The matter of Elazac Pty Ltd v Shirreff [2011] VSCA 405 (Elazac v Shirreff) was an appeal before the Court of Appeal of the Supreme Court of Victoria (Redlich and Mandie JJA, and Beach AJA). It was an appeal in respect of issues under the Occupational Health and Safety Act 1985. The point of interest that this article concerns is the discussion of whether or not the plaintiff was the defendant's employee.
In Elazac v Shirreff, the plaintiff (Shirreff) fell down a lift well and sued the defendant (Elazac) claiming that the defendant was his employer. The defendant alleged that the plaintiff was a contractor, and denied liability on that basis. In the trial, Robson J found that the plaintiff was the defendant's employee and found that the defendant was liable for the plaintiff's injuries. The quantum was reduced to reflect contributory negligence.
Some of the characteristics of the relationship between the plaintiff by the defendant were:
- The plaintiff was in a business partnership with his wife since 1984 as an electrical contractor.
- Mr Morgan, a representative of the defendant, requested the plaintiff do work at his various company addresses and his home.
- The defendant, thrugh Mr Morgan, engaged the plaintiff as a project manager to manage the refurbishment of one of the defendant's buildings.
- By the time the accident occurred, the plaintiff was working almost exclusively for the defendant.
- When the plaintiff threatened to resign, he entered into a new contract with the defendant, set out in a file note. The contract provided for payment to the plaintiff's business, authorisation of certain expenses by Mr Morgan and gave the plaintiff a wage of $450 per day. The contract noted that the plaintiff had employees and allowed an hourly rate for these employees.
- Invoices were rendered to the defendant charging out the labour of the plaintiff and his employees.
- If further people were needed for the job, they were initially employed by the plaintiff and then transferred to the defendant.
- Mr Morgan gave the plaintiff directions what to do on a daily basis. However the plaintiff was the one to decide how to perform a task and who was to perform it.
Robson J found that the plaintiff was the defendant's employee for the following reasons: In doing so I have taken into account the totality of the relationship between Mr Shirreff and Elazac, and particularly that between Mr Morgan and Mr Shirreff. There are several factors that are of particular importance. I have considered the matter on a practical basis which takes into account how the parties conducted themselves, irrespective of the formal contract between them. In other words, I have considered substance over form. On a practical level Mr Morgan demanded and expected, and Mr Shirreff tacitly accepted, complete authority by Mr Morgan over Mr Shirreff’s activities. Mr Morgan gave him instructions on a daily basis and sometimes hourly. Mr Shirreff’s duties as project manager of the projects being undertaken by Mr Morgan at his home and at 401 and 411 Collins Street were not delegable by him but had to be personally performed by him. Mr Shirreff was remunerated for the time he spent on Mr Morgan’s projects but not on the basis of his output or the tasks he performed. True it is that Mr Shirreff had flexibility in the hours he worked, but they were required to average 8 hours per day. Mr Shirreff was primarily supervising the employees of Elazac who were themselves under the control of Elazac. I accept the plea of Mr Shirreff in his amended statement of claim that Mr Morgan exercised a high degree of control over Mr Shirreff.
The Court of Appeal disagreed with the characterisation of the relationship and held that the plaintiff was a contractor. The Court first set out the matters to be considered when faced with a question of whether an employment relationship exists (at [30] to [31]):
30 His Honour commenced this part of his judgment with a detailed and careful analysis of the relevant authorities.[5] Whilst earlier authorities often regarded ‘control’ as the determinative factor in deciding whether someone was an employee or an independent contractor, later authorities have recognised that control (or, more particularly, the right to exercise control) is only one of a number of possibly relevant factors (albeit an important one) in determining the issue. Modern authority is to the effect that it is the totality of the relationship between the parties which must be considered. Relevant factors in determining the nature of the relationship between a person who engages another to perform work and the person so engaged include:
(a) the degree of control which the former can exercise over the latter;
(b) whether what is being supplied is the work and skill of a person (contract of service) or the supply of equipment or its performance (contract for services);
(c) whether or not the person engaged can set their own hours of work;
(d) the method of payment (and, in particular, whether payment is determined by hours of service or output or production);
(e) whether or not income tax is deducted and holiday pay or long service leave or superannuation paid;
(f) whether or not the person engaged employs employees and/or conducts his business in partnership;
(g) whether or not there is a power to delegate (send someone else to perform the work); and
(h) whether or not the person engaged considered the relationship as one of independent contractor.
31 Further, whilst earlier authorities supported the proposition that if a person engaged had more technical or specialist skill than the person who engaged him, then the person engaged was more likely to be an independent contractor, more modern authority recognises that it is relatively commonplace to employ employees who have particular technical skills or expertise that are not possessed by those employing them. The fact that a person engaged to perform work has particular expertise no longer, of itself, provides any great support for a conclusion that that person is an independent contractor.
The Court of Appeal considered that an important matter was that the plaintiff had a high degre of control over what he did and the defendant did not have any control as to how a task was to be performed by the plaintiff (at [35]):
35 The issue of control falls to be considered not merely by reference to what control was actually exercised, but also by reference to the level of control which could be exercised. Undoubtedly, Mr Morgan did exercise a great deal of control as to when the performance of particular tasks should be performed. Clearly, when Mr Morgan wanted something done immediately then it had to be done immediately. However, the evidence does not disclose any basis for concluding that Mr Morgan was capable of exercising control (or did exercise control) over how a relevant task was to be performed. Whilst it can be accepted that Mr Morgan was very interested in particular jobs being undertaken and completed immediately following the giving of an instruction to do the work, there is no evidence that Mr Morgan took any interest in how the task was to be performed. Mr Morgan was only interested in work being performed to his satisfaction when he wanted it performed, rather than the mechanics of its performance.
However the most significant issue was that the plaintiff had his own employees, and the Court of Appeal said that because of this it would be 'unusual' if the plaintiff was actually an employee of the defendant (at [36] to [39]):
36 In our view, the most significant feature in relation to the issue of whether the plaintiff was an employee or contractor is the plaintiff’s employment of his own employees at the work sites at which he was required to perform work. Whilst it may not be absolutely inconsistent with a relationship of employer/employee that an alleged employee employs on site his or her own employees, in our view this would certainly be unusual.[8] Looking at the totality of the relationship between the plaintiff and the defendant, we have little doubt the plaintiff was a contractor and not an employee of the defendant. Not only did the plaintiff consider himself to be self-employed, everything he did in the course of his work suggested that this was so: he employed employees; his tax returns and financial documentation disclosed he was operating a business in partnership with his wife; he could determine who he employed and where they worked; he performed additional work (in working hours) for an organisation unrelated to the defendant (and sent his employees to work there from time to time); and finally, the defendant did not deduct taxation from the plaintiff’s pay and did not pay him holiday pay, sick leave, long service leave or superannuation.
37 In the plaintiff’s written submissions,[9] it was submitted that ‘it is conceptually possible that one man may work for another, at different times and undertaking different tasks, on the one hand under a contract for services, and on the other hand under a contract of service. Reliance was placed upon the decision of Barnes v Dawson.[10]
38 The facts in Barnes may be briefly stated as follows. The claimant, in partnership with his son, employed a third person to assist them with various kinds of rural work which they undertook and for which equipment belonging to the partnership was used. Accounts rendered by the partners for work done were based on a daily rate for each person involved and for equipment used, with adjustments for supplies and similar items received from the person for whom the work had been done. Whilst engaged on certain fencing work for the putative employer, the claimant was asked by the putative employer to assist him and some of his employees to brand and mark some calves. The claimant acceded to this request and, whilst engaged on this task, sustained injury. An account was rendered on the usual basis. The claimant later made application for workers’ compensation in respect of the injury, but this was dismissed.
39 In remitting the claimant’s claim for reconsideration, the Full Court of the Supreme Court of New South Wales acknowledged the possibility that a person performing work in the course of his or her business may become an employee for the purpose of performing some other specified task which was under the control, or the direction, of another. However, that is not this case. The evidence in this case discloses that the plaintiff was performing the tasks he was performing at the time of the accident as part of his overall agreement with the defendant. His Honour did not conclude (and there would have been no basis for concluding) that whilst the plaintiff was a contractor of the defendant during 2002, he became an employee for the purpose of fixing the lift on the afternoon of 25 June.
Elazac v Shirreff is useful as it summarises the modern authorities on what constitutes an employment relationship, and reiterates that control is a significant consideration when faced with a question of whether or not a relationship is employer-employee. It also points out that where an alleged employee employs his own employees to work on the alleged employer's tasks, then this is normally not indicative of an employment relationship between the alleged employee and the alleged employer.
