Brendon Montgomery v innovative Exterior & Landscaping

[2020] FWC 4316

[2020] FWC 4316

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Brendon Montgomery
v
innovative Exterior & Landscaping
(U2020/6351)

DEPUTY PRESIDENT SAUNDERS NEWCASTLE, 17 AUGUST 2020

Application for relief from unfair dismissal – jurisdictional objection - minimum employment period – small business employer.

[1] This decision relates to an unfair dismissal application by Mr Brendon Montgomery pursuant to section 394 of the Fair Work Act 2009 (Cth) (Act) against his former employer, Innovative Exterior & Landscaping Pty Ltd (Innovative Exterior).

[2] Innovative Exterior objects to Mr Montgomery’s application on the basis that it was, at the time of Mr Montgomery’s dismissal, a small business employer and Mr Montgomery had not completed the minimum employment period (12 months) at the time of his dismissal.

[3] On 13 August 2020 I conducted a hearing, by telephone, to determine the jurisdictional objection raised by Innovative Exterior. Evidence was given on behalf of Innovative Exterior by Mr Ryan O’Connell, sole director and shareholder of Innovative Exterior, and Mrs Rebecca O’Connell, who is the wife of Mr Ryan O’Connell and the person responsible for processing payroll for Innovative Exterior. Mr Montgomery gave evidence, as did Mr Ryder King, a former employee of Innovative Exterior.

Legislative framework

[4] In order to be protected from unfair dismissal, a person must have completed a period of employment with his or her employer of at least the minimum employment period (s 382(a) of the Act). The minimum employment period is one year for a small business employer and six months for other employers (s 383 of the Act).

[5] A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at the time (s 23(1) of the Act). For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) all employees employed by the employer at the time (including the dismissed employee who has made the unfair dismissal application) are to be counted subject to the caveat that a casual employee is not to be counted unless, at the time, he or she has been employed by the employer on a regular and systematic basis (ss 23(2) & (4) of the Act); and

(b) associated entities are taken to be one entity (s 23(2) of the Act). The expression “associated entity” has the meaning given by section 50AAA of the Corporations Act 2001 (Cth) (the Corporations Act).

[6] Section 50AAA of the Corporations Act provides as follows:

“Associated entities

(1)  One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2)  This subsection is satisfied if the associate and the principal are related bodies corporate.

(3)  This subsection is satisfied if the principal controls the associate.

(4)  This subsection is satisfied if:

(a)  the associate controls the principal; and

(b)  the operations, resources or affairs of the principal are material to the associate.

(5)  This subsection is satisfied if:

(a)  the associate has a qualifying investment (see subsection (8)) in the principal; and

(b)  the associate has significant influence over the principal; and

(c)  the interest is material to the associate.

(6)  This subsection is satisfied if:

(a)  the principal has a qualifying investment (see subsection (8)) in the associate; and

(b)  the principal has significant influence over the associate; and

(c)  the interest is material to the principal.

(7)  This subsection is satisfied if:

(a)  an entity (the third entity)controls both the principal and the associate; and

(b)  the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8)  For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a)  has an asset that is an investment in the second entity; or

(b)  has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[7] Section 50AA of the Corporations Act defines “control” as follows:

“(1)  For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

(2)  In determining whether the first entity has this capacity:

(a)  the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and

(b)  any practice or pattern of behaviour affecting the second entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(3)  The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

(4)  If the first entity:

(a)  has the capacity to influence decisions about the second entity's financial and operating policies; and

(b)  is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members

the first entity is taken not to control the second entity.”

[8] Except in chapter 2E of the Corporations Act, a reference to an “entity” in the Corporations Act is a reference to “a natural person, a body corporate (other than an exempt public authority), a partnership or a trust” (s 64A of the Corporations Act).

Associated Entities

[9] Innovative Exterior accepts that Vogue Pools & Spas Pty Ltd (Vogue Pools) was an associated entity at the time of Mr Montgomery’s dismissal. Mrs O’Connell was, and is, the sole director and shareholder of Vogue Pools. The primary business of Vogue Pools is to sell fibreglass pools. Innovative Exterior undertakes, or arranges subcontractors to undertake, pool excavation work and other landscaping work. Mr O’Connell is, and was at the time of Mr Montgomery’s dismissal, the sole director and shareholder of Innovative Exterior.

[10] Mrs O’Connell gave evidence that she is, and was at the time of Mr Montgomery’s dismissal, the sole director and shareholder of Select Pools Sydney Pty Ltd (Select Pools), which sells a different brand of fibreglass pools to that sold by Vogue Pools. I accept Ms O’Connell’s unchallenged evidence that Select Pools did not have any employees at the time of Mr Montgomery’s dismissal. Accordingly, it is not necessary to determine whether Select Pools was an associated entity of Innovative Exterior at the time of Mr Montgomery’s dismissal.

[11] It was not suggested, and there is no evidence to support a finding, that Innovative Exterior had any other associated entities at the time of Mr Montgomery’s dismissal.

Relevant Facts

[12] Mr Montgomery was employed by Innovative Exterior for approximately 9.5 months from 8 July 2019 until 22 April 2020, at which time he was dismissed. It follows that if Innovative Exterior was a small business employer at the time of Mr Montgomery’s dismissal then he is not protected from unfair dismissal because he had not completed at least the minimum employment period (12 months) at the time of his dismissal.

[13] Mrs O’Connell gave evidence that, as at 22 April 2020, Innovative Exterior had five employees, including Mr Montgomery, and Vogue Pools had five employees, including Mrs O’Connell. Mr Montgomery did not challenge Mrs O’Connell’s evidence in relation to those 10 employees (in total), but contended that other persons were employed by Innovative Exterior or Vogue Pools at the time of his dismissal. I will address each of those persons below.

[14] Mr Trent Manning installs swimming pools for Innovative Exterior. He is a sole trader with his own ABN. He does not have any set hours of work for Innovative Exterior and is paid a fixed price for installing a pool. The price Mr Manning is paid by Innovative Exterior depends on the size of the pool he installs. He is not paid an hourly rate. Mr Manning supplies his own equipment and uses his own vehicle. Mr Manning wears a high-vis shirt with Innovative Exterior and Vogue Pool signs on it. Mr Manning undertakes pool installation work for other pool suppliers and private clients. When Mr Manning needs a labourer to assist him in his work for Innovative Exterior, he engages and pays for the labourer himself. When Mr Manning is not available to undertake work for Innovative Exterior, Mr O’Connell either undertakes the pools installation work himself or engages another contractor to do so. In all the circumstances, I am satisfied that Mr Manning was not employed by Innovative Exterior or Vogue Pools at the time of Mr Montgomery’s dismissal. He was engaged by Innovative Exterior as an independent contractor.

[15] There is no dispute that Tim has worked for Innovative Exterior in the past as a casual employee. No evidence was given as to Tim’s surname. Mr and Mrs O’Connell gave evidence, which I accept, that the last time Tim worked for Innovative Exterior was in about February or March 2020, and since that time Tim has worked on some of Innovative Exterior’s jobs but when he did so he was engaged by Mr Manning as a labourer and paid by Mr Manning to assist Mr Manning in his pool installation work. I prefer the direct evidence given by Mr and Mrs O’Connell about this matter over the hearsay evidence given by Mr Montgomery to the effect that Tim told Mr Montgomery that he was getting paid by Vogue Pools. In all the circumstances, I find that Tim ceased to be an employee of Innovative Exterior or Vogue Pools in about February or March 2020 and he was not employed by either of those entities at the time Mr Montgomery was dismissed on 22 April 2020.

[16] There is no dispute that Malcolm has worked for Innovative Exterior in the past as a casual employee cleaning pools and servicing pool pumps. No evidence was given as to Malcolm’s surname. Mr and Mrs O’Connell gave evidence, which I accept, that the last time Malcolm worked for Innovative Exterior was in about January 2020, and Innovative Exterior now uses a subcontractor with his own pool maintenance business to clean a pool once it has been installed. I prefer the direct evidence given by Mr and Mrs O’Connell about these matters over the contention by Mr Montgomery that Malcolm has been working for Innovative Exterior or Vogue Pools since January 2020. The evidence given by Mr and Mrs O’Connell about these matters is also broadly supported by Mr King’s evidence that Malcolm last undertook work for Innovative Exterior or Vogue Pools about two months prior to Mr Montgomery’s dismissal. In all the circumstances, I find that Malcolm ceased to be an employee of Innovative Exterior or Vogue Pools in about January 2020 and he was not employed by either of those entities at the time Mr Montgomery was dismissed on 22 April 2020.

[17] A range of contractors such as Mr Dan Lalor, concretor, Waters Cranes, and Cameron, an electrical contractor, often work on Innovative Exterior’s projects. Mr O’Connell gave evidence, which I accept, that about 75% of the time clients of Innovative Exterior directly engage and pay contractors such as Mr Lalor, Waters Cranes, and Cameron for their services in undertaking concreting, crane work, and electrical work respectively in connection with the installation of a pool. In the other approximately 25% of cases, Innovative Exterior enters into a contract with the client which includes the provision of some or all of these services and Innovative Exterior engages and pays contractors such as Mr Lalor, Waters Cranes, and Cameron for their services. Regardless of which of these two methods is used on a particular site, I am satisfied that the persons who undertake the relevant work are not, and were not on 22 April 2020, employees of Innovative Exterior or Vogue Pools, even though some of them wear Vogue Pool shirts when they undertake work for Innovative Exterior or Vogue Pools. They are independent contractors or employees of such contractors; the contractors run their own businesses and provide services to a range of clients, including clients of Innovative Exteriors and, at times, Innovative Exterior itself.

[18] Two persons remain to be considered: Mr Ryan O’Connell and a worker known as Jason, whose surname was not provided. However, in light of my findings in paragraphs [14] to [17] above, even if I found that Mr O’Connell and Jason were employed by Innovative Exterior or Vogue Pools on 22 April 2020, the total number of employees of Innovative Exterior and its associated entities as at 22 April 2020 would only be 12 (i.e. the 10 employees identified by Mrs O’Connell plus Jason and Mr O’Connell). Accordingly, I do not need to make findings in relation to Jason and Mr O’Connell. I will, however for completeness, make short findings about each of them:

•  Jason was employed by Innovative Exterior as a regular and systematic casual employee up until about February or March 2020. Jason undertook excavation work in connection with pools being installed for clients of Innovative Exterior. In about February or March 2020 Jason commenced a period of absence from work on workers’ compensation. About one month ago Jason came off workers’ compensation and returned to work for Innovative Exterior. The fact that an employee is absent from work on workers’ compensation does not, of itself, mean that they cease to be employed by their employer. There is no evidence to support a finding that Jason’s employment relationship with Innovative Exterior came to an end when he went on workers’ compensation or that he was not employed by Innovative Exterior on 22 April 2020. I am therefore satisfied that Jason should be included in the calculation of the total number of employees of Innovative Exterior and its associated entities as at 22 April 2020.

•  Mr O’Connell is the sole director and shareholder of Innovative Exterior. He is a licensed swimming pool builder and works in the business on a full-time basis, focusing primarily on construction work and some pool installations. Mr O’Connell is not paid a wage or salary. When the business can afford to do so, it pays Mr O’Connell some financial reward, usually in the form of a director’s fee or loan. Mr O’Connell has not received any payment from Innovative Exterior for about the last six months due to the financial position of the business. Although Mr O’Connell does not receive a wage or salary from Innovative Exterior and is not shown as an employee of Innovative Exterior in its payroll records, I find on the limited evidence adduced in these proceedings that Mr O’Connell was an employee of Innovative Exterior on 22 April 2020. My finding in that regard is influenced primarily but not solely on the basis that Mr O’Connell works in the business on a full-time basis and is intimately involved in the day to day operation of the business.

Conclusion

[19] For the reasons stated, I find that Innovative Exterior and its associated entities employed 12 employees at the time Mr Montgomery was dismissed (22 April 2020). Accordingly, Innovative Exterior was a small business employer at the relevant time and the minimum employment period for Mr Montgomery was 12 months. Mr Montgomery was employed by Innovative Exterior for about 9.5 months. He was therefore not employed for the minimum employment period and he was not protected from unfair dismissal (s 382 of the Act). It follows that Mr Montgomery’s unfair dismissal application must be dismissed.

DEPUTY PRESIDENT

Appearances:

Mr Montgomery on behalf of himself
Mr O’Connell on behalf of the Respondent

Hearing details:

2020.
Newcastle (by telephone):
13 August.

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