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Visiting Medical Officers - Employees or independent contractors / the ACT experience

Newsletter Article 31 August 2006

In New South Wales, Visiting Medical Officers (VMOs) are independent contractors by virtue of the provisions of the Health Services Act 1997.

Whether VMO's are classified as employees or independent contractors carries with it numerous consequences including liability issues, and the payment of superannuation and leave entitlements. As such, the distinction is of significant importance.

Whether VMOs in the ACT are employees or independent contractors, was considered by the Full Bench of the Federal Court in the decision of ACT Visiting Medical Officers Association v Australian Industrial Relations Commission [2006] FCAFC 109 (4 July 2006).

The Full Bench of the Federal Court held that VMOs in the ACT are independent contractors and not employees. 
In other jurisdictions VMO's are classified as employees.

Background

In 2001, the ACT Visiting Medical Officers Association (‘ACTVMOA’) applied for registration as an association of employees pursuant to Section 188 of the Workplace Relations Act 1996 (Cth). The application was opposed by Australian Salaried Medical Officers Federation (‘ASMOF’) and the Australian Capital Territory Health Care Service (‘ACTHCS’) on the basis that VMOs were not employees because of the nature of the work they performed.

The First Instance Decision – Senior Deputy President Williams

In order to determine whether medical practitioners were employees or contractors at the public hospitals that engaged them as VMOs, Senior Deputy President Williams analysed the working conditions of four doctors. These four doctors typified ACTVMOA’s membership and formed the basis of SDP Williams’ assessment of VMOs’ professional activities.

SDP Williams looked at the characteristics of the VMO/Hospital relationship including:

The level of control

  • SDP Williams concluded that the hospitals exercised “a significant and substantial degree of control over the place of work and the hours of work of VMOs”, and this was indicative of an employment arrangement.

Modes of remuneration

  • SDP Williams found that VMOs were paid neither a fixed salary (indicative of an employee) nor by reference to the completion of tasks (indicative of a contractor arrangement). SDP Williams concluded that VMOs were paid according to the services rendered and that this was evidence of an independent contractor arrangement.

SDP Williams then applied the test formulated by the Australian Industrial Relations Commission (‘AIRC’) in Abdalla v Viewdaze Pty Ltd (2003) IR 125 (‘the Abdalla test’). This required an assessment of the nature of the relationship between VMOs and the hospitals at which they provided services, namely whether the VMO was conducting a business of his or her own or whether the VMO was the ‘servant’ of another. SDP Williams concluded that VMOs were representatives of the hospital they provided services to and therefore the relationship was one of employer/ employee.

AIRC Full Bench Decision

The decision of SDP Williams was appealed and came before the Full Bench of the AIRC in June 2005. The Full Bench, whilst agreeing with certain aspects of SDP Williams’ decision, concluded that VMOs were independent contractors and not employees.

The Full Bench found that each of the four doctors was carrying out a business in his or her own right as a “specialist medical professional” and that the work done by a VMO formed part of that business.

The work performed was of a skilled and specialised nature and each of the doctors performed work for others and were entitled to conduct a private practice within the public hospitals.

The Full Bench also noted the following:

  • The ability of the doctors to delegate work;
  • PAYG tax was not deducted from the payments made;
  • The fact that the doctors were not awarded sick leave or paid holidays; and
  • Each of the contracts in question explicitly denied the existence of an employer/ employee relationship.

The Full Bench acknowledged the importance of the level of control as a factor in determining the relationship between a VMO and the person/entity who engaged them to provide services. However, whilst an important issue, it was not the decisive one.

Federal Court Decision

The Full Bench of the Federal Court upheld the AIRC Full Bench decision and effectively halted ACTVMOA’s application for registration. Justices Wilcox, Conti and Stone ruled that the AIRC had correctly taken into account the “practical realities” of the relationship between VMOs and the hospitals at which they were providing services.

Citing the case of Stevens v Brodribb Sawmilling Company P/L (1986) 160 CLR 16 the Full Bench noted that there are numerous factors that must be weighed up in determining whether a contract is one of employment or not. The measure of control is only one of a number of indicia.

The AIRC Full Bench said that regard must be had to the terms of each contract. Consideration was given to the surrounding circumstances such as the fact that the VMOs were conducting their own businesses and the terms of the service contracts entered into as part of those businesses. Justices Wilcox, Conti and Stone concluded that whilst certain factors such as control, delegation and discipline were indicative of the type of relationship “they [were] not determinative”.

Conclusion

The decision of the Full Bench of the Federal Court demonstrates that the relationship between VMOs and the hospitals at which they provide services is a complex one and, in the absence of legislation defining the nature of the relationship, one that no doubt will be the subject of further scrutiny in the future.


Scott Chapman, Partner
Sydney

Dominique Egan, Partner
Sydney

Newsletter Article 31 August 2006
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