DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Michael Gardiner
v
Next Residential Pty Ltd T/A Next Residential
(U2015/10461)

Application for relief from unfair dismissal - employee not contractor - commissions not earning - employee below high income threshold - Commission has jurisdiction.

[1] Mr Michael Gardiner has made an application seeking relief from unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (the Act). Mr Gardiner was employed by Next Residential Pty Ltd T/A Next Residential (Next Residential).

[2] Next Residential objects to Mr Gardiner’s application on two grounds. First that he was a contractor and not an employee and second, it says that if Mr Gardiner was an employee he earned above the high income threshold and hence is not protected from unfair dismissal.

[3] For the reasons given below I find that Mr Gardiner was an employee and that he did not earn above the high income threshold. The Commission therefore has jurisdiction to deal with his application.

[4] At the hearing Mr Gardiner was granted permission to be represented by Mr Mullally and Next Residential was granted permission to be represented by Ms Beeson.

Contractor or employee?

[5] The first jurisdictional question to be determined is if Mr Gardiner is an employee or contractor.

Evidence

[6] Mr Gardiner was engaged by Next Residential pursuant to a ‘Sales Agent Agreement’ (SAA). The SAA states that the Sales Agent is a proprietary limited company, being PAB Consultants Pty Ltd. Mr Gardiner signed the SAA on 27 February 2012 as a director of PAB Consultants Pty Ltd. 1 The SAA provided for a weekly payment of $250 per week plus commission payments from Next Residential to PAB Consultants Pty Ltd (PAB Consultants). A further SAA was signed by Mr Gardiner as a director of PAB Consultants on 1 March 2013. It did not contain any weekly payments but did provide for commission payments.

[7] Mr Cameron Sims, Director of Next Residential, gave evidence that he engaged PAB Consultants to perform contract services for Next Residential. He said that Mr Gardiner was responsible for setting his own hours and controlling and regulating his own work, just as Mr Gardiner would control any staff PAB Consultants might engage. Mr Sims agreed however that Mr Gardiner came into the offices of Next Residential every day.

[8] Mr Sims said that Mr Gardiner had full control over discounts he offered to potential clients, over split commission arrangements, incentives and the like. He says that PAB Consultants was required to file weekly reports with him so that he could be satisfied the terms of the SAA were being met.

[9] Mr Gardiner did have a desk at Next Residential although he was not required to attend at the office. Under cross examination Mr Sims agreed that Mr Gardiner actually had an office with a door.

[10] Mr Sims said that Mr Gardiner was given a Next Residential email address so he could communicate with the Next Residential team and so that he had access to up to date marketing material. He agreed further that there were computer related issues at Next Residential where Mr Gardiner was included in email advice in relation on viruses and upgrades.

[11] Mr Sims said that Mr Gardiner was not required to wear a uniform or any Next Residential ‘livery’ although Mr Gardiner did request some Next Residential badged polo shirts. Whilst this was contrary to Next Residential’s policy Mr Sims said he provided them anyway.

[12] Mr Sims agreed that an office phone number of Next Residential advertised on its website and marketing material was diverted to Mr Gardiner’s own mobile phone. Mr Gardiner was generally expected to take calls coming through from this number to his mobile phone. Mr Sims also agreed that Mr Gardiner had a business card issued by Next Residential and that card contained the office number that was diverted to Mr Gardiner’s mobile phone. 2

[13] Mr Sims also gave evidence that, when he was proceeding on some leave, he issued, at the request of the sales agents, guidelines on ‘deals’ that might be done in his absence and some dollar limits on such deals. Further, his evidence is that Mr Gardiner was included in general Next Residential correspondence and information generally sought from Next Residential employees was also sought from Mr Gardiner

[14] Mr Sims confirmed that Mr Gardiner was, apart for a brief period at the commencement of the relationship, paid solely on commission and that he was responsible for raising invoices so he could be paid his commission. Mr Sims agreed that this was not done until Next Residential issued a commission statement to Mr Gardiner which occurred once a job had reached a certain stage.

[15] Mr Gardiner’s evidence is that he commenced working for Next Residential following a direct approach to him by Mr Sims. He agreed that, in his discussion with Mr Sims, it was made clear that to work for Next Residential he would need an ABN but says that PAB Consultants (his company) was not discussed with Mr Sims. He agreed however that he knew he was being engaged by Next Residential in his capacity as a director for PAB Consultants.

[16] Mr Gardiner agreed that he provided his own laptop and mobile phone whilst working for Next Residential.

[17] He said that when he commenced working for Next Residential he was one of five people working for the company and he was the only office based sales representative. He said he had his own office and his hours of work were set by Next Residential but were flexible. He says he was under the control and supervision of Mr Sims.

[18] Mr Gardiner said that he was required to attend sales meetings every week, and was included in all meetings and emails regarding the operation of the sales division of the business.

[19] Further, he was required to have his personal laptop configured to Next Residential’s server and provided with a Next Residential email account through which he did all of his work for Next Residential. He was given his own office based phone extension and business cards which showed he worked for Next Residential. 3

[20] Mr Gardiner said that during the period of his purported employment with Next Residential he did take some leave but was not permitted to appoint someone to do his work during this period. Whilst he was not required to complete a leave form he said that he advised Mr Sims when he would be taking leave. He agreed that that he did not have any subcontractors or anyone else he could engage but said that Mr Sims would make arrangements for his work to be covered when he was away.

[21] Mr Gardiner gave evidence that he was given two polo shirts by Mr Sims and that they were for him to ‘represent the company’. 4 Whilst Mr Gardiner agreed he was not directed to wear the polo shirts he did question why he would have been given them if he was not to wear them.

[22] Mr Gardiner confirmed that, in addition to his Next Residential email account, he also had a personal ‘gmail’ address.

[23] Mr Gardiner gave evidence that Next Residential would provide a commission statement to him, which he would then copy into an invoice and provide to Next Residential. Mr Gardiner maintained in cross examination that Next Residential would ‘generate an invoice’ which he would then work off in invoicing for commissions due.

[24] Mr Gardiner gave evidence that his accountant looked after quarterly business statements, taxes, superannuation and the like in relation to PAB Consultants.

Consideration

[25] In French Accent v Rozario 5 the Full Bench of the Commission outlined the matters necessary for consideration in determining if a person is properly an employee or contractor. I do not repeat that decision here.

[26] In Kimber v Western Auger Drilling Pty Ltd 6 the Full Bench said:

[41] The courts have developed a multi-factorial approach, in which there is no single decisive criterion to determine whether a contractual relationship is one of employment or one subject to a contract for services. This approach requires the consideration of the various indicia as summarised in French Accent set out above. It is also clear from the decision of the Full Bench of the Federal Court in ACE Insurance Limited v Trifunovski and others, that no one single criterion will necessarily be determinative and that each matter will turn upon the particular circumstances of the case, with the decision maker weighing all the relevant factors. 

[42] French Accent also endorses the following propositions in Abdalla v Viewdaze Pty Ltd t/a Malta Travel that:

“the ultimate question will always be whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf : that is whether, viewed as a practical matter, the punitive worker could be said to be conducting a business of his or her own. This question is answered by considering the terms of the contract and the totality of the relationship.”

[footnotes omitted]

[27] I have applied the approach in French Accent and Kimber to the matter before me.

Did the putative employer exercise control?

[28] I am satisfied that Next Residential exercised a degree of control over the work of Mr Gardiner.

[29] In having reached this decision I have taken into account the industry within which Next Residential operates and the work required to be undertaken by Mr Gardiner (whether as himself or through PAB Consultants). Mr Gardiner was a Sales Agent. His role was to sell the product (houses) offered by Next Residential. To this extent it is not surprising that Mr Gardiner may not have kept strict ‘office’ hours. I have taken into account however that a phone number of Next Residential was forwarded to Mr Gardiner’s mobile phone, that he had a Next Residential business card, that he had a Next Residential email address, that he was required to attend sales and training meetings and that, to a reasonable degree Next Residential established guidelines around ‘deals’ that could be done with potential clients.

Did Gardiner perform work for others?

[30] There is no doubt that Mr Gardiner performed work for others through PAB Consultants while he was engaged by Next Residential. The work performed involved planning drawings. 7 There is no evidence of substantial work being performed by Mr Gardiner outside the work he performed for Next Residential.

[31] In terms of sales agent work, the contract signed by Mr Gardiner (both in 2012 and 2013) specified that the sales agent ‘must not act for any other builder or marketing body in the residential home building industry.’

[32] Whilst I accept that Mr Gardiner could perform work for others he certainly could not do so in the area of work he was performing for Next Residential. In this respect the SAA was restrictive of the work PAB Consultants could perform.

[33] If the business of PAB Consultants was limited to the type of work Mr Gardiner performed for Next Residential the terms of the SAA would place a restrictive bar of Mr Gardiner or PAB Consultants being able to take on any other work. As it is, Mr Gardiner has skills as an architectural draftsperson and PAB Consultants did do some other work, albeit of a limited nature, whilst engaged by Next residential.

Did Gardiner have a separate place of work or advertise his services at large?

[34] Mr Gardiner had a home office. He also had an office at Next Residential which he says he attended every day. Mr Sims says he did not see Mr Gardiner every day but does agree that he had an office and did attend at Next Residential daily.

[35] There is no evidence that Mr Gardiner advertised his ‘services at large’ at some address other than that of Next Residential although he did have a private email address (the gmail address) which he used. This is not determinative of much however as many employees with a business email address also maintain a private email address for non-work matters.

Did Gardiner provide and maintain his own tools and equipment?

[36] Mr Gardiner owned and used his own laptop and mobile phone. I consider these criteria to be relatively neutral in my considerations.

Could Gardiner delegate or subcontract the work?

[37] Whilst it is clear from the contract that Mr Gardiner could delegate or subcontract the work, Mr Sims made it clear that he would not allow a ‘stranger’ to access the Next Residential office. Mr Sims did agree however that Mr Gardiner could delegate the work if the person was ‘competent’. To this extent it would appear that the capacity to delegate did have limitations beyond the ‘competence’ of the person the work was delegated to.

Did the putative employer have the right to dismiss or suspend Mr Gardiner?

[38] Under the contract Next Residential retained the right to terminate the services of PAB Consultants.

Was Mr Gardiner presented as an emanation of the business?

[39] Mr Gardiner had a Next Residential business card. It indicated he was a senior housing and design consultant for Next Residential. When a potential client rang Next Residential the call was, in all likelihood, answered by Mr Gardiner or at least diverted to his mobile phone such that a client would understand that Mr Gardiner was from Next Residential. He was also given and wore Next Residential polo shirts. Mr Gardiner says he doesn’t know why he was given the polo shirts if he was not expected to wear them.

[40] I note in the contracts Mr Gardiner signed it stated that:

All sales representatives whilst in attendance at a display home are not required to wear clothing of any type bearing the name or logo of Next Residential…

[41] I do not accept that Mr Gardiner was required to wear the polo shirts provided by Mr Sims and certainly the contract he signed did not require that he wear the polo shirt. In other respects however I am satisfied that Mr Gardiner was put forward as an emanation of Next Residential.

Deductions from wages

[42] No income tax or superannuation was paid by Next Residential in relation to Mr Gardiner.

Provision of leave

[43] Mr Gardiner was not provided with any paid leave and was not required to produce evidence of illness for personal leave purposes.

Was Gardiner remunerated by periodic wage?

[44] Mr Gardiner was not remunerated by regular weekly wages. A $250 per week payment to him for the early period of his engagement was not paid as salary (it was inclusive of GST) and in any event, by the terms of the contract, 8 was required to be repaid out of his first commission payment.

Did Mr Gardiner created goodwill or saleable asset?

[45] There is no question in my mind that Mr Gardiner did create goodwill for Next Residential. His continued income stream from Next Residential was contingent on Next Residential delivering to its clients so that more clients might be encouraged to enter into contracts for housing. This is no reason to doubt that Mr Gardiner did create good will for Next Residential.

Did Gardiner spend a significant portion of his remuneration on business expenses?

[46] There is no evidence that Mr Gardiner spent a significant portion of his remuneration on business expense.

Conclusion as to contractor or employee

[47] No single one of the indicia outlined above point conclusively in determining if Mr Gardiner was a contractor or employee.

[48] Standing back from the minutia and viewing the relationship as a whole however, I am satisfied that Mr Gardiner was an employee of Next Residential. I have reached this conclusion taking into account his place of work, the type of work undertaken, the business cards and email address, that the Next Residential office phone was redirected to Mr Gardiner’s mobile phone and the limitations on Mr Gardiner performing work for others as specified in the SAA. These factors, taken as a whole, paint a strong picture of an employee/employer relationship.

[49] That Mr Gardiner completed work for PAB Consultants whilst engaged by Next Residential does not change this overall picture.

High income threshold

[50] Having determined that Mr Gardiner was an employee of Next Residential it is now necessary to determine if his annual rate of earnings exceeded the high income threshold (s.382(b)(iii) of the Act).

[51] The high income threshold, at the time Mr Gardiner was dismissed, was $136,700. If Mr Gardiner’s annual rate of earnings exceeds this amount he is not protected from unfair dismissal and the Commission does not have jurisdiction to consider his application.

[52] Earnings are defined in s.332 of the Act:

332 Earnings

(1) An employee’s earnings include:

(a) the employee’s wages; and

(b) amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and

(c) the agreed money value of non-monetary benefits; and

(d) amounts or benefits prescribed by the regulations.

(2) However, an employee’s earnings do not include the following:

(a) payments the amount of which cannot be determined in advance;

(b) reimbursements;

(c) contributions to a superannuation fund to the extent that they are
contributions to which subsection (4) applies;

(d) amounts prescribed by the regulations.

Note: Some examples of payments covered by paragraph (a) are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).

(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:

(a) to which the employee is entitled in return for the performance of work; and

(b) for which a reasonable money value has been agreed by the employee and the employer;

but does not include a benefit prescribed by the regulations.

[53] In December 2012 Mr Gardiner signed a contract with Next Residential which provided for a remuneration structure apparently of:

0-3 homes per month 3.5% incl GST

4-6 homes per month 4.0% incl GST

7+ homes per month 4.5% incl GST

[54] In the contract signed by Mr Gardiner in 2013 his remuneration structure was adjusted to provided that his remuneration was a total commission of 4% including GST to a maximum of 4 jobs per month a less $1500 fee payable on contract signing (Mr Gardiner was selling houses). In addition he was entitled to a bonus structure.

[55] It appears from the evidence before the Commission that there was some adjustment to commission rates effective 26 June 2015. 9

[56] In Jenny Craig Weight Loss Centres Pty Ltd v I Margolina 10 the Full Bench said of s.332 of the Act:

[19] It seems clear enough that the legislature intended to exclude bonus payments which are contingent, either because they depend on performance in some way or because management reserves the right to modify or discontinue them. On the evidence in this case it seems that both the annual bonus and the one-off five year bonus are contingent in the relevant sense. In relation to the five year bonus, there is a specific reservation of the right to alter or discontinue the plan. It is unclear, although it is likely that the same reservation applies in relation to annual performance bonuses. This cannot be determined in advance because the remuneration policy provides that: “Management has the right to modify and discontinue the remuneration plan at its discretion”.

[footnote omitted]

[57] Next Residential submitted that, while a portion of Mr Gardiner’s income cannot be determined in advance, if he was an employee at the time his employment was terminated at the very least $384,000 of annual earnings would be guaranteed.

[58] It makes this submission on the grounds that if Mr Gardiner had not sold two houses per calendar month he would not have met the requirements of his contract 11 and his employment would have been terminated for poor performance. On the basis that each house sold was worth, on average $400,000, calculating this across the year and applying the 4% commission payment means that Mr Gardiner would have received $384,000 in commission in any one year.

[59] Anything he sold above the minimum of 2 houses per month, it conceded, could not be determined in advance.

[60] Mr Gardiner submitted that all payments made to him by Next Residential are in the form of commissions and bonuses.

Conclusion on high income threshold

[61] The submissions of Next Residential in this matter are novel but they do not overcome the clear legislative intent of the section of the Act. The legislative note under the s.332 indicates that it is intended that ‘payments the amount of which cannot be determined in advance’ includes commissions. The Explanatory Memorandum to the Fair Work Bill 2009 indicates that commission payments are amounts which cannot be determined in advance. 12

[62] Even if the performance required of Mr Gardiner was that he sold two houses per month the indisputable fact is that the payments to him were commission based. Evidence of the change in commission payments memo issued in June 2014 demonstrates that the commission structure could change. Further, Mr Gardiner did not control the value of the houses he sold. This was totally within the control of Next Residential.

[63] A failure of Mr Gardiner to achieve the level of sales required by his contract would not necessarily lead to dismissal as suggested by Next Residential. It may lead to the provisions of training, counselling, development of a performance plan or any other range of alternatives an employer may have at its disposal to assist an employee perform at the required level.

[64] I am satisfied that the payments made to Mr Gardiner were all in the form of commission payments or bonuses, none of which could be determined with any certainty in advance.

[65] For this reason I find that Mr Gardiner’s annual rate of earnings did not exceed the high income threshold.

Conclusion

[66] There is no suggestion that Mr Gardiner is covered by an award or enterprise agreement.

[67] Given that I have found that Mr Gardiner was an employee of Next Residential and that his annual rate of earnings dis not exceed the high income threshold I am satisfied that Mr Gardiner is protected from unfair dismissal. The Commission therefore has jurisdiction to deal with his application for relief from unfair dismissal.

[68] The file shall be returned for further programming for conciliation and/or arbitration.

COMMISSIONER

Appearances:

P. Mullally of Workclaims Australia for the applicant.

J. Beeson of Beeson HR Consulting for the respondent.

Hearing details:

2015.

Melbourne:

November 17.

 1   Exhibit A20.

 2   Exhibit A1.

 3   Exhibit A1.

 4   Transcript PN624.

 5   [2011] FWAFB 8307.

 6   [2015] FWCFB 3704.

 7   Exhibit R3.

 8   Exhibit A20.

 9   Exhibit A14.

 10   [2011] FWAFB 9137.

 11   Exhibit A20, paragraph 2.5 of the SAA. This clause was replicated in the 2013 contract.

 12   Paragraph 1327.

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