Seminar paper on protecting the taxi bailment arrangement, presented by Owen Ratner at the Australian Taxi Industry Association Conference at Darwin on 8 June 2010.
I have been asked today to talk about the protection of the bailment arrangement as it applies to the taxi Industry in Australia.
Firstly the purposes of today I will not draw distinction between taxi owners and taxi operators. I will simply categorize both as being taxi owners.
Historically the relationship between taxi owners and taxi drivers has been one of bailment.
So what is a bailment? The legal definition of bailment is “A delivery of goods on a condition, express or implied, that they shall be returned by the bailee to the bailor, or according to his directions, as soon as the purpose for which they are bailed has been fulfilled.”
Since the 1850’s the courts in England and in Australia have consistently reaffirmed that when a taxi driver drives a taxi cab he does so on his own account. All that the taxi owner does is deliver the taxi cab to the driver under a hiring arrangement or in legal terminology the owner bails the taxi cab to the driver in return for a payment for the use of the taxi cab.
Throughout most of Australia as I understand it taxi drivers provide a share of their takings by way of payment for the use of the taxi cab although in Sydney and some other areas of Australia it is more common for the taxi driver to make a fixed pay in. In either case the payment to the owner is regarded as a pay in for the use (or bailment) of the taxi cab.
Before looking at issues concerning threats to the bailment it is worth discussing some basic principles that apply to the relationship between owners and drivers.
Firstly the fact that a taxi cab is bailed to a taxi driver by the taxi owner does not prevent there being a relationship of employer and employee or independent contractor. It is still conceivable that the taxi cab could be bailed to the taxi driver but at the same time there could exist sufficient factors governing the relationship between the taxi owner and the taxi driver for a court to hold that the taxi driver was the employee of the taxi owner.
So what are the factors that have consistently resulted in courts in almost all cases finding that taxi drivers are bailees and not employees or independent contractors.
In the late 1990’s the Federal Commissioner of Taxation decided that it wanted to bring taxi drivers within superannuation laws as employees and as a result a test case was brought before the Federal court of Australia which resulted in 1997 in a decision by Justice Hill in the matter of Federal Commissioner of Taxation v Deluxe Red and Yellow Cabs Co operative Trading Society Limited.
In this case all of the relevant facts concerning how taxi owners and taxi drivers operated in the states of Australia were put before the court and following a detailed examination of the facts and past decisions of the courts in Australia and England, Justice Hill held that taxi drivers were bailees and not employees or independent contractors. Some of the points that can be taken from Justice Hill’s decision include the following:
- 1. “The driver pays the owner and not the other way around”. This was an important factor at the time as in a normal employment relationship the employer pays the employee. In all cases considered by the court the driver paid the owner for the use of the taxi cab.
- 2. In almost all cases there was an agreement in writing or it was implied by legislation as in New South Wales that the arrangement between the taxi owner and the taxi driver was one of bailment and not employment. In law it is important to give weight to what parties agree. It is not the end of the matter but it is an important factor in considering what the true arrangement is between the parties.
- 3. Justice Hill said “Although some control is exercised by the operators over the drivers, that control is only such as is necessary to ensure compliance with legislation concerning taxis rather than such as to signify employment relationship”. Control is an important, but not the only, factor which determines whether a driver is an employee. The Judge noted that in the case of taxi owners there is a degree of control but it is generally only to ensure that drivers comply with the law or comply with the rules of networks which the taxi owners belongs.
- 4. “Drivers are free to obtain work as they wish and in fact do so”. The Judge noted that there was no compulsion on drivers to use the network although it would be in the interest of drivers to do.
- 5. Drivers provide their own change and directories pay for the petrol consumed and the costs of keeping cars clean.
- 6. Payment of long service leave, sick leave and worker’s compensation premiums. The judge noted that whilst these matters support an argument in favour of employment it needed to be looked at that particularly in New South Wales the requirement for the these payments was imposed by industrial legislation which itself recognized the relationship as one of bailment.
After finding that the relationship between owners and drivers was one of bailment and the judge also then considered whether, notwithstanding the fact that there was a bailment, the drivers could still be considered employees for the purposes of superannuation.
The judge in this situation again referred to the fact that the payment was from the driver to the operator not the other way around. This of course made it very difficult if, not impossible, for any deductions to be made for the purposes of superannuation.
The judge went on also to say “whether a contract is wholly or principally for labour of a person will depend upon whether the contract is one for the production of the result or whether it really is one for the performance of labour.”
In this case the judge held that even if it could be said that there was a payment by the operators to the drivers the real relationship between the operators and drivers is that the drivers make payment to the operators for the right to bail the cabs and apply them in their own business. They are neither employees in the ordinary sense nor do they receive payments under contracts for their labor. In other words they were neither employees nor independent contractors.
In this matter the Federal Commissioner of Taxations appealed to the Full Bench of the Federal court where he lost and sought leave to appeal to the High Court which was refused.
Without boring you with detailed statements of the law which were set out by the full bench in rejecting the appeal its worth noting that the judges again restated that important factors in considering whether taxi owners were employers of taxi drivers included the following
In determining whether a person is an employee the following matters are to be considered:
- (a) the extent of the ability to control;
- (b) type of occupation, the locality whether the work is usually done under the direction of the employer;
- (c) the skill required in the occupation;
- (d) whether the employer or the workman supplies the instrument and tools and the place of work;
- (e) the method of payment;
- (f) whether or not the work is a part of the regular business of the employer;
- (g) whether or not the parties believe that they are creating the relationship or master and servant.
After considering all the matters the court found the true character of the relationship to be one of bailment and relied heavily on the historical circumstances including the clear line of authority over many years.
ADVANTAGES OF BAILMENT OVER EMPLOYMENT
So what are the advantages of taxi drivers being bailees rather than employees.
The advantages can be summarised as follows:
- 1. The taxi driver is responsible for his or her own tax. The owner
eis not required to deduct PAYE tax nor pay superannuation.
- 2. The taxi driver is not generally entitled to the benefits that usually apply for the benefit of employees under laws such as Fair Work Act or under awards such as annual leave, long service leave and personal leave. However under certain laws in various states the drivers are entitled to Worker’s Compensation coverage and in Sydney where there is a contract determination under the Industrial Relations Act taxi drivers are entitled to annual leave, long service leave and sick leave.
- 3. There is no vicarious liability imposed by the common law on taxi owners for the acts of taxi drivers. In other words a taxi owner is not responsible for the actions of a taxi driver who drives his or her taxi in the way that he or she would be if the taxi driver were an employee.
PROTECTING THE BAILMENT ARRANGEMENT
So now to the main topic of this talk. Protection of the bailment arrangement.
One would have thought given the long history of courts finding in favour of taxi drivers being bailees including as recently as 1998 taxi owners would be safe for some years yet.
In fact I believe there are number of factors which may give some cause for concern that the status quo will continue.
What are these factors?
- 1. The players in the industry. Having been in involved in the taxi
Industry for over 40 years I sense that there is a now greater degree of activism on the part of drivers and a greater recognition by media and bureaucrats of unauthorized representatives of taxi drivers in relationship to the role of taxi drivers in society. I am speaking predominately from my experience in Sydney. In the past and now the Transport Workers Union has represented taxi drivers and whilst there has been quite an active and perhaps disruptive taxi drivers section within the Transport Worker’s Union generally the status quo has been maintained and the industrial relationship has been largely uneventful. More recently associations such as the New South Wales Taxi Drivers Association and The Australian Taxi Drivers Association have become far more vocal and for some reason and appear to be receiving a greater recognition by the media, parliamentary enquiries and the Industrials Relations Commission than one would have expected. As an example in the recent award modernization hearing concerning the Passenger Transportation Award the Deputy President took submissions from the Taxi Drivers Association of Victoria. Mr Ryan appearing of behalf of this association argued that the award should very clearly and very specifically provide a classification for taxi drivers and hire care drivers. He went on to argue that taxi drivers were employees. It is not necessary or relevant to go into the detailed arguments that were put by Mr Ryan but it is worth noting that the Deputy President did not give any indication of her being aware of the historical circumstances that I have referred to previously regarding findings of taxi drivers being bailees. In finalising her recommendations she indicated as follows
” If an employee is an employee as defined under the Act it doesn’t matter what the cases have said when it has been put in issue as to which side of the line a particular person on the facts or evidence on that case – the assertion that has been made by you is that there is person who has a status of an employee who drives a taxi around Australia and Mr Ryan and saying that is not so. But in any event I don’t have to try and spot someone. Awards already identify a classification of taxi driver. So one might therefore consider whether it is appropriate to have such a classification in any exposure draft that issues.”
This statement was made in response to submissions by Leonie Kyriacou from our firm.
It is also noted that the representative of the Transport Worker’s Union stated as follows “We can all agree that a lot of taxi drivers or most taxi drivers might be bailees but to say that no taxi driver is an employee. It is a matter of logic, virtually an impossibility and just as I have been sitting at the bar table of done some very basic search of the Commission’s decision and seen at least two. One where a person was found to be an employee and one where they weren’t and decisions were decided on the facts based on the usual indicia employment and independent contracting status”.
So in summary it seems to be that the playing field is changing. The state based Industrial commissions play a lesser role in regulating industrial law and the commissioners sitting in the Federal jurisdiction may have less of an experience in understanding the established concept of bailor and bailee in the taxi Industry. It is almost as if we are travelling in new territory each time a new issue is raised. This allows for a fresh approach by the courts in addressing these issues and whilst they are bound by the line of authority that exists in the courts so far nevertheless it is clear that they are prepared to look at the facts in each case and decide on those facts in determining whether a taxi driver is an employee or not.
Before going on it is worth noting that the new Passenger Vehicle Transportation Award 2010 includes a driver of passenger vehicles as category of employee but that this legislation will not apply to circumstances where individuals bail taxis to taxi drivers as opposed to corporations. This means there is different legislation that applies to say networks which are governed by the Federal laws and individuals who are governed by State laws.
- 2. Some courts have decided a taxi driver is an employee.
For example the case of McDougall and Castlemaine Taxis Pty Limited and Lukazsewski before Commissioner Lewin in the Australian Industrial Relations Commission Melbourne in 2002 . In that case that the Commissioner held that he was free to and will look at individual operations in order to decide whether a particular taxi driver is an employee or not.
In this particular case the taxi drivers concerned drove in the town of Castlemaine in Victoria. The taxi operation was a small operation and all of the taxis in the town were owned by two people who engaged all the drivers.
The Commissioner examined the law and restated the factors which determine whether a taxi driver is an employee or not. The factors stated by the Commissioner were fairly much consistent with the factors that I have mentioned previously.
The Commissioner said that on balance he would need to consider whether the totality of the situation was such that the work done by the drivers for the owners should be characterised as the sale of their labour to the owners.
Some of the factors that the Commissioner considered worked in favour of the taxi drivers being employees where that:
- (a) The taxi owners identified themselves as employers in publicity and advertising.
- (b) The taxi service was operated in a prescribed, orderly and established manner.
- (c) The drivers conformed to a pattern of service provision in a system of work allocation and performance which was effectively governed and controlled by the taxi owners.
- (d) The relationship was supervised, reinforced and in certain cases, subject to specific personal direction of the drivers by the taxi owners.
- (e) The taxi owners effectively determined the manner in which the taxi service of the town would be provided and how the work of the drivers was to be performed.
- (f) The work of the drivers was monitored and specific detailed instructions were issued to drivers from time to time by the owners of the business about the structure and specific performance of tasks and work.
- (g) The work was effectively rostered and rationed and prescribed and defacto systems of work performed according to rules maintained by the taxi owners.
- (h) There was no competition for work within the market place.
- (i) Drivers were integrated into the service provided by the taxi owners for the people of the town.
- (j) The drivers provided no equipment, the taxi was provided by the respondent who also provided the fuel. Drivers were required to provide a uniform.
- (k) Drivers were rostered and expected to and felt obliged to present for work.
- (l) There was no delegation or assignment of the lease agreement to persons other than the drivers.
In this case, as I’ve stated, the taxi drivers were found to be employees. So in certain circumstances it is clearly open for a court to find a taxi driver to be an employee based on the facts.
- 3. It is probably relevant to note that judges are human and where cases involve taxation there is probably less moral pressure on the court to find in favour of an employer/employee relationship as opposed to circumstances where a plaintiff might be disadvantaged by such a finding.
For example, there were two decisions in recent years involving Crisis Couriers owned by a company called Vabu Pty Limited. In the first series of decisions the Federal Commissioner of Taxation endeavoured to argue that bicycle couriers were employees. The full bench of the Supreme Court of New South Wales found that bicycle couriers were in fact independent contractors.
Some time later a person in Sydney CBD was struck by a bicycle courier and seriously injured. He could not identify the bicycle courier and so he sued the owners of Crisis Couriers on the basis that a bicycle courier was an employee of the company and therefore the employer was vicariously liable for the injuries that the individual suffered. In this case the matter went to the High Court where it was found that the earlier decisions concerning bicycle couriers being independent contractors were wrong and in factthe bicycle couriers were employees of the company. The result of this decision was that the unfortunate member of the public was able to recover the as a result of the injuries that he suffered.
I think that with there being a greater focus on anti-discrimination laws involving taxi drivers, a greater awareness of the rights of the public to performance standards being met by taxi networks and a continued focus on the rights of taxi drivers by associations that appear to be far more vocal that the established industrial organisations such as the TWU, there is more pressure on the courts to find in favour of an employer/employee relationship. This is not to case that the courts will not follow precedent but as can be seen from the Castlemaine case, the courts will look at the facts and facts can be interpreted in different ways by different courts in different times in different circumstances.
- 4. I think that with the focus nationwide on improvements in standards of service by taxi networks there is a greater degree of pressure on the taxi owners to ensure high standards of service and this of necessity may involve imposing a greater degree of control over taxi drivers. The increased focus on providing services for disabled members of the public through wheelchair accessible taxis places pressure on taxi owners to ensure that services are provided in order to meet the demands of the authorities which are in turn imposed by networks. Whilst the court in the Deluxe case considered that imposing requirements on taxi drivers in order to comply with laws may not necessarily result in a finding that the taxi owner is controlling the driver, nevertheless there does seem to be a climate in which there is more of a requirement to control what the driver does than existed in the days when the taxi was simply given to the driver and all the driver had to do was pay for the taxi return it at the end of the shift.
- 5. Technology has impacted on the flow of the money from the taxi driver to the taxi owner by way of pay-ins. With electronic payment systems becoming a predominant method of paying taxi fares the main method of processing the payments involves the taxi operator receiving a credit for the fares processed by the driver and the taxi driver’s pay-ins being set off against the value of taxi fares processed using electronic payment systems or taxi instruments such as the blue and green Cabcharge dockets. The argument therefore that the flow of money is from the taxi driver to the taxi owner is to a large degree affected by the fact that now a large part of the takings of the driver flow back from the taxi owner to the taxi driver. This may well be a factor in any future consideration by courts as to the relationship between the taxi driver and the taxi owner.
I believe that the fixed pay-in system is from the point of view of determining the relationship more likely to support a bailment arrangement than sharing of the meter but as the court has found both circumstances allow for the finding of a bailment. Nevertheless I believe that a fixed pay-in is a safer way to operate if the desire is to maintain factors which support a bailment rather than an employment relationship.
So in summary, I can see no substantial change in the law occurring in the near future but I do believe that there are probably other arrangements similar to the Castlemaine case, probably more so outside metropolitan areas where there is a greater likelihood that the relationship between taxi owner and taxi driver will be found to be one of employment. In all other circumstances I believe that the taxi owners need to be aware that decisions that they make in relation to drivers during their shifts will impact on the relationship that they have with those drivers.
Some things to be aware of are:
Do not describe your drivers as employees;
Do not direct your drivers as to what they do during their shift. The more control you have over your driver the more likely the driver is to being an employee;
Only impose conditions on your drivers that are required by law;
Have a written agreement which includes a confirmation that the driver is a bailee;
Keep the flow of money from the driver to the owner.
For more information contact Leonie Kyriacou on firstname.lastname@example.org
This article is intended to provide general information in summary form on a legal topic, current at the time of publication. The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.