Waiuku Rigging and Labour Hire Limited v Accident Rehabilitation and Compensation Insurance Corporation

Decision N.57/97 IN THE DISTRICT COURT DCA No. 130/96 AT WELLINGTON UNDER THE Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to Section 91 of the Act BETWEEN WAIUKU RIGGING AND LABOUR HIRE LIMITED APPELLANT AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION RESPONDENT Heard at Auckland: 23 and 25 October 1996 Date of Decision: 18 April 1997 G.M. Harrison as counsel for the appellant A.E. Howman as counsel for the respondent RESERVED DECISION OF JUDGE J.W. IMRIE I have decided that the Corporation should determine under Regulation 11 a classification for the appellant. [P:\IMRIEJ\WAIUKU.DOC JAB] 2. Introduction: The issue in this appeal is the classification of the appellant for employment premiums pursuant to the Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1994. The classification units, unit numbers, and rates of premiums are set out in the Schedule to the Regulations. The Corporation has classified the appellant under the unit description "Contract Labour Hire - Non-Office Based" which has a classification unit number of 78621 and a rate of premium per $100 of earnings of 5.49. The appellant says it falls within the Classification Unit Description "Non-Building Construction (not elsewhere classified) " which has a classification unit number of 41220 and a rate of premium of 5.49. The rate of premium is at present the same for both classifications but the appellant wishes to receive the correct classification. The rate of premium between classifications may vary from year to year. Review of evidence: By letter dated 17 March 1994 the appellant's accountants wrote to the Inland Revenue Department describing the appellant's industrial activity as "rigging services". The letter went on to say:- "However this activity does not have a classification in the schedule of ACC premiums. The main activity carried out by the company is rigging which involves the removal and replacement of 3. machinery, lifting motors, etc. in factories and workshops. There is some erection of scaffolding involved with some jobs but this is a minor part of the activities. We consider, from the classifications available, that the industrial activity should be Engineering (Class No: 35). Could you please confirm this." By letter dated 11 October 1994 the Corporation's premium supervisor wrote to the accountants. The letter reads in part:- "The Corporation has determined that for ACC employer premium purposes, Waiuku Rigging and Labour Hire Limited (WRLHL) should calculate and pay their premium at the rate prescribed for class 38. The activities performed by WRLHL are more in line with the activities performed in class 38 rather than class 35. WRLHL's industrial activity can be identified as being 'Labour pool services (other than stevedoring or clerical - management employees), business of' class 38. This activity is classified in class 38 which would include the labour hire division of the WRLHL and the undertaking of the rigging services operation. The construction of scaffolding, being either the supply or construction of, is also classified in class 38. Even though this may be a secondary service to the main activity it is still one which is classified in this class. It is accepted that there is not an easily identifiable activity description in the Premiums Schedule, but the Corporation is of the opinion that this is the most accurate. Last year WRLHL was charged an experience rating loading of $9,841.47. Since the premium rate for any particular class is based on past accident cost history compared with its liable earnings base, this loading would indicate that the risk associated with WRLHL's business exceeds the risk normally associated with others in this class. Since there is not a classification in the Premiums Schedule for every employer in New Zealand the Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1993 gives the Corporation the power to determine descriptions. The Corporation under regulation 7 shall determine a description for the purpose of calculating and paying premium where there is no description set out in the schedule describing the industrial activity of an employer, or where there is doubt as to the 4. appropriate description. If an application was made under this regulation, the Corporation would still place WRLHL in class 38." By letter dated 3 April 1995 the accountants wrote:- "We reply to your letter of 11 October 1994 and apologise for the delay in replying. This delay has been caused by the time taken to obtain information from others in the same industry to determine the most appropriate industrial activity classification. We are not sure of the information passed on to you from your Takapuna branch but the company does not perform "Labour Pool Services" at all. Although the company's name may indicate this and it may have been the intention when the company was formed, it has never carried out that activity. I understand labour Pool Services as being the provision of workers on a temporary basis for a range of activities. The only activity the company undertakes is rigging contracts. All of the company's work is carried out at BHP NZ Steel Limited, Steel Works at Waiuku. The duties of the company in performing these contracts is the removal and replacement of equipment in the steel making process The company's workers remove/dismantle equipment, which is then repaired or replaced, and then the company's workers reinstate the equipment. Interestingly there is now an industrial classification in the current Employer Premium Rates (ie for earnings to 31 March 1995) which aptly describes the activities of our client. This is classification unit number 28690 - 'Heavy Plant Maintenance Operation'. Although some of the company's activity involves scaffolding erection this is ancilliery to their main activity. This would be the same as a builder or a painter erecting scaffolding to enable them to carry out their activities of building or painting. The company's principal activity is 'Rigging' which is involved with the maintenance of heavy plant and machinery. The employees belong to the NZ Engineering Union and the rigging activities come under the jurisdiction of this union. We respectfully ask that you reconsider your determination as set out in your letter (ie Labour Pool Services). The 1995/96 premium rate classification for Heavy Plant Maintenance Operation has an equivalent in the 1994/95 rate of 'Heavy Plant Maintenance', Class 35, and after consideration this is the classification to use in 5. our opinion. We regret we had not realised before that there was such a classification. We look forward to your reply." An investigator for the Corporation visited the premises of the appellant in August 1995. He recorded the results of his investigation as follows:- "The writer visited Waiuku and interviewed Chris Allen the Managing Director of this company also N J Baker the company accountant. This is an unusual set up, Waiuku Rigging and Labour Hire supply experienced riggers for NZ Steel. No staff are hired to any other company. If NZ Steel was the employer they would pay ACC accordingly. I pointed out to Allen and Baker that Mr Allen is the employer, I asked him if he was in the business of rigging. He said no he just supplied this to NZ Steel. They purchase the staff from him. I said 'unfortunately that makes your business labour hire. There may be some consideration given because of this unusual set up but right now I go alone with Labour Pool Services' see attached purchase order from NZ Steel.' The Corporation wrote to the accountants by letter dated 31 August 1995:- "Thank you for your letters of 3 April and 23 June 1995. A Premiums Investigator recently investigated your clients activities. The Investigator has confirmed the Corporation's determination contained in its letter of 11 October 1994. Therefore, the industrial activity for your client for the 1994 year is Labour Pool Services (other than stevedoring or clerical management employees) business of - Class 38. The basis for this determination is that an industrial activity is determined by the nature of the goods or services rendered by the employer. The service your client provides to New Zealand Steel is that of labour. The premium classification system has recently changed to a slightly modified version of the Australian and New Zealand 6. Standard Industrial Classification (ANZSIC) System. The classification for your clients activity for the 1995 year is: Classification unit description: Contract labour Hire, non office based Classification unit number: 78621 Premium rate per $ 100 of liable earnings: $5.55 Due date for employer premium: 31 May 1995" The appellant applied for a review of the decision. The reasons given in the application were:- "The applicant company's business is contracts for rigging heavy plant and machinery. Its duties involve the removal and replacement of equipment in the steel making process. The industrial classification which should be applied is 'heavy plant maintenance operation' - 28690 for the 1995 year and equivalent classification for the 1994 year." The result sought was:- "Industrial activity classification for the applicant of 'heavy plant maintenance operation' - 28690 or equivalent for the years 1994 and 1995." At the hearing of the review on 8 March 1996 Mr G. Bayliss, who was then the manager of the appellant, gave evidence. He said in part:- "5. In explanation, the company is a sub-contractor to BHP New Zealand Steel Ltd carrying out work for it mainly at its Glenbrook plant but also at other New Zealand Steel locations. 6. At the moment, the company employs six permanent riggers. On a day-to-day basis, the company does the following work for New Zealand Steel - (a) Lifting machinery; (b ) Alterations to buildings; 7. ( c ) The hiring to the mill of rigging equipment and scaffolding; (d) The hiring of the company's equipment to other sub-contractors; (e) The installation of numerous machinery. The principal activity of the company is that it moves 95% of equipment and machinery that cannot be picked up or moved by a person. 7. The company can only hire properly qualified and certified riggers. No other employees, whether casual labour or not, are employed by the company. It is only when there is a major shut down at the steel mill that we employ extra riggers as temporary labour. These riggers come from all over the North Island particularly its northern half for this work. 8. There is a major shut down at the mill every 3 months for between 1-2 weeks. That is 10 weeks per year. In addition, there are on average one day shutdowns once per month which would occupy two working weeks of the year. So, for 12 weeks of the working year, the company takes on extra qualified riggers as temporary labour. It is obvious that this temporary labour is hired for at most 25% of the working year, the remainder of the time, the company employees are permanent staff. 9. I annex a copy of the original contract dated 31 December 1991 entered into between the company and New Zealand Steel. A separate order is issued each year during that contract and a copy of the order for the current year is also annexed. Up until now, the payment for work carried out under the contract has been assessed on a labour attendance basis, i.e. how many men on the job and hours worked but henceforth, the system will change to fixed price contracts making the numbers of employees utilised in any particular job irrelevant. 10. The company has recently changed its name to Waiuku Rigging Ltd. Approximately 10 years ago, it used to hire labourers to dig out water tanks for similar work but as the contracts involving rigging increased, no labour other than qualified riggers was employed. That accounts for the words Labour Hire' in the company's name which have now been deleted because it is irrelevant to the company's operation." 8. At the hearing of the review Mr Harrison for the applicant submitted (inter alia) :- "6. As a matter of fact also, the company's activity is not labour pool services. Mr Bayliss will give detailed evidence of the company's activities which involves the employment of certified riggers only who through their employment by the company as a sub-contractor to New Zealand Steel perform a wide range of functions utilising their own machinery equipment vehicles and so on. Labour pool services contemplates the employment of labour of any sort whether skilled or unskilled available to undertake any type of labour only task not involving the use of specialised machinery, and not a class of properly certified employees." At the review hearing counsel for the Corporation made written submissions. In part he said:- "2. CLASSIFICATION 2.1 A classification unit is defined in the Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1994 as: ... the industry, trade, business, profession, or undertaking of an employer or a person who has earnings other than as an employee as determined by the nature of the goods or services produced or rendered by that employer or person who has earnings other than as an employee; or if no goods or services are produced or rendered, as determined by the nature of the employment; 2.2 It is the goods produced or services rendered that must be considered in determining the employer's classification unit. Waiuku Rigging provide labour to New Zealand Steel. New Zealand Steel then use that labour to maintain the plant. Waiuku Rigging do not maintain the plant they provide the labour which maintain the plant. The service provided by Waiuku Rigging is labour hire. 2.3 Waiuku Rigging have only considered the activities of their employees in determining their classification unit. Although employees of Waiuku Rigging are involved in maintaining the 9. plant it is the employer's activity which is relevant in determining the classification unit. It is the 'industry, trade, business, profession or undertaking of an employer' not of an employee which is relevant. Waiuku Rigging is in the business of supplying labour. 2.4 The classification unit Contract labour hire, non office based-78621 is based on the ANZSIC group Contract Staff Services-7862. A copy of the relevant page of the ANZSIC guide is attached and marked 'F'. The Corporation, for the 1995 premium year, divided this group into two separate classifications Contract staff, office based workers, only-78620 and Contract labour hire, non office based-78621. This was necessary because each of these classification units has a different risk and therefore must have a different rate. 2.5 The classification unit Contract labour hire, non office based-78621 includes employers who supply their own staff for non office work. It is not necessary that staff are supplied to more than one employer or that staff are involved in a variety of different activities. 2.6 Classification in this way was clearly intended when the Employment Premiums Regulations were drafted, otherwise the classification unit Contract labour hire, non office based would serve no purpose. 3. CONCLUSION 3.1 Waiuku Rigging supply their own staff to undertake rigging work for NZ Steel. The service provided by Waiuku Rigging is the supply of non office based workers. The correct classification unit for such an employer is Contract labour hire non office based 78621. The Corporation's determination for the 1995 premium year must stand." Following the review hearing the Corporation's senior premiums investigator reported to the technical premiums manager of the Corporation by memorandum dated 27 March 1996 as follows:- "You have asked for my comment on Mr Harrison's letter of 18 March 1996, addressed to Mr GM Smith. 10. Mr Harrison has confirmed our understanding that the change to fixed-price contracts is forthcoming'. Until that change has actually happened (and is able to be evidenced by written contracts), and certainly for past premium years, the information provided by Waiuku Rigging & Labour Hire is that there have been separate contracts for the provision of manpower and equipment. The labour contract sighted, under which the applicant has operated for a number of years, and apparently still operates; makes no mention of the provision of other than manpower. would consider that operation of the applicant's business under this contract cannot be other than under the classifications Labour Pool Services (other than stevedoring or clerical-management employees), business of - Class 38 for the 1992,93,94 premium years, and Contract Labour Hire - Non-Office Based - 78621 for the 1995 premium year. Currently and historically, any provision of equipment has been a separate arrangement. I do not think that there is any disagreement between myself and Mr Harrison that when the business has completed the change to its contractual relationships, and is providing an integrated service, it will qualify for a change in its premium classification for subsequent years." Mr Harrison was sent a copy of that letter and he responded on 26 March 1996 stating:- "It seems that the senior premiums investigator has misinterpreted the company's case. The company does in fact provide the rigging service and to use Mr Parker's words, 'where an integrated package of manpower, equipment and on-site management is provided to carry out a specific task.' That is what is undertaken at the moment and this is confirmed by the forthcoming change to fixed price contracts which Mr Parker concedes would justify a change in classification to '41220 non-building construction."" The Review Officer issued a written decision dated 9 April 1996. In that decision he reviewed the correspondence, the submissions and the evidence given at the hearing and the report dated 14 March 1996 and Mr Harrison's 11. response to that report. His decision on the classification issue was as follows:- "At the heart of this issue, is determining whether or not for the purposes of the 1995 premium year, whether or not the plant and labour provided by WR & LH Ltd are in fact done so separately, rather than as an integrated package." He referred to Regulation 4 and said:- "Mr Harrison and Mr Bayliss submit that the nature of the work carried out at N Z Steel, i.e. rigging, requires specialised labour, i.e. certified riggers to carry out that activity. That labour is submitted as being qualitatively different to 'labour' generally, and that the rigging and labour for it are inseparable in terms of the activity . From the available evidence, including the above-mentioned memoranda of the. Premiums Investigator, I believe it is reasonably established that the services provided by Waiuku Rigging and Labour Hire Ltd are, for the period under consideration, severable. This includes the provision of rigging machinery (for want of a better word) and separate labour hire. As previously stated, this is supported by the contract appended to Mr Bayliss' written evidence, and the contract sighted by the Premiums Investigator, which effectedly delineates two separate industrial activities. By virtue of Regulation 4(2) and having due regard to the classification unit, it appears that the company is engaged in at least two classification units, but does not maintain separate records as specified in paragraphs (a) and (b), and consequently the employees should be classified in the unit for which the highest rate of premium is prescribed by these regulations. That being the case, it is evident that for the premium year under discussion, the higher rate falls on labour pool services - non-office based, - 78621 for the 1995 premium year. Furthermore, Mr Bayliss stated at the hearing that the company was to change its name to Waiuku Rigging Ltd, and it appears this will involve an integrated package which was also contingent upon fixed-price contracts with New Zealand Steel for services rendered. 12 Until that point, the operations and activities can be seen as separate and therefore pursuant to Regulation 4(2), the higher of the premiums for labour pool services is payable. Consequently, the application for review is unsuccessful and the Corporation's decision is confirmed." At the hearing of the appeal on 25 October 1996 evidence was given by Mr C.M. Allen who is the managing director of the appellant company which has now formally changed it name to Waiuku Rigging Limited. In evidence Mr Allen said in part:- "3. It has always been my opinion that the company was supplying a complete rigging service to BHP New Zealand Steel Ltd. I endeavoured to explain this to Mr Flett, the Corporation's inspector when he visited me at my accountant's office in August 1995. I offered to take Mr Flett to New Zealand Steel's premises to demonstrate to him the work that we carried out but he declined to do so and showed really very little interest in the company's activities. 4. As previously explained, at the commencement of each year, New Zealand Steel supplies my company with an order for labour and equipment. The payment agreed with New Zealand Steel each year for labour supplied is a special one-off payment that I negotiate with New Zealand Steel. The calculation commences with the basic rate payable to riggers but there are a series of additions which cover the company's overhead in supplying various items for my men such as gloves, overalls, ear plugs, etc and I attach the break down that I work from each year in arriving at the agreed rate with New Zealand Steel. It will be observed that one item allowed for is the cost of 3 supervisors who are my employees but who undertake also a supervisory role of the men supplied for any particular task. 5. I also receive an order for machinery and equipment from New Zealand Steel for each particular job. The equipment required will vary from job to job. For some jobs that are estimated to cost less than $2,000, I do not submit time sheets and equipment schedules as required by the yearly orders. For these smaller jobs, the steel company simply asks me to quote a price which is all-inclusive of labour and the 13. supply of equipment and if accepted, then the job is completed for that agreed price. 6. I am aware that all other sub-contractors to New Zealand Steel are obliged to follow the same procedures as my company with regard to the supply of labour and equipment in that signed timesheets for the labour content of their work is required where jobs undertaken cost more than $2,000. Prices for these jobs vary, the highest I have ever undertaken being for $300,000. 7. As to equipment, I have a complete set of equipment and machinery required by riggers for any particular job. This varies of course but can include the use of a mobile crane or forklift both of which the company supplies and vans, chain blocks, strops, shackles, air winches, and so on. All lifting equipment has to be tested every six months by an approved testing agency and I have with me and produce for inspection the company's register for its lifting equipment. 8. A typical job undertaken for New Zealand Steel will commence with a phone call from one of its personnel to me specifying a job and requesting a certain number of men and items of equipment to carry out that job. An instance of this might be when they have a break down such as the electric motor on one of the very large fans. These motors weigh seven tonnes and require the crane and chain blocks to remove them. Either I or one of my supervisors will direct the company's riggers and supervise their work. Generally, minimal supervision is required because all of the company's employees are certified riggers and are highly skilled at what they do. My practice is normally to be present at the commencement of the job, ascertain what is required allocate the required number of men and supervise progress at various times during the day. At the completion of each day, I will fill in the necessary time records and at the end of the job, submit all records for both the riggers' time and the supply of equipment to New Zealand Steel." In further evidence Mr Allen said:- "1. The basis of the arrangement between the appellant and NZ Steel is the written agreement dated 31 December 1991. In essence in that agreement the applicant 'agrees to provide a rigging and labour hire service at 'NZ Steel's sites as per the terms and conditions set out in the agreement. 14. 2. Each year the companies negotiated labour rates. 3. For jobs involving a breakdown frequently the cost of equipment exceeds the cost of wages. 4 . The NZ Steel personnel who arranged jobs with Mr Allen all worked for the appellant in the past and are experts in the work they ask the appellant to do.". Counsels' submissions on the classification: Mr Harrison submitted that the evidence showed that the appellant provided a complete rigging service, namely, labour, expertise and equipment. He submitted that the appellant's services were different from that of a straight labour hire owner. In many instances labour hire owners send out a person who uses equipment provided by the temporary employer. Mr Howman said that it was accepted by the Corporation that the appellant provided rigging services but submitted that those services included both the hire of labour and the hire of equipment. Findings on the Evidence: The evidence proves:- A typical job carried out by the appellant involves rigging in the sense of lifting out and in machinery or parts of machinery that has to be repaired or replaced. 15. On the evidence I find that:- (1) The appellant supplies the appropriate number of men and the appropriate equipment for the job. (2) The appellant charges for the men and equipment at the appropriate rates. Conclusion: The relevant parts of Regulations 5 and 2 read:- "5. Classification of earners for premium purposes - For the purposes of calculation and payment of premiums under the Act, - (a) Earners shall be classified into their respective categories of - (i) Earners who have earnings other than as an employee; (c) Except as provided in regulations 8 and 10 of these regulations, earners who have earnings other than as an employee shall be classified in the classification unit, as set out in the Schedule to these regulations, which most accurately describes their activity." "2. Interpretation - (1) In these regulations, unless the context otherwise requires, - Activity' means the industry, trade, business, profession, or undertaking of an employer or a person who has earnings other than as an employee; and, for that purpose, functions which are ancillary or subservient to an activity (including, but without limitation, administration, marketing and distribution, technical 16. support, maintenance, product development, or other like functions) shall comprise part of that activity and shall not form a separate activity." The "activity" of the appellant is the undertaking of the appellant which is rigging in the sense of the lifting out and in, by its employees and with its equipment, machinery or parts of machinery that has to be repaired or replaced. The manner in which it fixes its charges for that undertaking does not change the nature of its undertaking, nor does the fact that employees of NZ Steel know because of their experience what the appellant will have to do to carry out the appellant's undertaking. The appellant's provision of men could perhaps be classified as "Contract Labour Hire - non-office based" or "Temporary Labour Hire - non-office based". The applicant's provision of equipment could be classified as "Plant Hiring or leasing". However, to separate out the ingredients of the appellant's undertaking in that way is artificial. The undertaking of the appellant is a rigging service for which it charges set rates for labour and machinery. "Non-Building Construction (not elsewhere classified)" is not really an appropriate classification, nor is "Construction Services (not elsewhere classified)". The classification "Heavy plant maintenance, business of" would be appropriate but last appeared in the 1993 regulations. 17. Regulation 6 deals with the classification of an employer who is engaged in two or more distinct and independent activities but the appellant does not engage in two or more distinct activities. The appellant's activity is the provision of a rigging service. That activity does not fall properly within any of the classifications in the schedule to the Employment Premium Regulations. Regulation 11 reads:- "11. Power of Corporation to determine description - (1) Where there is no classification unit set out in the Schedule to these regulations describing the activity of any employer or earner who has earnings other than as an employee, the Corporation, on application by the employer or earner who has earnings other than as an employee, or any agent or representative of any such employer or earner, shall determine a classification unit for that activity for the purpose of calculation and payment of premiums, which shall apply to all employers and earners who have earnings other than as an employee in that activity. (2) For the purposes of these regulations, a classification unit determined under subclause (1) of this regulation shall be treated as if it were set out in the Schedule to these regulations." I consider that the Corporation should determine under regulation 11 a classification for the activity of the appellant. In doing that the Corporation should first confer with the appellant so that if possible agreement can be reached on the nature of its activity. 18. This appeal can be brought on for hearing again if need be. ..... TJ.W. Imrie) District Court Judge (This decision is given under s.25A of the Acts Interpretation Act 1924)