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Contract For Services: Case Study Of Lou, An Owner Of A Tea Wholesaling Firm Add in library

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Case Study

Lou, the owner of a tea wholesaling company, decided about a year ago that product quality of some imported sources was too variable. To improve consistency of the product Lou decided he would employ someone to test samples of imported product and grade them. His retired Uncle Jim came to mind.  He was a food scientist and using his skills would also assist him by keeping him busy. 

Lou approached Jim with an agreement titled Contract for Services, devised by the company’s lawyer. It involved Jim agreeing not to be an employee and to have his own incorporated consulting business. The agreement included a clause suggesting he was not permitted to delegate any of his responsibilities at the tea company to another unless he got Lou’s approval. The agreement also stated he would be paid a set fee for each day he came to the warehouse and worked and a monthly pay date. Although not mentioned in the agreement, Jim was to pay his own taxes and make his own superannuation contributions. He was supplied with a warehouse uniform and all the equipment he required to perform his scientific analysis.

Jim worked from 9am to 5pm Monday to Friday for eight months without a day off and then suffered a serious heart attack. His daily routine at work had involved him checking in with Lou for instructions on the day’s work, Lou’s oversight of his progress during the day and an assignment of administrative support to support him at particular times. Toward the end of the financial year Jim was asked to supervise a couple of juniors in stocktaking processes, for about four weeks, but he had otherwise stuck to his scientific analysis.

One of the policies Lou added to the Employee Handbook last year was an anti-bullying policy.  The policy required a particular procedure to be followed if bullying was detected by any member of staff, and indicated management would treat the behaviour, if confirmed on investigation, as serious misconduct and it was likely to result in disciplinary procedures being taken. The policy was not included in staff contracts but they were all alerted to it on commencement of their engagement. Jim had reported the two juniors he had supervised as bullies just before his heart attack.  He made a written complaint stating their language was repeatedly demeaning to him and their regular slapping of him on the back was so aggressive it upset him to the point he was ready to resign. Lou was aware of his issues with the young workers and wonders what he is required to do now that Jim is convalescing and may not return to work.

Advise Lou whether

  • Jim could be regarded as an employee, despite their written agreement.
  • He is contractually bound to follow the Employee Handbook procedure in relation to the bullying complaint.
  • He has breached any common law duty to Jim even if he is not contractually bound to follow the Employee Handbook procedure.


The given case scenario is about Lou, an owner of a tea wholesaling firm. The Company Head decided to recruit a candidate for the work of testing the quality of several important products. Due to this Lou visits his uncle Mr. Jim who is a food scientist by profession. Lou desired of using the skill of his uncle. A contract named ‘Contract for services’ was drafted by the lawyer of the firm that was represented by Lou to his uncle (McGregor, 2014). On a general basis, a contract that is titled as ‘contract for services’ refers to an agreement by virtue of which an individual provides his consent to deliver performance to the organization being an independent contractor (Lowe and Korr, 2008). On account of this, no relationship amidst employer and employee exists. However, the employee is not covered under the provisions of the ‘Employment Act’. So accordingly, Jim was not considered to be Lou’s employee that is on the basis of a condition provided in it. However, the firm hired Jim at a fixed salary. Owing to the presence of a contract, Jim does not deserve to be an employee of the firm, contrary to which would violate the contract.

Another issue mentioned in the case scenario is about “bullying”. For protecting the self-interest of the employees, the legislature of Australia has enacted the act for workplace safety and health. This enactment assures that no organizational employee shall be exploited by his employer in any way. For creating a strong work culture as well as positive attitude within the workplace, the statutory body plays an important role in West Australia (Magliveras, 2005). The key issue here is that of ‘anti-bullying.’ Bullying is considered to be a common phenomenon in almost every workplace. It denotes an organized causing of interpersonal devastation which affects majorly upon mental, physical, or psychological condition of a person. This is now a common aspect in educational institutions or workplaces. As per the surveys, the ultimate cause of this bullying at workplace is that it is not yet made illegal at some place. And even if it is illegal at places, these are not executed as per the rule (Johnston, Phanhtharath and Jackson, 2010). In the case, Lou is responsible on a contractual basis for acknowledging the procedure in the employee rulebook related to bullying issue. The policy of ‘anti-bullying’ has been introduced in the employee handbook but not in staff contracts. So, Lou is not liable at all legally to abide by the procedure. But, he had the responsibility to hear all complaints of employees linked with bullying. It is clearly mentioned in the employee handbook procedure about the way employees are required to act in workplaces irrespective of job role (Wallace, 2002). This is given to every member of the organization. If the policy of anti-bullying is to be followed in compliance with the handbook for employment procedure, it might get ambiguous for authorities to provide remedies of bullying.

The policy of anti-bully had been introduced by Lou himself within the handbook of employment procedure in the last year. However, no action was undertaken in favor of the complaint by Jim. As per the rule made by the owner of the firm relating to anti-bullying process, if any case of bullying occurred or any complaint was launched by any employee, it would be taken quite seriously with due steps to mitigate it by the company management. However, all the mentioned steps must comply with the conditions given in the procedure handbook (Halbesleben and Wheeler, 2010). If it is identified after or during the investigation that bullying has occurred then the guilty would be held responsible for the act of bullying the victim and thus he must be penalized as per the policy norm as prescribed in the rule. As referred to in the case, the complaint that was launched by Jim related to the bullying act upon two organizational employees, was not even inquired any way by the higher authority of the company.


In compliance with the law in Australia, compensation is to be awarded to Jim since no step had been taken in favor of the complaint launched by Jim. Several cases were launched whereby management or higher authority has been alleged in incompetent dealing with issues related to bullying aspects the firm also faced much allegation in a way that the management has been very much reluctant in discharging duties in favor of bullying issues (Dealtry, 2003). During 2006, they were provided justice by giving a huge sum amount in the form of compensation related to the complaints launched in relation to bullying. The court had awarded that the defendant needed to pay the salary of 38 weeks at the rate of $627 per week.

Again, an obligation of common law has been breached to Jim who has been breached by Lou though he is not liable to abide by the handbook of employment procedure. Despite the fact that he is not responsible to abide by the handbook procedure, as an employer he could not escape his responsibility. One of the key responsibilities of him is to carefully attend to the complaints and adopt necessary actions in favor of the issue of bullying. The employer has the duty to identify and punish the actual culprit whoever he may be (Chernyaeva, n.d.). It is identified that such an act may reduce the productivity or level of motivation and even the work culture on account of lack of concern by Lou. The key aim of the Workplace Health and Safety law is to give enough protection to all employees during their course of work life, thereby reducing the risk aspects amidst employees within the workplace is another aim of the statute. The factors associated with risks may be mitigated by enacting the acts of bullying as well as other issues in lieu of increased penalties. The main attribute of the law governing health as well as safety at workplace are:

  • Assuring safety of each employee irrespective of individual post or role within the company.
  • Adequate care towards safety measures of the workers or employees.
  • Necessary actions to be taken on issue of complaints (Hager, 2004).
  • Guilty must be adequately penalized.

Within Australia, by means of statute or any other mean, no proper definition of bullying is given, particularly the elements comprising the issue of bullying. This happens to be one of the most significant issues within the given sector particularly by the employees, since bullying can occur in several ways but no specific way is prescribed. For instance, several students across the Australian territory are exposed to bullying in schools (Wright, 2005). Often employees experience menace on account of lack of implementation of present statutes and also lack of enactment of new laws in relation to menace. Irrespective of gender, caste, creed, or religion often most of the people whether students or employees are subjected to activities of bullying. As per different surveys, it has been identified that it commonly happens giving out different dare consequences every time.

During the course of employment as well as work environment, the act of bullying gives a negative impact on employees. In this given case, the reluctant behavior of Lou with respect to that of the culprits of the act of bully provided them due advantage in relation to the aggressive behavior towards others. The behavior of Lou may act as an encouragement for the culprits in the act. To the consequences of this, Jim had a massive heart attack. Some fatal outcomes of bullying acts are:

  • Declining attendance graph on account of the dread as well as fear among employees, leading to hamper in work. One of the key outcomes of such an act is declining attendance. Employees often go on a leave due to panic, and this affects productivity of the company.
  • Increase in anxiety among the junior employees result in occurrence of more errors during work. This symptom is stated in the case that Jim may not have suffered from heart attack if corrective measures were taken (Wright, 2005).
  • Decreasing level of performances amidst employees and less work productivity. The act of bullying may lessen the performances of the employees. As in case of Jim it became devastating. He had to give up his work due to heart attack.
  • The act of bullying often de-motivates the employees at their work.
  • During the cases of complaints of bullying activities, the management often needs to spend increased time in solving the issues. This is wastage of time and hinders further growth of the organization (McGregor, 2014).

Thus, it is a common responsibility of Lou to adopt certain important measures against the incident and the issue and punish the guilty although he is not liable for this contractually. Jim would not have suffered if it was done much earlier.



Chernyaeva, D. (n.d.). Workplace Mobbing and Workplace Harassment Regulation in Russia. SSRN Journal.

Dealtry, R. (2003). Issues relating to learning accreditation in corporate university management.Journal of Workplace Learning, 15(2), pp.80-86.

Hager, P. (2004). Lifelong learning in the workplace? Challenges and issues. Journal of Workplace Learning, 16(1/2), pp.22-32.

Halbesleben, J. and Wheeler, A. (2010). Coverage by smoke‐free workplace policies by race/ethnicity and health outcomes. International Journal of Workplace Health Management, 3(2), pp.111-130.

Johnston, M., Phanhtharath, P. and Jackson, B. (2010). The Bullying Aspect of Workplace Violence in Nursing. JONA's Healthcare Law, Ethics, and Regulation, 12(2), pp.36-42.

Lowe, T. and Korr, W. (2008). Workplace Safety Policies in Mental Health Settings. Journal of Workplace Behavioral Health, 22(4), pp.29-47.

Magliveras, K. (2005). The Regulation of Workplace Sexual Harassment in Greece: Legislation and Case Law Analysis. International Journal of Discrimination and the Law, 7(1-4), pp.169-186.

McGregor, M. (2014). Harassment in the Workplace: Context as Indicator. International Law Research, 3(1).

Wallace, M. (2002). Managing and developing online education: issues of change and identity. Journal of Workplace Learning, 14(5), pp.198-208.

Wright, T. (2005). Inside the Workplace. Industrial Law Journal, 34(4), pp.349-352.


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