Employer v Employee - Super Guarantee Charge
The recent decision of the Trustee For Virdis Family Trust t/a Rickard Heating Pty Ltd [2022] AATA 3 showcases the never-ending debate of who is an employee versus a contractor. A business was forced to pay a superannuation guarantee charge after a worker was found to be an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Act).
Factual Context
A cornerstone of the Superannuation Guarantee Scheme created under the Act, is that employers, who do not make superannuation contributions for the benefit of an employee (as defined by the Act) are liable to pay a Superannuation Guarantee Charge. The charge is equal to super contributions that should have been paid.
On 5 November 2019, the employer lodged an objection to the Superannuation Guarantee Charge assessments made by the Commissioner of Taxation for each of the quarters from 1 October 2013 to 31 March 2018. The charge concerned a sub-contractor named Mr Pirie, who was engaged to do jobs for employer but had not been paid super.
The decision required a determination about whether Mr Pirie was an ‘employee’. This required a holistic analysis of Mr Pirie’s working relationship with the employer.
Section 12 of the Act defines the terms ‘employer’ and ‘employee’ in wider language than their ‘ordinary meaning’. The apparent objective is to widen the class of people who are to be treated as employees for the purpose of the Act and for the purpose of making superannuation contributions to these people.
Was Mr Pirie an employee for the purposes of the Act?
Mr Pirie began his employment with the employer on 19 September 2011 and had a letter of engagement that identified him as a sub-contractor/casual plumber. The terms of his employment were the same as those set out in the Plumbing and Fire Sprinklers Award 2010 and applicable legislation. The AAT Member pointed out that this was odd as awards generally only apply to employees.
There were a number of factors that pointed to Mr Pirie’s relationship being characterised as more of an employee than a contractor in that his letter of engagement clearly outlined obligations to his employer and how he must endeavour to promote and protect the interests of the employer.
In practice, Mr Pirie was told where he was required to work, how many hours he was required to work and if he was unable to work, he would notify the employer and another employee would do the work, he was unable to delegate jobs. The employer also paid for any materials required for a job and Mr Pirie would often wear a T Shirt containing the name of the employer and for a while his van did have signs advertising the name of the employer.
The employer submitted that Mr Pirie advertised his services as being available to others who may seek his services. While Mr Pirie acknowledged that he was free to, he rarely did as he was working full time hours for the employer.
When the AAT Member came to decide whether Mr Pirie worked under a contract that is wholly or principally for the labour of the employer, he held that Mr Pirie was an employee for purposes of the Act and therefore, the employer had to pay the superannuation charge.
This case is an important reminder about how tribunals and courts will always look to the conduct of parties rather than necessarily be constrained by the terms of a contract to characterise or determine the real working relationship.
