remarkable fact that over the past six years several judges confronted with almost the same factual matrix have made different findings as to the nature of the relationship between a courier company and its bicycle couriers.
In Vabu Pty Ltd t/as Crisis Couriers v. The Commissioner of Taxation69(Crisis
methods of delivery.70As a result, Vabu was ordered to lodge the Superannuation
Guarantee Statement. Upon appeal, however, the New South Wales Court of Appeal overturned Justice Ireland’s findings and held that the relationship between Vabu and its couriers was one of principal and independent contractor. In apply-ing the multiple indicia test espoused in Stevens v. Brodribb, the Judges of the Court of Appeal focused primarily on factors other than the degree of control exercised over the couriers, such as the fact that running costs were to be borne by the couriers, the couriers were required to provide and maintain their own equipment, the couriers received no wage or salary and were permitted to oper-ate as a company and bore the risk of operating at a loss. An application by the Commissioner of Taxation for special leave to appeal was refused by the High Court. At the time, the decision of the New South Wales Court of Appeal represented a confirmation of the multiple indicia test, but with a decrease in the significance of control as being a determinative factor, most notably reflected in Meagher JA’s statement that the ‘old test of “control” is now superseded by some-thing more flexible’.71
However, the relationship between Vabu and its couriers was once again required to be scrutinised in the context of a determination of whether Vabu was vicariously liable for a personal injury inflicted by one of its bicycle couriers upon Mr Hollis, himself a courier with another firm. At first instance, and upon appeal to the New South Wales Court of Appeal, much emphasis was placed on the decision in Crisis Couriers 1. Accordingly, the couriers were dealt with as inde-pendent contractors, with the result that Vabu could not be held vicariously liable for Mr Hollis’ injury. However, on appeal the majority of the High Court72in
the decision on Hollis v. Vabu Pty Ltd (t/as Crisis Couriers) (Crisis Couriers 2)73
held that the Court of Appeal gave too much weight to the fact that the bicycle couriers owned their own bicycles, bore the expense of running them and supplied their own accessories.74An examination of various relevant indicia led
the majority of the High Court to conclude that, viewed practically, the bicycle couriers were indeed engaged under a contract of service with Vabu. First, the majority reasoned that it was ‘intuitively unsound’ to consider that the couriers were running their own enterprise. Secondly, and notably, the majority found that Vabu exercised considerable control over the performance of the couriers’ work75by requiring them to commence work by 9.00 am and assigning work in
provide their own equipment and tools, especially when there is only a small capital outlay on the equipment and in instances such as the present where the bicycles could not strictly be construed as tools that were only capable of use for courier work, but can also provide a means of personal transport or even a means of recreation out of work time. Finally, the majority concluded that the method by which couriers were required to deliver goods was in fact very systematic and controlled. The majority succinctly and simply stated that:
Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations.76
In contrast to the majority, Justice McHugh decided the matter by sole refer-ence to principles of vicarious liability.77 His Honour drew upon established
authority78to hold that a principal, in certain circumstances, may be vicariously
liable for the conduct of an agent that is neither an independent contractor nor an employee.79It should be noted that Justice Callinan delivered a dissenting
judgment based on the fact that Mr Hollis had conceded in the Court of Appeal that the relationship between Vabu and its couriers was one of principal and inde-pendent contractor, and held that Mr Hollis should not subsequently be allowed to withdraw that concession. Furthermore, his Honour also disagreed with the extension of the principles of vicarious liability and suggested that given the policy considerations involved it was a matter better left to institutions other than the courts.80
Arguably, the decision of the majority of the High Court has reaffirmed the indicium of control as the most prominent, but by no means sole, determinant of the nature of the employment relationship in Australia. On the face of it, the High Court in Hollis v. Vabuhas restored some degree of certainty to the appli-cation of the primacy of the multiple indicia test. However, it would seem that the major difficulties surrounding the test to be used in distinguishing between employees and independent contractors is that the intricacies of the employment relationship never cease evolving. Although the High Court’s judicial analysis of the multiple indicia and control tests represent a timely re-examination of the nature of the employment relationship in the modern context, one cannot review the case without referring to Justice McHugh’s salient observation:
the genius of the common law is that the first statement of a common rule or principle is not its final statement. The contours of rules and principles expand and contract with experience and changes in societal conditions.81
The observation reminds us that given the organic nature of the common law one can look forward to further, maybe even more radical, deliberations on the matter in the not necessarily distant future.
NOTES
1. [2001] FCA 1533, 31 October 2001, No. 1461 of 2001. 2. [2001] FCA 1600 (14 November 2001).
4. (2001) 181 ALR 263. 5. Note 1.
6. ibid. at par 58. 7. ibid. at par 66. 8. ibid.
9. ibid. at par 70. 10. ibid. at par 71. 11. ibid. at par 78. 12. ibid. at par 16. 13. ibid.
14. Note 2 15. ibid. at par 24. 16. ibid. at par 26.
17. (1990) 1 WLR 1587 at 1610. 18. (1991) 25 NSWLR 593 at 602. 19. Note 2 at par 28.
20. [1971] Ac 424 at 449. 21. [1964] 1 Ch 303 at 333. 22. Note 2 at par 29. 23. ibid. at par 33. 24. ibid. at par 34. 25. ibid. at par 50. 26. ibid. at par 53.
27. Australian Municipal, Administrative, Clerical and Services Union and Transport Workers’ Union of Australia v. Ansett Australia Limited and Others(PR909513, 24 September 2001, Boulton J). 28. (1992) 174 CLR 345.
29. See Australian Airlines Limited v. Moore(1995) 59 IR 119; Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v. TRW Steering and Suspension Australia Limited (Print S2925, 3 February 2000, Munro J.) and Qantas Airways Limited v. Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (Print S4003, 9 March 2000, Munro J.). 30. Note 3.
31. ibid. at par 13.
32. Australian Municipal, Administrative, Clerical and Services Union v. Greater Dandenong City Council
101 IR 143 at par 26. 33. ibid. at par 27.
34. Both of which were industrial instruments within the meaning of s.298L(1)(h) of the Workplace Relations Act 1996 (Cwlth).
48. Note 3 at par 41. 49. ibid. at par 121. 50. ibid. at par 86.
51. Comprising of Justices Wilcox, Merkel and Finkelstein. 52. Note 3 par 69.
53. ibid. at par 71. 54. ibid. at par 128. 55. ibid. at par 212. 56. ibid.
57. ibid. at par 89. 58. ibid. at par 90. 59. ibid. at par 141. 60. ibid. at par 167.
61. ibid. at par 204. See for example, Connington v. Council of Municipality of Kogarah [1913] AR NSW 40, Grayndler v. Broun [1928] AR NSW 46 and Hunt v. Railway Commissioners for New South Wales[1928] AR NSW 151 which considered the effect of s.52 of the Industrial Arbitration Act 1912(NSW), the NSW equivalent of s.298L(1)(h); and the cases of Eaton v. McKenzie
and Klanjscek v. Silverwhich considered antecedents of s298L(1)(h) which followed the approach taken in relation to the NSW provisions.
62. Note 3 at par 199. 63. ibid. at par 172. 64. ibid. at par 180. 65. ibid. at par 218. 66. ibid. at par 219. 67. ibid. at par 221.
68. Stevens v. Brodribb Sawmilling Company Pty Ltd(1986) 160 CLR 16. 69. (1996) 33 ATR 537.
70. Vabu Pty Ltd v. Commissioner of Taxation(1995) 30 ATR 303 at 308. 71. Note 69 per Meagher JA at 538.
72. Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ. 73. Note 4.
74. ibid. at 47. 75. ibid. at 49. 76. ibid. at 47. 77. ibid. at 72.
78. Colonial Mutual Life Assurance Society Ltd v. Producers and Citizens Co-op Assurance Co of Australia Ltd (1931) 46 CLR 41.
