In Australia, complex legal tests apply when determining whether a person who performs work for a company is an employee or contractor, and in determining whether the company receiving the benefit of the work (or an interposed entity such as a labour hire agency) should be regarded as the employer.
These tests, and their consequences, are illustrated in the Ramsey litigation.
Ramsey Foods Pty Ltd (Ramsey) had an agreement with Tempus Holdings Pty Ltd (Tempus) under which the latter supplied appropriate staff on a day to day basis. Ramsey paid Tempus all outgoings associated with the supply of labour.
Mr Tomlinson and a number of other persons performed work for Ramsey under this agreement. All of them were laid off without notice or termination payments when Tempus ceased to be the supplier of labour to Ramsey.
The Fair Work Ombudsman (FWO) took legal action against Ramsey claiming that the workers were employees of Ramsey and thus entitled to notice of termination, severance pay and leave payments.
The matter was heard by Buchanan J in the Federal Court, who found in favour of the FWO.
Buchanan J examined the legal principles concerning the circumstances in which a company might obtain labour without being the direct employer. His Honour referred to three possibilities: independent contracting, labour hire and intra-group arrangements.
In relation to independent contracting, Buchanan J concluded that Tempus did not stand in a traditional relationship of employer with any of the workers. Tempus had no business of its own, it earned no money, and it had no interest in the engagement of any employee. Ramsey, on the other hand, had the right to recruit the workers and dismiss them, and it had the right to decide what work was to be performed and by whom.
Buchanan J held that the arrangements between Tempus and Ramsey did not possess the necessary characteristics of labour hire because Tempus did not interview or select the workers and did not determine their remuneration.
Finally, Buchanan J concluded that the arrangements between Tempus and Ramsey Food could not be explained as an intra-group arrangement as there was no rational business reason for Tempus to be undertaking the supply of labour. (Tempus apparently acted as a dummy employer intended to relieve Ramsay of statutory employers’ obligations.)
Declarations were made that the workers were employees of Ramsey and orders were made requiring Ramsey to pay compensation.
Some years later Mr Tomlinson commenced proceedings against Ramsey for damages for an injury suffered whilst he was working at Ramsey’s premises.
In contrast to the Federal Court proceedings, Mr Tomlinson claimed that he was employed by Tempus and his services were supplied to Ramsey. He alleged that Ramsey breached the duty of care owed to him as a person regularly sent to work at its premises.
This change in position can be explained by the fact that Mr Tomlinson was prevented by statute from claiming damages against Ramsey as his employer – among other things, a 6 month time limit applied to claims against employers.
Ramsey defended the claim on the basis that it had the benefit of an issue estoppel arising from the judgment and orders of Buchanan J. “Issue estoppel” is a principle under which a party and its “privies” (ie. those associated with it in the litigation) are estopped (prevented) from agitating in another set of proceedings an issue which was finally decided in earlier litigation.
The trial judge found against Ramsey’s issue estoppel argument for the following reasons:
- The subject matter of the litigation in the Federal Court was different from the issues here.
- The Federal Court proceedings were started by the FWO and Mr Tomlinson had no control over them. There was no privity of interest.
- Ramsey should not benefit from findings made in the Federal Court proceedings that characterised its conduct of interpositioning Tempus in the workplace structure as a sham, put in place for the purpose of avoiding employment obligations.
Ramsey successfully appealed to the NSW Court of Appeal, which found that:
- The issue of whether Mr Tomlinson was employed by Ramsey at the time of his injury was the principal issue determined by the final declarations made in the Federal Court proceedings.
- While Mr Tomlinson was not a party to the Federal Court proceedings, the FWO was his privy for the purposes of determining that issue.
- Mr Tomlinson was estopped from asserting that, at the time of his injury, he was not employed by Ramsey and so his claim had to be dismissed.
Mr Tomlinson is pursuing an appeal of the NSW Court of Appeal’s decision to the High Court of Australia.