Chief of Defence Force v Fiona Ross-Taylor

• Jurisdiction: New Zealand
• Judge: B S Travis
• Judgment Date: 10 March 2010
• Court: Employment Court
• Docket Number: ARC 5/09
• Date: 10 March 2010

BETWEEN

In the Matter of point of law challenge to a determination of the Employment Relations Authority

The Chief of Defence Force

Plaintiff

and

Fiona Ross-Taylor

Defendant

[2010] NZEMPC 22

ARC 5/09

IN THE EMPLOYMENT COURT AUCKLAND

Challenge by Chief of Defence Force to a finding that a doctor working at the Devonport Naval Base Hospital was an employee rather than an independent contractor–agreement entitled “Independent Contractor Agreement”, and contained a clause specifying that the relationship was an independent contractor agreement and that it was not to operate as a contract of employment — whether, in addition to considering the intention of the parties, the real nature of the relationship could be ascertained by applying the control, integration and fundamental tests to determine whether the contracted person had been effectively working on his or her own account.

Appearances:

Joanna Holden and Nigel Lucie-Smith, counsel for plaintiff

Penny Swarbrick and Karen Jones, counsel for defendant

JUDGMENT OF JUDGE B S Travis

1 The plaintiff has challenged a determination of the Employment Relations Authority (AA20/09) which found that the defendant was an employee and not an independent contractor. There is no challenge to the remedies awarded by the Authority, the fate of which will be determined by this challenge as to the defendant's status.

2 There is no issue between the parties that the challenge was governed by s 6 of the Employment Relations Act 2000 (“the Act”) the relevant portion of which reads:

6 Meaning of employee

• (1) In this Act, unless the context otherwise requires, employee -

  • (a) means any person of any age employed by an employer to do any work for hire or reward under a contract of service; and

  • (b) includes-

    • (i) a homeworker; or

    • (ii) a person intending to work; but

• (c) excludes a volunteer who-

  • (i) does not expect to be rewarded for work to be performed as a volunteer; and

  • (ii) receives no reward for work performed as a volunteer.

• (2) In deciding for the purposes of subsection (1)(a) whether a person is employed by another person under a contract of service, the Court or the Authority (as the case may be) must determine the real nature of the relationship between them.

• (3) For the purposes of subsection (2), the Court or the Authority-

  • (a) must consider all relevant matters, including any matters that indicate the intention of the persons; and

  • (b) is not to treat as a determining matter any statement by the persons that describes the nature of their relationship.

• …

3 Counsel both cited the leading case on this section, Bryson v Three Foot Six (No 2) 1. The recent Employment Court case of Singh v Eric James and Associates Ltd 2 confirms that the enquiry in each case is intensely factual and sets out the following principles identified by the Supreme Court in Bryson which include:

• … Section 6 defines an employee as a person employed by an employer to do any work for hire or reward under a contract of service, a definition which reflects the common law.

• • The Authority or the Court, in deciding whether a person is employed under a contract of service, is to determine “the real nature of the relationship between them”: s 6(2).

• • The Authority or the Court must consider “all relevant matters” including any matters that indicate the intention of the persons: s 6(3)(a).

• • The Authority or the Court is not to treat as a determining matter any statement by the persons that describes the nature of their relationship: s 6(3)(b).

• • “All relevant matters” include the written and oral terms of the contract between the parties, which will usually contain indications of their common intention concerning the status of their relationship.

• • “All relevant matters” will also include divergences from, or supplementations of, those terms and conditions which are apparent in the way in which the relationship has operated in practice.

• • “All relevant matters” include features of control and integration and whether the contracted person has been effectively working on his or her own account (the fundamental test).

• • Until the Authority or the Court examines the terms and conditions of the contract and the way in which it actually operated in practice, it will not usually be possible to examine the relationship in the light of the control, integration and fundamental tests.

• • Industry or sector practice, while not determinative of the question, is nevertheless a relevant factor.

• • Common intention as to the nature of the relationship, if ascertainable, is a relevant factor.

• • Taxation arrangements, both generally and in particular, are a relevant consideration but care must be taken to consider whether these may be a consequence of the contractual labelling of a person as an independent contractor.

Factual background

4 The plaintiff operates at Devonport the New Zealand Defence Force (“NZDF”) Navy Hospital (“Navy Hospital”). The Navy Hospital has approximately 25 beds and provides medical advice and assistance to military and non-military patients. The defendant is a civilian medical practitioner. She was first engaged by the Navy Hospital in 1996 when there were approximately 11 medical officers, eight of whom were military medical officers. The civilian and military medical officers worked identically but the military medical officers were employed by the NZDF and the civilian medical officers were taken on as independent contractors.

5 At the time of her engagement on what she expected to be a short-term locum basis, the defendant had left her own private medical practice and was GST registered. There was no written contract at that stage but she was told by the then director of medical services, Surgeon Commander Kenny, to present invoices for payment as she would do in any other locum role. Her pay was based on a 1993 civilian medical officers pay scale and she was told how much to invoice. Initially she worked two sessions a week which produced about half her weekly income, with the balance coming from other locums and deployments.

6 In 1998 Robin Hulford, who was then the general manager of the Navy Hospital, decided to formalise the relationship and gave the defendant a written draft agreement which the defendant read through very carefully. The defendant had a number of concerns and issues with that draft and in particular medico-legal difficulties in relation to liability issues. The defendant discussed the draft with a senior accountant and had a number of meetings with Mr Hulford. The NZDF agreed with a number of her suggested amendments and the medical consultancy agreement was signed on 4 September 1998.

7 There is no dispute that the agreement she signed was a contract for services as an independent contractor. I find that the defendant, who was an experienced medical practitioner familiar with running her own private practice and operating as an independent locum, fully understood the nature of the document she was signing.

In later years the defendant acted as the negotiator of the terms of employment on behalf of herself and the other civilian doctors engaged at the Navy Hospital.

8 The agreement was described as a “Medical Consultancy Agreement for the supply of medical services” and the defendant is named as the consultant “who is employed in the independent professional capacity by the Crown to carry out the Services and includes their executors, administrators, legal successors and permitted assigns”.

9 The agreement states, at cl 2.2, that the consultant was an independent contractor and that “nothing in this agreement shall be deemed to create an employment, joint venture, partnership or agency relationship between the Consultant and the Crown”. The defendant acknowledged in the agreement that she was deemed to be fully informed as to her requirements under the agreement. The defendant provided certain indemnities to the Crown and undertook to join and maintain at her cost membership of the Medical Protection Society or the Medical Defence Union (cl 17.1). She was required to meet her taxation liability and ACC levies. Either party was able to terminate the agreement on one month's notice and any matters in dispute not settled by negotiation or conciliation could be referred to arbitration. The defendant acknowledged entering into the agreement in reliance on her own knowledge and skill and not in reliance on the Crown. The agreement did not prevent the defendant having private patients and did not require the exclusive provision of her services.

10 By the time the agreement was signed the defendant was performing a wider range of services than originally contemplated and had agreed to perform on call duties. Throughout the more than 10 years that the defendant worked at the Navy Hospital she invoiced her services on GST invoices and paid all her professional fees. She sought and obtained the ability to see private patients at the Navy Hospital and in particular private patients she attended to who required aviation medicals.

11 On 3 June 2003 the defendant signed an “Independent Contractor Agreement” which contained the following clause:

INDEPENDENT CONTRACTOR

2.1 The relationship between Navy Hospital and the Provider is and shall be for all purposes an independent contractor relationship and neither this agreement nor anything contained herein or implied shall constitute any other relationship.

2.2 For the avoidance of doubt the parties acknowledge and agree that this agreement shall not operate as, or constitute, an offer or contract of employment either during its currency or on termination for whatever reason.

12 The defendant signed a similar independent contractor agreement, containing an identical clause 2 in 2005 and again on 2 May 2007. There were a total of four written independent contracting agreements all with materially similar...