Edited version of private advice

Authorisation Number: 1052242955760

Date of advice: 2 May 2024

Ruling

Subject: Status of the worker

Question 1

Are the A (the Workers) that are engaged by B (B entity) employees within the ordinary or common law meaning for the purposes of subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

Question 2

Are the Workers engaged by B entity employees under the expanded definition of an employee under subsection 12(3) of the SGAA?

Answer

Yes.

This advice applies for the following periods:

1 July 2017 to 30 June 2024

The scheme commenced on:

1 July 2017

Relevant facts and circumstances

1.     B entity is a not-for-profit organisation that provides ..., to help clients from ... background.

2.     The constitution of B entity provides that the principal objects are to establish, operate and promote a ... service for the ... and ... of ...:

1. for the ... of ... in the community;
2. for the delivery of ... programs for the ...;
3. to promote the provision of ...;
4. to assist ... to ...;
5. to provide a range of ... services ...;
6. to promote ... in the quality and effectiveness of ... by ...;
7. to provide ... services in ... of ... including ....

3       The Workers are ... engaged by B entity to prepare and deliver ... programs (the Programs). There are around X active Workers who run the Programs.

4       The Programs are almost exclusively run by the Workers (who are not considered 'employees' by B entity at the point of applying for this Advice). Rarely, a Worker running a Program is an employee of B entity. This can occur when the Worker running a Program applies for a job at B entity and is successful. On this occasion, they may continue working under their employment agreement and their Worker contract simultaneously.

5       The main services that B entity provides to its clients are not limited to the Programs that are run by the Workers. For example, there are X other types of services that are run by B entity's employees, ranging from X to X employees for each type of the service. The Programs make up less than X% of B entity's overall service delivery.

6       It is common for the Workers to work as 'X' for other organisations simultaneously while delivering the Programs.

Method of Engagement

7       It is a requirement of becoming a Worker that they have ... to be able to form participating groups.

8       ...who are interested in becoming a Worker must first undertake an unpaid training program run by B entity. After completion of the training program, the person will be able to work as a Worker.

9       When a Worker has identified a need to host a Program for X, they will approach B entity to propose the Program and confirm whether B entity has the ability to 'host' the Program. Almost all of the Programs are initiated by the Workers.

10     There are a few different types of the Programs.

11     A Program is hosted by two Workers under the oversight of B entity's X officer. The number of workshops and hours in a Program varies, dependent on the type of Program that the Workers choose to run.

12     When B entity approves the Programs, B entity will engage the Workers (individually) under 'X contracts' (the Contracts).

The Contracts

13     There are 3 sample contracts provided, in which it is found that the 3 sample contracts follow very similar formats.

Services provided by the Workers

14     Clause X of the Contracts set out the primary services provided by the Workers:

15     In the 3 sample contracts, the preparation and delivery of a set number of workshops over a set period are outlined. For instance, they are X workshops of X hours each, over X weeks (Contract 1), X workshops of X hours each, over X weeks (Contract 2) and X workshops of X hours each, over X months (Contract 3).

16     In Contract 1 and Contract 2, it also includes the preparation and delivery X catering for the duration of the Program.

17     In Contract 1 and Contract 2, it is provided that the workshop guide (the Guide) has been developed by B entity and is required to be used as the basis of the workshops. A copy of the Guide will be supplied to the Worker for use during the workshops on a USB drive, which will remain the property of B entity to be returned in good condition at the end of the contract period.

18     The 3 sample contracts provide that times, dates and venues for the delivery of the workshops are determined and arranged by the Workers after appropriate consultation with the B entity's X officer and the workshop participants.[1]

19     The 3 sample contracts require that Workers will attend requisite X group, X and X sessions for the purposes of maintaining skills and professional development.

20     The Workers are responsible for maintaining detailed workshop records and feedback to the B entity's X officer on the appropriateness and effectiveness of the Program design and suggestions for improvements.

The contract fees

21     Clause X of the Contracts set out the fees payable to the Workers.

22     Subclause X.X of the sample contracts stipulate the 'X fees'[2] payable for the preparation and delivery of a set number of workshops. The 'X fees' for delivery of workshops are $X in Contract 1, $X in Contract 2 and $X in Contract 3.

23     Subclause X.X provides that the contract fees will be paid in X instalments, X instalments and X in Contract 1, Contract 2 and Contract 3, respectively on receipt of invoices and relevant paperwork (including X forms and workshop progress notes)[3]. The invoice (format) and other relevant paperwork (format) shall be provided by B entity.

24     Catering payments - in Contract 1, catering payments are $X ...; in Contract 2, it is $X ....

25     Payment will also be made for the Workers' attendance to the requisite X group, X and X sessions, at an hourly rate of $X.

26     The Workers are responsible for making arrangements with the Australian Taxation Office in the declaration of fees received, including obtaining an ABN registration where relevant.

27     There is no provision made by B entity for sick leave, annual leave or superannuation payments.

Insurance and Indemnity

28     Clause X of the sample contracts contain a number of subclauses that release and indemnify B entity against all liability (i.e. physical injury, damage to property, defamation, etc.) that may arise directly or indirectly in the course of carrying out the services under the Contracts.

29     The Workers shall keep up to date all insurances required to give effect to the indemnities given under the Contracts, except where C insurance are covered by B entity in some contracts - within the 3 sample contracts, Contract 2 and Contract 3 include the clause that C insurance are covered by B entity.

Contract Material

30     Clause X of the sample contracts provides that ownership of all materials produced to conduct the workshops shall remain with and be the property of B entity.

Code of Ethics

31     Subclause X.X in the sample contracts require the Workers to behave in a manner which is ethical, professional and sensitive to the needs of the client group, by

a)    not disseminating any materials in addition to the Guide (i.e. of a political, religious or business nature) unless approved by B entity's X officer;[4]

b)    not promoting their own personal or business interest within the workshops;

c)    not taking advantage of personal information obtained from the group during the program;

d)    dressing and behaving in a manner which is appropriate to the X background of the group;

e)    being non-judgemental;

f)     being punctual and well prepared.

32     Subclause X.X provides that the Workers have a responsibility to maintain confidentiality with regard to any information obtained in relation to B entity, B entity's clients and workshop participants.

Termination and variation of a contract

33     Either B entity or a Worker may terminate a contract by giving X days of notice in writing to the other party.

34     B entity may instantly terminate a contract at any time where a Worker is found to have breached the Code of Ethics.

35     Where a Worker is unable to deliver a workshop due to sickness or emergency, they must advise the B entity's X officer as quickly as possible of their inability to attend.

36     In all other circumstances where a Worker is unable to deliver a particular workshop, they must advise the B entity's X officer of their inability to attend at least X days prior to the planned workshop date so that the workshop can be rescheduled or a suitable replacement found.[5]

37     In the event that a Worker is unable to deliver a particular workshop, they are not entitled to any payment in respect to that workshop.[6]

Additional workshops

38     If any further workshops are arranged on top of the contracted workshops, the Worker and B entity will be the subject of a separate contract.

Other relevant information

39     In relation to the preparation and delivery X catering,

• While most Workers would purchase food from a shop or engage with a X to cook the food, a small number of Workers would prepare/cook the catering food themselves.
• In the provided Workers' sample invoices, there is a Program of the same type as Contract 1 (with the value of preparation and delivery of X workshops amounted to $X) show that the X payment for provision of catering (...) amounted to $X.
• In the provided Workers' sample invoices, there is a different type of Program (with the value of preparation and delivery of workshops amounted to $X) with reimbursements for food catering in X separate invoices valued ranging from $X to $X, totalled $X.

40     A client/workshop participant may provide evaluation for the Program. However, there is no connection between evaluation result and the contract fees payable to the Workers. The client evaluation is not about the Worker's performance but about the overall efficacy of the Program. The Worker's performance is assessed by B entity's X officer with factors including Worker's timeliness in attending workshops, ..., etc.

41     The contract fee to the Worker is contingent on the completion of the workshops and providing required admin tasks and paperwork. In the situation where a Worker was absent or failed to provide any of the workshops, they would not be paid for the workshops. If this absence or failure occurred more than occasionally, the Worker's contract may be terminated.

42     There is no formal participation agreement entered with individual workshop participant. There is, however, a negotiated group agreement created at the beginning of each Program ....

43     The Workers do not wear any B entity's branded apparel and B entity Logos are not present in the Guide, except there is a small legal sentence around copyright at ...

44     The Workers often distribute information relating to services relevant to the module they are delivering. This information includes brochures for ... which participants might find useful. B entity's brochures (with B entity Logos) may be distributed in relation to the X session only.

Relevant legislative provisions:

Superannuation Guarantee (Administration) Act 1992 subsection 12(1)

Superannuation Guarantee (Administration) Act 1992 subsection 12(3)

Reasons for decision:

Question 1

Are the A (the Workers) that are engaged by B (B entity) employees within the ordinary or common law meaning for the purposes of subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Summary

The Workers are considered employees within the ordinary or common law meaning.

Detailed reasoning

Employee or contractor

45     The relationship between an employer and employee is a contractual one. When a business engages a worker, generally it will either be a relationship of employment, often referred to as a contract of service, or a principal/independent contractor relationship that is referred to as a contract for services.

46     The leading case outlining the principles governing the ordinary meaning of 'employee' is Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contacting Pty Ltd[7] (Personnel Contracting). The majority of the High Court in Personnel Contracting confirmed that whether a worker is an employee of a putative employer is a question of fact to be determined by reference to an objective assessment of the totality of the relationship between the parties, having regard only to the legal rights and obligations which constitute that relationship.[8]

47     As such, the totality of the relationship is derived from the rights and obligations created by the contract[9] between the parties, construed at the time they entered into it.[10] Where the parties have comprehensively committed the terms of their relationship to a written contract, and the contract has not been varied, challenged as a sham or subject to legal or equitable relief, then it is the legal rights and obligations in that contract alone that are relevant in this analysis.[11]

48     Evidence of subsequent conduct and work practices can only be considered in some instances, such as establishing the existence of a contract, identifying the contractual terms agreed to where the contract is wholly or partially oral, demonstrating that the contract has been varied or is a sham, and establishing evidence of other legal or equitable entitlements.[12]

49     Where a contract is oral, evidence of the way the parties conducted themselves may be considered but only for the purposes of inferring what terms and conditions were verbally agreed to or necessarily implied into the contract. The relationship cannot be characterised based on the 'reality' of what took place over the duration of the performance of work.[13]

50     The examination of the totality of the relationship must be considered through the focussing question of whether the worker is working in the business of the putative employer, having regard to the various employment indicia from case law.[14] In Marshall v Whittaker's Building Supply Co,[15] Windeyer J said that the distinction between an employee and an independent contractor is:

"rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own."

51     The common law indicia include the level of control exerted by the putative employer, the extent of integration of the worker into the business, whether the worker is able to delegate, whether the remuneration is for a specified result, whether the worker uses their own tools and equipment, whether either party generates goodwill and the level of risk borne by each party. Importantly though, the indicia are not to be applied as if they are a mechanical checklist.[16]

Whether worker is serving in your business

52     An employee serves in the business of an employer, performing their work as a representative of that business. In contrast, an independent contractor provides services to a principal's business, but the contractor does so in furthering their own business enterprise and representing their own business.

53     A person is not excluded from being an employee just because they also conduct their own business.[17] A person may realistically have more than one job and may both conduct their own business and be employed in someone else's business.

54     As such, it is helpful to focus attention upon the aspects of the contractual relationship which bear more directly upon whether the worker's work was so subordinate to the employer's business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise.[18]

Characterising a putative employer's business

55     The correct characterisation of the business being carried on by the putative employer is an essential part of determining whether the worker is working in the business of the putative employer.[19]

56     In Personnel Contracting, the majority considered that the core of Construct's business was their promise to supply compliance labour to their customer, Hanssen. Construct's right to control the provision of Mr McCourt's labour was an essential asset of their business, which they deployed in order to fulfil contractual obligations with Hanssen.[20]

57     The Australian Taxation Office's response to the Personnel Contracting case is provided in a Decision impact statement (the Statement) issued on 31 March 2022, and states:

The long-established employment indicia are still relevant when characterising the contractual relationship between the parties. However, they are to be considered through the focusing question or prism of whether the putative employee is working in the business of the employer. This reflects the Commissioner's understanding and application of the business integration test. The High Court has elevated that test as one of the primary and focusing aspects of the examination of the contractual terms. In addition, the High Court has continued the emphasis on the examination of control as a complementary focus to the business integration test.

Presenting as an emanation of the business

58     Whether a worker is represented to the public as an emanation of the putative employer's business is a key consideration in determining whose business they are serving in.

59     However, it is important to distinguish between a worker being contractually obliged to present as an emanation of the putative employer's business (such as in Hollis v Vabu Pty Ltd (Hollis)[21]), and them merely choosing to do so to abide by a business' expectations (such as in ZG Operations Australia Pty Ltd & Anor v Martin Jamsek & Ors (ZG Operations)[22]).

Application

60     In this case, as restricted by the 'Code of Ethics' section in the Contracts, the Workers cannot promote their own personal or business interest within the workshops. It is therefore difficult to conclude that the Workers are furthering their own business enterprise and representing their own business.

61     In addition, we are of the view that the services performed by the Workers, are in line with the 'principal objects' as listed under B entity's constitution. For example, the workshops that the Workers ..., may assist ...[23]; the workshops are likely part of ...[24].

62     For the requirement that the Guide must be used as the basis by the Workers in the workshops, and the Guide is developed by B entity, we hold a view that it is more likely for the workshop participants to see the Workers as an emanation of B entity's 'business'/operations.

63     Accordingly, it is reasonable to consider that the Workers' services are subordinate to B entity's 'business'/operations.

Control

64     An employer is usually able to control how, where and/or when its employee performs their work. The importance of control in this context lies not in its actual exercise, but rather in the contractual right of the employer to exercise such control.[25]

65     Where the main operating activity of the business is the supply of labour or a service of some kind, often a critical element of the business is the need to retain control over that labour or the workers providing the service. This was emphasised by Kiefel CJ, Keane and Edelman JJ in Personnel Contracting:

"... the existence of a right of control by the putative employer over the activities of the putative employee serves to sensitise one to the subservient and dependent nature of the work of the employee, so as to assist in an assessment of whether a relationship is properly to be regarded as a contract of service rather than a contract for services."[26]

66     A term in a contract that purports to confer a right to control must be interpreted in the context of the broader contract and the services being provided. A contract may afford an employer a different kind of control, such as control over how long a casual worker can work, or the clause may allow 'reasonable direction' as distinguished from a true right to control a worker.[27]

Application

67     The Contracts provide that times, dates and venues for the delivery of the workshops are determined and arranged by the Workers after appropriate consultation with the B entity's X officer and the workshop participants.

68     More importantly, the Contracts require that the Guide must be used by the Workers as the basis for the workshops, and the Guide is developed by B entity.

69     The paragraphs (a to f) under the 'Code of Ethics' section in the Contracts also impose restrictions and control to the Workers as to how they behave in order to comply with this section.

70     Clause X of the sample contracts provides that ownership of all materials produced to conduct the workshops shall remain with and be the property of B entity - this shows that B entity has the control over all the materials produced to conduct the workshops.

71     The above paragraphs indicate that B entity retains a certain level of control (although not full control) regarding where and when the work is conducted, along with a high level of control over how the Workers perform their work and the materials produced to conduct the workshops.

72     Given the overall control that B entity purports to have over the Workers, we consider that this element leaning towards a finding that the Workers are employees of B entity.

Delegation

73     An unlimited, unfettered power to delegate or subcontract to others to perform the work is usually an indication that the worker is not an employee.[28] That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise. In contrast, where a person is contractually required to personally perform the work, this points to the person being an employee. Personal service is generally seen as a critical feature of an employment relationship, whereas a contractor having the ability to utilise their own workforce is consistent with carrying out their own business.

⁷⁴          True delegation is differentiated from situations where the worker has delegated tasks in a supervisory capacity or has asked another colleague to take an additional shift or responsibility where the worker is unable to work.[29] In these arrangements, the worker has merely organised a substitution or shared the workload. It is not the same as the freedom of an individual to subcontract or employ others to perform the work in their own business. A subcontractor is generally paid by the worker, reflecting that they work for the worker, whereas a substitute is usually paid directly by the putative employer, without the involvement of the worker.

75     Some contracts may provide a "limited or occasional" power of delegation where the scope and operation of the power is so narrow that the worker cannot exercise it unilaterally, for example where the putative employer needs to provide consent before a subcontractor is engaged. This factor is not inconsistent with an employment relationship[30], as the putative employer effectively has full control over who provides the services.

76     The case in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (On Call) entailed both of these circumstances. A purported power to delegate was found to be not any more than job swapping that can occur amongst casual employees, given the requirement that any replacement interpreter had be on the register and approved by On Call.[31]

Application

77     While the 'Termination and variation of a contract' section of the Contracts provides,

•         Where a Worker is unable to deliver a workshop due to sickness or emergency, they must advise B entity's X officer as quickly as possible of their inability to attend.

•         In all other circumstances where a Worker is unable to deliver a particular workshop, they must advise B entity's X officer of their inability to attend at least X days prior to the planned workshop date so that the workshop can be rescheduled or a suitable replacement found.

•         In the event that a Worker is unable to deliver a particular workshop, they are not entitled to any payment in respect to that workshop.

We do not believe that the Workers have the right of unlimited, unfettered power to delegate or subcontract to others to perform the work. In contrast, the circumstances of this case align with the situations described in paragraphs 75 and 76 above, which are not considered inconsistent with an employment relationship.

'Results' contracts

78     Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services.[32]

79     The meaning of the phrase 'producing a result' means the performance of a service by the worker for the putative employer where the worker is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to provide the worker's labour.

80     Under a results-based contract, payment is often made for a negotiated fixed price on completion of the job, as opposed to an hourly rate.[33] The total fee may reflect an estimated completion time.

81     However, a piece rate or output-based remuneration can still be consistent with an employment relationship if they are a natural means to remunerate the particular kind of task the worker is performing.[34] For example, in Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd (Roy Morgan), the Court found that although interviewers were only paid on the completion of each assignment, their pay was calculated by reference to their time spent, not for producing a result.[35] In Hollis, it was considered that payment to the bicycle couriers per delivery was a natural means to remunerate employees whose sole purpose is to perform deliveries, for ease of calculation and to provide an incentive to more efficiently to make deliveries.[36]

Application

82     In this case, we do not find any clearly specified result outlined in the clauses of the Contracts. For instance, there is no benchmark specified to measure the workshop participants' X improvement/achievement as result of attending the workshops. Furthermore, it's been provided that even the workshop participants may provide feedback/evaluation; the contract fees are not affected by the feedback/evaluation outcome.

83     It is noted that the Workers are remunerated with a hybrid fee structure - the 'X fees' for the preparation and delivery of workshops appear to be negotiated fixed prices, while payments for the Workers' attendance to the requisite X group, X and X sessions are at an hourly rate. However, we do not consider this fee structure inconsistent with an employment relationship, as it is highly likely that the negotiated fixed price component is calculated by reference to Workers' time spent, depending on the type of the Program rather than producing a result.

Tools and equipment

84     A worker who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required for their work and be reimbursed for business expenses by the employer. This includes being given a reimbursement or allowance for the use of the worker's own assets such as a car.

85     In comparison, independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses.[37] Usually, they will have factored these costs in their overall fee or will seek separate payment for such expenses from the principal.

86     The question of scale with respect to the cost of tools and equipment is important. Where a worker uses a substantial item or piece of equipment for which they are wholly responsible to conduct their work, the mechanical aspect of the contract outweighs the personal.[38]

87     Equipment that is not specialised or used only for completing the contracted services, such as a mobile phone, are less likely to be considered significant.[39]

Application

88     In this case, we do not find any specific tools or equipment required from the Workers by the clauses of the Contracts. In contrast, it is noted that:

•         the Contracts require that the Guide must be used by the Workers as the basis for the workshops, in which the Guide is developed by B entity;

•         ownership of all materials produced to conduct the workshops (including the Guide loaded to the USB drive) shall remain with and be the property of B entity;

•         the Workers are reimbursed for the food purchased for catering in some of the workshops.

89     We consider that the above three points are in support that the Workers are integrated as employees into the business with the tools and equipment provided and be reimbursed for business expenses by the employer. Additionally, no evidence was provided that the Workers have their own premises from where they conduct the workshops.

Goodwill and Intellectual Property

90     If an independent contractor performs services in the course of their own business, it would be common for the contractor to be able to generate goodwill for that business.

91     Where a contract between a worker and putative employer prevents any goodwill from accruing for a worker's possible business, this may indicate that the worker is instead serving in the putative employer's business.

Application

92     In this case:

•         the Workers cannot promote their own personal or business interest within the workshops;

•         ownership of all materials produced to conduct the workshops shall remain with and be the property of B entity.

We therefore consider it is unlikely that the Workers are able to generate goodwill for 'their business'.

Risk

93     Generally, employers are vicariously liable for negligence and injury caused by their employees. In contrast, a principal will not be liable for negligence or injury caused by an independent contractor.

94     Where a contract requires a worker to obtain their own insurance or indemnify the putative employer against loss arising from harm or injury caused by the worker, it may be seen as a consequence of a subjective characterisation that the contract is one for service, and as such must be considered in light of the entire contract.

95     In On Call, although interpreters were contractually required to indemnify On Call against loss, Bromberg J found that On Call bore the ultimate financial risk for a failure by an interpreter to perform the work, having taken out its own insurance policy against claims made by clients and not financially penalising interpreters for unsatisfactory work.[40]

96     In Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd[41], the Full Federal Court concluded although these workers were required to acquire their own public liability insurance, this one factor alone was insufficient to support a conclusion that the workers were not employees.

Application

97     In this case, we find that there are mixed factors in this element:

•         clause X of the sample contracts contain a number of subclauses that release and indemnify B entity from and against all liability (i.e. physical injury, damage to property, defamation, etc.) that may arise directly or indirectly in the course of carrying out the services under the contracts;

•         within the 3 sample contracts, Contract 2 and Contract 3 include the clause that C insurance are covered by B entity.

98     We therefore do not consider this element points either way to an employee or subcontractor relationship.

Use of labels to characterise relationship

99     In Personnel Contracting the High Court found that the "labels" which the parties may have chosen to describe their relationship are not determinative or even likely relevant to, the characterisation of their relationship.[42] Rather the characterisation of the relationship needs to turn on the substantial rights and duties between the parties.[43]

100  Clauses that stem as a consequence of the parties' characterisation of their relationship will be similarly limited in their impact on the actual character, for the same reasons, for example obtaining an ABN or the provision or lack of provision of certain work entitlements.

Application

101  In this case, although the Workers

•         may be responsible for obtaining ABN registrations;

•         have no provision made for sick leave or annual leave

we are of the view that the label of 'X' or 'contractor' is not determinative in relation to the characterisation of the relationship.

Conclusion as to subsection 12(1) of the SGAA

102  We find that the overall impression of contractual terms that establish the parties' relationship, as analysed in the above indicia, supports that the Workers are employees of B entity.

Question 2

Are the Workers engaged by B entity employees under the expanded definition of an employee under subsection 12(3) of the SGAA?

Summary

The Workers are considered employees under the expanded definition of an employee under subsection 12(3) of the SGAA.

Detailed reasoning

103  Subsection 12(3) of the SGAA is intended to extend the scope of superannuation beyond traditional employment relationships to take into account some independent contractors who principally provide their own labour to meet obligations under a contract.

104  For a worker to be an employee under subsection 12(3) of the SGAA, three elements must be satisfied:

a.    there must be a contract (written or otherwise);

b.    which is wholly or principally for the labour of a person; and

c.     that person works under that contract.

105  For the purpose of determining if a contract is wholly or principally for the labour of a person, it is useful to identify whether the terms of the contractual relationship indicate that:

a.    the individual is remunerated (either wholly or principally) for their personal labour and skills

b.    the individual must perform the contractual work personally (that is, where there is no right to delegate, or only a limited right), and

c.     the individual is not contracted to achieve a result.

Wholly or principally for the person's labour

106  A person's labour can include mental and artistic effort, as well as physical toll.[44]

107  The words 'wholly' and 'principally' take on their ordinary meaning. The Macquarie Dictionary defines the word 'wholly' to mean 'entirely; totally; altogether; quite.' To the extent that a contract is partly for labour and partly for something else (for example, the supply of goods, materials or hire of plant or machinery), it will only meet the provision if it is 'principally' for labour. The word 'principally' is defined by the Macquarie Dictionary as 'chiefly; mainly.'

Benefit derived by the putative employer

108  The case of Dental Corporation v Moffet (Moffet) provides guidance as to determining whether the contract is wholly or principally for the labour of the individual engaged. Specifically, the question must be answered from the perspective of the person obtaining the benefit of the labour (i.e. the quasi-employer).[45]

109  In Moffet, Perram and Anderson JJ considered that the Services Agreement provided Dental Corporation, the putative employer, with two sets of benefits:[46]

"... One related to Dr Moffet's personal services as a dentist, as a practice manager, as a consultant both in relation to the administration of the practice but also in relation to fees and as a maintainer of medical records (i.e. the 'Dentistry Services' contained in Sch 1). The other was his promise that the practice would achieve a minimum cash flow which was backed up by a right in Dental Corporation to reduce his monthly drawings by 50% until any shortfall was made good."

110  Dr Moffet's obligation to provide personal services as a dentist and manager was 'for labour', whereas the promise to achieve the minimum cash flow was not.[47] The two benefits were so intertwined that they had to be dealt with together, where the requirement to provide minimum annual cash flows could not be met without Dr Moffet carrying out his services.[48] For that reason, the Services Agreement was, from Dental Corporation's perspective, wholly or principally for Dr Moffet's labour.[49] It was substantially for that purpose[50], notwithstanding that the contract also provided a secondary, non-labour benefit.

Contract for a result

111  Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is not wholly or principally for the person's labour, but rather for the worker to produce the result they have contracted to produce. While the worker may perform labour, they do so for their own purposes to achieve the contracted result.[51]

112  A contract is for the production of a given result where the worker is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not wholly or principally to provide the worker's underlying labour that produces the result.

113  Where a worker uses a substantial item or piece of equipment for which they are wholly responsible to conduct their work, the contract may be better described as for a result that entails the specific use of the item.[52] In other circumstances, the contract may be for the sum of multiple components that involve both labour and equipment, but the use of the equipment is so significant that the labour is no longer principal. This contract would not be wholly or principally for the worker's labour even if it is not for a result.

114  Under a results-based contract, payment is often made for a negotiated fixed price on completion of the job, as opposed to an hourly rate.[53] The total fee may reflect an estimated completion time.

115  However, a piece rate or output-based remuneration can still be consistent with an employment relationship if they are a natural means to remunerate the particular kind of task the worker is performing.[54] For example, in Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd (Roy Morgan), the Court found that although interviewers were only paid on the completion of each assignment, their pay was calculated by reference to their time spent, not for producing a result.[55] In Hollis, it was considered that payment to the bicycle couriers per delivery was a natural means to remunerate employees whose sole purpose is to perform deliveries, for ease of calculation and to provide an incentive to more efficiently to make deliveries.[56]

As such the contractual relationship as a whole must still be considered to determine whether the legal rights and obligations in contract demonstrate an intention to wholly or principally engage labour to serve in the putative employer's business or to obtain a result.

Worker must perform the work personally

116  Subsection 12(3) of the SGAA requires the contract to be for the worker's labour specifically. An unlimited, unfettered power to delegate or subcontract to others to perform the work is usually an indication that the worker is not required to perform the work personally.[57] That is so even if the contractor actually does personally perform the work and had no intention of doing otherwise. Even if a contract is "for labour", an unrestricted delegation power indicates that the contract is not for the worker's labour.

117  Some contracts may provide a "limited or occasional" power of delegation where the scope and operation of the power is narrow and the worker cannot exercise it unilaterally, for example where the putative employer needs to provide consent before a subcontractor is engaged. The putative employer effectively has full control over who provides the services and the contract more clearly contemplates that it would primarily be the worker who does the work. Thus a limited delegation power may indicate that while the contract is not wholly for the worker's labour, it is still principally for their labour.

118  True delegation is differentiated from situations where the worker has delegated tasks in a supervisory capacity or has asked another colleague to take an additional shift or responsibility where the worker is unable to work.[58] In these arrangements, the worker has merely organised a substitution or shared the workload. It is not the same as the freedom of an individual to subcontract or employ others to perform the work in their own business. A subcontractor is generally paid by the worker, reflecting that they work for the worker, whereas a substitute is usually paid directly by the putative employer, without the involvement of the worker.

119  The case in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (On Call) entailed both of these circumstances. A purported power to delegate was found to be not any more than job swapping that can occur amongst casual employees, given the requirement that any replacement interpreter had to be on the register and approved by On Call.[59]

Person works under the contract

120  The word 'work' in subsection 12(3) of the SGAA takes on its ordinary meaning. The Macquarie Dictionary defines 'work' as a verb to mean 'to do work, or labour; exert oneself.' Where a person has provided the agreed services in accordance with the contract, the person has worked under the contract.

121  Where a person has a right to delegation and has in fact delegated their work to someone else, it is less likely that the person has worked under the contract.

Application

122  In this case, we consider that there are written contracts between the Workers and B entity so the element 'a' under subsection 12(3) is met.

123  With respect to the element 'b' under subsection 12(3), we are of the view that properly construed, the contracts are principally for the labour of the Workers, for the below reasons:

•         the remunerations for the preparation and delivery of workshops and the attendance to the requisite X group, X and X sessions can be considered 'wholly' for the Workers' personal labour and skills, while it may be arguable that the payments for the catering may not be principally for labour. However, as evidenced by the sample contracts and the Workers' sample invoices, the remuneration values for their personal labour and skills have far exceeded the values of catering. We therefore conclude that the overall remunerations are 'principally' for labour.

•         as analysed in Question 1 of this Advice, the Workers have no right or only a limited right to delegate, they therefore must perform the contractual work personally.

•         as analysed in Question 1 of this Advice, the Workers are not considered contracted to achieve results.

124  With respect to the element 'c' under subsection 12(3), we consider that the Workers do not have a right to freely delegate and as such have worked under the Contracts.

Conclusion as to subsection 12(3) of the SGAA

125  We find that the Workers are employees under subsection 12(3) of the SGAA.

[1] It is provided that a Worker may also initiate a change in time/date/venue should the need arise after the signing of a contract.

[2] It's been explained that that the 'X' contract fees are normally inclusive of time incurred for a X session, ... and associated travel expenses, and at times, an X activity for the group.

[3] While the total fee is fixed, in practice, the number of instalments is at the discretion of the Workers.

[4] The Guide contains a range of modules with respect to different topics. The modules are largely fixed with only a little flexibility available to the Worker, which means the Worker cannot add any modules to the Guide. On the other hand, there are a range of activities available within each module where the Worker may determine which of these activities they will use in their workshops. Adjustments by the Facilitator to activities/extra-curricular elements may be introduced after consultation with the B entity's X officer. For example, ...

[5] Suitable replacement means another suitably trained and available Worker, and subject to B entity's consent for the work to be transferred to the suitable replacement Worker.

[6] Where a replacement is found, the replacement Worker would be paid with the relevant workshop fees by B entity (and not by the original Worker).

[7] Personnel Contracting [2022] HCA 1.

[8] Personnel Contracting at [61] and [172-173].

[9] Personnel Contracting at [60], [124] and [173].

[10] Personnel Contracting at [174].

[11] Personnel Contracting at [43], [59] and [173]; WorkPac Pty Ltd v Rossato [2021] HCA 23 at [56-57] and [63].

[12] Personnel Contracting at [54], [59] and [177].

[13] Secretary, Attorney-General's Department v O'Dwyer [2022] FCA 1183.

[14] Personnel Contracting at [36-39], [61-62], [121], [173] and [183]. The relationship may be affected by statutory provisions and by awards made under statutes (Personnel Contracting at [41]).

[15] (1963) 109 CLR 210 at [217].

[16] Personnel Contracting at [34].

[17] Personnel Contracting at [181].

[18] Personnel Contracting at[39].

[19] Personnel Contracting at [70-71], [89] and [200].

[20] Personnel Contracting at [89].

[21] Hollis 2001 ATC 4508 at [50-52].

[22] ZG Operations at [32-33] and[52-53].

[23] The principal objects of the constitution, at 'd' (of paragraph 2 of this Advice).

[24] The principal objects of the constitution, at 'e' (of paragraph 2 of this Advice).

[25] Zuijs v Wirth Bros Pty Ltd [1955] HCA 73; 93 CLR 561 (Zuijs) at [571-573]; Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16 (Stevens) at [9] and [15-20], per Mason J.

[26] Personnel Contracting at[73].

[27] ZG Operations at [69] and [105].

[28] Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at [391]. See also Neale (DFC of T) v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at[425].

[29] On Call [2011] FCA 366 at [105] and [253].

[30] Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 515, cited with approval in On Call at [283].

[31] On Call at [253].

[32] World Book (Australia) Pty Ltd v FC of T 92 ATC 4327 at [4334].

[33] For example, in Stevens.

[34] Hollis at [54].

[35] Roy Morgan (2004) SASC 288at [42].

[36] Hollis at [4520].

[37] Stevens at [12].

[38] ZG Operations at [88].

[39] Hollis at[56].

[40] On Call at [290].

[41] [2015] FCAFC 37.

[42]Personnel Contracting at [58], [63], [127] and [184].

[43] Personnel Contracting at[66].

[44] Deputy Commissioner of Taxation v Bolwell (1967) 1 ATR 862 at 873.

[45] Moffet [2020] FCAFC 118 at [96-97].

[46] Moffet at [100].

[47] Moffet at[101].

[48] Moffet at[103].

[49] Moffet at [104].

[50] Ibid.

[51] World Book at [4334].

[52] ZG Operations at [88]. See also Humberstone v Northern Timber Mills (1949) 79 CLR 389.

[53] For example, in Stevens.

[54] Hollis at [54].

[55] Roy Morgan (2004) SASC 288 at [42].

[56] Hollis at [4520].

[57] Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at [391]. See also Neale (DFC of T) v. Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 (Neale) at [425].

[58] On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 (On Call) at [105] and [253].