Significance: Singapore High Court considers factors to determine whether a person was engaged as an employee or independent contractor for purposes of the Central Provident Fund Act (CPFA).
In this case, Jurong Country Club was convicted of four charges under s 7(1) read with s 58(b) of the Central Provident Fund Act (Cap 36, 2013 Rev Ed) (“CPFA”) for failing to contribute to the CPF of its employee.
A key issue was whether the personnel in question was an employee or independent contractor.
Past decisions on this issue include: Kureoka Enterprise Pte Ltd v Central Provident Fund Board  SGHC 113; and BNM (administratrix of the estate of B, deceased) on her own behalf and on behalf of others v National University of Singapore and others and another appeal  4 SLR 931 (CA).
Generally, whether a particular person should be deemed an employee for the purposes of the CPFA is, to an extent, one of contractual interpretation, in which due regard should be had for parties’ intentions.
There may be situations in which the parties’ relationship is ambiguous and the agreement is capable of being construed as either a contract for or of services. In such cases, parties can remove the ambiguity by the very agreement they make with each other.
Where the parties have either inadvertently or deliberately used a label (eg, of an independent contractor) that does not match the reality of their working relationship, the court should not hesitate to depart from the express wording of the contract (eg, by finding that the worker was in fact an employee). the applicable test is flexible and fact sensitive.
The factor of control is of less significance where the employee has been retained on account of his special skills or expertise.
All three factors of control, personal service and mutuality of obligations are, to an extent, assessed on a spectrum. The fact that all these three factors are present would not necessarily be conclusive.
Ultimately, the court must engage in a qualitative balancing exercise that must be sensitive to the specific facts of the particular case. This would still be the case under the structured approach, where there would be considerable difficulty in assessing to what extent the three factors, taken together, are strongly suggestive of an employment relationship, or otherwise
As such, when considering whether a particular person is an employee for the purposes of the CPFA, a court should have regard to the parties’ intentions, either expressly stated or evinced through the terms of the engagement. This is particularly where there is no evidence of a lack of good faith and no indication that the parties have tried to conceal the true nature of their relationship to avoid payment of CPF contributions.
The extent of control exercised has to be considered in the context of the type of work being undertaken and the level of skill involved in performance of the work. Consideration should be given to the underlying reasons for the extent of control exercised. The operational or business reasons for, eg, dictating the person’s working hours are relevant.
The provision of employee benefits is a relevant factor. A person who was contractually entitled to medical leave and related benefits was more likely to be an employee. Thus, under the multi-factorial approach, courts should consider whether the package of benefits provided to the worker as a whole suggested that that the relationship was one of employer and employee
In this case, the following key factors were considered:
(1) Financial risk, earnings, and ownership of assets.
The following are relevant:
The fact that the independent contractor undertook the risks of running its business, had its own assets and personnel, retained its own profits, took out its own public liability insurance and so on in finding that the organisation was carrying on a business on its own account. The extent to which the supply of tools and provisions is relevant would depend on the industry in question. Where these tools are large, immobile or costly, the fact that the tools were provided by the alleged employer may not be indicative of a contract of service.
While the personnel was not at liberty to decide the rates charged for his programmes, whether he had an element of control over how much he earned. For example, he designed the programmes with limited input from the organisation (even though the latter had to approve them). To this extent, he did have an “opportunity of profiting from sound management in the performance of his task”.
Whether the products or services were an ancillary or core portion of the organisation’s business.
The fact that the organisation had considered engaging the services of an independent contractor to replace the personnel.
(2) Renegotiation and renewal of the contracts.
Whether the contracts were renegotiated on a yearly basis or otherwise–that it was done on an annual basis supported the existence of an independent contractual relationship. The length of relationship and expectations of the parties were not strongly indicative of a specific type of relationship.
(3) Remuneration and commission.
The fact that the personnel’s remuneration package was weighted towards commission may be characterised as suggestive of an independent contractor relationship. A person who was remunerated through a regular salary rather than commission was more likely to be considered an employee
(4) Comparative working arrangements and benefits.
The personnel was not on the organisation’s list of employees which was used for budgeting purposes, and was not invited to staff functions such as “Dinner and Dance”. The organisation gave evidence that the “Dinner and Dance” was compulsory for all employees, and that the failure to attend would have resulted in a deduction of one day’s leave. The personnel did not report to the HR department, was not issued the HR manual, was not subject to the organisation’s employee performance appraisal framework and had no key performance indicators to meet.
The personnel was given biometric access only to the gym, unlike employees who could access all areas of the organisation’s office. The organisation also did not require the personnel to sign personal data protection forms even though it required this of all employees. The identification number given to him was also distinct from that given to staff members.
Work place injury insurance had been provided despite the fact that there was some indication that the organisation had not intended to do so when converting the personnel to an independent contractor.
The personnel was not given medical benefits, hospitalisation leave, or medical leave under the contracts he entered into with the organisation. This may be indicative of an independent contractor relationship.
Another significant factor was the fact that the personnel had been permitted to conduct public programmes in the gym after his stipulated working hours in the contract. The contract expressly stated that these public programmes could be conducted for non-members as well. This was in contrast to the general position that employees were not allowed to engage in personal work at the organisation’s premises without permission from the Management, as illustrated by the HR Policy Manual.
On balance, the court found that the personnel was an independent contractor.
As a Singapore employment lawyer, this decision is welcomed clarification.