s.394 - Application for unfair dismissal remedy

M.W Clarke & A.P Mcveity & E.M Scott & R.A Taylor

Application for an unfair dismissal remedy-whether Applicant meets minimum employment period-whether Respondent is a small business-whether owners of the business are employees-determined the Respondent is a small business and the Applicant has not met the minimum employment period-application dismissed

• [1] This matter involves an application to the Fair Work Commission (the Commission) made pursuant to section 394 of the Fair Work Act 2009 (the Act) for unfair dismissal remedy. Ms Murfet (the Applicant) claims she was unfairly dismissed from her employment with M.W Clarke & A.P Mcveity & E.M Scott & R.A Taylor (the Respondent).

• [2] A jurisdictional objection has been raised by the Respondent alleging that it is a small business employer within the meaning of the Act and that the Applicant has therefore not completed the minimum employment period. The Applicant disputes that the Respondent was a small business employer at the relevant time.

• [3] The matter was listed for Hearing - Jurisdiction only before me on 14 April 2025. The Applicant represented herself and gave evidence on her own behalf with her father present as her support person. Mr Taylor, one of the five partners, represented and gave evidence for the Respondent.

• [4] Section 382(a) of the Act provides as follows:

"382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person's annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold."

• [5] It is not necessary to deal with the factors in s.382(b) of the Act as I am simply dealing with the minimum employment period.

• [6] Section 384(1) of the Act provides the meaning of "period of employment":

(1) An employee's 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."

• [7] Section 383 of the Act provides the meaning of "minimum employment period":

(a) if the employer is not a small business employer - 6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(ii) immediately before the dismissal; or

(b) if the employer is a small business employer - one year ending at that time."

• [8] Section 23 of the Act relevantly defines a small business employer as follows:

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee's employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated."

• [9] The Applicant commenced employment with the Respondent on 11 July 2024. The Applicant was a part-time employee. Her effective date of dismissal is 17 February 2025. As the applicant was dismissed on 17 February, this date is the "particular time" for the purposes of section 23 of the Act.

• [10] The Applicant's period of employment is a period of greater than 6 months but less than 12 months. Therefore, if the Respondent was a small business employer at the particular time, the Applicant will not have been employed for the minimum employment period and therefore will not be a person protected from unfair dismissal.

• [11] The Respondent provided a payroll record of employees engaged, including casual employees, in the month leading up to the Applicant's dismissal date[1].

• [12] That list of employees is as follows:

1. Ruby Coleman
2. Enya Cosgrove
3. Torben De Boer
4. Kym Ellery
5. Ella Holland
6. Hannah Kirkland
7. Jarrod Kolovos
8. Phoebe Lunson
9. Jasmine Murfet
10. Emerson Snowden-Allen
11. Ilse Taylor
12. James Young

• [13] The Applicant agreed that those employees should be counted. However, the Applicant submitted that another six employees were in fact employees at the particular time. Those additional alleged employees are:

1. Alex McVeity
2. Edith Scott
3. Rhys Taylor
4. Amber Taylor
5. Max Clark
6. Mikey

• [14] It was agreed during the hearing that, in fact, Enya Cosgrove had resigned from her employment prior to 17 February. Therefore, she was not employed at the particular time and should be removed from the count of employees. However, while the evidence was not clear, it is more likely than not that "Mikey" or "Michael" commenced employment prior to the cessation of the Applicant's employment and therefore should be included in the count of employees. Therefore, it is apparent that there were at least 12 employees, including the Applicant, at the particular time. The remaining 5 names on the Applicant's list are, on the evidence of the Respondent, joint partners in the business and are not employees. The Applicant submits that the five persons are employees. The key question then to be determined is whether or not the five partners in the business are in fact employees. If three or more of those individuals are employees, then the Respondent will not be a small business.

• [15] The five partners of the business are Max Clarke, Alex McVeity, Edith Scott, Ryan Taylor and Amber Taylor. While Amber Taylor is not currently listed as a partner in the business, the evidence of Mr Taylor is that she has invested in the business and that the Accountant is yet to alter the partnership agreement to reflect this. There was no particular challenge to that evidence, and I accept that Amber Taylor is now part of the business partnership.

• [16] People who are owners or directors of a company can be, in certain circumstances, both owners and employees of the same company:

"As managing director he is a party to a contract with the company and this contract is a contract of employment; more specifically I am of the opinion that it is a contract of service and not a contract for services. There is nothing anomalous in this; indeed it is a commonplace of law that the same individual may have two or more capacities, each including special rights and duties in relation to the same thing or matter or in relation to the same persons."[2]

• [17] The question is whether there is a contact of employment for each or any of the partners in the business. A contract of employment is a particular species of contract requiring personal service:

"Contracts of employment (contracts of service traditionally so-called) are contracts for personal service. [...] The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment. Thus, contracts with corporations, contracts with partnerships, contracts permitting unlimited delegation and contracts which do not actually compel the performance of work but pay only on results, are each prima facie not contracts of the necessary quality[...] ".[3]

• [18] The unchallenged evidence of Mr Taylor is as follows:
  1. There are no contracts of employment for any of the persons in the partnership.
  2. The partners occupy many different roles; Alex is in charge of accounts and bookkeeping. Amber is in charge of social media, marketing and branding. Rhys is in charge of maintenance and general handyman tasks. Edith is in charge of staff rosters and training and Max is a junior partner learning the different parts of the business. Additionally, all partners are required to cover day to day shifts as needed.
  3. Some of the partners are scheduled on the work roster in order to fill in gaps where employees aren't able to work.
  4. As it is a partnership, renumeration is via owners drawings, there are no wages or superannuation paid.
• 5. None of the partners are covered by a workers compensation policy.[4]

• [19] The only factual circumstance suggesting there is a contract of employment is that the partners perform work for the business. However, the work performed (other than filling in ad hoc for unfilled shifts) is more akin to efforts to advance the affairs of the business by the owners. Importantly, there is no evidence the services are rendered to the business in exchange for a particular consideration. There is no wages or superannuation paid to the partners and none of the partners are covered by a worker compensation policy.

• [20] Having examined the various facets and circumstances of the relationship, I am satisfied that none of the partners of the business have entered into a contract of personal service with the Respondent.

• [21] I therefore do not consider the partners, in the circumstances before me, to be employees of the business, such that they should be included in the head count of employees for the purposes of the jurisdictional question. As the 5 partners are not included in the head count it follows that there were 12 employees of the Respondent at the particular time and the Respondent was a small business.

• [22] I am satisfied that the Respondent is a small business employer within the meaning of s.23 of the Act. In order to be a person protected from unfair dismissal, an employee who was employed by a small business employer must have completed one year of continuous service. It is not in dispute that the Applicant was employed for less than that period. As the Applicant does not meet the minimum period of employment, she is not a person protected from unfair dismissal and the application is therefore dismissed.

• [23] An order[5] to that effect will be issued concurrently with this decision.

[1] Digital Hearing Book (DHB), page 38.

[2] Anderson v James Sutherland (Peterhead) Ltd. [1941] SC 203.

[3] ACE Insurance Limited v Trifunovski [2013] FCAFC 3, per Buchanan J, [25].

[5] PR786111.

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