Employment Law: Problem Based Questions - Case Study Example

Employment Law Part A Brief Facts Rosita had been working as a software specialist for Rapster Pty Ltd for more than eight years, on a full time basis. Due to allegations against her that she was diverting Rapster’s business to her own newly formed company Five Stars Ltd, Rapster wanted to terminate her services immediately and seek an injunction against Rosita, in order to protect its interests. With regard to this, the following discussion has been taken up to assess whether Rosita is an employee or an independent contractor. Issue Whether Rosita is an employee of Mentor Software Suppliers Ltd. Whether Rosita is an employee of Rapster Pty Ltd. Rule of Law The common law fails to provide a single conclusive test to categorise a relationship as employer-employee or engager-independent contractor. It had been the practice to employ the control test to ascertain the presence of an employment relationship. An individual who consented to detailed control by another person regarding the work to be completed, the place where it was to be accomplished, when it was to be completed, and most importantly the manner in which it was to be performed would be classified as an employee under a contract of service. The extent and actual exercise of such control was crucial under the control test. All the same, with the passage of time, the control test lost its utility. In the contemporary period, the courts have adopted a multifactor approach, in order to determine employment status[Mar062]. The description provided by industrial legislation, regarding the term employee refers to the common law. Thus, Section 4(1) of the Workplace Relations Act 1996 (Cth) defines the employee as any individual whose customary occupation is that of an employee. Upon applying the multi-factor test of Stevens v Brodribb, it becomes clear that the class of worker described is that of an independent contractor with limited rights under this act[DeP97]. Analysis A work relationship has to necessarily be comprised of the following. First, ownership of tools and equipment. In employment, the required equipment is generally provided to the employee by the employer. If workers bring in their own tools and equipment, on a major scale, then the relationship indicates an independent contract. Second, method of remuneration. An employment contract can be safely assumed, when the remuneration is calculated on the basis of the time worked, or when there is regular or periodic payment[Mar062]. In ACE Insurance Limited v Trifunovski, the Federal Court’s full bench ruled that sales agents were employees, although they had signed contracts designating them as independent contractors. This ruling was based on the following factors; first, the agents were representatives of the insurance company; second, the insurance company was entitled to control the work done by these agents[pau13]. Third, duration of service. When the worker is engaged for an indefinite period, it denotes a contract of employment. On the other hand, when the worker is engaged for performing a specific task, then the relationship is an independent contract. Fourth, hours of work. An employment contract is distinguished by fixed or regular working hours. In addition, the worker is permitted to take holidays only during prescribed times. Fifth, exclusivity of service. When one party is entitled to demand exclusive service from the other, then there is an employment contract between them. All the same, a person can be an independent contractor, whilst working exclusively for another. Sixth, the authority to delegate work. This enjoins a duty to ensure the completion of the work, and when it need not be done by that person, then an independent contract can be presumed. However, some employees do have the authority to delegate work to others. Seventh, the deduction of income tax. An employment contract is indicated, when there is deduction of income tax from the payments made to a worker[Mar062]. In Hollis v Vabu Pty Ltd, the High Court ruled that some categories of couriers were employees. This was despite their supplying and maintaining their own vehicles. This categorisation was applied even though these couriers were paid on the basis of the number of deliveries they made and not on the basis of the number of hours they had worked. The Court held that as a practical issue these couriers were not conducting their own enterprise or business. Moreover, these persons did not enjoy independence in the conduct of the operations[Leo11]. In essence, a balancing exercise has to be conducted with regard to the features that depict an employment contract and the factors that indicate an independent contract. This constitutes the multi-factor approach. However, in Australian Air Express v Langford, the delivery driver had to work under arrangements that were akin to the couriers in Hollis v Vabu. However, he was also required to own and supply a truck that was quite expensive. Moreover, he had to obtain the approval of the company prior to providing a substitute driver[pau13]. The New South Wales Court of Appeal held that he was an independent contractor. In our problem, Rosita had worked on full time basis for more than eight years in Rapster’s campus and dealt with Rapster’s customers, attending to their specific needs. She had access to Rapster’s present, and future expansion plans. Moreover, she had been provided with employees work manual, equipment and uniform. She has also been provided with access to Rapster’s software research facilities. These facts indicate a relationship of employment between Rosita and Rapster. According to the decision in Hollis v Vabu Pty Ltd Rosita can be considered an employee, since her work is an integral part of Rapster’s business. In addition, despite the fact that she has to follow Raster’s instructions, Rosita is allowed to delegate work to others with the permission of Rapster. This factor indicates the working nature of an employee, having authority to delegate the work to others. Moreover, Rosita’s remuneration will be paid to Mentor, who deducts tax and pays Rosita. This indicates that Rosita is an employee of Mentor. Eight, place of work. Discretion to determine where the work is performed specifies an employment contract. Nine, control test. An employment contract is indicted when the person for whom the work is done exercises control[Mar062]. In Sweeney v Boylan Nominees Pty Ltd, a refrigeration mechanic had to maintain his own insurance, and he provided his own equipment and tools. Furthermore, he invoiced for each job undertaken by him. The High Court of Australia held that he was an independent contractor[pau13]. In Oanh Nguyen v ANT Contract Packers Pty Ltd & Thiess Services Pty Ltd, the Thiess Services Pty Ltd (Thiess) hired a process worker Nguyen. This hiring process was direct, as most of its workers were hired via ANT Contract Packers Pty Ltd (ANT). She was dismissed after two and a half years, ostensibly as she had become pregnant. Nguyen made a claim against Thiess and ANT. The NSW Industrial Relations Commission ruled that Nguyen was an employee of Thiess, as the latter exercised practical and legal control upon her [Whe04]. As she had been directly hired by Thiess, the commission found an employer-employee relationship between Nguyen and Thiess. Conclusion According to the above discussion and case law, Rosita can be considered an employee of Raster Pty Ltd, despite the fact that she had signed the ‘Conditions of Assignment as Independent Contractor Agreement’ with Mentor and Rapster Pty Ltd. After applying the multifactor approach and case law, Rosita can be considered an employee of Rapster Pty Ltd. She can be considered an employee of Mentor, since the contract between Mentor and Rapster was made with a document named ‘Conditions of an Assignment of an employee’. Moreover, salary is paid to Rosita through Mentor after deducting taxes. Part B Issue Whether Rosita has breached any implied duties under common law. Whether Rapster has breached any common law obligations. Whether Rapster has violated any provisions of the Fair Work Act in its decision to terminate the services of Rosita. Rule A number of obligations have been placed upon employees by the common law. These are deemed to be in existence, even when they are not specifically mentioned in industrial instruments or employment contracts. Some of these are; the obligation of employees to behave in an honest manner, the stipulation that employees carry out their allotted work to the best of their ability, the obligation to promote the interests of the employer, and the obligation to comply with orders that are reasonable and lawful[Wal131]. In addition, the common law empowers an employer to dismiss an employee, without notice, for misconduct that is incompatible with the faithful or due discharge of duty towards the employer. This was the ruling in Concut v Worell. [Law12]. Regulation 1.07 of the Fair Work Regulations 2009 stipulates that acts of assault, theft, fraud, being intoxicated, and wilful and deliberate conduct of an employee that are inconsistent with the continuation of the employment contract provide the employer with the right to dismiss the errant employee without serving a notice. It also provides for the right to dismiss without notice for conduct that results in impending and grave danger to the reputation, profitability, or viability of the employer’s business, or to health and safety[Aus142]. It is the prerogative of the courts to determine what constitutes such serious misconduct. Analysis Breach of the above mentioned common law obligations by the employee, entitles the employer to dismiss such employee. However, the employer has to adhere to the prescribed procedure in this context. As such, the dismissal of an employee, in the normal course, has to be based upon the infringement of these implied duties. In addition, breach of workplace policies could constitute the basis for dismissing an employee. At the same time, the employer has certain obligations towards his employees. Some of these are; the duty to pay a specific or agreed upon amount to employees as remuneration, and to ensure their safety at the workplace and while carrying out their allotted work[Wal131]. In Barker v Commonwealth Bank of Australia, the Federal Court of Australia ruled that Australian law incorporated in employment contracts, an implied term of mutual trust and confidence. This implied term was breached, when the employer infringed his redeployment policy[Cas12]. The dismissed employee, in this case, was awarded a large amount as damages. Action that is illegal if taken for certain reasons is termed adverse action. Several actions have been described as adverse by the Fair Work Act 2009. Some of these are; doing, threatening, or organising one of the following. The dismissal of an employee by an employer, injuring employees during their employment, changing their position to their disadvantage, or treating an employee less favourably than the other employees[Aus141]. In instances of misconduct that warrants dismissal, it is not incumbent upon the employer to establish beyond reasonable doubt that the employee in question is guilty. All the same, the employer is required to conduct a reasonable investigation and after assessing the various factors, become convinced that the employee has indulged in misconduct that warrants dismissal. Some instances, wherein it would not be unfair to dismiss an employee are; assault, criminal acts, dishonesty, drugs, drunkenness, insolence, and serious infringement of safety norms during the course of work. The gravity of the misconduct depends upon several factors, such as the nature of the work, the duties of the employee, and the length of service[Leg13]. In our problem, Rosita had diverted Rapster’s business to her own newly developed company Five Stars Ltd. This behaviour can be deemed as gross dishonesty and unfaithfulness towards the employer. In Bi-Lo Pty Ltd v Hooper, the ruling was that the employer was not obliged to establish the commission of the misconduct by the employee, in order to avert a finding of harsh, unjust or unreasonable dismissal. The investigation conducted by the employer had been meticulous and had considered all the issues pertaining to the alleged misconduct. The dismissal could not be deemed to be harsh, unreasonable or unjust, as the employee had failed to inform the employer of other facts that could have exonerated him[Leg13]. Moreover, Section 387 of the Fair Work Act 2009, provides the factors that have to be considered at the time of ascertaining whether a dismissal has been harsh, unjust or unreasonable. Some of these are; whether there has been a valid reason for the dismissal, whether the employee has been informed about the reason behind the dismissal, whether the employee has been provided with an opportunity to respond, and whether the employee has been warned about unsatisfactory performance[Mur14]. It is necessary for the employer to demonstrate that he has a valid reason for dismissing the employee. In our problem, it was alleged that Rosita had indulged in conduct that was detrimental to Rapster’s business interests. In addition, Clause 8 of the Employee Assignment contract states that Mentor should take the responsibility of limiting its employees from indulging in any activities with the customers of Rapster for a period of 36 months after the termination of its contract. As such, in Boston Deep Sea Fishing v Ansell, Ansell, a managing director in the plaintiff company, had been dismissed for receiving commissions from clients to whom he had allotted company contracts. The court upheld the dismissal and directed him to transfer the commissions to the employer. Conclusion In our problem, Rapster Pty Ltd can terminate the employment of Rosita without giving any notice, according to the above discussion and case laws. Rosita had indulged in conduct that was detrimental to the company’s interests. Moreover, Rapster can terminate its engagement with Mentor for the latter’s failure to control its employee as per the agreement between them. Additionally, Rapster can obtain an injunction, against Rosita in order to protect its business interests. References ACE Insurance Limited v Trifunovski (2013 ) FCAFC 3. Fair Work Act 2009. Canberra, Commonwealth of Australia. Fair Work Regulations 2009. Canberra, Commonwealth of Australia. Austlii, n.d. Fair Work Regulations 2009 (SLI No 112 of 2009)-Reg 1.07. [online] Available at: [Accessed 3 September 2014]. Australian Air Express v Langford (2005) NSWCA 96. Australian Government Fair Work Ombudsman, n.d. Protections at work. [online] Available at: [Accessed 3 September 2014]. Barker v Commonwealth Bank of Australia (2012 ) FCA 942 . Bi-Lo Pty Ltd v Hooper (1992) SAIRComm 63. Boston Deep Sea Fishing Co v Ansell (1888 ) 39 Ch D 339. Caspersz, T., 2012. Recent developments: Implied term of trust of confidence, and 'productivity' under the fair work act. [online] Available at: [Accessed 1 September 2014]. Concut Pty Ltd v Worell (2000) HCA 64. De Plevitz, L., 1997. Dependent Contractors: Can the Test from Stevens v Brodrib Protect Workers who are Quasi-Employees?. Queensland University of Technology Law Journal, Volume 13, pp. 263-275. Hollis v Vabu Pty Ltd (2001) HCA 44. Lawrence, C., 2012. Remedies on Termination of Employment. [online] Available at: [Accessed 4 September 2014]. Legal Services Commission of South Australia, 2013. Unfair Dismissal. [online] Available at: [Accessed 3 September 2014]. Leow, J., Murphy, S. & Hooper, G., 2010-2011. Australian Master Superannuation Guide. 14 ed. CCH Australia Limited. Marshall, B., 2006. Working it out-Employee or independent contractor?. [online] Available at: [Accessed 31 August 2014]. Murphy, J., 2014. Fair Work Commission clarifies differences between a support person and advocate. [online] Available at: [Accessed 3 September 2014]. Oanh Nguyen v ANT Contract Packers Pty Ltd & Thiess Services Pty Ltd (2003) NSWIR Comm 1006. paul-wong, 2013. Is it possible for an independent contractor to be deemed an employee?. [online] Available at: [Accessed 1 September 2014]. Stevens v Brodribb Sawmilling Co Pty Ltd (1986 ) HCA 1. Sweeney v Boylan Nominees Pty Ltd (2006) HCA 19. Walsh, P., 2013. Termination of Employment in Australia: Best Practice Guide. [online] Available at: [Accessed 1 September 2014]. Wheelright, K., 2004. Roosters, Ducks and Labour Hire Arrangements. Southern Cross University Law Review, Volume 8, pp. 190-200. Read More