Express law No. 28

28 September 2005

Employment by authority of a law of the Commonwealth

The Full Federal Court has held that a person who was
engaged by the Department of Defence as an independent
contractor, and who had been found by the Australian
Industrial Relations Commission (the Commission) to be
an employee of the Commonwealth, was not entitled to
bring an action for unfair dismissal in the Commission.

The Court found that the issuing of a radiographer's
contract under an administrative instruction made under
the Defence Act 1903 (Cth) (Defence Act) could not constitute 'employment … by
authority of a law of the Commonwealth', in accordance
with section 170CD(1) of the Workplace Relations Act
1996 (WR Act), where the administrative instruction only allowed
contracting for services rendered.

Re Australian Industrial Relations Commission and Arends;
ex parte Commonwealth of Australia

Federal Court of Australia – Full Court, 16 September
2005, [2005] FCAFC 204

Mr Arends worked as a radiographer for the Department
of Defence (the Department) for approximately 8 years,
from 6 July 1994 to 24 April 2002. During that period,
he signed six contracts, five for a term of one year and
one for 14 months. In each contract, Mr Arends was described
as an 'independent contractor'. The Department
entered into the contracts with Mr Arends under the 'Defence
Instructions (General) Administration 24.1' (DI(G)
ADMIN 24.1), made under section 9A(2) of the Defence Act.

Shortly before the end date of the last contract, the
position held by Mr Arends was advertised. Mr Arends applied
for the position but was unsuccessful. On 26 April 2002,
he filed an application with the Australian Industrial
Relations Commission, under section 170CE of the WR Act,
seeking relief on the basis that the termination of his
employment was harsh, unjust or unreasonable and/or that
the Commonwealth was in breach of section 170 CK of the
WR Act.

Senior Deputy President Drake determined that Mr Arends
was an employee of the Commonwealth, despite being described
as an independent contractor, on the basis that the type
of work, hours of work, method of work, method of payment
of salary, payment of superannuation contributions and
other financial arrangements indicated an employment relationship.
She did not decide whether Mr Arends had been a 'Commonwealth
public sector employee' within the meaning of section
170CD(1) of the WR Act, but held regardless that the Commission
had jurisdiction in the matter and granted relief to Mr
Arends accordingly.

The Commonwealth sought leave to appeal against the decision
to a Full Bench of the Commission, contending that, in
order for the Commission to have jurisdiction, the contractual
relationship between Mr Arends and the Department would
need to fall within one of the three areas of engagement
by the Commonwealth set out in the definition of 'Commonwealth
public sector employee' in section 170CD(1) of the
WR Act and that Mr Arends did not fall into any of the
three categories. The Full Bench of the Commission granted
leave to appeal but dismissed the appeal on the basis that
Mr Arends fell within paragraph (c) of the definition by
virtue of being a 'person in employment ... by authority
of a law of the Commonwealth', namely DI(G) ADMIN
24.1.

Decision of the Full Federal Court

The Commonwealth sought orders in the High Court against
the Commission's jurisdiction and on 24 November
2004 the High Court made an order remitting the matter
to the Full Federal Court. The Full Federal Court quashed
the decision of the Full Bench of the Commission. It found
that Mr Arends did not meet the test of employment by authority
of a law of the Commonwealth in the definition of 'Commonwealth
public sector employee' in the WR Act:

  • He was not employed as an employee under the Public
    Service Act 1999 or any other Act or instrument under
    an Act.
  • DI(G) ADMIN 24.1 authorised the making of a contract
    for services, not a contract for employment. The authority
    conferred by the law (to engage a contractor) determines
    the relevant character of the relationship established
    under the law. It is insufficient that the relationship
    of contractor established under the law may in practice
    develop features of an employment relationship.

Mr Arends relied on DI(G) ADMIN 24.1, but this instrument
specifically provided that 'the contractual arrangements … in
this instruction only apply to situations where the contract
is to be a contract for services rendered. It would not
be appropriate to use these arrangements where the practitioner
will be … deemed to be the Department's common
law employee'. Thus, DI(G) ADMIN 24.1 did not disclose
any intent to apply the authority of the Commonwealth to
make a person with whom a contract was entered into, under
that instrument, an employee of the Commonwealth.

The Court held that '[t]he fact that subsequent "operational" factors
such as method of work and performance would have the hypothetical
effect at common law that Mr Arends was an employee does
not mean that he was in employment by authority of a law
of the Commonwealth, particularly in circumstances where
the instrument under which the contract was made was specific
in stating that the contract did not effect employment'.
Consequently, Mr Arends was not a 'Commonwealth public
sector employee' under section 170CD(1) of the WR
Act and thus the Commission had no jurisdiction to grant
relief under subdivision B of Division 3 of Part VIA of
the WR Act, which contains the provisions relating to unfair
dismissal.

Implications of the decision

Generally an employee in the APS will be covered by the
unfair dismissal provisions of the WR Act only where the
employee is employed as an APS employee under the Public
Service Act 1999. Contractors generally will not be covered,
even if they are common law employees. Similar observations
apply to Commonwealth public sector employees who are engaged
under other legislation governing their employment.

It is desirable that any statutory instruments relating
to engagement of contractors in the Commonwealth public
sector should specifically indicate that an employment
relationship is not established or intended.

It is important to note that this decision relates only
to the application of the unfair dismissal provisions of
the WR Act. In other contexts when construing the relationship
between the parties, the law will look beyond the legal
authority for the relationship and will assess all the
circumstances to determine whether an employment relationship
exists.

The decision also provides another endorsement for the
much quoted judgment of Brennan J in Director-General
of Education v Suttling (1987) 162 CLR 427 at 437–8:

The relationship between a civil servant of the Crown
and the Crown has often been described as contractual,
though the civil servant has been appointed pursuant
to statute … If the relationship is contractual,
the contract must be consistent with any statutory provision
which affects the relationship. No agent of the Crown
has authority to engage a servant on terms at variance
with the statute. To the extent that the statute governs
the relationship, it is idle to inquire whether there
is a contract which embodies its provisions. The statute
itself controls the terms of service.

The text of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/204.html

AGS acted as solicitor for the Department of Defence.

For further information please contact:

Richard Harding

Senior General Counsel

T 02 6253 7026 F 02 6253 7304

richard.harding@ags.gov.au

Jessica Cleaver

Lawyer

T 02 6253 7455 F 02 6253 7381

jessica.cleaver@ags.gov.au

Jim Heard

Senior Executive Lawyer

T 02 9581 7477 F 02 9581 7650

jim.heard@ags.gov.au

Paul Vermeesch

Senior Executive Lawyer

T 02 6253 7428 F 02 6253 7381

paul.vermeesch@ags.gov.au

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