Andrew Douglas: This is a case about an overseas employee. It was a woman who was employed by a legal practise. She was employed in the Philippines as an independent contractor. She did paralegal duties. She was, on any objective evidence that comes through the case, she wasn’t treated wonderfully as she went. And was eventually terminated and she brought a claim.

Kim McLagan: Unfair dismissal.

Andrew Douglas: Unfair dismissal claim. And what we had was a jurisdictional claim as to whether-

Kim McLagan: She was an employee.

Andrew Douglas: As to whether she was the employee. So the key issue here is, was she an employee? And for the purpose of the jurisdictional argument, she walked, talked, and look like an employee, since the high court’s been crushed as far as legislation goes, the traditional test applies, what was the nature of the work? What was the level of control?

Kim McLagan: Did she have the right to delegate?

Andrew Douglas: Yeah, all those things.

Kim McLagan: Yeah.

Andrew Douglas: Clearly she was an employee. But there’s an Obiter, that’s a legal expression for not final determination around jurisdiction. And I think that’s flawed, can I just get that out there right now? Where they said that a person who is a resident of foreign jurisdiction, but is an employee of an Australian constitutional company, has rights around unfair dismissal. I don’t think he’s right. But we’ll have to wait and see. It will be agitated in the final hearing this matter. This matter was settled, so it’ll never go to the next stage.

Kim McLagan: Yeah.

Andrew Douglas: And the Obiter remarks, these remarks that have been made, I don’t think they’re right, but we don’t have a case that sits there that tells us what it is. So it is a red flag to employers when they run this model, independent contractors without the appropriate structure. Not a good idea. And this is main topic for today. Really, we’re talking about in every country, there are now organisations that you can engage people through an intermediary to make sure that the foreign law and safety, workers’ compensation, all those issues, does apply, and therefore, you can exclude the risk here, except in places like France and stuff where there are more onerous obligations than Australia. Australia has one of the most onerous sets of obligations. And we have an award system that no one else has.

Kim McLagan: Yeah.

Andrew Douglas: Okay. So, there are simple ways through this. If they’re a genuine independent contractor get the independent contractor contract right. But for a little bit of extra money, really not paying much, and here this woman, if she wins, wins everything. She wins award payment rates, and she was paid considerably.

Kim McLagan: Under the award, yeah.

Andrew Douglas: Considerably under the award. Why would you do any of this when you can hire through an independent organisation overseas this person directly to them, not sharing, and you have no risk.

Kim McLagan: Yeah.

Andrew Douglas: Now why would you do it?

Kim McLagan: Yeah.

Andrew Douglas: Particularly when it is a problem that exists in different organisations, in different countries throughout the world, around what is an independent contractor employee? And these purpose-built organisations are now international, who do just that for you, and for whom you can still control what is being done.

Kim McLagan: Yeah.

Andrew Douglas: Without the risks of it being a direct employer, like a labour hire.

Kim McLagan: Yeah.

Andrew Douglas: So there are ways through this stuff, okay? You don’t have to take the high risk way. And remember, cheap always comes at a bigger price.

Kim McLagan: Yeah.

Andrew Douglas: Okay? And the biggest price for all of us is risk. Well, that’s major topic done and dusted. So, why don’t we get onto the case study? Now, here we go. You’re going to read the case study?

Kim McLagan: No, I’ll read it.

Andrew Douglas: You don’t feel awkward reading it?

Kim McLagan: No, I do. I’ve got Invisalign, don’t do it, it’s not worth it.

Andrew Douglas: Well, I think she’s just brought us another piece of litigation against us.

Kim McLagan: Oh sh*t.

Andrew Douglas: And now another one for saying sh*t. I don’t mind reading.

Kim McLagan: You think, no I can read, I can read. It just hurts a bit.

Andrew Douglas: I don’t notice it, but I know you feel it.

Kim McLagan: Nigel was concerned about the independent contractors engaged by Nostradam-

Andrew Douglas: Nostradam.

Kim McLagan: -Leaning Proprietary Limited or NL.

Andrew Douglas: That should be Learning, by the way, that’s my spelling.

Kim McLagan: Oh.

Andrew Douglas: Nobody fixed it. But anyway, Nostradam Learning.

Kim McLagan: Learning, okay.

Andrew Douglas: So you can learn from that incredible character about what the future’s going to be, Nostradamus.

Kim McLagan: Oh, okay.

Andrew Douglas: No, it’s bullsh*t. I do it when I’m bored.

Kim McLagan: Fair enough, there you go.

There were contractors throughout Asia being residents of Asia and Australia. Their role was to assess safety exams for Cert IV Safety at Institutes for Advanced Learning in Australia.

I really forgot my lisp.

Andrew Douglas: Yeah, it’s going well, I’m liking it.

Kim McLagan: Nigel had received two letters that alarmed him. One was from Prasad in India arguing that his termination was unfair under the Fair Work Act and that he had been underpaid. His rate in India was $9 per hour, which was below the award rate. Prasad was hired as an independent contractor. He stated that he had been injured at work and was seeking workers’ compensation.

The second letter was from Ken, a resident of Sydney, who had always worked for NL as an independent contractor. He claimed he was owed superannuation, holiday pay, loading and overtime, as the work was done on piece rates not recognised by the award.

He forwarded a spreadsheet detailing the hours worked. He also complained about the lack of resources that had lead him to developing RSI. He made a claim based on the Victorian Certificate of Capacity he had sent to his local doctor.

Nigel advised Ken he was an independent contractor and needed to insure himself, the Victorian workers’ compensation agent rejected both claims.

So was the Victorian workers’ compensation agent right to reject the claim? I would say yes?

Andrew Douglas: Absolutely, yeah, yeah.

Kim McLagan: And but Ken would’ve had a claim in New South Wales.

Andrew Douglas: That’s right.

Kim McLagan: And so NL would’ve had to have taken out policy in New South Wales.

Andrew Douglas: And that’s a real problem for NL, because otherwise the statuary obligations that arise hit them very heavily.

Kim McLagan: Yeah.

Andrew Douglas: Okay. So can I just be clear about that? When you’re a resident outside of Victoria, or if you’re in New South Wales, is the site of the business outside of New South Wales, wherever, the law of that jurisdiction holds, what is workers’ compensation, but your obligation as an employer is, when you employ somebody outside of a jurisdiction, is to be insured, they are covered by the relevant jurisdictional workers’ compensation to the extent-

Kim McLagan: Yeah.

Andrew Douglas: -that it is required. So in India it’s not required.

Kim McLagan: No.

Andrew Douglas: Okay? So I just, it’s not understood. But what I do want to say to you, you can be prosecuted and that prosecution in New South Wales is not a nice prosecution. And the premium cost hit after is just massive.

Kim McLagan: Yeah.

Andrew Douglas: So please, it’s very common to have independent contractors. It’s very common to have them in different jurisdictions. Independent standalone contractors are deemed employees in every jurisdiction for the purpose of workers’ compensation.

Kim McLagan: Mm. Yeah.

Andrew Douglas: Okay. So for those of you who want to puddle through clause nine of schedule one of Victorian one, you’ll find it, but you’ll find the same throughout Australia.

Kim McLagan: Yeah. Okay.

Andrew Douglas: Okay.

Kim McLagan: Well you’ve answered number two.

Andrew Douglas: Did I?

Kim McLagan: Yeah. Was NL liable for Prasad’s work covered claim? No, he was not, because he was a resident overseas.

Andrew Douglas: Very good.

Could Prasad bring an unfair dismissal claim in Australia? What would he need to prove? Could he bring a claim from award breach, underpayment?

Now, I’ve told you, I don’t know the answer to this, but I think the case that we’ve told you about, I’m not sure it’s right, but let’s assume for a second that the discussion that arose in the jurisdictional hearing is right by the judge. So let’s assume he could be.

At that stage once the jurisdiction applied, the award does apply. It’s pretty horrible, isn’t it? After that stage.

Kim McLagan: Yeah.

Andrew Douglas: And there is absolutely no doubt that Prasad and these people are being directed to do a job. Now the issue is what level of control they actually have. Can I work whenever I feel like? Can I get someone else to do the work for me? That’s going to be a question of fact.

Kim McLagan: Yeah.

Andrew Douglas: Going through it. But any standalone ABN type person, without an incorporated entity, without other people working for them-

Kim McLagan: Yeah.

Andrew Douglas: -without a capacity to truly delegate, and here you would assume that Prasad has been tested to be able to be competent to do it.

Kim McLagan: Yeah.

Andrew Douglas: It’s hard for him to delegate. At that stage, if he can bring a claim in Australia, you’re in deep sh*t. Because I think he’s definitely going to be deemed to be employee, and I think the thing we’re seeing in the Fair Work Commission at the moment, which is different, is that it doesn’t matter where the commission has come from, what political background they are, they’re moving quickly to see that anybody who fits the traditional test of what is an employee, they’re very quick to go there.

Kim McLagan: Yeah.

Andrew Douglas: So that’s a problem. We’ve got another question, I’m sure I read another one.

Kim McLagan: We’ve got a couple.

Andrew Douglas: Could Ken bring a claim for a breach of award and underpayment? And remember he was in New South Wales. What would he need to prove? I don’t think Ken has any trouble in bringing his claim.

Kim McLagan: No.

Andrew Douglas: Okay. Piece work is only set out in a number of awards. So if you’re paying someone to do something based on piece work, beware, because hourly rates apply. And if Ken can demonstrate a requirement to do work, and a commission to do it as and when he feels it, then the award breach is highly complex and difficult to establish, well, was it out of hours? Was he entitled to overtime? Probably will struggle around those issues.

Kim McLagan: Yeah.

Andrew Douglas: But he’ll certainly be entitled for all the entitlements that flow from it.

Kim McLagan: Yeah.

Andrew Douglas: But what I do want to say is this, we haven’t talked about this, we’ve both been a bit shy about it, but the reality is I don’t want anyone to forget that if you’re on a non-delegable independent contractor, in other words, I can’t get someone else to do it, and you’re only working for one person, and we’ll come back to Workers Comp and the 80% rule, by the way, we forgot to talk about that.

Kim McLagan: Yeah.

Andrew Douglas: Then you’re probably obliged to pay superannuation as well. And I want you to remember with superannuation, there is no limitation period for the recovery of that. Okay, so with underpayments, there are now, as Kim will always say, you’re only obliged to keep records for five years. And these cases always turn on records.

Kim McLagan: Yeah.

Andrew Douglas: So there is a practical thing that may prevent it to a degree, but courts are happy to jump in and have a guess based on what you’re being paid, what your entitlement would be.

Kim McLagan: Yeah.

Andrew Douglas: But we should have said about Workers Comp, it was my fault.

Kim McLagan: Okay.

Andrew Douglas: That irrespective as a contractor, if what you do is 50% of your work is only done for the organisation, you’re using assets, you’re definitely not going to be deemed independent contractor. But if 80% of your work and it’s-

Kim McLagan: And remuneration.

Andrew Douglas: And remuneration is purely labour-

Kim McLagan: Yeah.

Andrew Douglas: -then you’re a deemed contractor

Kim McLagan: You’re in trouble.

Andrew Douglas: A deemed employee, okay? Now is there a better way to manage local and overseas workers? Well, we’ve just talked about it before. One, if you’re going to use independent contractors, set up the process correctly, get the right contracts, but why wouldn’t you use a shared service provider overseas to engage these people, so all these risks just disappear?

That’s what we’ve been doing recently with a number of professional services business. We were seeing people in New Zealand and other places where we go, why would we get caught up in this? Why wouldn’t we have somebody who’s got a skilled HR part who manages all that process? We don’t do it.

Kim McLagan: Yeah.

Andrew Douglas: We just direct the work that we want done. That’s my suggestion anyway.

Kim McLagan: Yeah.

Andrew Douglas: And remember, employees and contractors, the tension is growing. And more quickly, every day, regulators and tribunals, commissions are going, nah, look, if it looks like an employee, you’re going to be an employee. So be careful.

Kim McLagan: Yeah.

Andrew Douglas: Thanks, Kim, lovely to have you on board.

Kim McLagan: Yes.

Andrew Douglas: I didn’t hear the lisp.

Kim McLagan: Oh.

Andrew Douglas: Okay, we’ve known each other a long time, I lie easily. Anyway, thank you very much for being here. We’re back at home, and see you next week. Cheers.

Kim McLagan: See you.