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The full decision can be found here.

Introduction

Whilst this unfair dismissal application was subsequently sent off assisted conciliation; the FWC provided its own written view on someone who provides work in return for free accommodation.

I found this intriguing given that the respondent was arguing that the FWC had no jurisdiction, as the applicant was not an employee; and further last time I checked, such arrangements were unlawful and better dealt with by the Fair Work Ombudsman who has a guidance note on unpaid work.

This “decision” also provides a somewhat simplistic, but useful, information on contract law.

Background

In 2017, the applicant, who at that time was in financially distressed circumstances, came to be a resident of the hostel. After Mr McCrae had been a guest for a few months, and out of concern for his financial plight, two fellow residents approached the owners suggesting that more could be done to help the applicant, who was going through a difficult time in life.

A suggestion was discussed between the two guests and the owners that they could offer the applicant free accommodation in return for performing cleaning work in the hostel. An oral agreement was subsequently reached between the owners and the applicant to this effect.

The precise circumstances in which that agreement was reached, and its terms are in dispute. Whether the agreement was varied during its life to add or vary hours of work, duties or benefits is also in dispute.

Duties

The applicant cleaned using buckets, mops and cleaning products supplied by the hostel. The applicant had no prior expertise in cleaning. Although he was not asked to do the most arduous of cleaning duties, it was not ‘light duties’. Although the applicant’s work was criticised from time to time by the owners, it was usually (especially initially) to an adequate minimum standard. Although the owners did not cease doing cleaning work and sometimes had to ‘go over’ the applicant’s work or ask for it to be re-done, the applicant’s cleaning work had the effect of lessening the overall cleaning burden on the owners. The applicant did some hours of cleaning (often two or three hours) on most, but not all days of the week.

Working in pyjamas

He was not provided a uniform but usually cleaned in his day clothes. He was required by the owners to look neat, after once being criticised for cleaning in his pyjamas.

Encouraged to find work elsewhere

The applicant had no other business or work outside of the hostel. He was free to leave the hostel at any time (on a daily, permanent or temporary basis) and secure alternate or additional work. The owners actively encouraged the applicant to look for an external job.

“Provisional view”

His Honour stating:

“At this stage of my decision-making, I have formed a provisional but not yet concluded view on the jurisdictional issue”.

For the first year of the agreement, the arrangement was mutually beneficial and amicable.

However, in the second (and final) year of the agreement, problems emerged, and the relationship strained. The owners believed the applicant’s cleaning work became sub-standard and required regular oversight and remediation. The owners started to receive complaints about the applicant, not just in relation to his cleaning work but also his personal hygiene and conduct.

Conflicted

The owners debated what to do with the applicant, and this put strain on their relationship. They felt conflicted between a desire to help the applicant and what they believed to be a seemingly unending arrangement that they believed was having adverse repercussions for their business. In short, they believed that the applicant had overstayed his welcome. In the midst of this, the applicant suffered a serious health condition.

After an exchange of emails, the owners agreed that the applicant revert to two hours cleaning per day.

Rude

In March 2019 the owner believed the applicant had been rude to his wife. He told the applicant to apologise to her, or “pack all your stuff and leave my property”. The applicant apologised by email but defended his conduct.

The situation came to a head in August 2019 after a guest, complained about what he considered to be conduct by the applicant that made him feel uncomfortable and the applicant made reciprocal complaints about the residential habits of some guests.

Eviction

On 9 August 2019 the owner sent the applicant an email. It read, in part:

“[Name], please read carefully as a staff/worker…

[Name], I have read through the complaints letter feedback by those who stayed [here]…I want you go down the store read by yourself tomorrow.

With all these reason list below, I don’t think why I should keep you anymore. Despite I have given you so many chances to instruct you but you still doing your way not listening…

So, this is to notify you that [we] and convenience store sack you from the day of 16 August 2019 please note that from the day you have terminated no more as an exchange accommodation worker with [premises] anymore.

Please be aware the amount of $60 you borrowed from [premises] to be paid back before you move out.

The management”

The applicant’s reply

The applicant replied shortly thereafter by email which read, in part:

“I dispute the series of disrespectful claims you have made against me (in response to the quality of my cleaning day in and day out).

Out of courtesy I acknowledge that you want me to leave as of the 16th August!

Please! Beware that I am owed a $100 Bond.”

On 14 August 2019 the applicant sent the owners an email and letter of demand. He claimed unfair dismissal. He sought immediate reinstatement as a guest. He sought his $100 bond. He sought that the business classify a $60 payment made to him as a “gift”. He sought that the business immediately evict two guests from the hostel. Finally, he sought that the owners “immediately relinquish ownership” of [the premises], issue a statement to that effect, put in place temporary management arrangements and agree to restitution over the next 8 years”.

Contract?

According to His Honour, an oral agreement can form a contract of employment under Australian law. An employment contract is not required to be an agreement in writing.

For a contract of employment to exist, there must, at law, be a contract. The elements that comprise a contract must exist. This involves a meeting of minds in which there is a legally binding exchange of promises in return for some mutually agreed benefit. In legal terms the elements include:

  • An offer;
  • An acceptance of the offer;
  • Valuable consideration; and
  • An intention to create legal relations on agreed and enforceable terms.

Even where these elements exist, a contract can be void if it is made for an illegal purpose or by persons without capacity or without genuine consent.

Further, not all contracts for the performance of work are employment contracts. An employment contract is a contract of service. It differs from a contract for the performance of services.  A contract for services involves a service provider who is working as an independent contractor, not an employee. There are characteristics that differentiate an employment contract from a contract with an independent contractor. Often an independent contractor is self-employed, operating their own business. In contrast, an employee is usually working under the control of others.

Whether an employment relationship exists is a question of fact. The question whether an employment relationship was created does not depend upon the parties’ subjective intentions or understandings. Rather, it depends upon what a reasonable person in the position of the parties would have understood was the objective position.

Each case turns on its own facts. As the Commission said in Re McDonald:

“For example, a worker may receive board and lodgings or reimbursements for expenses and still be considered a volunteer provided that this was the fundamental nature of the relationship. In other situations, a worker who performs work for non-monetary benefits, such as rent-free accommodation, can be considered to be an employee rather than a volunteer if the underlying relationship is objectively intended to be a legal contract of that nature.”

In conclusion

His Honour stating that for the applicant’s application to fall within the jurisdiction of the Commission I need to be satisfied that:

  1. There was an agreement between the applicant and the owners that formed a contract at law; and
  2. The contract at law was a contact of employment; and
  3. The applicant was dismissed from the contract of employment.

On issue 3 (above), my provisional view is that there was an agreement between the applicant and the owners to do cleaning work in exchange for free accommodation and that this agreement was terminated by Perth Backpackers on 9 August 2019 effective 16 August 2019. That termination was capable of being a dismissal within the meaning of section 386 of the FW Act as it was conduct at the initiative of the business.

On issue 2 (above), my provisional view is that the weight of evidence points against Mr McCrae having been an independent contractor under a contract for services. He was not operating his own business. He was using equipment supplied by Perth Backpackers. He was under the supervision and control of Mr and Mrs Hon as to the quality and general frequency and timeliness of his work.

Issue 1 (above) involves more difficult questions. There was an offer, an acceptance and (in my provisional view) valuable consideration in the form of an exchange of promises for mutual benefit. However, whether there was, in an objective sense, an intention to create legal relations on agreed and enforceable terms is a more problematic issue.

If there was, my provisional view is that Mr McCrae’s application would be within jurisdiction.

If there was not, Mr McCrae’s application would fail for want of jurisdiction.

No concluded view

“I express no concluded view on this question, other than to indicate that there is some force in [the applicant’s] contentions that the agreement was not a mere domestic arrangement or voluntary work. While allowance must be made for [the owner’s poor English and use of terms in his email of 9 August 2019 that he did not intend to be taken as a “sacking” or “termination” from “staff”, the subjective intention of a party is not a proper basis to determine this matter. The length of the arrangement, the context in which the work was performed, the regularity of the work and the formality of the manner in which the arrangement was brought to an end point in favour of the conclusion sought by [the applicant].

“Against that conclusion, however, is the fact that [the applicant] was free to leave at any time to secure a job, referred to himself as a “guest” in some of his emails to [the owner] and was told by other guests and the owners not to hold himself out as a staff member (let alone an ‘assistant accommodation manager’)”.

Commentary

In my (always humble) opinion, there was an employment contract in place. But I think His Honour did the right thing to let the parties work it out themselves. As mentioned in the outset, I wonder at the view of the Fair Work Ombudsman, who has been VERY active in “wage theft” (see my special report here). And then there is the old saying: “The road to hell is paved with good intentions”.