Facility Management Arrangements may well be a new way for dealing with “contractors” for those in health and allied health sectors. Those who own businesses in the fields of:
- speech pathology,
- occupational therapy
should take note of the potential to utilise facility management arrangements.
Employees are entitled to the superannuation guarantee in addition to their wages. Importantly, the definition of an ‘employee’ for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Act) is much broader than the concept of an employee in the traditional sense and can include independent contractors. Section 12(3) of the Act extends the definition of an employee for the purposes of superannuation to include a person who “works under a contract that is wholly or principally for the labour of the person”.
It is an increasingly common arrangement where a managing business provides the use of facilities and administration to clinicians, professionals and other sole traders in exchange for a portion of the earnings. This is common in health services clinics but is also seen in many other industries. In these cases, the application of Section 12(3) of the Act can have serious and unexpected consequences for the facility provider.
Recently a dental practice dealt with one such situation.
Moffet v Dental Corporation Pty Ltd
The recent case of Moffet v Dental Corporation Pty Ltd  FCA 344 concerned a dentist engaged as an independent contractor under a services agreement. According to the services agreement the services were provided by the dentist to the dental clinic in exchange for renumeration.
In this case, the court found that although the dentist was not an employee for employment law purposes, he did fall within the extended definition of employee for the purpose of Section 12(3) of the Act. The dental clinic was required to back pay superannuation for several years.
It was key in that case that the services were provided by the dentist to the clinic in exchange for payment of a service fee.
This type of arrangement can be distinguished from a facility management arrangement, in which the clinic or office manager is providing administration and facilities to the clinician or professional in exchange for an administrative fee.
ATO Interpretative Decision 2011/87
The Australian Taxation Office (ATO) Interpretative Decision 2011/87 (ATO ID 2011/87) is an example of a situation wherein the term ‘employee’ under either the ordinary meaning of the term, or any expanded meanings within section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) has not applied to a medical practitioner who was operating from a medical clinic under a facility management arrangement.
The medical practitioner had entered into an arrangement with the medical clinic where the practitioner provided their services to their clients from the clinic and the clinic provided administrative services and facilities to the practitioner. Fees paid by the practitioner’s clients were paid to the clinic on behalf of the practitioner. The practitioner was then paid a portion of their billings. The remaining portion was kept by the clinic to cover facilities, administration and equipment. This was pursuant to the agreement between the clinic and the practitioner.
The clinic had no right of control over the manner in which the practitioner performed their services to their clients. Upon consideration of the relationship in a contractual and practical sense, the ATO was of the view that the relationship between the practitioner and clinic was not characteristic of an employer/employee relationship.
The work of the medical practitioner did not require a payment for ‘labour’ and rather payment was results-based where the practitioner would receive payment in proportion to consultations completed. Services were provided to the clients, not to the clinic in contrast to the dentist in Moffet v Dental Corporation Pty Ltd.
Given these circumstances, the ATO was of the view that the practitioner was also not an employee under the extended definition in Section12(3) of the Act. No superannuation was payable.
Interpretative Decisions of the ATO are not legally binding but are indicative of the ATO’s attitude in similar cases.
These cases are a reminder to any business engaging independent contractors on a regular basis to review their trading structure and workplace arrangements. As with all such cases concerning employee entitlements and superannuation, the legal risks and outcome depend on the totality of the circumstances of the relationship.
Business owners must also be wary of sham contracting laws which may apply notwithstanding the employment law or superannuation law definitions of ‘employee’.
Business Owners of:
- speech pathology,
- occupational therapy
should strongly consider the use of Facility Management Arrangements – this may well be the solution that health services owners have been looking for – avoiding the dreadful and frankly “grey” area of contracting and contractors.
If you wish to review your workplace arrangements, NB Lawyers can offer an obligation free consultation to discuss how we can assist you with any concerns you may have
Jonathan leads a team of handpicked experts in the areas of employment law and commercial law who focus on educating clients to avoid headaches, deal with problems before they fester and when action needs to be taken or a mistake is made mitigate risk and liability.
Daniel Dash is part of the commercial law team and has significant exposure working with individuals and business owners on a range of matters including business sales, property disputes, estate disputes, shareholder agreements, intellectual property, litigation and taxation matters.