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Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue (2019) 109 ATR 879
Chief Commissioner of State Revenue v E Group Security Pty Ltd (2022) 109 NSWLR 123
Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89
HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue (2018) 108 ATR 84
JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391
Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317
UNSW Global Pty Ltd v Chief Commissioner of State Revenue (2016) 104 ATR 577
Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA) (1985) 16 ATR 296
Background
The assessment notices issued were concerned with contracts under which the Plaintiff performed trolley collection services at specified Woolworths, Aldi and IGA stores, where each supermarket operator owned the trolleys. These services included returning trolleys to the store bays to keep them always replenished, and occasionally conducting searches in neighbouring areas to collect trolleys. The Plaintiff engaged subcontractors to perform the services, including sole traders, partnerships and proprietary companies.
The assessments relating to ALDI stores included separate contracts for the provision of cleaning services by subcontractors at two stores in country New South Wales.
The Chief Commissioner assessed the Plaintiff as liable for payroll tax on the basis that payments made by the Plaintiff to its subcontractors were deemed “taxable wages” under s. 40 of the Act, by reason of the Plaintiff being an “employment agent” within the meaning of s. 37(1) of the Act). The Plaintiff was the “deemed employer”, with Woolworths, ALDI, and IGA being the relevant “clients”.
The Statutory Framework
The employment agency contract provisions are contained in Division 8 of Part 3 of The Payroll Tax Act. Section 37 defines an employment agency contract. Sections 38 and 39 define the deemed “employer” and “employee”.
Submissions
The dispute was confined to the question of whether the “in and for” test (as expounded by White J in UNSW Global Pty Ltd v Chief Commissioner of State Revenue[1]) was satisfied.
Plaintiff’s submissions
The Plaintiff submitted that the correct test was that stated by Ward CJ in Eq in E Group Security Pty Ltd v Chief Commissioner of State Revenue.[2] That is, the test was whether the workers performing the trolley collection were sufficiently integrated into each client’s business to be seen as additional to the client’s workforce. The test, which was also applied in HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue [3], referenced four main factors:
Location of work. The services provided by the trolley collectors were essentially an external one. Subcontractors did not need to go into the store, and although there was access to the clients’ toilet and eating facilities, evidence indicated that this was rarely taken up.
Nature of the task. The nature of the task was objectively defined in the contract and subcontract. The subcontractor received a specified fee. The labour and equipment requirements were the subcontractors’ responsibilities.
Demarcation. The Plaintiff required all trolley collectors to wear a distinct uniform which identified them as part of the Plaintiff’s organisation. Staff were also required to sign into the visitor’s book and wear a “visitor” tag when on the client’s premises.
Degree of interaction between the trolley collectors and the client’s staff and customers. The Plaintiff was responsible for handling complaints/requests from the client, and for the training/supervision of trolley collectors. Interacting with staff and the client’s customers was not formally part of the job.
Chief Commissioner’s submissions
The Chief Commissioner submitted that the “in and for” test should be applied at a general level, as per Emmett AJA’s formulation in Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue.[4] In particular, the test did not represent a binary choice between working in a client’s business and the employment agent’s business, rather trolley collectors could be working for both simultaneously.
The Chief Commissioner also submitted that the “integration test” risked error, as the word “integration” does not appear in s. 37, nor in White J’s construction in UNSW Global. Further, under s. 37(2), if there is a common law employment relationship between a client and a worker, then there was no employment agency contract under s. 37. The Chief Commissioner submitted that the “integration test” was essentially identical to the common law test of employment, meaning that circumstances satisfying the “integration test” would fall within the ambit of s. 37.
The Chief Commissioner submitted the following list of factors relevant to the “in and for” test in the present case:
Trolley collection was essential to the client’s business. The trolleys were owned by the client, and the trolley collectors were therefore dealing with property belonging to the client, reinforcing that their activities were part of the client’s business.
The services required continuity and regularity; trolley services were provided for as long as the stores were open. The Plaintiff had a practice of providing continuity by engaging the same subcontractors at the same store; and subcontractors had an obligation to ensure continuity of staff who worked as trolley collectors.
The client had a substantial degree of control over the provision of services. Contractual provisions required the Plaintiff to comply with the client’s directions and policies.
Good relations and communication were required between the trolley collectors on the one hand, and store management and customers on the other. For example, the Plaintiff’s Woolworths Checklist and Compliance Manual required weekly meetings with the store manager, and stated that trolley collectors “are part of the customer service team for the stores”.
Critically, the trolley collectors were not, in essence, “genuine” independent contractors as the trolley collection work could have otherwise been done by the client’s employees. The relevant question was whether the work was of a type that was “ordinarily” done by a typical contractor.
Simultaneous employment was not an issue. Citing Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [5], the Chief Commissioner submitted that casual employees could be employed by another employer.
Decision
Trolley Collection
With reference to s. 37, Parker J outlined that the statutory task begins with identifying the “employment agency contract”. His Honour disagreed with the Chief Commissioner that the employment agency contract is the contract between the Plaintiff and Woolworths (ie, the head contract). Accepting Brereton JA’s analysis in Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [6] (being the minority view), Parker J noted the critical question was the characterisation of each of the subcontracts and whether it was an employment agency contract, particularly as the services (and potentially other relevant circumstances) differed under each of the subcontracts: [144].
Parker J considered that evidence about the way the contracts operated in practice was not relevant in characterising the contractual relationship between the parties: [147].
Parker J declined to rule on the validity of the “integration test”. Instead, his Honour came to the view that the underlying concern of White J when formulating the “in and for” test was to allow independent contractors operating their own businesses who were retained by a client through an intermediary to remain as independent contractors and to not be regarded as undertaking work “in and for” the business of the client: [149].
His Honour rejected the possibility of trolley collectors working for more than one business, coming to the view that the true dichotomy is between working “in and for” the business of the client, and conducting one’s own business as an independent contractor: [150].
Parker J disagreed with the Chief Commissioner’s submission that an employment agency contract necessarily falls outside a contract of employment at general law: [151]. Addressing the multi-factorial approach argued by both sides:, his Honour concluded:
The location of work, being outside Woolworths’ premises without any need of supervision or cooperation by Woolworths staff is significant and in favour of the Plaintiff: [154].
Woolworths’ business may be characterised as one of selling goods by retail using a supermarket format. The collection of trolleys is an activity “in and for” that business, although it may be for the benefit of the business: [156].
The defined nature of the task to be done by the trolley collectors, and the associated maintenance of demarcation, are significant factors: [157].
Woolworths’ ownership of the trolleys makes no real difference, nor does the contractual obligation for trolley collectors to identify themselves as “Woolworths trolley collectors” when dealing with the public. The perception of a third party is not relevant for the purpose of characterising the contract: [158].
It is important that the subcontractors were responsible for supplying and maintaining the equipment needed to collect the trolley; that is a typical indication of an independent contractor conducting its own business: [159].
The subcontractors were able to, and in some cases did, work for more than one store at the same shopping centre, demonstrating their business’ independence: [160].
Woolworths’ apparently broad powers of direction in the head contract ought to be read down to accord with the subcontract in which they appeared; the power to give a direction would have been limited to directions having some relevant connection with the discharge of the Plaintiff’s functions under the head contract: [161].
The use of employees to do the trolley collection work at some Woolworths stores is not relevant. The evidence was that Woolworths, ALDI and Coles had differing practices as regards the use of employees and contractors to perform the trolley collection. However, his Honour did not accept that could mean that Woolworths’ business, for the purpose of s. 37, varied from Coles and ALDI’s businesses: [166].
Parker J concluded that the Woolworths trolley collectors did not satisfy the “in and for” test under s. 37 and hence, the assessments fail.
Although his Honour did not purport to determine the question, he expressed the view that the reference in s. 37 to a “service provider” is to the person who actually provides the service rather than the subcontractor entity: [171].
Parker J held that the same conclusions that he reached in relation to the Woolworths contracts apply to the ALDI trolley collection contract: [184]; and to the IGA trolley collection contract: [193].
ALDI Cleaning Services
His Honour considered that the decision of Kunc J in JP Property Services Pty Limited v Chief Commissioner of State Revenue [7] (which concerned the provision of after-hours cleaning services for a supermarket) is a case in point. In applying JP Property Services, it had been relevant to Kunc J’s decision that the cleaning was not done to protect members of the public while they were shopping and therefore was not directly related to the sale of goods: [188] – [189]. Therefore, the cleaning services provided to ALDI were not the subject of an employment agency contract within the meaning of s. 37: [194].
Orders
The Court ordered:
Revocation of the assessments made by the Chief Commissioner.