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Employer or Independent Contractor? Court Provides Insight Into Classification in Multiparty Arrangements

A full bench of the Victorian Supreme Court reversed an earlier decision of a single Judge who held that a worker was an employee and not an independent contractor. The Court considered and applied the common law test for an employee in the context of a multi-party arrangement.

The Facts

George Barca (Mr Barca) worked as a mechanic and roadside assistance van operator for Eastern Van Services Pty Ltd (EVS). The vehicle (the Van) Mr Barca used and his uniform were Royal Automobile Club of Victoria (RACV) branded and he provided emergency roadside assistance (ERA) services to RACV members or customers. Mr Barca had no direct legal relationship with RACV. RACV had a contract with EVS for it to provide ERA services and, in turn, EVS had a contract with Mr Barca.

In early 2016, Mr Barca lodged a claim form under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) (the ‘Act’) in relation to an injury he sustained when he was providing ERA to an RACV member. In the claim form, Mr Barca identified ‘Nation Wide Towing’ as the ‘employer responsible for this workplace’ and ticked the boxes next to the words ‘Full time’ and ‘Contractor’. EVS is part of the Nationwide Group, being wholly owned by Nationwide Towing & Transport Pty Ltd.

Initially the Victorian WorkCover Authority (VWA) accepted Mr Barca’s claim for compensation. EVS lodged an objection to liability with VWA on the ground that Barca was not a ‘worker’ within the meaning of the Act and should not be claiming compensation against EVS.

VWA determined in writing that Mr Barca was a ‘worker’ of EVS as defined in the Act. VWA concluded that the contract between Mr Barca and EVS was a contract of service and thus he was deemed an employee of EVS, and EVS was his employer.

The Trial

EVS appealed the VWA Determination to the Victorian Supreme Court. The trial judge dismissed the Appeal by EVS, concluding that Mr Barca’s work for EVS had little or nothing to do with his business and that the relationship between Mr Barca and EVS was one of employer/employee.

The Appeal

EVS appealed to the Full Bench of the Victorian Supreme Court. EVS contended that the judge should have concluded that Mr Barca was not an employee and not a worker within the meaning of the Act. The Full Bench of the Victorian Supreme Court agreed and held that Mr Barca was not a common law employee of EVS and did not fall within the definition of ‘worker’ under the Act. The Court considered a number of common law factors relevant to this determination:

  1. Control

The Full Bench of the Victorian Supreme Court considered the element of control in classifying the nature of the employment relationship between Mr Barca and EVS, and noted that control may be less significant or reflected differently in multi-party arrangements when compared to a bilateral relationship. The Full Bench held that while the relationship carried a high degree of control over the presentation of the Worker and integration into the RACV network, Mr Barca retained significant control in the way he utilised his skills and judgement in providing services.

Crucially, Mr Barca also had the freedom of choice to decline work, was not required to commit to minimum work levels and was allowed to delegate work, which supported the argument that the relationship was that of an independent contractor.

  1. Provision and maintenance of equipment

EVS did provide Mr Barca with the Van which could not be used for any other business. The provision of the Van, which is essential to the provision of the ERA services, does suggest that Mr Barca is engaged in the business of EVS rather than on his own account. Certainly, it is difficult to see how an ERA business could be conducted without the Van.

Mr Barca provided, and was responsible for, his other tools of trade. He was also responsible for the maintenance and upkeep of the Van provided by EVS.

The provision of the Van was an important factor in favour of a conclusion of an employment relationship. It is tempered, to an extent, by the fact that Mr Barca was required to keep it operational and provide other tools and equipment.

  1. Remuneration

The Court found that the frequency and form of payment was also a factor that is relatively neutral and was of a kind that might commonly be seen in both contracts of employment and contracts for services. Certainly, the absence of a fixed wage and the risk borne by Mr Barca as to the volume of work are factors that pointed away from an employment relationship.

Mr Barca was paid at “an agreed job rate for each completed job” through the provision of an invoice to EVS. He also did not receive did not receive typical employee benefits such as annual leave and sick leave.

  1. Tax arrangements

The taxation arrangements was also held to be relevant and of some weight in determining the relationship as it detracted from an employment relationship.

The evidence showed that Mr Barca treated the EVS income as business income in a personal services business. Correspondingly, EVS did not withhold tax from the payments it made to Mr Barca. Mr Barca’s tax returns show that he claimed deductions against the EVS income.

  1. Intention of Parties

The written contractual agreement between Mr Barca and EVS (“the Agreement”) also contained an express clause stating that he was a contractor of EVS.

It is important to note that when the competing indicia for employee/independent contractor are reasonably evenly balanced, as they are in this case, the parties’ own genuine understanding of their relationship will usually be very instructive.

Whilst this alone is not determinative of the true employment relationship, it was found that the agreement was longstanding, and the label of ‘contractor’ seemed to fit more harmoniously with the Agreement as a whole and was not simply a self-serving label.

The takeaway for employers

This decision provides insight into the relevant common law tests that are considered in the context of a multiparty arrangement in order to classify an employee as a workers employment relationship or one of independent contractor.

If you have any further questions regarding whether to classify workers as independent contractors or employees in the context of multiparty arrangements (or generally) please do not hesitate to contact Nick Stevens, Jane Murray or Bernard Cheng.

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