This case shows why you should hire professionals who have a local understanding of employment law.

The Fair Work Commission (FWC) has ruled a Sydney-based Canadian worker (O’Farrell) an ‘employee’ of technology company GuestTek, despite the company claiming him to be a contractor, and awarded him US$17,704.29 in compensation for unfair dismissal.

Employee not a contractor

O’Farrell originally worked as a project manager for the Canadian company in 2009. In 2012 he was sent to Australia under a contractual arrangement that referred to O’Farrell as ‘an independent contractor at all times’.

However, commissioner Bernie Riordan found that O’Farrell was in fact an employee, not a contractor.

“It is obvious that [O’Farrell] was not performing the work of an entrepreneur who owns and operates the business,” Riordan says in the decision.

Some of the factors considered were the fact that O’Farrell was paid 12 equal instalments “irrespective of the number of work days in that calendar month”.  Also, aside from his wage, O’Farrell only charged GuestTek for his mobile phone. No other charges were made.

“There was no GST charged, no on-costs, no overheads and no profit,” Riordan says.

Australian law stipulates that an employee cannot subcontract or delegate work nor can they pay someone else to do the work, whereas a contractor can (though the Foodora case from late last year showed there is some room for interpretation here). But when O’Farrell went on annual leave, GuestTek decided to cover him internally.

A major similarity between Canadian and Australian law is that contractors aren’t entitled to leave.

According to the FWO a contractor “is not entitled to paid leave” and according to Canadian labour laws a contractor isn’t entitled to vacation pay.

“From my 30 years’ experience in industrial relations, I have never heard of a contractor accruing annual leave, taking the leave after approval had been provided by the client and then the client paying for the contractor’s replacement,” Riordan says.

It’s a duck

The jurisprudence section of the case report references a Full Bench decision which highlights the issue of distinguishing between an employee and contractor. It says that parties cannot alter the true nature of their relationship by putting a different label on it.

“In the same way that if a bird looks like a duck, walks like a duck and quacks like a duck, then it is a duck, [O’Farrell] in this case is an employee,” Riordan says.

GuestTek’s global HR manager presented the fact that the contracted said “it is expressly understood and agreed that [the] contractor is not an employee, agent, joint venture or partner of GuestTek” and that he would not “assert a claim of employment against GuestTek”.

Riordan did not accept this as evidence against O’Farrell’s unfair dismissal claim.

“For an overseas company, such a provision may result in the belief that the outcome of this matter is guaranteed,” Riordan says. “However, the Australian law does not support such an outcome.”

Interestingly, it doesn’t seem as though Canadian law supports such an outcome either. The University of British Colombia says of this same issue that “it is a misconception that contractual language is determinative in itself. It is not.”

Redundancy

In 2014 and 2017 O’Farrell signed upgraded contracts. In 2018 he was told that his position was being made redundant due to an organisational restructure.

An India-based worker took over O’Farrell’s role and three months after his dismissal the company advertised for O’Farrell’s position, an APAC project manager. Subsequently O’Farrell filed for unfair dismissal.

“It is not in dispute that [O’Farrell] was not offered this position,” says Riordan.

Riordan also says that the award O’Farrell was under (Telecommunications Services Award 2010) states that he was entitled to a consultation regarding major workplace changes.

“If [GuestTek] wanted to make [O’Farrell] redundant and transfer [his] role to Asia, then such a transfer should have been discussed with [O’Farrell].

“Alternatively, [O’Farrell] may have been able to prove that, with today’s electronic capacity, he may have been able to service [GuestTek’s] customers and market from Sydney…The lack of consultation by [GuestTek] makes [O’Farrell’s] termination harsh.”

It seems clear that GuestTek was either unaware of Australian employment law, or thought they weren’t subject to it. Ironically if they had done the exact same thing in Canada, the outcome could have been the same.

This highlights the fact that knowledge of local employment law is crucial. Had GuestTek had a qualified Australian lawyer or HR professional review the employment relationship at the beginning, or even before they dismissed O’Farrell, they could have avoided this ruling and upcoming legal complications.

“I note that the Applicant does not appear to have been paid any superannuation in accordance with the Superannuation Guarantee Levy Act or any pro rata Long Service Leave in accordance with the NSW Long Service Leave Act,” says Riordan in the decision. “The Applicant may wish to consider an application to the Fair Work Ombudsman in relation to these issues.”