Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: French CJ,Kiefel,Bell,Gageler,Nettle JJ
• Judgment Date: 02 December 2015
• Neutral Citation: [2015] HCA 45
• Court: High Court
• Date: 02 December 2015
• Docket Number: P38/2015

[2015] HCA 45

HIGH COURT OF AUSTRALIA

French CJ, Kiefel, Bell, Gageler and Nettle JJ

P38/2015

Fair Work Ombudsman

Appellant

and

Quest South Perth Holdings Pty Ltd & Ors

Respondents

Fair Work Act 2009 (Cth), s 357.

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd

Employment law — Employer and employee — Independent contractor — Sham arrangements — Fair Work Act 2009 (Cth), s 357(1) prohibits representation by employer to employee that contract of employment under which individual is employed is contract for services — First respondent represented that employees performed work as independent contractors under contracts for services with second respondent — Whether first respondent contravened s 357(1).

Words and phrases — ‘contract for services’, ‘independent contractor’, ‘sham arrangement’.

1 French CJ, Kiefel, Bell, Gageler and Nettle JJ. The question in this appeal is whether s 357(1) of the Fair Work Act 2009 (Cth) prohibits an employer from misrepresenting to an employee that the employee performs work as an independent contractor under a contract for services with a third party. For the reasons that follow, the answer to that question is in the affirmative and the appeal should be allowed.

French CJ

The Act

2 Section 357 is within Div 6 of Pt 3–1 of the Act. An object of Pt 3–1 is ‘to protect workplace rights’1. The expression ‘workplace right’ is defined to include benefits to which a person is entitled as an employee, under a workplace instrument or under the National Employment Standards set out in Pt 2–2 of the Act2. The heading to Div 6 forms part of the Act3. The heading is ‘Sham arrangements’.

3 Section 357 provides:

• ‘(1) A person (theemployer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.

  Note: This subsection is a civil remedy provision (see Part 4–1).

• (2) Subsection (1) does not apply if the employer proves that, when the representation was made, the employer:

  • (a) did not know; and

  • (b) was not reckless as to whether;

    the contract was a contract of employment rather than a contract for services.’

4 As a civil remedy provision within the meaning of Pt 4–1 of the Act, contravention of s 357(1) is not an offence4, but can give rise to civil proceedings for pecuniary penalty orders and other orders5. Those proceedings can be brought in the Federal Court of Australia or the Federal Circuit Court of Australia by a person affected by the contravention, by an industrial association or by a Fair Work Inspector6. The Fair Work Ombudsman has capacity as a Fair Work Inspector7.

Procedural history and facts

5 The Fair Work Ombudsman brought a proceeding in the Federal Court claiming, amongst other things, pecuniary penalty orders against Quest South Perth Holdings Pty Ltd (‘Quest’) for contraventions of s 357(1) of the Act. McKerracher J held at first instance that the proceeding was to be dismissed so far as it related to that claim8, and an appeal from that order was dismissed by the Full Court of the Federal Court (North, Barker and Bromberg JJ)9. This appeal, by special leave, is from that decision of the Full Court.

6 The Full Court found a number of uncontentious facts and reached a number of uncontroversial conclusions of law10. To the extent relevant to the appeal, they can be succinctly stated as follows.

7 Quest operated a business of providing serviced apartments, in the course of which Quest had for some years employed Margaret Best and Carol Roden as housekeepers. Contracting Solutions Pty Ltd (‘Contracting Solutions’) operated a labour hire business.

8 Quest and Contracting Solutions purported to enter into an arrangement of a kind which the Full Court described as a ‘triangular contracting’ arrangement11. The arrangement had two components. First, Contracting Solutions purported to engage Ms Best and Ms Roden as independent contractors under contracts for services between them and Contracting Solutions. Next, Contracting Solutions purported to provide the services of Ms Best and Ms Roden as housekeepers to Quest under a labour hire agreement between Contracting Solutions and Quest.

9 Quest, by its conduct, then represented to Ms Best and Ms Roden that they were performing work for Quest as independent contractors of Contracting Solutions.

10 In fact, Ms Best and Ms Roden continued to perform precisely the same work for Quest in precisely the same manner as they had always done. In law, they never became independent contractors. At the time Quest represented that they were performing work for Quest as independent contractors of Contracting Solutions, they remained employees of Quest under implied contracts of employment.

11 The Full Court indicated that it would have held Quest's representations to Ms Best and Ms Roden to be contraventions of s 357(1) had it construed that provision to extend to a representation by an employer to an employee that the employee performs work as an independent contractor under a contract for services with a third party12.

12 Instead, the Full Court construed s 357(1) to have a much more confined operation. The Full Court held that, to contravene the provision, a representation by an employer to an employee must mischaracterise the contract of employment that exists between the employer and the employee ‘as a contract for services made between the employee and the employer’13. That construction, the Full Court considered, was compelled by the text of s 357(1), read in light of its purpose as illuminated by its legislative history14.

13 We disagree.

Resolving the question of construction

14 The prohibition in s 357(1) is against an employer making a particular representation to an employee or prospective employee. The prohibited representation concerns the character of the contract, which exists or would exist between the employer and the employee as a contract of employment, under which the employee performs or would perform work. The content of the prohibited representation is that the contract of employment is or would be a contract for services under which the employee performs or would perform work as an independent contractor.

15 Nothing in the language of s 357(1) warrants the construction that the representation prohibited by the provision is confined to a representation that the contract under which the employee performs or would perform work as an independent contractor is a contract for services with the employer. The reference in the provision to ‘the contract of employment under which the individual is, or would be, employed by the employer’ is a reference to the object of the prohibited representation. It is not a reference to the content of the prohibited representation. The content of the prohibited representation is expressed in terms which require nothing more than that the...