Edited version of private advice

Authorisation Number: 1051582917627

Date of advice: 11 November 2019

Ruling

Subject: Status of worker

Question 1

1.    Are the trainers and assessors, engaged by the Principal, considered common law employees for the purposes of subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

2.    Are the trainers and assessors considered employees for the purposes of subsection 12(3) of the SGAA?

Answer

·         Having considered the nature of the working relationship between the Principal's trainers and assessors and the Principal, it has been determined that the relationship is one of employer and employee under both subsection 12(1) and subsection 12(3), of the SGAA 1992.

·         On balance, the factors which point to the trainers and assessors being employees outweigh those which indicate they are not employees therefore the Principal needs to provide superannuation guarantee support.

This advice applies for the following period:

Year ending 30 June 2020

The arrangement commences on:

1 April 2019

Relevant facts and circumstances

In your request you made the following contentions:

1.    The Company is a vocational education organization, delivering courses under the Australian national qualification framework. The Principal is registered with the Australian Skills and Qualifications Authority (ASQA) and must operate pursuant to the National Vocational Education and Training Regulator Act 2011. (the NVR Act).

2.    The Principal engages trainers and assessors to provide training and assessment services for the Principal's students by:

·         Marking written assessments which includes the provision for feedback.

·         Face to face assessments with students including at the Principal's workplace.

·         Assessment of Recognition of Prior learning (RPL) to determine if a student is able to receive a credit towards their studies due to prior studies and/or work experience.

1.    Assessment services are provided on an 'as required' basis as there is no set volume of students assessments submitted therefore workers are used on an on demand basis.

The trainers and assessors therefore can either accept or decline assessments as students request to have their work assessed.

If the trainers and assessors agree to provide the requested services, then they will provide the services at the time that suits the trainers and assessors.

2.    The substance of the agreement between the trainers and assessors and the Principal is for them to mark written assessments against agreed marking guidelines together with providing constructive and timely feedback to students regarding their assessments. This includes responding to students queries regarding their assessments and clarification of any topic material.

3.    Under the agreement, the main remuneration for approved workers is the standard rate per marked assessment based on marking blocks. Assessments may vary in length, complexity and course level qualifications possessed by the trainers and assessors and assessment remuneration levels will vary in line with these parameters. The standard rate is reduced where re-marking assessments is required. Other circumstances where trainers and assessors can be paid a standard rate are:

·         Assessment validation and moderation where trainers and assessors provide additional professional or separate work experience

·         Where trainers and assessors provide formal feedback to students, either face to face or direct support about their assessments/reports.

·         Trainers and assessors participate in meetings as required by the Principal's senior staff.

1.    The trainers and assessors have control over how they provide their services. They have discretion of when they perform the engaged service including:

·         when and how often they accept assessments for marking

·         choose their own times

·         accept or decline assessments to mark

·         can choose their own work location and supply their own equipment to deliver their services.

2.    The trainers and assessors cannot find another substitute assessor/trainer to perform like services as the trainers and assessors are required to have defined skillsets for the qualification they are assessing, as a compliance obligation imposed on the Principal by ASQA. However, this arrangement can be overridden if the trainers and assessors obtain prior approval from the Principal.

We formed our view by relying on this information

·         Private Ruling Application - supplied by the Principal

·         Annexure 2 - Questions, facts and technical analysis supplied by the Principal

·         Annexure 3 - A copy of the contractor agreement supplied by the Principal

·         Our response to your request for advice letter and information supplied by the ATO.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 Subsection 12(1)

Superannuation Guarantee Administration Act 1992 Subsection 12(3)

Reasons for decision

Summary

1.         The facts and evidence provided by you suggest that the trainers and assessors are your employees for the purposes of the SGAA and that you have an obligation to pay superannuation guarantee contributions on behalf of these trainers and assessors.

Detailed reasoning

2.         Under section 12 of the SGAA, the expression 'employee' has both its ordinary (common law) and extended meanings.

3.         Under subsection 12(1) of the SGAA, if a person is an employee at common law, that person is an employee under the SGAA. However, classification of a person as an employee for the purposes of the SGAA is not solely dependent upon the existence of a common law employment relationship.

4.         Subsection 12(3) of the SGAA extends the definition of 'employee' to include a person who works under a contract that is wholly or principally for labour.

5.         Labour includes mental and artistic effort as well as physical toil (Superannuation Guarantee Ruling (SGR 2005/1) Superannuation guarantee: who is an employee?, paragraph 67).

6.         SGR 2005/1 (paragraph 20) states that an employer must provide the prescribed minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge.

Common law tests

7.         Although the Courts have identified various factors to indicate the nature of the employment relationship, these factors are only ever a guide in determining it. It is necessary in each case to examine all the terms of the contract and to determine whether, on balance, the person is working in the service of another for an agreed payment (as an employee) or is working on his or her own behalf to achieve a result.

8.         A clause in a contract that purports to characterise the relationship between the parties as that of principal and independent contractor and not that of employer and employee must be considered with all the other terms of the contract.

9.         Whatever the facts of each particular case may be, there is no single feature which is determinative of the contractual relationship. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor (Stevens v. Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16; (1986) 63 ALR 513 (Stevens v. Brodribb) at CLR 29; ALR 521) (Refer SGR 2005/1, paragraph 25). This means the parties cannot deem the relationship between themselves to be something that it is not (Re Porter: re Transport Workers Union of Australia (1989) 34 IR 179).

10.      Significantly, there are many relevant facts and circumstances that are determinant of a true contractual relationship, some pointing to a contract of service, others pointing to a contract for services (Commissioner of Payroll Tax (Vic) v. Mary Kay Cosmetics Pty Ltd 82 ATC 4444; 13 ATR 360).

11.      In deciding whether a worker is a common law employee, there are seven tests to consider.

1.    The control test

2.    The integration test

3.    The results test

4.    The delegation test

5.    The terms of engagement test

6.    The risk test

7.    The provision of tools and equipment test

12.      The common law tests have been applied against the facts provided, to determine if the workers were employees under common law.

The control test

13.      The classic test for determining whether the relationship of employer and employee exists is the exercise of control over the manner in which the work is performed.

14.      With increasing usage of skilled labour and consequential reduction in supervisory functions, the focus of the control test has changed from the actual exercise of control to the right to control (emphasis added).

15.      The right to control versus actual control is particularly relevant where the nature of the employment requires a considerable degree of experience, knowledge or skill. In these circumstances, it is to be expected that the employer will leave the performance of the activity up to the employee.

16.      While control is important, it is not the sole indicator or whether or not a relationship is one of employment. The main features of the control test are the right to control:

·         how

·         when

·         where and

·         who is to perform the labour.

17.      It is not necessary for the employer to exercise day to day control over the worker. What is important is that the employer has the legal right of control. As stated by Dixon J in Humberstone v. Northern Timber Mills;

The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in performance of his work resided in the employer so that he was subject to the latter's orders and directions.

18.      In Hollis v. Vabu, the majority of the High Court quoted the following statement by Windeyer J in Marshall v. Whittaker's Building Supply Co:

... the distinction between an employee and 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.

19.      Therefore the justices were concerned with the fundamental question of whether the worker was operating their own independent business or was operating within Vabu's business.

20.      The High Court in Zuijs v. Writh Brothers Proprietary Ltd (Zuijis) described the significance of control in the context of skilled employment where the nature of the work performed left little scope for detailed control:

21.      What matters is lawful authority to command as far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters.

22.      According to such case law, this test is considered the 'surest' guide as to whether there is an employer / employee relationship - a test of master vs servant, whereby the employer has the right to control the employee (whether or not that right is exercised). Therefore, the test of control is not necessarily found in an employee's special skills, even though there is very little room for direction by the employer. Rather, the test of control is found where the employer has the 'right' to control, and this is more important than its actual exercise.

How this affects you

23.      The Principal falls under the classification as a Registered Training Organisation (RTO) registered by the Australian Skills Quality Authority (ASQA) to deliver vocational education and training (VET) services. They offer certificate, advanced certificate and diploma level courses in business, accounting, management, marketing and communication.

24.      The written agreement stipulates what amounts of remuneration will be provided that are dependent on the trainers and assessors' qualifications level, the completion level of each assessment, and a decreasing amount of remuneration levels dependant on how many times each assessment needs to be re-marked.

25.      The Principal's submission acknowledges that the trainers and assessors must meet certain service standards. However; the Principal believes that 'these service standards are to ensure that the engaged services provided by the trainers and assessors are of a satisfactory level to meet ASQA's requirements' rather than being a direction from the Principal on how its trainers and assessors must comply with their requirements to perform the engaged services.

26.      As stated under Zuijis, the test of control is not necessarily found in an employee's special skills, the test of control is found where the employer has the 'right' to control. A service standard imposes a set of conditions the trainers and assessors must carry out within the requirements of the said standards which implies the Principal has a right to control the trainers and assessors' performance.

27.      The trainers and assessors are only permitted to carry out the Principal's training and assessment services by holding approved skills and qualifications as per ASQA requirements. Further, the agreement states that trainers and assessors are to undertake professional development to keep their skill at an acceptable level to meet the vocational competencies criteria required by ASQA.

28.      The Principal also requires its trainers and assessors to possess a National Police Check and complete a Working with Children Check. The Principal has the right to terminate the agreement if checks identify a criminal history.

29.      Further the agreement stipulates that trainers and assessors must 'comply with any policies, rules, regulations or procedures prescribed by the Company as well as all applicable laws' relating to the Principal and 'act in a manner consistent with the best interests of the company'.

30.      The Principal's trainers and assessors could assign and/or delegate their services but only with prior written consent from the Principal. Further, the agreement states that 'the worker will not delegate their obligations and responsibilities to any third party or agent' without the Principal's approval.

31.      The trainers and assessors' tasks are not directly supervised, although the agreement stipulates that if the trainers and assessors fail to satisfactorily perform the agreed services, delivers any services in competition with those offered by the Principal without prior written approval or fails to meet the relevant requirements under any Australian law or standard, will have their agreement terminated.

32.      According to the Principal's contention, trainers and assessors are engaged for their specific skills, qualifications and experience and these are required for delivery by the Principal of high quality training products. They are engaged to perform vocational assessments related to specific accredited subjects usually from their home, but could provide these services at the Principals premises if they choose to as well.

33.      The Principal relied heavily on the contention that trainers and assessors are independent in the way they have discretion and flexibility when to perform the engaged services, can choose whether to accept or decline assessments to mark and can provide the services from a location of their choice. We view this essentially as the trainers and assessors lending their skills to best deliver these accredited vocational assessments in a way that allowed them an opportunity to deliver them in their own style. This is an argument that supports the control test rather than an indication of their true independence.

34.      The Principal is regulated as a Registered Training Organisation (RTO) to deliver training/assessments in training products that fall under a set curriculum. A high degree of direction and control is not uncommon in contracts for services where a high degree of skill and qualifications are required to successfully fulfil the requirements of the agreement. The Principal sets the courses and assessment structure and it is up to the trainers and assessors as to how they delivered these set services to the Principal's students, utilizing the tools provided to the trainers and assessors to ensure the services are compliant.

35.      It's our view that the Principal retains the ultimate right of control over how these accredited packages are provided in order for the students to complete vocational units of competence. The assessments are not created or generated by the trainers and assessors themselves but are set for the Principal's students by the Principal, which the trainers and assessors subsequently mark as part of their services.

36.      When considering the decisions in Dixon J in Humberstone v. Northern Timber Mills, Hollis v. Vabu and Zuijs v. Writh Brothers Proprietary Ltd and taking into account all the facts in this case, it can be concluded that the Principal held the ultimate authority to control their worker.

37.      In Hollis v. Vabu, the majority of the High Court quoted the following statement by Windeyer J in Marshall v. Whittaker's Building Supply Co:

... the distinction between an employee and 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.

38.      Therefore the justices were concerned with the fundamental question of whether the worker was operating their own independent business or was operating within Vabu's business for example.

39.      Our view is that the trainers and assessors were operating within the Principal's business and not as an independent business.

40.      This lends weight to the argument that that the trainers and assessors were employees of the Principal for the purposes of the SGAA.

The integration test

41.      A significant factor in establishing the nature of the contractual relationship at common law is to determine whether the worker's services are an integral part of the Employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is otherwise known as the 'business' or 'integration' test.

42.      In a contract of service, a worker is employed as an integral part of the business and under a contract for services, although a worker may do work for a business, the work is simply an accessory to the business and not integral (Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans 1952 1 TLR 101).

43.      The skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skill or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills.

44.      Activities or requirements of the worker which may indicate his/her integration into the business include:

·         the hours spent working for the Principal during the term of the contract are equivalent to those of a full-time employee

·         the work is normally performed at the premises of the Principal

·         the work is performed using a substantial amount of the Principal's assets and equipment

·         inability to perform other work which gives rise to a conflict of interest

·         the individual's performance is monitored

·         the requirement to comply with the Principal's policies, guidelines or directions

·         the requirement to maintain dress standards, use uniforms or display signage

·         attending meetings on behalf of the Principal or representing the Principal's business

·         receiving training by the Principal.

45.      As set out in SGR 2005/1, there are situations where, having regard to the custom and practice of the work, or the practical circumstances and nature of the work, very little or no tools of trade or plant and equipment are necessary to perform the work. This fact by itself will not lead to the conclusion that the individual engaged is an employee. The weight or emphasis given to this indicator (as with all indicators) depends on the particular circumstances and the context and nature of the contractual work. All the other facts must be considered to determine the nature of the contractual relationship.

How this affects you

46.      The Principal contends that the trainers and assessors' contract states 'the approved trainers and assessors may perform work for persons other than the company provided that the company has first consented to them doing so'. According to the Principal, this is in order to 'preserve and protect the Principal's proprietary information and systems and manage any perceived conflicts of interests should the trainers and assessors provide their services to a competitor'. Therefore, pursuant to these terms of the contract, the trainers and assessors are permitted to provide their services to their people other than the Principal.

47.      They must maintain currency in the industry (to meet ASQAs requirements) and are responsible for all necessary professional development (to provide quality training and assessment services).

48.      The agreement stipulates the company must 'pay the trainers and assessors the contract rate for the performance of services under this agreement and provide the trainers and assessors with a copy of the learning materials, assessments and marking guides.

49.      The Principal asserts under these agreement conditions that trainers and assessors are not restricted in being engaged by their agreement therefore they are of the view this indicates an independent contractor relationship.

50.      However, as was stated under the control test, the Principal relied heavily on the contention that trainers and assessors' skillsets allow them the flexibility to operate independently and provide the flexibility to transfer their skillsets to other clients albeit they are required to seek the Principal's permission to do so.

51.      As held in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans under a contract of service, a person is employed as part of the business and their work is done as an integral part of that business; whereas under a contract for services, the person's work, although done for the business, is not integrated into it but is only an accessory to it.

52.      In this case, the trainers and assessors work for the Principal's organisation that markets itself as a vocational training provider, providing courses as a regulated RTO related to the vocational training industry. Even though the trainers and assessors were independently trained and qualified as a trainer and assessor, while they worked for the Principal, the trainers and assessors were integrated within that organisation's business model by providing comprehensive training and assessing services in that industry by following a set curriculum.

53.      Therefore on balance, our view is that the trainers and assessors were operating within the Principal's business and not as an independent standalone business.

The results test

54.      Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services. The production of a given result is considered to be a mark of independent contractor status (World Book (Australia) Pty Ltd v. FC of T 92 ATC4327).

55.      In a contract for services, the contract specifies the services to be performed in return for an agreed payment. Satisfactory completion of the specified services is the result for which the parties have bargained.

56.      Conversely, under a contract of service, payment is not necessarily dependent on, and referable to, the completion of the specified services.

57.      The meaning of production of a given result as referred to in World Book (Australia) Pty Ltd v FC of T refers to the workers freedom to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome (SGR 2005/1, paragraph 43). Results contracts describe traditional principal/independent contractor arrangements where a specific identifiable task is performed. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to the hours worked.

58.      Having regard to the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine result based contracts. For example, there are results based contracts where the contract price is based on an estimate of the time and labour cost that is necessary to complete the task, or may even be calculated on that basis, subject to reasonable completion times (SGR 2005/1, paragraph 45).

59.      In a contract for services (whether written, oral or implied), the contract specifies the services to be performed in return for an agreed payment. Satisfactory completion of the specified services is the result for which the parties have bargained. Conversely, under a contract of service, payment is not necessarily dependant on, or referable to the completion of the specified services.

60.      While the notion of payment for result is expected with a contract for services, it is not necessarily inconsistent with a contract of service. The High Court in Hollis v Vabu considered that the payment to the bicycle couriers per delivery, rather than per time period engaged was a natural means to remunerate employees whose sole purpose is to perform deliveries.

61.      Therefore, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties.

How this affects you

62.      The Principal contends that the contract stipulates 'the primary remuneration for trainers and assessors is the standard rate per assessment marked. It is our view that the substance of the contract is to achieve a result on the completion of a marked assessment.' And the payment trainers and assessors will receive will be determined by the volume of assessments that they mark'.

63.      The questions that must be answered are who sets the rate of pay and whether the payment is dependent on the completion of the job/task. Further, if the job was not completed satisfactorily and the worker had to reperform the services, who would remunerate the worker under those circumstances?

64.      The written agreement states that the services are to be provided by trainers and assessors at the agreed fees of a sliding scale dependent on the trainers and assessors' level of qualifications.

65.      We consider that it was the Principal that set the rates of pay. Furthermore, additional remunerated rates of pay are provided dependent on the trainers and assessors' feedback provided on the Principal's supplied learning materials content (using their standard course derived template), contributing to the organisations assessment validation process and participating in the assessment moderation process all using the company's standard provided templates. Further amounts are paid for the trainers and assessors' participation in company meetings and what is clear is that these additional amounts are allowed for as sufficient remuneration when the fees are set in the agreement.

66.      There are a series of specific service standards that the trainers and assessors are expected to comply with in the execution of their duties with the Principal.

67.      A core component of these standards imposes conditional performance outcomes that must be met. These include marking written assessments against agreed marking guidelines and providing timely feedback to students. Timely feedback according to the standards means marking an assessment within required timeframes and responding to any student queries within required timeframes.

68.      We view that these provisions reinforce the set fees structure established and remunerated by the Principal.

69.      The trainers and assessors are clearly servicing the students as clients of the Principal, they are being remunerated by the Principal, and have service standards imposed upon them. They are not being paid 'for result' that is expected under a contract for services.

70.      We consider that the workers were not free to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome. It is our contention that this was not a contract for services to produce a given result.

The delegation test

71.      An unlimited power to delegate work is an important indication that the worker is an independent contractor. Delegation is generally implied in a contract for services where the emphasis is on a result. However, delegation clauses are considered in the context of the contract as a whole to determine if they are consistent with the apparent essence of the contract or if they are merely self-serving statements.

72.      Delegation is not simply the act of substituting one employee for another, shifting a task from one employee to another or the ability to swap shifts or request a fellow employee to perform some duties. It is the ability to subcontract or employ others to perform the work, or to assist the contractor in their business to perform the work contracted for.

73.      The power to delegate or subcontract (in the sense of the capacity to engage others do the work) is a significant factor in deciding whether the worker is an employee or independent contractor. If a person is contractually required to personally perform the work, this is an indication that the person is an employee.

74.      A common law employee may frequently 'delegate' tasks to other employees, particularly where the employee is performing a supervisory or managerial role. However, this 'delegation' exercised by an employee is fundamentally different to the delegation exercised by an independent contractor. When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker, rather the workers have merely organised a substitution or shared the work load. This is not delegation consistent with that exercised by an independent contractor (Refer SGR 2005/1, paragraphs 48-50).

75.      A capacity to delegate work indicates the worker is an independent contractor. If the contract does not expressly require the worker to personally perform the services, an independent contractor has the capacity to delegate or subcontract all (or some) of the work to others. This is because the emphasis in the contract is on the production of a particular result. The contractor is therefore responsible for remunerating the replacement worker.

How this affects you

76.      The agreement states that '... the contractor agrees that it will not employ employees, contractors or sub-contractors of the company during the terms of this agreement or for twelve months thereafter without prior written consent of the company. The contractor will not delegate its obligations and responsibilities to any third party or agent who is not approved in advance and writing by the company.'

77.      The Principal acknowledges that the trainers and assessors are not allowed to delegate its obligations and responsibilities to a third party who is not approved in advance' by them. They argue that rather than limiting the manner in which the trainers and assessors operates, it is intended to ensure that only appropriately qualified individuals are responsible for marking assessments and that students receive a uniform standard of assessment feedback.

78.      The Principal states 'this limitation is required as they have a statutory obligation imposed on it by ASQA (under the RTO Standards 2015) to ensure only qualified and experienced parties carry out assessment activities in accredited courses.'

79.      The agreement bases worker's remuneration on a basic level to a more specialist level of qualifications for specific remuneration amounts. It is the ATO's view that since many subcontractors are engaged on the basis of their personal skills, qualifications and experience, the worker will often not have the capacity to delegate the contractual work.

80.      Their skills and experience could be transferred to another worker if they could not undertake the course work themselves. But the Principal is inherently responsible for delegating and assigning course work to another trainer if an existing trainer cannot carry out their training requirements.

81.      The written agreement states that the worker may assign or subcontract any part of the workers services with the prior written consent from the Principal.

82.      It's the ATO's view that the trainers and assessors do not have the ultimate right to delegate without the approval of the Principal.

83.      On balance, it is the ATO's view that the Delegation test is indicative that the trainers and assessors are an employee for the purposes of the SGAA.

The terms of engagement test

84.      Some conditions of engagement are intimately associated with employment and may therefore be persuasive indicators; For example:

·         provision of benefits such as annual, sick, and long service leave

·         provision of other benefits prescribed under an award for employees

·         payer prescribed times and location for the performance of work

·         remuneration in the form of a salary or wage

·         the worker uses assets and materials provided by the payer or is reimbursed, or paid a compensatory allowance for expenses incurred in respect of use of own assets and materials

·         payer discretion within the boundaries of industrial relations laws in respect of task allocation and termination.

85.      However, this list is not exhaustive and there is not a standard set of conditions applicable to an employee and another (different) set applicable to an independent contractor. This was highlighted Re Porter: re Transport Workers Union of Australia (1989) 34 IR 179 as follows:

...Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive. A court will always look at all of the terms of the contract to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it. As Mr. Black put it in the present case, the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.

How this affects you

86.      The work is carried out carried out usually at the trainers and assessors' home (but this could change if invited by the Principal to their premises to participate in a workshop or assessment validation exercise) and the Principal provides training and assessment materials for the job.

87.      The trainers and assessors are expected at their own expense to supply any equipment necessary to perform their services. However the agreement states that 'the Principal provides trainers and assessors with copies of the learning materials, assessments and marking guidelines to train students' together with the template platform that the trainers and assessors need to access to undertake their student assessment work.

88.      The signed written agreement does not have any provisions for benefits prescribed under an award for employees including annual, sick or long service leave. It states that 'all types of professional indemnity and public liability insurances are borne by the trainers and assessors'. The Principal also establishes the condition whereby any intellectual property created by the trainers and assessors is to remain the property of the Principal. Further, the agreement stipulates that any information and material the trainers and assessors receives from the Principal is agreed by the trainers and assessors to be held in confidence and if this condition is breached, legal recourse is open to the Principal.

89.      The ATO accepts that the written agreement establishes the working terms and conditions with a party engaged under contract to the Principal. It sets out the trainers and assessor's obligations and duties, particularly as set out under the service standards and provides a schedule of items for which the trainers and assessors agrees to work to. Under commercial law, once there is an agreement, intention or consideration present, an agreement will be binding whether or not both parties have read and understood the agreement's terms. The trainers and assessors continued engagement by the Principal over the period under review demonstrates an implicit acceptance of the terms and conditions of the written agreement.

90.      The Principal maintains that the trainers and assessors were engaged under the terms and conditions of a 'Contractor Agreement,' and the purported working relationship as per the Principal's definition of 'contractor' throughout the document did exist in reality. The ATO has taken into account the decision in Porter: re Transport Workers Union of Australia (1989) 34 IR 179. Justice Gray said "...the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognize it as a duck." The ATO has examined the true substance of the relationship to determine the underlying reality of what occurred and measured it against the requirements of the SGAA and the Commissioner's view of who is an employee found in SGR 2005/1.

91.      When considering Re Porter: re Transport Workers Union of Australia and taking into account the working relationship in its entirety, it is our view that the 'Terms of Engagement' test is indicative that the trainers and assessors is deemed an employee for the purposes of the SGAA.

The risk test

92.      Where the worker bears little or no risk of the costs arising out of injury or defect in carrying out his or her work, he or she is more likely to be an employee.

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

94.      The higher the proportion of the gross income of the worker which is required to be expended in deriving that income, and the more substantial the assets which the worker brings to the tasks, the more likely that the contract is for services, or that the contract is with an independent contractor.

95.      The issue of risk concerns the matter where the worker bears little or no risk of the costs arising out of remedying a defect in carrying out the work. (SGR 2005/1, paragraph 51)

How this affects you

96.      The written agreement states that the trainers and assessors must maintain at all times during the contract period appropriate workers compensation, professional indemnity and public liability insurance policies that cover the trainers and assessors.' The Principal maintains that the trainers and assessors bore complete risk of costs arising out of injury or defect in carrying out their work which suggests that the Principal would have not been exposed to a commercial loss, as a result of any injury the trainers and assessors may have sustained, or for any liability for the cost of rectifying faulty work.

97.      The Principal has the option under the agreement 'to terminate the employment of the worker if they fail to adequately perform the engaged service.'

98.      The agreement includes an indemnity clause which amongst other things 'indemnifies the company against all expenses, losses, damages and costs that the company may sustain or incur as a result' of several conditions where any claims could be made against the Principle.

99.      On balance, when considering the totality of the facts and evidence in this Risk test, it is the ATO's view that the trainers and assessors is deemed an employee for the purposes of the SGAA.

Provision of tools and equipment and payment of business expenses

100.    It has been held that the provision of assets, equipment and tools by an individual and the incurring of expenses and other overheads is an indicator that the individual is an independent contractor.

101.    However, the provision of necessary tools and equipment is not necessarily inconsistent with an employment relationship. As highlighted in Hollis v. Vabu, the provision and maintenance of tools and equipment and payment of business expenses was significant for the individual to be considered an independent contractor. The majority of the High Court stated that:

'In classifying the bicycle contractors as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories. A different conclusion might, for example, be appropriate where the investment in capital was more significant, and greater skill and training were required to operate it.'

102.    The weight or emphasis given to this indicator, as with all the other indicators depends on the particular circumstances and the context and nature of the contractual work. All the other facts must be considered to determine the nature of the contractual relationship.

How this affects you

103.    The Principal contends that for the delivery of its engaged services, the trainers and assessors are to provide all of 'their own tools and equipment including laptops and stationary as required' and is not reimbursed by the Principal.

104.    However, trainers and assessors are supplied with access to the Principal's learning platform. This platform is a significant means by which students assessments are submitted. This platform forms an intrinsic part of working for the Principal as it is designed to ensure the Principle's confidential and proprietary information is not sent through personal channels (eg. through a trainers and assessor's own email addresses) and the Principal maintains its obligations under the Privacy Act.

105.    The Principal includes the trainers and assessors' industry currency and experience through their professional development as being the most important tool available to them. According to the Principal, other important tools also includes 'a police clearance and working with children check.' However, it is accepted that the provision of tools and equipment is typically regarded as assets and tangible items that are used to assist in the running of a business.

106.    It can be argued that the Principal supplied the bulk of the material for trainers and assessors to have the ability to assess their students including all the intellectual and proprietary safe guards that came with that material to protect the Principal's commercial interests. Any items the trainers and assessors supplied were incidental in carrying out the effective operation of their role

107.    On balance, it is the ATO's view that the Provision of tools and equipment test resembles an employer/employee relationship for the purposes of the SGAA.

Employee by extended definition

108.    For the purposes of subsection 12(3) of the SGAA (SGR2005/1, paragraph 11), where the terms of the contract in light of the subsequent conduct of the parties indicate that:

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

·         the individual must perform the contractual work personally (there is no right of delegation); and

·         the individual is not paid to achieve a result,

the contract is considered to be wholly or principally for the labour of the individual engaged and he or she will be an employee under that subsection.

How this affects you

109.    In order to leave no doubt as to the Commissioner's view of this matter, the extended definition has been considered as follows and the ATO's conclusion supports the view that the trainers and assessors are principally employed for their labour.

110.    Although there is a contract in place and the trainers and assessors are classified by the Principal as a 'contractor', they are engaged principally for their labour, being trainer/assessment services. Their personal labour includes their technical knowledge and communication skills to grade and report on course work. They are not responsible for setting the course matter, educational material and assessment submissions, but rather grading and communicating it in a manner as directed by the Principal to ensure the students are graded for their accredited course work.

111.    We consider that it was the Principal that set the rates of pay. Furthermore, the written agreement confirms, what amounts of remuneration will be provided. The rates of pay are dependent on the workers qualifications level.

112.    The additional hourly payments are tied to the level of worker's involvement beyond the core assessment and follow-up tasks. For example, where the worker provides formal face-to face student assessment, feedback, contributes to the organisations assessment validation process and participates in the assessment moderation process, using the Principal's standard. The Principal relied heavily on the contention that trainers and assessors' skillsets allows them the flexibility and latitude to operate independently.

113.    We viewed this aspect essentially as the trainers lending their skills to best deliver these accredited training assessments in a way that allowed them an opportunity to deliver them in their own style. The Principal sets the courses and assessment framework and it is up to the workers as to how they deliver these set services to the Principal's students.

114.    We view this as further evidence of integration of the worker in the Principal's business and not further evidence that the worker was engaged to produce a given result.

115.    The trainers and assessors are clearly servicing the students as clients of the Principal and not as a 'payment for result' that is expected under a contract for services.

116.    We consider that the trainers and assessors are not free to employ their own means (such as third party labour,) to achieve the contractually specified outcome. It is our contention that this is not a contract for services to produce a given result.

117.    Trainers and assessors bring their intellectual skills and experience to the contract and do not invoice for the use of any materials, assets or equipment used. The Principal supplied the bulk of the material for assessment purposes.

118.    The trainers and assessors aren't able to delegate work to others in the conventional sense. The Principal expressly requires the trainers and assessors to perform the work personally and if the trainers and assessors engages an alternative worker, it would be the Principal that is required to approve that person. Although the Principal allows trainers and assessors to assign their services, their prior written consent is required. This is not delegation consistent with that exercised by an independent contractor and the ATO considers that the trainers and assessors do not have the ultimate right to delegate the work.

119.    On balance, the ATO considers the working arrangement between the Principal and the trainers and assessors as being a contractual agreement principally for the labour of the trainers and assessors engaged and the relationship as being classed as an employer/employee arrangement for the purposes of the SGAA.

Conclusion

120.    It is clear that the contract between the Principal and the trainers and assessors states that the relationship between the parties is that of 'principal' and 'independent contractor.' However, clauses in a contract that intends to characterise the relationship between the parties as that of 'principal' and 'independent contractor' and not that of 'employer' and 'employee' must be considered with all the other terms of the contract.

121.    Such clauses cannot singularly receive effect if it contradicts the agreement as a whole. The totality of the relationship between the parties must be considered to determine the true relationship between the worker and the principal. The parties to an agreement cannot alter the true substance of the relationship by simply giving it a different label and deem the relationship between themselves to be something that it is not. Subsequent conducts of the parties demonstrate the relationship has a character contrary to the terms of the contract.

122.    On balance of the tests presented above, the ATO has concluded that the relationship between the Principal and trainers and assessors are one of 'employer' and 'employee' under the common law definition of the term for the purposes of the SGAA.

123.    The ATO has applied the facts of this case against the extended definition under subsection 12(3) of the SGAA. The facts support the view that the trainers and assessors are principally employed for their labour under an 'employer/employee' relationship. Therefore, the trainers and assessors are considered to be the Principal's employees for the purposes of the SGAA and are eligible for superannuation support.