Lecturer found to be employee for super guarantee purposes

In the recent decision of JMC Pty Limited v Commissioner of Taxation [2022] FCA 750, the Federal Court found that an ‘independent contractor’ was an employee for super guarantee purposes.

JMC provides higher education programmes within the creative industries sector. It engaged Mr H, a qualified sound engineer/technician to provide JMC with ‘teaching services’. Those teaching services involved delivering lectures to JMC’s students at its Melbourne campus and marking student examinations or assignments.

The terms on which Mr H was engaged by JMC were recorded in writing. They included:

  • That JMC would pay Mr H an hourly rate for delivering lectures and marking exams;

  • That Mr H was required to submit invoices to JMC specifying the details of the teaching services he had provided;

  • Those invoices were to be accompanied by time sheets and signed weekly lesson plans;

  • That JMC, through its managing academic officer, had a degree of oversight and control over Mr H, including when, how and where he was to provide the teaching services.

Mr H provided the teaching services and submitted his invoices to JMC. JMC paid the invoices but did not make any superannuation contributions in respect of Mr H on the basis that Mr H was an independent contractor rather than an employee of JMC.

The Court looked at both definitions of employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SG Act), being:

  • The ordinary definition of employee (section 12(1)); and

  • the expanded definition of employee under section 12(3), where a person works under a contract that is wholly or principally for their labour.

In applying the ordinary definition of employee, the Court referred to the recent decisions of the High Court in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89 and ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144, stating that those decisions had made it clear that the characterisation of the relationship between parties to written contracts of the sort in question in this case must proceed by reference to the respective rights and obligations of the parties under the contracts.

The Court noted that, under the contracts between Mr H and JMC:

  • JMC effectively directed and controlled when, how and where Mr H was required to perform the relevant teaching services;

  • While Mr H had a right to sub-contract or assign the provision of his teaching services under the contract, the scope and potential operation of this clause was very limited. Importantly, Mr H could only sub-contract or assign the services if he obtained the written consent of JMC’s representative. He could not unilaterally decide to sub-contract or assign the services;

  • A number of operative clauses made it clear that the default or expected position was that Mr H would himself personally provide the teaching service. This included clauses which provided that Mr H was required to ‘personally’ provide the teaching services on the basis of representations Mr H had made about his relevant qualifications;

  • Mr H was contracted to provide services (delivering lectures and marking papers) at hourly rates, as opposed to being contracted to produce a product or result. That is, none of the operative clauses of the contracts were expressed in terms of Mr H being remunerated for the production of an identified or readily identifiable product or result.

In relation to the ordinary definition of employee, the Court found that on balance, the totality of the legal rights and obligations provided for in the contracts between JMC and Mr H indicated that the relationship was that of employer and employee, as opposed to principal and independent contractor, and that Mr H was, for all intents and purposes, employed by JMC as a lecturer to provide lecturers to JMC’s students and mark their papers.

In relation to the expanded definition of employee, the Court found that the contracts were principally for the labour of Mr H in that the substantial or predominant purposes of the contracts was that Mr H would personally provide his labour in order to provide the teaching services in accordance with his representations as to his appropriate qualifications. The benefit that JMC obtained from the contracts was principally, if not wholly, Mr H’s labour in providing the teaching services. Mr H was not contractually obliged to provide any equipment or tools in providing the teaching services. Accordingly, the Court found that Mr H was also an employee under the expanded definition under section 12(3) of the SG Act.

This decision is the latest in a series of cases involving ‘independent contractors’ who were subsequently found to be employees for super guarantee purposes. Employers should therefore review their relationships with contractors and be mindful of their potential super guarantee obligations, as significant penalties, charges and interest apply for late/underpayment of super guarantee.

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163  
E: pbroderick@sladen.com.au           

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au

Jan Oh
Graduate Lawyer
T +61 3 9611 0158
E joh@sladen.com.au

Phil Broderick