Fair Work Act 2009

s.394 - Application for unfair dismissal remedy

Application for Unfair Dismissal Remedy - whether person protected from unfair dismissal since minimum employment period completed - "Continuous service", "transfer of business" and "transferring employee" considered.

[1] This decision concerns a jurisdictional objection to unfair dismissal applications made by Maria Vowles and Joel Gilchrist relating to their dismissal from employment by Habiku Pty Ltd. Habiku trades as The Daily Dose, which is a café in Box Hill North in suburban Melbourne. Ms Vowles and Mr Gilchrist are married to each other and were both employed by Habiku and its predecessor in operating The Daily Dose and were dismissed from employment by Habiku on the same day, for what are stated to be the same reasons. Accordingly the jurisdictional objections relating to their applications have been jointly heard and determined by me.

[2] Section 396 of the Fair Work Act 2009 (the Act) requires the determination of four initial matters before consideration of the merits of the application, one of which is whether an applicant is a person protected from unfair dismissal, including for reason of whether they have completed the minimum employment period.

[3] The other matters requiring determination under s.396 are whether an application was lodged with the Fair Work Commission within the 21 day period for making such applications; whether the dismissal was consistent with the Small Business Fair Dismissal Code or whether it was a case of genuine redundancy. Although there is no contention that the applications are out of time, the Respondent contends both that they are a small business, requiring consideration of whether the dismissals were consistent with the Code, and that the dismissals were genuine redundancies. Those two matters have not been considered in this decision.

[4] The jurisdictional objection under consideration in these matters is therefore whether or not either applicant has completed the minimum employment period provided for within s.383 of the Act. While the service of each Applicant with the Respondent in this matter, Habiku, only dates from September 2016, and each was dismissed in January 2017, in the event that the Commission finds that either or both employees is a "transferring employee" within the meaning of the Act, the circumstances of the matter mean that they will be found to have completed the minimum employment period and are thus protected from unfair dismissal and eligible to make an unfair dismissal application in relation to their dismissal.

[5] For the reasons set out below, I am satisfied that each Applicant was a transferring employee; that each has completed the minimum employment period; and that their unfair dismissal applications may continue.

[6] The legislative provisions which are relevant to this matter are set out in several places within the Act. In particular;

• s.382 provides that a person is protected from unfair dismissal if they have completed a period of employment of at least the minimum employment period and their employment is covered, as is the case in this matter, by a modern award;

• s.383 provides that the minimum employment period is six months if the employer is not a small business employer or one year in the event that the employer is a small business employer;

• s.384 provides that the "period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee". While s.384(2) provides for exclusion of certain service, the section deals only with service as a casual employee. Neither Applicant in these matters was a casual employee; rather each was employed on a full-time basis;

• s.311 provides the following in relation to who is a "transferring employee";

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work."

• the meanings of "service" and "continuous service" are defined within s.22, with s.22(7) providing the circumstances in which a transfer of employment occurs, and s.22(5) providing that if there is a transfer of employment, service with a first employer counts as service with the second, albeit that the time between the two periods may not be counted as service. Section 22(7) is in the following terms;

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee's employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer."

[7] The matter proceeded before me in the form of a determinative conference. The Applicants were represented pro bono by Angus Mackenzie, solicitor, from Bartlett Workplace Lawyers, having been given permission by me to appear for reason of the efficiency that he would bring as a legal representative to the proceedings taking into account its complexity (s.596(2)(a)). The Respondent was represented by Nabil Kurban, who is a director of the company, and Hala Kurban.

[8] Submissions made by the Applicants on representation included that since the Commission was required to determine the question of whether the minimum employment period had been served and that a legal representative would be able to more effectively cross-examine on the relevant matters, a grant of permission for legal representation would bring efficiency to the proceedings. They also pointed to the jurisdictional matter requiring determination by the Commission involved substantial complexity.

[9] On Friday, 7 April 2017, having considered the material provided by each regarding the application for permission for legal representation, I advised the parties that I would grant the application pursuant to s.596(2)(a) and that reasons for doing so would be provided in the course of the Commission's decision on jurisdiction.

[10] Section 596 of the Act, which regulates when a party may be represented by a lawyer or paid agent in proceedings before the Commission, provides as follows:

(1) Except as provided by subsection (3) or the procedural rules, a person may be represented in a matter before the FWC (including by making an application or submission to the FWC on behalf of the person) by a lawyer or paid agent only with the permission of the FWC.

(2) The FWC may grant permission for a person to be represented by a lawyer or paid agent in a matter before the FWC only if:

(a) it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter; or

(b) it would be unfair not to allow the person to be represented because the person is unable to represent himself, herself or itself effectively; or

(c) it would be unfair not to allow the person to be represented taking into account fairness between the person and other persons in the same matter.

(3) The FWC's permission is not required for a person to be represented by a lawyer or paid agent in making a written submission under Part 2-3 or 2-6 (which deal with modern awards and minimum wages).

(4) For the purposes of this section, a person is taken not to be represented by a lawyer or paid agent if the lawyer or paid agent:

(ii) an association of employers that is not registered under the Registered Organisations Act; or

[11] In granting the Applicants' application for permission for representation by lawyer, I had regard to the proper interpretation of s.596, which was considered by Flick J of the Federal Court in Warrell v Walton[1]:

"[24] A decision to grant or refuse "permission" for a party to be represented by "a lawyer" pursuant to s 596 cannot be properly characterised as a mere procedural decision. It is a decision which may fundamentally change the dynamics and manner in which a hearing is conducted. It is apparent from the very terms of s 596 that a party "in a matter before FWA" must normally appear on his own behalf. That normal position may only be departed from where an application for permission has been made and resolved in accordance with law, namely where only one or other of the requirements imposed by s 596(2) have been taken into account and considered. The constraints imposed by s 596(2) upon the discretionary power to grant permission reinforce the legislative intent that the granting of permission is far from a mere "formal" act to be acceded to upon the mere making of a request. Even if a request for representation is made, permission may be granted "only if" one or other of the requirements in s 596(2) is satisfied. Even if one or other of those requirements is satisfied, the satisfaction of any requirement is but the condition precedent to the subsequence exercise of the discretion conferred by s 596(2): i.e., "FWA may grant permission...". The satisfaction of any of the requirements set forth in s 596(2)(a) to (c) thus need not of itself dictate that the discretion is automatically to be exercised in favour of granting "permission"."[2]

[12] It is well established that in order for permission for representation to be granted under this section, the Commission must first determine if there exists a jurisdictional prerequisite to the exercise of discretion by virtue of at least one of the three conditions in s.596(2) of the Act being met. The Commission must then decide whether or not to exercise the discretion to grant permission.[3] The task of determining whether any of the criteria in s.596(2) is satisfied involves the making of an evaluative judgment akin to the exercise of a discretion.[4]

[13] In respect of s.596(2)(a), even if legal representation would enable a matter to be dealt with more efficiently, a lack of complexity may still mean that permission is refused.[5] Sheer volume of documents or the existence of extraneous issues does not equate to complexity.[6] While the consideration of complexity must be treated as a matter of significance in consideration of this criterion, ultimately the issue is whether the grant of permission would enable the matter to be dealt with more efficiently.[7] There may be many grounds for a consideration of "efficiency" and familiarity with the subject matter, the conceptualisation and organisation of argument in the statutory context and marshalling of relevant materials may be matters that assist in the efficient conduct of the hearing of a matter, as may the increased alacrity with which cross-examination may be carried out, as well as familiarity with the Act and authorities in the context of a jurisdictional question.[8] The expertise and familiarity with the issues before the Commission of human resource practitioners or in-house counsel may also be relevant.[9]

[14] The relevant complexity in this particular matter is whether, in all the circumstances the service of the Applicants may properly be regarded as continuous service for the purposes of the Act for reason of the questions set out below of transfer of business and transfer of employment. Within the context of a short jurisdictional hearing ostensibly to be focused upon the facts of the matter it was considered by me that legal representation by the Applicants would assist the matter to be dealt with more efficiently.

[15] Each of the Applicants gave brief oral evidence in the determinative conference held by me in relation to these matters, as did Mr Kurban and Ms Kurban. In addition to their oral evidence, each party filed submissions, documents and witness statements in relation to their respective contentions. I have had regard to all this material.

[16] The operators of The Daily Dose changed in September 2016. Prior to that change the cafe had been operated by LS Management. That company withdrew from operation of the business on 18 September 2016 with the operation of the business being taken over from 19 September 2016 by Habiku.

[17] Ms Vowles had worked at The Daily Dose since 1 October 2014, working in the capacity of the Café Manager. Mr Gilchrist had worked at The Daily Dose since 25 May 2015, working as the café' Chef.

[18] The evidence and other material leads to the following findings;

• Ms Vowles was employed by LS Management, then the operator of the business known as The Daily Dose, on 1 October 2014 and worked from that date on a full time basis as the Café Manager. Mr Gilchrist was employed by LS Management on 25 May 2015 and worked from that date on a full-time basis as The Daily Dose's Chef.

• LS Management was the Applicants' employer until 18 September 2016. Each Applicant's employment with LS Management until that date was a period of continuous service, within the meaning of the Act.

• LS Management operated the business of The Daily Dose until 18 September 2016. While the Applicants' submissions contend that "the business trading as The Daily Dose may be leased to Habiku Pty Ltd by the old employer",[10] there is no direct evidence of that before me. In particular, there is no evidence before me as to whether LS Management, owned by a person named as Luke, also owned, or continues to own, the business name and the equipment, or the premises from which the business operates.

• Some time prior to August 2016, LS Management decided to cease operation of the business of The Daily Dose, and Habiku agreed to take over its operation. There was an arrangement between LS Management and Habiku to do so, which included Habiku owning or having the beneficial use of some or all of the assets of LS Management (whether tangible or intangible) in connection with the operation of the business of The Daily Dose. Those assets included the business name and location; its fixtures, fittings and menus; and, to the extent they are an asset, the knowledge and goodwill contributed to the business by the Applicants.
• In August 2016 there was a meeting between representatives of LS Management, Habiku and the two Applicants, in which the change in business operator was discussed and explained to the Applicants. There is imprecise evidence before me as to what was discussed in the meeting, however the evidence there is leads to the findings that;

• Luke, the representative from LS Management, advised the Applicants that he would cease employing them from the date Habiku would take over operation of The Daily Dose; that their future employment would be with Habiku; and that his company would pay out the Applicants their accrued entitlements; and
  • Neither of the Kurbans spoke much of their expectations for the Applicants' future employment, leaving the conversation instead up to Luke, the Director of the outgoing employer.

• Neither of the Kurbans, or anyone else acting on behalf of Habiku, informed the Applicants in writing before their employment with Habiku started that their period of service with LS Management would not be recognised when they were employed by Habiku.

• On 25 September 2016, LS Management paid Ms Vowles an amount equivalent to 92.25 hours of unused annual leave and annual leave loading.[11] On the same date Mr Gilchrist received from LS Management payment for 133.28 hours' accrued annual leave.

• The Applicants started employment with Habiku on 19 September 2016[12] and were continuously employed by that company until they were notified of their dismissal on 13 January 2017, which took effect on 20 January 2017. The reason given to the Applicants for their dismissal was that the business was not covering its costs. They were advised that as a consequence the business would restructure as it no longer needed a full-time Chef or Café Manager and that their positions would be made redundant.

[19] The question that requires determination in these matters is whether, for reason of the provisions of the Act in relation to transfer of business, Ms Vowles and Mr Gilchrist are persons protected from unfair dismissal. This may come about if they are deemed to have completed the applicable minimum employment period for the reason that they can be found to be a "transferring employee" from the former operator to the new. In this regard, it is to be further noted that the minimum employment period is either six or twelve months of continuous employment, depending on whether The Daily Dose is a small business employer. That question in itself is a subject of dispute between the parties, however it does not need to be addressed in this decision since the Applicants' period of continuous employment with LS Management was greater than 12 months.

[20] A determination in favour of the Applicants requires a finding that each is a transferring employee in the manner set out in s.311 and that their service is continuous service within the meaning of s.22.

[21] Determination of whether or not an employee is a transferring employee is a matter dealt with in s.311(2), which in turn requires the provisions of s.311(1)(a), (b) and (c) to be satisfied.[22] An analysis of the circumstances of the matter allow the following findings;

• the Applicants' employment with their old employer, LS Management, terminated on 18 September 2016 (which satisfies s.311(1)(a));

• each Applicant was then employed by Habiku the next day, 19 September 2016 (which satisfies s.311(1)(b)); and

• the work each Applicant performed for Habiku was the same, or substantially the same, as the work each performed for LS Management (which satisfies s.311(1)(c)).

[23] As a result, I find that each of the Applicants was a transferring employee within the meaning of s.311(2).

[24] It is also germane to consider whether there has been a transfer of business in the manner set out within s.311(1). My findings above, in relation to the question of the Applicants being transferring employees, satisfies the provisions of s.311(1)(a), (b) and (c), which then leaves s.311(d) for consideration, which deals with whether there is a connection between the old and new employer of one of the types described in ss.311(3)- (6).

[25] In this regard, I find that there is a connection between the old employer, LS Management, and the new employer, Habiku, of the nature set out in s.311(3), which refers to there being a transfer of assets from the old employer to the new employer. Relevantly, LS Management sold the assets of the business to the Respondent, so that Habiku owned or had beneficial use of them, and which relate to the transferring work.

[26] Accordingly, the elements of s.311 have been satisfied. There was a transfer of business and the Applicants are transferring employees.

[27] The question of whether the Applicants' service is continuous service requires consideration of s.22 of the Act. That section provides a general meaning of the term in s.22(1), and a general proposition within s.22(2) about periods of leave that will be excluded from continuous service;

"(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(b) any period of unpaid leave or unpaid authorised absence, other than:

(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee's contract of employment; or

(iii) a period of leave or absence of a kind prescribed by the regulations;

(c) any other period of a kind prescribed by the regulations."

[28] The further subsections of s.22 are not directly relevant to the determination of this matter, other than s.22(7) which defines the meaning of "transfer of employment" and which is set out above.

[29] The evidence before the Commission is that the Applicants worked continuously for LS Management, and there is no evidence of either having taken leave of the type contemplated in s.22(2) or otherwise having broken their period of service. Similarly, there is no evidence that either worked other than continuously for Habiku.

[30] As a result of this analysis, I find that each Applicant, Maria Vowles and Joel Gilchrist, is a person protected from unfair dismissal, since each has completed the minimum employment period. The continuous service of each is the period of their entire employment with LS Management and Habiku, since each was a transferring employee within a business arrangement that was a transfer of business.

[31] These matters will now be reassigned to the Commission's Unfair Dismissal Case Management Team to be dealt with in the usual manner.

Mr A Mackenzie, solicitor, on behalf of the Applicants.

Mr N Kurban and Mrs H Kurban for the Respondent.

[1] [2013] FCA 291.

[2] Accepted by the Full Bench of the Commission as the correct approach to s.596 of the Act in New South Wales Bar Association v McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663.

[3] Appellant v Respondents [2014] FWCFB 4297; Emily Oratis v Melbourne Business School [2014] FWCFB 3869 [5].

[4] Asciano Services Pty Ltd v Hadfield [2015] FWCFB 2618 [19].

[5] King v Patrick Projects Pty Ltd [2015] FWCFB 2679 [15].

[7] Singh v Metro Trains Melbourne [2015] FWCFB 3502 [16].

[8] Smith v James Cook University [2016] FWC 6010, [6]-[7].

[10] Applicant's Outline of argument: objections (Vowles) 8; Applicant's Outline of argument: objections (Gilchrist) 8.

[11] Exhibit A3, Applicant's Document List (Vowles).

[12] Applicants' solicitor's correspondence, 24 April 2017.

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