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When might a training contract establish an employment relationship?

Many training agreements involve an employment relationship, for example, trainees and apprentices are employees.

Where the relationship is the subject of a comprehensive written contract, the relationship is to be characterised solely by reference to the rights and obligations specified in that contract. The way the contract is performed and the course of dealings between the parties is irrelevant, unless it is alleged the training contract has been varied to create an employment contract.

For a training contract to establish an employment relationship, there must be, under the contract, two obligations:

  1. An obligation on the so-called employer to pay remuneration as consideration for the services reasonably demanded under it by the so-called employee.
  2. An obligation on the so-called employee to perform such services.

The label or characterisation placed on the relationship by the contract is not determinative.

In Tracey v Murdoch University (2022), the Fair Work Commission (FWC) had to determine whether a person participating in a university training program was employed during the time he spent in the program.

The contract he signed provided for him to receive a ‘stipend’. The person was required to devote themselves to their studies during all required working hours throughout the year except for 10 days of ‘annual leave’ and 10 days of ‘personal leave’. The agreement provided that the stipend related at least in part to the undertaking of studies. The agreement also required successful completion of the required degree, compliance with relevant University rules during the course of the degree, and compliance with applicable safety and ethics rules.

The FWC ruled that the word ‘stipend’ encompasses payment in the nature of salary for work performed and payments that are not necessarily linked to the performance of work, with the key criterion being that the payments are of a fixed and regular nature.

In this case, the fundamental elements of an employment relationship were not present and the obligations in return for the stipend could not be considered the performance of work. Rather, the stipend was paid as consideration for the person undergoing an integrated program of study and training, not for the performance of work.

The person claimed obligations contained in the program descriptions to perform specified ‘clinical duties’ in a hospital constituted work, in that it contributed to the provision of the services which the hospital provided to its fee-paying clients. However, the FWC stated this requirement was only a component of an integrated training program, which also requires the completion of a post-graduate course in education, participation in university teaching for training purposes, and undertaking research and other academic activities. The clinical duties were for the purpose of training.

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