s.394 - Unfair dismissal

Application for an unfair dismissal remedy - jurisdictional objection - minimum employment period - whether small business - whether Applicant was previously performing work as contractor or employee - no contract - jurisdictional objection upheld - application dismissed

• [1] Ms Katie Spalding (the Applicant) made an application to the Fair Work Commission (the Commission) seeking a remedy pursuant to s.394 of the Fair Work Act 2009 (the Act) stating that she was unfairly dismissed from her employment with Above The Line Safety Solutions Pty Ltd (the Respondent).

• [2] Section 396 of the Act requires satisfaction of four matters before considering the merits. The Respondent raised a jurisdictional objection that the Respondent is a small business and the Applicant was not a person protected from unfair dismissal as she did not meet the minimum employment period of twelve months under s.382 and s.383 of the Act as she was only employed for nine months from May 2024.

• [3] The matter was listed for a hearing on 1 May 2025. Both parties appeared self-represented. The Respondent was represented by its Director, Mr Glenn Peck.

• [4] The Applicant contested the jurisdictional objection on two bases.

• [5] Firstly, the Applicant argues that prior to signing her employment contract in May 2024, she was engaged by the Respondent as a contractor from approximately 12 February 2024. The Applicant's contention is that from approximately 12 February 2024, she was in practice an employee of the Respondent.

• [6] Secondly, the Applicant contests that the Respondent is a small business employer under s.23 of the Act. The Applicant argues that employees of associated entities have not been counted. Initially the Applicant also objected on the basis that the Respondent engages a number of contractors who she says should be counted as employees. The Applicant was informed that if she wished to press that argument, testimony from those contractors would be required. Subsequently, the Applicant is no longer pressing the argument that the contractors should be counted.

• [7] The Applicant's husband, Mr Michael Spalding and Mr Peck knew each other as Mr Spalding had done previous jobs for the Respondent.

• [8] There was a conversation over beers on a Saturday afternoon in February 2024 between Mr Peck and Mr Spalding at Mr Peck's house. The Applicant was not present. The Applicant understood the effect of this conversation to mean that Mr Peck would be providing her with casual work. Mr Peck states that the Applicant was having a difficult time with her employer at the time, and so Mr Peck floated the idea of offering work to the Applicant and her husband. Mr Peck said that it was Mr Spalding who elected to work as contractors, as according to Mr Peck, the couple were interested in entrepreneurship and the tax benefits of contracting. To the extent the accounts of Mr Peck and the Applicant differ about effect of the Saturday afternoon conversation, I prefer Mr Peck's account because he was present for the conversation.

• [9] Mr Spalding set up an ABN and a business name, K&S Contracting on Sunday, 11 February 2024. ASIC Records indicate that the ABN and business name is registered to Mr Spalding as a sole trader. The Applicant gave evidence that there is no formal partnership arrangement between her and her husband.

• [10] The Applicant provided evidence of text message conversations between her and Mr Peck's wife. On 20 February 2024 they had the following conversation:

Applicant: So what's that [laughing crying emoji]

Mrs Peck: Once things are more of a permanent thing one day Glenn will discuss

Applicant: Perfect! But what's the gst amount on top?

• [11] The first evidence of an invoice from K&S Contracting to the Respondent is dated 22 February 2024.[2] The invoice is from "K&S Contracting" with "Michael Spalding" underneath and the ABN registered to him. The Applicant highlighted the invoice item of 4 units of "Office" at $30.00 per unit. The Applicant says this was her contribution. The balance of the invoice is for work performed by Mr Spalding. The bank account details listed are for an account in Mr Spalding's name. The money was paid into that account, which the Applicant apparently has access to.

• [12] There were 17 invoices in total for work performed over the period from 12 February 2024 to 10 May 2024.

• [13] The Applicant provided further evidence of a text message between her and Mrs Peck about the work she was performing on 29 February 2024. On 8 March 2024, the Applicant provided a draft incident report to Mr Peck for an incident involving the Applicant's husband.

• [14] The Applicant's evidence is that she worked she performed involving re-formatting Work Health and Safety policies of the Respondent. Mr Peck said the work the Applicant performed was mostly cleaning and administrative tasks such as scanning. Mr Peck said he was trying to train her to use the rostering system, Deputy.

• [15] The Respondent's evidence of the Applicant's hours during this period is as follows:

From 12 February 2024 to 10 May 2024 inclusive, Katie Spalding was contracted through K&S Contracting for hours of work managed by her as follows:

• 61 workdays (excluding weekends and public holidays)
• 41 Days of actual work appearances were completed
• 218.5 actual work hours were completed and invoiced
• An average of 5.3 work hours were completed by Katie Spalding in 41 workdays of a 61-workday period

• • Hours of work range from 1 hour to 7.5 hours over the 41 days of work attendance[3]

• [16] On 13 May 2024, the Applicant signed a full-time employment contract. The commencement date of the contract was 9 May 2024.

• [17] There was a dispute during the hearing about the fact that the commencement date of the contract says 13 January 2024 on the Applicant's copy and 9 May 2024 on the Respondent's copy. On both versions, the date of the contract, 9 May 2024 is the same but the commencement date differs. I accept the explanations provided by the Respondent during the hearing that the version with the commencement date of 13 January 2024 is a typo and that page of the contract was later replaced. This aligns with the date of the document. Further a commencement date of 13 January 2024 does not make sense. The uncontested evidence is the parties is that the earliest the Applicant performed work for the Respondent was February 2024. The Applicant clearly cannot rely on a typo, which she knows to be incorrect, and which was later rectified, as proof of her meeting the minimum period of service.

• [18] The Applicant's role under the full-time employment contract was as Work Health Safety Environmental and Quality (WHSEQ) Coordinator. Under the full-time employment contract, the Applicant worked 40 hours per week.

• [19] The Applicant recalled that the reason she and her husband became full time employees instead of contractors is allegedly that Mr Peck received advice from his accountant that he had too many contractors. Conversely, Mr Peck says that the reason the Applicant became a full time employee is because her and Mr Spalding had just received a significant BAS bill and had decided they would prefer to be employees.

• [20] On Friday, 21 February 2025, Mr Peck called the Applicant and informed her that her employment would be terminated effective immediately, with one week's notice paid in lieu. The Respondent emailed the Applicant a Termination Letter on Monday, 24 February 2025. The Applicant's husband had left the prior to the Applicant's termination. According to the Respondent, Mr Spalding walked out of the business in a "abrupt and aggressive" manner. The circumstances of Mr Spalding's departure are relevant insofar as they relate to the reasons for the Applicant's dismissal. The stated reasons for termination were as follows:[4]

1. Katie Spalding was, on more than one occasion, informally counselled for manipulating the workers roster to benefit her husband, creating an inequality workplace.

2. Katie Spalding was, on more than one occasion, informally counselled, along with her husband, for instructing other employees to perform tasks that were allocated to her.

3. Katie Spalding continuously requested to work from home, even though she had previously admitted to doing nothing when working from home for her previous employer.

4. Katie Spalding and her husband were, on more than one occasion, counselled for the private use of company vehicles.

5. Katie Spalding and her husband became increasingly fixated on seeking financial compensation from previous employers as a means to get ahead, both had indicated they have pending claims in the system.

6. Through her work tasks, Katie Spalding had access to workers' personal details and company details, including access to credit cards, contract details, bank and insurance details.

7. Katie Spalding is considered a security risk to ATL Safety Solutions for the following reasons:

a. The threatening aggression her and her husband claimed and observed towards their previous employers.

b. Her husband's abusive departure from the business.

c. Her unchallenged commitment to her husband's directions.

• [21] The key issues to be addressed in determining the jurisdictional objection in this matter are as follows:

1. Is the Respondent a small business employer?
2. If so, was there a contract between Applicant and Respondent between 12 February 2024 to 10 May 2024?
3. If so, did that contract create an employment relationship? If so, which test applies?
4. If so, was there continuity of service between 10 May 2024 and 21 February 2025?

• [22] Each of these issues is to be dealt with in turn. If the Respondent is not a small business employer, that disposes of the whole jurisdictional objection, given the Applicant was employed for at least six months. Equally, if there was no contract between the parties from 12 February 2024 to 10 May 2024, there could be no employment contract for that period.

• [23] As indicated above, the Applicant initially indicated that she wished to challenge that the Respondent's contractors were in fact employees and not contractors. There are approximately 15 contractors. My Chambers advised the Applicant that I would want a copy of the contracts and witness statements from those individual contractors if the Applicant wished to make that argument. The Applicant subsequently did not press that argument. Further, the Respondent states that the contractors have signed opt-out notices under s.15AB of the Act so the new legislation does not apply to them.[5]

• [24] The Applicant further challenged that the Respondent is a small business employer on the basis that Mr Peck has "other companies". However, ASIC searches conducted by the Commission indicate that what the Applicant refers to are two business names. There is only one company entity, the Respondent. Mr Peck and his wife are the sole shareholders of that company. Mr Peck gave evidence that he is not a director of any other company. Accordingly, I find that there are no relevant associated entities within the meaning of s.50AAA of the Corporations Act.

• [25] During the hearing, the Respondent provided evidence of the number of employees of the Respondent. The Respondent also provided payroll data in evidence. The Respondent gave evidence of 6 full time employees at the time of dismissal including the Applicant and himself and 5 casual employees. In relation to the casual employees, I questioned Mr Peck about the regularity of their work. Given the nature of the Respondent's business in ship cleaning and maintenance, it was project specific. Mr Peck said many of the casual employees also worked as electricians and firefighters and would take on projects when they needed extra money. I find that, on a conservative estimate, only four casual employees would count as employees for the purposes of s.23 of the Act. Therefore, I find the total number of employees of the Respondent at the time of the Applicant's dismissal is 10. I find that the Respondent is a small business employer under s.23 the Act. Therefore, the relevant minimum employment period is twelve months.

Was there a contract between Applicant and Respondent between 12 February 2024 to 10 May 2024?

• [26] The question is not, as the Applicant put it, whether she "worked" for the Respondent for a period of twelve months. It is quite clear that she did perform work of some description which benefitted the Respondent in the period between February 2024 and February 2025. The question is whether there was a contract in the period between 12 February 2024 and 10 May 2024 and, separately, whether that contract created an employment relationship which continued until her dismissal.

• [27] In deciding whether a contract existed between the Applicant and Respondent for the relevant period, I have had regard to the elements of a contract as articulated in Macken's Law of Employment, 9th Edition:[6]

1. The "intention" between the parties to create a legal relationship, the terms of which are enforceable.
2. An offer by one party and its acceptance by the other.
3. The contract must be supported by valuable consideration.
4. The parties must be legally capable of making a contract.
5. There must be an absence of vitiating factors.
6. The contract must not be rendered ineffective by reason of conduct which is illegal or contrary to public policy.

• [28] As indicated above, I prefer Mr Peck's account of what was said during the Saturday afternoon conversation in February 2024. His account of the conversation was that it was an informal offer intended to help out Mr Spalding and his wife. The context for the conversation is that Mr Spalding had performed "a couple of other jobs" for Mr Peck previously. I place some weight on the fact that it seems the purpose of the conversation was to discuss future work for Mr Spalding. The work for the Applicant was an ancillary point brought up when Mr Spalding discussed that his wife was having a difficult time at her job at the time.

• [29] Mr Peck said Mr Spalding indicated he wanted to be a contractor. Mr Peck's evidence is that he understood that the Applicant would perform work "through" Mr Spalding occasionally. The Applicant would advise when she was available, and Mr Peck would find work for her to do. The money was then paid to her husband's account. As stated above, the evidence from the Applicant is that there was no partnership agreement with her husband.

• [30] Although the evidence is limited and finely balanced, I find that there was no intention to create a legal relationship between the Applicant and Respondent for the period between 12 February 2024 and 10 May 2024. Evidence indicates that there was an intention to create a legal relationship between the Respondent and Mr Spalding, for Mr Spalding to work as a contractor.

• [31] The evidence indicates that a verbal offer of contract work was made to Mr Spalding by Mr Peck during their conversation over beers.

• [32] There was no indication of an offer made to the Applicant of an ongoing commitment for the Respondent provide work to the Applicant.

• [33] The exchange between Mrs Peck and the Applicant on 20 February 2024 may be construed as an offer and acceptance, where Mrs Peck confirms the rates to be charge for the Applicant's work. However, Mrs Peck is not a Director of the Company. It is unclear if that was an offer and whether that offer binds the Respondent. In any event, that text message exchange leaves out the essential detail of what work the Applicant would be performing and is not an offer capable of acceptance.

• [34] On the evidence before me, I find no evidence of an offer by the Respondent and acceptance by the Applicant.

• [35] An issue arises that the invoices provided by the Applicant in evidence are under her husband's ABN, in his name and direct that payment be made to his bank account. There is no indication that the Applicant received any payment directly from the Respondent for the services she provided or that the Respondent promised the Applicant payment.

• [36] This raises the issue of consideration. The Applicant performed services for the Respondent and received nothing from them in return. She received payment by accessing her husband's bank account. This would suggest that if she was employed by anyone, it was her husband, not the Respondent.

• [37] The issue of legal capacity does not arise on the facts.

Absence of vitiating factors and illegality or contrariness to public policy

• [38] The Applicant raised the allegation that the Respondent told her to provide services in as a contractor. The Respondent denies that and says that it was the idea of the Applicant and her husband. Given other elements of a contract are not present, it is not necessary to decide this issue. For completeness, I note even if a contract were established, in my view, s.357 of the Act, under the sham contracting provisions, would not apply as the Respondent had a reasonable belief that the contract was a contract for services.

• [39] Having found that three of the elements of a valid contract are not present, it follows that no contract existed between the Applicant and Respondent for the period from 12 February 2024 to 10 May 2024. Therefore, the Applicant was not employed by the Respondent during the relevant period and the Applicant does not meet the minimum employment period to apply for unfair dismissal. The jurisdictional objection is upheld and the application is dismissed.

Did that contract create an employment relationship? If so, which test applies?

• [40] Although I have found that there is no contract, I wish to make some comments in relation to the test to be applied.

• [41] The Transitional Provisions under Schedule 1 of the Act in subclause 118 provides:

118 Entitlements determined by reference to length of a period of employment etc.

(a) immediately before commencement, an individual was not an employee of a person within the ordinary meaning of that expression; and

(b) because of the operation of section 15AA of the amended Act, on commencement, the individual becomes an employee of the person, within the ordinary meaning of that expression, in respect of that relationship.

(2) For the purposes of determining whether the individual has a right or entitlement under the amended Act or under a fair work instrument in respect of the employment of the individual, being a right or entitlement calculated by reference to:

(b) the individual's length of service (however described) as an employee; or

(c) a minimum period of employment (however described) of the individual;

the nature of the relationship between the individual and the person in respect of a period or periods before commencement is to be ascertained in accordance with the old Act.

• [42] The First Explanatory Memorandum to the Closing Loopholes Bill 2023 provides:

Clause 115: Entitlements determined by reference to length of a period of employment etc. 1637.This clause would provide that for the purposes of determining whether an individual who becomes an employee because of the operation of new section 15AA has a right or entitlement under the amended Act or under a fair work instrument calculated by reference to the individual's length of service or a minimum period of employment, the nature of the relationship in respect of a period or periods before commencement is to be ascertained in accordance with the FW Act as in force immediately before commencement.

1638.This clause would ensure that new section 15AA operates prospectively and any rights or entitlements accrued by an individual before commencement of new section 15AA would continue in effect after commencement.

• [43] Subclause 118 of the Transitional Provisions is not wholly applicable. The Applicant did not become an employee "because of" the commencement of s.15AA. However, the Explanatory Memorandum is clear that s.15AA is intended to operate prospectively and to preserve rights related to service that existed prior to the commencement of s.15AA. In my view, this means that for the purposes of counting service prior to the commencement of s.15AA, the Act which was in force immediately prior to the Commencement of s.15AA should apply, meaning the relevant test is the Jamsek and Personnel Contracting test.

• [44] The Applicant had the ability to perform work for others while working for the Respondent. Evidence indicates that she had control other the hours of work performed and indicated to the Respondent when she was available. The Applicant's work during the period from 12 February 2024 to 10 May 2024 was very sporadic. While this could all be indicative of a casual employee, together with other factors, if a contract were present, I would on balance find that it was a contract for services. The Applicant was paid by reference to units of work performed for completion of "Office" tasks. Invoices were provided on behalf of K&S Contracting to the Respondent with under an ABN, with a separate logo for the business and with GST applied. The Respondent gave evidence that the Applicant and her husband had t-shirts made with K&S Contracting written on them. There is no evidence that the Applicant would not have been able to subcontract her cleaning and scanning work. Income tax was not deducted from the invoice amounts, and she was not provided with holiday or sick leave. There is no evidence that the Applicant had any special equipment or tools which she was required to invest in, nor is there evidence of significant spending on business expenses in general. There is no evidence regarding the creation of goodwill in the business.

In the circumstances of this matter, I am satisfied the Applicant has not completed the required minimum employment period as the business has less than 15 employees and the Applicant was employed for less than 12 months. Therefore, the Applicant is not a person protected from unfair dismissal. The jurisdictional objection is upheld and the application is dismissed. I Order accordingly.

[3] Email from Mr Spalding to Chambers dated 27 April 2025.

[5] Email from Mr Spalding to Chambers dated 22 April 2025.

[6] Carolyn Sappiddeen et al, Macken's Law of Employment, (Thomson Reuters, 9th Edition, 2022) 108

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