Employees, Vicarious Liability & Atypical Employment Growth


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1. Employees and how the courts determine the existence of an ‘Employer-Employee’ relationship?

2. What is the doctrine of Vicarious Liability and its relevance to the Contract of Employment?

3. What is happening to employment in Australia and, is the increasing percentage of Atypical Employment Relationships good or bad?

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Employees, Vicarious Liability & Atypical Employment Growth

  1. 1. Employment in Australia:Employees, Vicarious Liability &Atypical Employment Growth Author: Thomas Upitis
  2. 2. Key Issues• What are Employees and how do the courts determine the existence of an ‘Employer-Employee’ relationship?• What is the doctrine of Vicarious Liability and what relevance does it have to the Contract of Employment?• What is happening to employment in Australia and, is the increasing percentage of Atypical Employment Relationships good or bad?
  3. 3. EmployeesIs it Black and White?• Ultimately, the courts will decide who is and isn’t an Employee• Typical characteristics of an Employee: • Performs work under a ‘Contract of Service’, • Will perform work for an employer in exchange for wages, • Will work under clear direction and control of an employer, • Will have tools and materials provided. (Department of Innovation, Industry, Science & Research 2011)
  4. 4. The Employer and Employee RelationshipHow do the courts determine?Historically• More obvious & easier to define (Lockwood 2011, P. 151)• Dates back to legal relationship of ‘Master and Servant’ (Leibowicz 2011, P. 46)• ‘Control’ and/or ‘Organisation’ test applied (Burnett 2007, P. 166) – Control Test Worker controlled by the employer? or, Self-controlled? – Organisation Test Worker an integrated part of the employer’s business?Today• More difficult to ascertain! Why? Differing Employment Relationships now more prevalent• Won’t the contract of employment make a determination straight forward? Not always – courts will consider the facts of the relationship, not the label applied• Recent Case Law favours a shift towards determination by way of the indicia test – that is, the totality of the ‘employer and worker’ relationship is considered (Burnett 2007, P. 166)
  5. 5. The Employer-Employee RelationshipTotality of the relationship?What will the courts consider as part of the indicia test?The Hollis v Vabu Pty Ltd (2001) Case highlighted the following: – What degree of control does the employer or employee hold? – Financial circumstances – e.g. who pays income tax? – Who supplied tools & equipment? – Can the worker work for other employers? – Can the worker delegate work to another contractor?Common Law• Comparison of recent Common law highlights increasing complexity where the courts must determine the existence of an ‘employer and employee’ relationship Hollis v Vabu Pty Ltd (2001) Court determined employer-employee relationship existed Sweeney v Boylan Nominees Pty Ltd t/as Quirks Refrigeration (2006) Court determined employer-employee relationship did not exist
  6. 6. Key Issues• What are Employees and how do the courts determine the existence of an ‘Employer-Employee’ relationship?• What is the doctrine of Vicarious Liability and what relevance does it have to the Contract of Employment?• What is happening to employment in Australia and, is the increasing percentage of Atypical Employment Relationships good or bad?
  7. 7. The Doctrine of Vicarious LiabilityExplained...“The classic common law rule is that employers are vicariously liable for the torts of their employees that are committed during the course of employment” (Lockwood, 2011 P. 149).What does this mean? Employers are liable for the negligent act(s) of their employee’s... Provided the act occurred during the course of employment.Simple Right? Recent developments in common law would suggest otherwise.
  8. 8. The Doctrine of Vicarious Liability Explained...• Unprecedented changing patterns of work and other considerations, such as more competitive market conditions have spurred an increased dependence on workers who are not necessarily employees, ( Brodie 2007, P. 503; Lockwood 2011, P. 151; Gray 2011). Why is this relevant? The doctrine of vicarious liability applies to employees and not independent contractors.
  9. 9. The Doctrine of Vicarious Liability An escape from liability then?• Does a ‘contract for service’ arrangement or ‘non-employer-employee’ relationship safeguard an employer against vicarious liability for workers they engage? It may have historically, but the more comprehensive indicia test is working against those employers who may look to protect themselves from vicarious liability unlawfully. If we look at Hollis v Vabu Pty Ltd (2001) and, Sweeney v Boylan Nominees Pty Ltd t/as Quirks Refrigeration (2006)... both cases used the Indicia test in deciding whether an employer-employee relationship existed. Whilst some uncertainty is introduced as a result it provides flexibility in considering the rapidly changing nature of workplace relations (Burnett 2007, P. 173-174).• Lockwood (2011, P. 161) warns that employers should not operate under a false belief that engagement of a non-employee worker will remove the obligation of vicarious liability. Lockwood’s conclusion undoubtedly favours the perspective of Gray (2011) who argues the traditional interpretation of vicarious liability unjustifiably influences the engagement of independent contractors , effectively removing the employer’s implications of vicarious liability.
  10. 10. The Doctrine of Vicarious LiabilityRelevance to contract of employment...• A ‘contract of service’, also referred to as a contract of employment will typically establish the existence of an employer-employee relationship Alternatively, those working under a ‘contract for service’ will more likely be independent contractors and liable for their own negligence Hollis v Vabu Pty Ltd (2001)• Once an employer-employee relationship has been established the determination of whether the negligent act fell within the employee’s course of employment must be determined The contract of employment and other supporting documentation would be used to define the explicit duties for which the employee was employed to perform. It is important to note that implied contract terms and the ‘close connection test ‘ will also be considered in determining negligence that may have occurred from an act not explicitly defined within the contract of employment (Lockwood 2011 P. 152)
  11. 11. Key Issues• What are Employees and how do the courts determine the existence of an ‘Employer-Employee’ relationship?• What is the doctrine of Vicarious Liability and what relevance does it have to the Contract of Employment?• What is happening to employment in Australia and, is the increasing percentage of Atypical Employment Relationships good or bad?
  12. 12. Permanent, Part-Time & Casual Definitions... Hours Duration Entitlements Loading Notice Benefits inc. Average Indefinite Annual Leave, Can Vary, > 38 hoursFull-Time Personal Leave, Nil Often 1-4 p/wk Long Service. weeks Benefits inc. Average Can Vary, Annual Leave,Part-Time < 38 hours Often 1-4 Indefinite Personal Leave, Nil(atypical) p/wk weeks Long Service. (pro-rata basis) No Casual LoadingCasual Guarantee No Nil In lieu of Nil(atypical) 0-38 hours Guarantee entitlements p/wk Fair Work Ombudsman (2011)
  13. 13. Employment in Australia What is happening? • The past 50 years (1961-2011) has seen significant changes including: – Increased workforce participation by women – Notable increase in part-time employment – Industry and Occupation changes (Australian Bureau of Statistics, 2011)Full Time V Part-Time Employment 1973-2011 Age specific labourforce participation rates, females 1966 v 2011(Australian Bureau of Statistics, 2011) (Australian Bureau of Statistics, 2011)
  14. 14. Employment in AustraliaWhat is happening?Evidence suggests the continued growth in Part-Time employmentis resilient to short term economic performance in Australia(Jeffersen & Preston 2010, P. 304).That is, there is a significant shift away from full-time permanentemployment, but trends indicate this is not in response to short-term economic fluctuationse.g. the Global Financial Crisis.The Australian Bureau of Statistics (1994) discussed this trend inthe mid-90’s and acknowledged both the demand and supply sideof the labour market influence such growth.
  15. 15. Employment in AustraliaWhy is it Changing?• Industry – The progressive decline of the manufacturing industry and emergence of a more dominant service industry has contributed significantly (Australian Bureau of Statistics 1994; Department of Education, Employment and Workplace Relations 2011, P. 14- 15).• Technology – Advancement has led to reorganisation of work (particularly, information and data processing)• Organisation Demand – Employers seeking more flexibility in a more competitive environment. Demand may peak at various times (during a day, during the year) and part-time employment provides cost efficiencies• Deregulation – Part-time working arrangements allowed on a permanent basis• Female Participation – Females make up a larger percentage of total part-time employment and the increase of female participation in the workforce has increased this further.• Students – A greater divide between low-skill and high-skill employment has increased the need for greater education and increased numbers of people are studying whilst working part-time to increase employment prospects. (Australian Bureau of Statistics 1994; Department of Education, Employment and Workplace Relations 2011 P. 27).
  16. 16. Atypical EmploymentWhat is it?• ‘Atypical’ employment by general definition is any type of employment that is not full-time and permanent with a single direct employer.• It includes diverse forms of work and may include part- time work, self-employment, fixed-term contracts, temp work (Hevenstone 2010, P. 315)• Creighton (1995, P. 288-291) highlights that atypical employment is forever in a state of flux with variations emerging to meet a forever changing marketplace.
  17. 17. Atypical EmploymentGood or Bad for Employers & Employees?• Can be attractive for employees who by ‘choice or, force’ experience changed circumstances Examples: – Combining paid employment with family commitments, – Undertaking study and employment concurrently. (Creighton 1995, P. 289; Australian Bureau of Statistics, 2011) In return, advantageous for employers: – Ability to attract and retain talent that may not be available on a full-time basis, – Sustainability in terms of a well-educated workforce.
  18. 18. Atypical EmploymentGood or Bad for Employers & Employees?• Australia has the need to develop its workforce to remain globally competitive (Skills Australia 2011, P. 15)• Casual and Part-Time employment has shown to provide substantially less vocational skills development (Richardson & Law 2009, P. 385)• Markey, Hodgkinson & Kowalczyk (2002, P. 129) also found that ‘employee participation’ where part-time employment is more prominent was weaker (compared to that of environments where permanent employment was more prominent)• In considering Creighton ‘s (1995, P. 289) observations regarding atypical employment being attractive to employees and, comparing them against the above points... Consideration of both the immediate benefits of atypical employment and, the long term skills development needed to maintain a sustainable Australian workforce is fundamental
  19. 19. Summary• The facts, figures and general consensus confirms a dynamic employment landscape that is more rapidly changing than ever before• Atypical employment relationships are becoming the norm and not the exception! This must be considered in terms of legal obligations and, future proofing the skills development of our workforce• Case law is progressively recognising the need to consider more factors in reliably determining the employer-employee relationship• As employment relationships become more complex and less identifiable people should watch with interest the courts interpretation specific to the doctrine of vicarious liability
  20. 20. Summary• Recent developments in common law indicates traditional contractual boundaries can be overlooked by the courts and vicarious liability may apply where it may at first not seem obviousWhat can employers do NOW?• Lockwood (2011, P. 161) provides good advice in terms of liability prevention – act strategically to identify risk and ensure all workers (employees or otherwise) are adequately trained and supervised• To protect against vicarious liability for intentional wrong doings of errant employees, recognise the responsibility to eliminate unacceptable behaviour & risk (Lockwood 2011, P. 162)• Ensure that you are considering the long term implications of engaging an atypical workforce – Ensure atypical employees receive the required development and training to support long term sustainability and competitive advantage
  21. 21. ReferencesAustralian Bureau of Statistics 2011, Employment Arrangements: Trends in part-time work, cat. no. 4102.0, ABS, Canberra, viewed 14 October2011, <http://www.abs.gov.au/ausstats/abs@.nsf/00000000000000000000000000000000/185c0d7f39d0b784ca2570ec007868d4!OpenDocument>.Australian Bureau of Statistics 2011, Fifty Years of Labour Force: Now and Then, cat. no. 6105.0, ABS, Canberra, viewed 12 October2011, <http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6105.0Feature%20Article1Oct%202011?opendocument&tabname=Summary&prodno=6105.0&issue=Oct%202011&num=&view=>.Brodie, D 2007, Eneterprise Liability: Justifying Vicarious Liability, Oxford Journal of Legal Studies, vol. 27, No. 3, pp. 493-508.Burnett, J 2007, Avoiding difficult questions: vicarious liability and independent contractors in Sweeney v. Boylan Nominees, The Sydney lawreview, vol. 29, Issue 1, pp. 163-174.Creighton, B 1995, Employment security and atypical work in Australia, Comparative labor law journal, vol. 16, Issue 3, pp. 285-316.Department of Education, Employment and Workplace Relations 2011, Australian Jobs 2011, Department of Education, Employment and WorkplaceRelations, Canberra.Department of Innovation , Industry, Science and Research 2011, What is an employee?, Department of Innovation , Industry, Science and Research2011, Canberra, viewed 7 October2011, <http://www.innovation.gov.au/SmallBusiness/LegalHelp/LegalTopics/EmploymentIssues/Pages/WhatIsAnEmployee.aspx>.Fair Work Ombudsman 2011, Fairwork Ombudsman, Canberra, viewed 12 October 2011, <http://www.fairwork.gov.au/employment/conditions-of-employment/pages/the-difference-between-full-time-part-time-and-casual.aspx>.Gray, A 2011, Why vicarious liability must be abandoned, Australian business law review, vol. 39, Issue 2, pp. 67-85.Hevenstone, D 2010, National Context and Atypical Employment, International sociology, vol. 25, Issue 3, pp. 315-347.
  22. 22. ReferencesHollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001)Jefferson, 2011, Labour Markets and Wages in Australia: 2010, Journal of industrial relations, vol. 53, Issue 3, pp. 303-323.Leibowicz, B 2011, ‘Independent Contractor or Employee?’, The CPA Journal, vol. 81, Issue 6, pp. 46-56.Lockwood, G 2011, The widening of vicarious liability: implications for employers, International journal of law and management, vol. 53, Issue 2, pp.149-164.Richardson, S & Law, V 2009, Changing Forms of Employment and Their Implications for the Development of Skills, Australian bulletin of labour, vol.35, Issue 2, pp. 355-392.Skills Australia 2011, Meeting Australia’s future skills and workforce demands, Skills Australia, Canberra.Sweeney v Boylan Nominees Pty Ltd t/as Quirks Refrigeration (2006) 227 ALR 46