Is a person injured at a direct selling company's premises
deemed a 'worker' for workers compensation purposes? The
2005 NSW Court of Appeal decision in Bessemer has significant
implications for direct selling companies and workers compensation
insurers as it may deem distributors/consultants as
'workers' for workers compensation purposes.
Simaru Pty Ltd ("Bessemer") was involved in the direct
marketing of cookware products. The marketing procedure was
conducted through sales persons. One such sales person was Mrs
Santelli, who arranged contracts of sale, collected payments and
made deliveries. She also held the role of a "Manager",
with the responsibility of recruiting 'agents' and
encouraging them to work for Bessemer. For every sale which she
procured, she received a commission of 24 per cent. She also
received an additional 3 per cent of an "overriding
commission" for each sale procured by an agent under her
Mrs Santelli was injured at Bessemer's premises when she
went to pay an account and to collect goods that were to be
delivered to a customer.
In the initial proceedings, after looking at the totality of the
relationship between the parties, the trial judge held that Mrs
Santelli was a 'worker' and was entitled to workers
compensation. Mrs Santelli was awarded $19,000 plus costs.
However, on appeal, Bessemer's workers compensation insurer
argued that Mrs Santelli was not a 'worker' and the public
liability insurer was liable to indemnify Bessemer.
If Mrs Santelli were deemed a 'worker' for the purposes
of the Workers Injury Management and Workers Compensation Act 1998
(the "Act"), Bessemer's workers' compensation
insurer would be obliged to indemnify Bessemer against
If Mrs Santelli were not a 'worker', Bessemer's
public liability insurer would be obliged to indemnify Bessemer
against liability. (Bessemer's public liability insurance
excluded cover if cover existed under Bessemer's workers
The Court of Appeal Judgement
The Court of Appeal considered the relationship of the parties
and the agreements in place.
Bessemer's "Agency Agreement" changed in July 2000
to become a Distributor Agreement.
Relevantly, it provided:
The Distributor is in business on
his or her own account and acknowledges that he or she
is not an agent, employee or partner of the
is not entitled under the agreement to a commission but
will retain the difference between the purchase price and retail
is not entitled to statutory employee entitlements from the
The distributor undertakes not to hold himself or herself
out to be an agent, employee or partner of the Company.
Mrs Santelli and other "distributors" were required to
sign this agreement, which was designed to redefine their roles and
responsibilities following the introduction of GST.
Despite Bessemer's efforts, the Court of Appeal held that
the trial judge was correct in considering Santelli's
relationship with Bessemer 'in its totality' and that Mrs
Santelli was deemed as a 'worker' in accordance with the
Act, as she was a person paid by commission, even though Bessemer
had attempted to characterise the payments otherwise - the
agreement was a 'mere disguise'.
Mason P, who delivered the leading judgement in the Court of
Appeal, found that Mrs Santelli clearly fell within Clause 5,
Schedule 1 of the 1998 Act which provided:
(5) A salesperson, canvasser,
collector or other person paid wholly or partly by commission is,
for the purposes of this Act, taken to be a worker in the
employment of the person by whom the commission is payable, unless
the commission is received for or in connection with work
incidental to a trade or business regularly carried on by the
salesperson, canvasser, collector or other person...
The Court held that Mrs Santelli was a 'salesperson' who
was paid a commission, regardless of the agreement. Mrs Santelli
was a 'go-between', who promoted, secured and facilitated
the sale of goods from Bessemer to the end-customer. This role did
not change under the post- 2000 agreement. Even if Mrs Santelli
were not classified as a 'salesperson', then she should be
classified as an 'other person' due to her managerial role
and 'overriding commission'.
What does this mean for direct selling companies?
The Courts will look beyond the 'labelling' of a
contract and determine the role of a worker based on the actual
responsibility of the individual, particularly whether the relevant
activities were done for the 'sole benefit' of the direct
selling company. The definition of 'worker' will be given
an expansive interpretation, and employment rights may be conferred
on sales agents and consultants in direct selling organisations.
Labels such as 'distributor' and express provisions to the
effect that the person is not an employee will not necessarily
prevent the application of the relevant legislation.
Care should be taken to ensure that appropriate extensions to
worker's compensation insurance are obtained.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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