Camm and Secretary, Attorney-General's Department

[2021] AATA 4608

Camm and Secretary, Attorney-General's Department [2021] AATA 4608 (2 December 2021)

Division:GENERAL DIVISION

File Number(s):      2021/2032 & 2021/2772

Re:John   Camm & Kristiana McMillan

APPLICANT

AndSecretary, Attorney-General's Department

RESPONDENT

Decision

Tribunal:Senior Member J Rau SC

Date:2 December 2021

Place:Adelaide

The decision under review in respect of the fair entitlements guarantee issue for Mr Camm and Ms McMillan is affirmed.

The decision under review in respect of the payment in lieu of notice entitlement for Mr Camm is set aside and substituted with a decision that Mr Camm is entitled to payment in lieu of notice at the maximum wage rate for the six-business day period between 9 September 2020 to 17 September 2020.

..........................[Sgnd]............................

Senior Member J Rau SC

Catchwords

EMPLOYMENT – fair entitlements guarantee – entitlement to redundancy payment – whether companies associated entities – whether Applicants were employed by a small business – payment in lieu of notice – decision of fair entitlements guarantee affirmed – decision of payment in lieu of notice set aside and substituted.

Legislation

Corporations Act 2001 (Cth)

Fair Entitlements Guarantee Act 2012 (Cth)

Fair Work Act 2009 (Cth)

REASONS FOR DECISION

Senior Member J Rau SC

2 December 2021

DECISIONS UNDER REVIEW

1. The decision under review in respect of the fair entitlements guarantee issue for both Applicants is as follows:

   (a)Mr Camm – the decision under review is the decision of the Respondent dated 1 April 2021 made under Subsection 39(1) of the FEG Act, which set aside and substituted the original decision of the Respondent dated 22 December 2020.

   (b)Ms McMillan – the decision under review is the decision of the Respondent of 1 April 2021 made under Subsection 39(1) of the FEG Act, which set aside and substituted the original decision of 17 December 2020.

2. With respect to the payment in lieu of notice entitlement for Mr Camm, the decision under review is the decision of the Respondent dated 6 August 2021 made under Section 37 of the FEG Act, which set aside and substituted the review decision of 1 April 2021 made under Subsection 39(1) of the FEG Act, which itself set aside and substituted the original decision of 22 December 2020 made under Subsection 15(1) of the FEG Act.

   FAIR ENTITLEMENTS GAURANTEE – MR CAMM & MS MCMILLAN

3. These applications seek review of decisions made concerning a claim for an advance made by the Applicants under the Fair Entitlements Guarantee Act 2012 (Cth) (the FEG Act).

4. The Applicants are seeking an advance under the FEG Act in respect of redundancy pay.[1] Both Applicants were formally employees of Tetracon Pty Ltd (Tetracon).

   [1] FEG Act, s 3.

5. The FEG Act provides that a person’s redundancy pay entitlement is the amount of redundancy pay to which the person is entitled under the “governing instrument” for their employment.[2]

   [2] Ibid, s 5 & 6

6. In this instance, there is no dispute that the “governing instrument” is the Fair Work Act 2009 (Cth) (the FW Act).

7. Section 119 of the FW Act establishes a general entitlement to redundancy pay in certain circumstances. There are, however, exclusions.

   “Redundancy pay

   Entitlement to redundancy pay

   (1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

   (a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

   (b) because of the insolvency or bankruptcy of the employer.

   Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

   Amount of redundancy pay

   (2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period
Employee’s period of continuous service with the employer on termination	Redundancy pay period
1	At least 1 year but less than 2 years	4 weeks
2	At least 2 years but less than 3 years	6 weeks
3	At least 3 years but less than 4 years	7 weeks
4	At least 4 years but less than 5 years	8 weeks
5	At least 5 years but less than 6 years	10 weeks
6	At least 6 years but less than 7 years	11 weeks
7	At least 7 years but less than 8 years	13 weeks
8	At least 8 years but less than 9 years	14 weeks
9	At least 9 years but less than 10 years	16 weeks
10	At least 10 years	12 weeks

(3) A reference in this section to continuous service with the employer does not include period of employment as a casual employee of the employer.”

1. Section 121 provides as follows:

   “Exclusions from obligation to pay redundancy pay

   (1) Section 119 does not apply to the termination of an employee's employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first):

   (a) the employee's period of continuous service with the employer (other than periods of employment as a casual employee of the employer) is less than 12 months; or

   (b) the employer is a small business employer.

   (2) A modern award may include a term specifying other situations in which section 119 does not apply to the termination of an employee's employment.

   (3) If a modern award that is in operation includes such a term (the award term), an enterprise agreement may:

   (a) incorporate the award term by reference (and as in force from time to time) into the enterprise agreement; and

   (b) provide that the incorporated term covers some or all of the employees who are also covered by the award term.”

2. It is not disputed that the Applicants have generally met the requirements of Section 119 in respect to their entitlement to redundancy pay. However, Section 121(1) of the FW Act provides that a person does not have an entitlement to redundancy pay, if at the time immediately before the termination, or at the time they are given notice of the day of termination, whichever happened first (the relevant time), the employer is a “small business employer” (SBE).

3. An SBE is defined as being an employer employing less than 15 workers.[3]

   [3] FW Act, s 23.

4. There is no dispute that at all relevant times, Tetracon as a single entity, was an SBE.

5. For the purposes of ascertaining whether an employer was an SBE, the employees of “associated entities” may, however, be aggregated. This is the primary contested issue in this case. Were there, at the relevant time, “associated entities”, the total number of employees of which, were 15 or more? If the answer to this question is yes, the issue moves to one of calculation of the entitlement. If the answer is no, there is no FEG entitlement.

6. The definition of “associated entities” is derived from section 50AAA of the Corporations Act 2001 (Cth) (the Corporations Act).[4] This provides as follows:

   [4] Ibid.

   “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. A critical element of Sub-section (7) is the element of “control”. This in turn is defined in section 50AA of the Corporations Act as follows:

   “Control

   (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. It is contended by the Applicants that another company, Remcast Pty Ltd (Remcast), was at all relevant times an “associated entity”.

9. It is not disputed that if Remcast and Tetracon were associated entities at the relevant time, they would have 15 or more employees between them and would therefore not come within the definition of an SBE. In these circumstances, the Applicants would be entitled to an advance under the FEG Act.

   Were Tetracon and Remcast “associated entities” at the relevant time?

10. The Applicants assert that Remcast and Tetracon were “associated entities” by reason of the application of Section 50AAA (5) or (7) (see paragraph 13 above). This is quite different to an assertion that they were” related entities”.

11. I am not persuaded on the evidence, that the provisions of Section 50AAA(5) have been met. Shared assets, or the existence of debt owed by one entity to the other does not of itself constitute a “qualifying investment” for the purpose of Section 50AAA(8).

12. The Applicants assert that Mr Hall was in “control” of both Remcast and Tetracon. This is to be determined by the application of the statutory definition of “control” in Section 50 AA (see paragraph 14 above).  

13. A diagrammatic representation of the ownership structure is helpful in understanding the circumstances as they applied at the relevant time. This is included at “Annexure A”.

14. Ultimately, as can be seen from “Annexure A”, Tetracon and Remcast were owned in equal shares by two common owners at the relevant time. These companies were separate entities for the purposes of the Corporations Act.[5]

    [5] Corporations Act, s 9.

15. An “entity” for these purposes can include a natural person.[6]

    [6] Ibid.

16. In this instance:

    (c)There were the same two joint directors of both companies, but with neither exercising “control”.

    (d)Both companies were 50% owned by two unrelated companies, Laurinna Pty Ltd and RNK Palatine Ply Ltd.

    (e)The shares in Laurinna Ply Ltd and RNK Palatine Ply Ltd were 100% owned by entities (individuals in this case), that were not “associated entities”.

    Conclusion

17. Having regard to all of the above, Tetracon and Remcast were not “associated entities” at the relevant time. This means that Tetracon was an SBE at the relevant time and accordingly, excluded from the operation of the FEG Act under section 121(1)(b).

    PAYMENT IN LIEU OF NOTICE – MR CAMM

18. Mr Camm had a separate issue before the Tribunal, namely payment in lieu of notice.

19. There is no dispute that at the time of Mr Camm’s termination, he was entitled to four weeks’ notice.

20. At 6:49am on Thursday 20 August 2020, Mr Camm sent an email to his employer advising that he was unwell, attaching a medical certificate for the period from 19 August 2020 to 29 August 2020. As at that time, he had accrued in excess of 109 hours of sick leave.

21. At 10:34am on that same day, Mr Camm received a text message from Ms McMillan advising him that she had heard that his employment had been terminated due to poor performance. This was the first that he had heard of his termination. This was not however, a communication of termination from his employer.

22. At about 3pm on Friday 21 August 2020, Mr Camm logged on to his work email account and found an email from Mr Nigel Hall. This email had been sent at 11:30am on 20 August 2020. Attached to the email was a letter headed “Termination of Employment”. The letter was dated 18 August 2020. This was the first communication to Mr Camm from his employer about his termination.

23. The text of this letter was as follows:

    “RE: Termination of Employment

    Dear John,

    This letter summarises our discussion on 18^th August in which we agreed that, based on long term poor business results and continued poor business pipeline, it is time for you to finish up with Tetracon.

    Your last day will be Tuesday 15^th September, 2020.

    Rob & I appreciate that you’ve offered you will work out your notice period in order to effect as smooth a handover as possible with both clients and team.

    I would like to add that we have always seen you act in the best interests of the company, so it is with sadness that we have come to this point. We sincerely wish you all the very best in the future.

    Regards,

    Nigel Hall
    Director”

24. There followed some exchanges with Mr Hall and Mr Siva. These confirmed that Mr Camm had not been dismissed due to poor performance, but due to the poor performance of the business.

25. Mr Camm produced two further medical certificates for the periods 31 August 2020 to 1 September 2020 and 1 September 2020 to 16 September 2020.[7]

    [7] Exhibit 7.

26. There is no dispute that the employer was placed into voluntary liquidation on 9 September 2020.

27. Mr Camm was entitled to 4 weeks’ notice of termination. There is a dispute as to when this notice period commenced.

28. See Annexure A for explanation of Mr Hall’s role.[8]

    [8] Exhibit 10.

29. On the basis of the available evidence, I find that Mr Camm was not formally advised of the termination of his employment until he viewed the email of 20 August 2020. I take that date as the date that he was given notice. The fact that he did not access it until the following day does not change the fact it was sent to him on the 20 August 2020. The fact that the actual termination letter that was emailed to him on the 20 August 2020 was dated 18 August 2020, is irrelevant. At this point in time, he was on authorised sick leave. The question arises as to whether Mr Camm’s four-week period of notice should run concurrently with his authorised paid leave.

30. It was conceded by the Respondent that the FW Act is silent on this point.

31. At the time of his termination, Mr Camm was on authorised leave, his entitlement to which had been accrued during the course of his employment. In this respect, his leave was an existing entitlement in the same sense as accrued holiday entitlements or long service leave. If an employee in any enterprise is made redundant, their accrued entitlements to annual leave and long service leave are not discounted or diminished on account of any additional payment in lieu of notice or on account of redundancy. Such a payment in lieu of notice or redundancy, is additional to, and not to be subtracted from, existing accrued entitlements. It is a beneficial and remedial general entitlement, under the FW Act.

32. There are some differences, however, between accrued annual leave and long service leave on the one hand, and sick leave on the other. The former two are routinely paid out at the point of an employee’s termination, the latter is not. Generally, in such circumstances, accrued sick leave is a contingent entitlement, in that it only crystallises in the event of appropriately certified medical requirements.[9] It is generally lost at the point of termination. The rationale for its existence is linked to the continuation of the employment in the course of which, it has accrued. Unlike the accrued entitlements to long service leave and annual leave, it has something of the quality of an insurance product.

    [9] In some circumstances sick leave may be taken for other purposes depending upon the provisions applicable to an individual’s employment.

33. In this instance, Mr Camm was already on sick leave for a known period, (this was extended on two occasions by appropriate medical certificates), when the fact of the termination of his employment was effectively communicated to him on 20 August 2020. In other words, Mr Camm’s contingent entitlement to sick leave had already crystallised into an actual entitlement. He was essentially in the same position as a person who might have been on annual leave or long service leave at the time of being terminated. So long as he remained employed, he was able to draw down this entitlement.

34. Mr Camm was not summarily dismissed. He was given notice of termination.

35. Notice of termination is exactly that. A person to whom notice is given is not, during the period of such notice, entitled to simply abandon their employment. To do so would be a breach of their contract of employment. They may not attend work, if they have an appropriate medical reason, or if they are able, under their contract of employment, to draw down on other leave entitlements.

36. In this instance, Tetracon was placed into liquidation on Wednesday 9 September 2020 and Mr Camm’s employment ceased on that day. There was never any question of Mr Camm being able to “work out” his period of notice from 20 August 2020, because he was on sick leave.

37. Mr Camm was ultimately due to return to work from his period of sick leave on 16 September 2020.

38. Whether Mr Camm was at work or on sick leave, he was entitled to receive four weeks’ notice of termination. This notice would take him to 17 of September 2020.

    Conclusion

39. In all the circumstances, I am of the view that his period of notice should run from 20 August 2020. His employment ended on 9 September 2020. This means that his period of notice was cut short by six working days.[10] He should have been paid sick leave, at his normal weekly pay rate, until his employment ended.

    [10] These six working days being 10, 11, 14, 15, 16 & 17 September 2020.

40. At the time, Mr Camm’s total weekly wage of $2,596.20 was in excess of the maximum weekly rate of $2,451. Mr Camm was entitled to payment in lieu of notice for six working days from 10 September 2020 to 17 September 2020 at the maximum wage rate.[11]

    [11] FEG Act, s 26.

41. Six days at the maximum weekly wage rate is $2,941.20.

    DECISION

42. The decision under review in respect of the fair entitlements guarantee issue for Mr Camm and Ms McMillan, namely the decision of the Respondent dated 1 April 2021 made under Subsection 39(1) of the FEG Act, which set aside the original decision of 22 December 2020, is affirmed.

43. With respect to the payment in lieu of notice entitlement for Mr Camm, the decision under review, namely the decision of the Respondent dated 6 August 2021 made under Section 37 of the FEG Act, which set aside and substituted the review decision of 1 April 2021 made under Subsection 39(1) of the FEG Act, which itself set aside and substituted the original decision of 22 December 2020 made under Subsection 15(1) of the FEG Act, is set aside and substituted with a decision that Mr Camm’s employment was terminated on 20 August 2020 and his period of notice thus concluded on 17 September 2020. Mr Camm is therefore entitled to payment in lieu of notice at the maximum wage rate for the six-business day period between 9 September 2020 to 17 September 2020.

    I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for the decision herein of Senior Member J Rau SC.

     

    ............................[Sgnd]................................

    Legal Administrative Assistant

    Dated:   2 December 2021

Date of hearing:

11 November 2021

Applicants (Self-Represented):

John Camm

Kristiana McMillan

Advocate for the Respondent:

Alexander Gent

HWL Ebsworth Lawyers

Annexure A – diagram of ownership structure