Recent case explores whether 'stipends' for training program were wages
Are you looking to hire a new worker? Knowing the difference between a trainee and an employee can be crucial — not only in ensuring legal compliance but also in ensuring the best outcomes for both you and the worker.
In Australia, there are a few key factors that can help determine whether a worker is a trainee or an employee. This includes considering their hours, duties and entitlements.
By understanding the differences between these two types of workers, employers can ensure they’re meeting their legal obligations and providing the best possible experience for staff.
Recently, HRD reported on the distinctions between an independent contract and an employee after the Fair Work Commission (FWC) found that there was no written employment contract between them. And early last year, the High Court determined definitive guidelines after it ruled on two landmark cases that dealt with the same issue.
So, how about in a situation where you hire a trainee?
This case was an appeal against the decision of the FWC to deal with a dispute arising under an enterprise agreement or award, where the alleged employee asked the FWC to resolve if he was an employee or not.
Background of case
The applicant, Oisin Tracey, filed against Murdoch University, his alleged employer, which has a Veterinary Medicine School. According to records, Tracey was a veterinary surgeon since 2016.
The application explained that he had previously worked at two other veterinary emergency centres and became interested in specialising in veterinary emergency and critical care. At the time, Murdoch was the only place in the state offering an emergency and critical care residency which the applicant says was “a three-year training programme to become a specialist.”
After applying to Murdoch, Tracey undertook a 12-month specialty training program for which the university pays a stipend. The curriculum was designed to provide clinical, research and teaching experience in the discipline of the student’s choice.
Moreover, the program aims to provide a foundation for future training in a residency to become a clinical specialist or academic in the veterinary discipline. In some cases, trainees have gone straight into academic positions.
The parties’ arguments
Tracey argued that the programs had “comprehensive written contracts,” saying that based on the “nature” of their relationship, he was the employee of Murdoch and wanted to be recognised as such and awarded with legal entitlements.
Tracey argued that the contracts “only partly provide the rights and obligations of the parties, and there are various conditions such as rostered hours and required after-hours duty which is not in the contract.” He then submitted that the contract between himself and Murdoch is “vague or opaque,” adding that there were “no clear guidelines regarding the expected time commitment for the program participants.”
Meanwhile, Murdoch argued that its relationship with Tracey “was not that of employee and employer.” It said that the programs that Tracey participated in “are a method of training used by Murdoch to train veterinarians to give them experience towards achieving a specialization.”
The programs were composed of two parts: enrolment in a teaching qualification with Murdoch and a work placement within Murdoch’s animal hospital. Enrolees in these are paid a fortnightly stipend, and Murdoch covers their educational costs. It explained that Tracey was accepted “as a trainee [and] not as an employee.”
The FWC’s decision
The FWC’s Full Bench identified three relevant principles that were necessary for resolving the parties’ despite:
“First, where relationship the subject of a comprehensive written contract, characterisation of relationship is to be undertaken solely by reference to rights and obligations specified therein [Personal Contracting];
Second, the ‘irreducible minimum of mutual obligation’ required to establish an employment relationship is the employer must, under contract, be obliged to pay remuneration as consideration for services the employee is obliged to perform;
Third, the characterisation of the relationship under the contract [is] not determinative.”
The FWC said that the second principle was “critical” in resolving the case, specifically regarding the university providing a stipend to the programs’ participants.
It ruled whether the “stipend” provided is for the performance of work by the applicant and, if so, whether it would be treated as a “work-wages” bargain.
The FWC found that the definition of “stipend” must be taken in the context of a university’s contractual arrangements. It said that the term referred to “financial incentivisation and support for studies,” and added that “none of the contractual obligations imposed in consideration for payment of [the] stipend expressed as concerning the performance of work.”
“Many of the [applicant’s duties] related to [the] undertaking of a postgraduate degree. The existence of ‘employment-like provisions’ is not determinative without fundamental elements of [an] employment relationship,” the FWC said in its decision.
Thus, the FWC found that the contractual arrangements were not “work-wages” bargains but of “a different character.” Thus, the applicant’s appeal was dismissed.
