Edi Idelman v Baccara-Geva (Australia) Pty Ltd T/A Baccara

[2015] FWC 296

[2015] FWC 296

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Edi Idelman
v
Baccara-Geva (Australia) Pty Ltd T/A Baccara
(U2014/14534)

COMMISSIONER RYAN MELBOURNE, 15 JANUARY 2015

Application for relief from unfair dismissal - Minimum Employment Period not served - Small Business employer - jurisdictional objection dismissed.

[1] An application for relief from unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (the Act) was made on 23 October 2014 by Mr Edi Idelman (the Applicant) following the termination of his employment on 3 October 2014 by Baccara-Geva (Australia) Pty Ltd T/A Baccara (the Respondent).

[2] On 30 October 2014 the Respondent filed in the Commission a Form F4 Objection to Application in which it stated its objection to the matter proceeding on the basis that it is a small business employer employing 5 employees in total on the day the Applicant’s employment was terminated and that the Applicant was employed for less than the minimum employment period of 12 months when his employment was terminated.

[3] Section 396 of the Act requires the Fair Work Commission to determine, among other things, whether the person “was protected from unfair dismissal” before dealing with the merits of the claim.

[4] The substantive matter was listed for conciliation on 18 November 2014. However, conciliation could not take place as the Respondent believed that the jurisdictional objection would be dealt with at or prior to conciliation commencing.

[5] The matter was subsequently listed for a jurisdictional hearing on 16 January 2015 and directions were issued for the filing and service by the parties of their respective submissions.

[6] Following the filing of material by the parties, it was agreed with the consent of the parties that I determine the jurisdictional issue on the papers without holding a hearing.

Respondent’s submissions

[7] The Respondent filed written submissions in support of its jurisdictional objection which stated, inter ala:

“6. At the time of termination of the Applicant's employment the Respondent employed 5 employees (including the Applicant).

7. The Applicant is fully owned by an overseas company, Baccara Geva Cooperative agricultural Society Ltd, a company registered in Israel ("Baccara Geva Israel").

8. Baccara Geva Israel has more than 15 employees, all of whom are employed overseas, and none of whom are National System Employees within the meaning of the Fair Work Act 2009 ("Act").

9. Baccara Geva Israel does not have any employees in Australia.

Applicable statutory provisions

10. Section 382 of the Act states:

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
(b) one or more of the following apply:
(i) a modem award covers the person;
(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.

11. The Respondent concedes that the Applicant satisfies the requirements of subsection 382(b), but not of 382(a).

12. Section 383 of the Act states:

The "minimum employment period" is:
(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.

13. Section 380 in Part 3-2 of the Act which governs unfair dismissal states:

"Meaning of employee and employer.
In this Part, employee means a national system employee, and employer
means a national system employer. "

14. "Small business employer" is defined in Section 23 of the Act, which relevantly states:

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

15. Any reference to "small business employer" can therefore only be made with respect to national system employers and national system employees.

16. Pursuant to section 12 of the Act, the definition of "associated entity" is taken from s 50AAA of the Corporations Act 2001.

17. The Applicant may seek to argue that Baccara Geva Israel is an associated entity of the Respondent within the meaning of the Act, that its employees are accordingly also to be taken into account for the purpose of the Act, and hence the Respondent is not a "small business employer".

18. If it were to do so, the Applicant may also argue that therefore the “minimum employment period” applicable to him under Section 383 of the Act is 6 months according to sub-section 383(a) and not one year according to subsection 383(b) and he is therefore entitled to seek a remedy in the Commission for unfair dismissal.

19. The Respondent accepts that Baccara Geva Israel would satisfy the definition of associated entity pursuant to the Corporations Act but submits that it nevertheless does not satisfy it for the purposes of the Act.

20. The Respondent submits that the Act does not apply to Bacarra Geva Israel and that accordingly its employees are not to be taken into account in determining whether the Respondent is a "small business employer".

21. The Respondent submits that the constitutional head of power underpinning section 23 of the Act is s51(xx) of the Commonwealth of Australia Constitution Act, that is, the corporations power. Under that head of power, the parliament can enact legislation for the peace, order and good governance of the Commonwealth with respect to, relevantly, foreign corporations. However, the Respondent contends that the construction of section 23 which the Applicant apparently contends for does not fall within that power. If Becarra Geva Israel was taken to be one entity with the Respondent for the purposes of determining whether the Respondent is a small business employer, that would have the effect of the Commonwealth legislating with respect to a foreign corporation in a manner which has no nexus with the governance of the Commonwealth: that is, to take into account employees of a foreign corporation despite that corporation having no operations or employees in Australia.

22. Further, upon investigation of the purpose of providing for "small business employers" in the Act it can be seen that any extension of section 23's use of "associated entity" to apply to foreign corporations directly affects the rights of those corporations.

23. In the second reading speech of the Fair Work Bill 2008, which became the Act when passed into law, the Honourable Julia Gillard, then Acting Prime Minister, said as follows:

"The bill recognises that small businesses do not have the human resources support that larger businesses enjoy."

24. The explanatory memorandum of that Bill says at [217]:

Small businesses tend not to have the resources to employ dedicated human resources professionals to help them manage dismissals. By providing a clear process and guidance to follow when dismissing an employee, the Code may help to mitigate any increase in unfair dismissal claims from small business employees, and provide certainty to small business when they need to dismiss an employee.

25. It is clear from this that the purpose of providing more limited protections from unfair dismissal to employees of small businesses was to lessen the burden on the comparatively lesser human resources capabilities of small businesses.

26. Section 23, in essentially deeming associated entities to be part of respondent employers, regards the human resources capabilities of associated entities as available to respondent employers in the position of the Respondent. That has the direct effect of seeking to hold the human resources department of a foreign corporation in Israel with no activities or employees in Australia to a certain standard of fairness. The Respondent submits that that cannot be the correct construction of section 23 of the Act.

27. The most recent consideration of the application of the Act to foreign companies is Jones v QinetiQ Pty Ltd T/A QinetiQ Australia (U2012/14201) 14 June 2013 [2013] FWC 3302 ("QinetiQ”). That case concerned the construction of section 22, relating to continuity of service in the case of transfers between employers that are associated entities. In considering the question of the ability of the Act to bind foreign corporations, at [43], Deputy President Asbury held:

In summary, cases where a foreign corporation has been found to be bound by the Act (and its predecessors), or cases where the activities of a foreign corporation have been relevant to the application of the Act to a related corporation formed within the limits of the Commonwealth, have involved foreign corporations in their capacity as employers of persons in Australia.

28. Deputy President Asbury went on to say at [44]:

"As Counsel for QinetiQ Australia submits, these cases are consistent with the principles set out in the decision of the High Court of Australia in New South Wales v The Commonwealth; (the Work Choices Case) where the majority cited with approval the decision of Justice Gaudron in Re Dingjan Ex Parte Wagner to the effect that the main purpose of the power to legislate with respect to foreign corporations must be directed to their business activities in Australia. " [citations omitted]

29. The Applicant submits that it would be inconsistent with the summary provided by Deputy President Asbury in QinetiQ, as well as the purpose of the small business provisions of the Act in relation to unfair dismissal, if section 23 were construed to allow the application apparently contended for by the Applicant.

30. Section 38 of the Act says, in essence, that if a provision of the Act exceeds the Commonwealth's power, it is to be read down to preserve every valid application of the provision. The Respondent submits that that is the appropriate way to construe section 23: the deeming provision in subsection 23(3) is applicable to associated entities of respondent employers only where there is sufficient nexus with Australia to permit the Commonwealth to legislate under, in this instance, the corporations power.

31. Further, the Respondent submits that the construction of section 23 for which it contends is the only practical one, and accordingly must have been the Commonwealth's intention. The determination of the number of employees of a respondent employer in an application for an unfair dismissal is a threshold fact­ finding exercise. If it were the case that section 23 applied to foreign corporations without employees in Australia, the Commission would be in a position of needing to obtain material in order to find facts about the nature of the offshore undertaking of such corporations. The Respondent submits that this cannot have been the intended reach of the section.

...

Conclusion

33. The Respondent submits that the Act cannot apply to foreign corporations without operations or employees in Australia. Baccara Geva Israel is such a corporation. Accordingly, Baccara Geva Israel cannot be taken to be one entity with the Respondent for the purposes of assessing the number of employees employed by the Respondent.

34. At the time of the termination of the Applicant's employment, the Respondent employed 5 employees and was therefore a "small business employer". The Applicant served less than 12 months' employment with the Respondent. Accordingly, pursuant to section 382 of the Act, the Applicant is not entitled to apply to the Commission for an unfair dismissal remedy, and the Commission has no jurisdiction to hear the application he has purported to make.”

Applicant’s submissions

[8] The submissions of the Applicant settled by Ms S.M. Keating of counsel included what it called “a summary of the relevant facts” and it is useful to include some of these below:

f. the respondent is a wholly owned subsidiary of Baccara-Geva Cooperative Agricultural Society Ltd, a company registered in Israel (BG Israel);
g. BG Israel is a foreign company within the meaning of the Corporations Act 2001 (Cth) (Corporations Act) and a constitutional corporation within the meaning of section 51(xx) of the Constitution of Australia Act 1901 (Constitution);
h. BG Israel is an associated entity of the respondent within the meaning of the Corporations Act 2001; and
i. BG Israel has in excess of 15 employees, none of who are employed to perform work in Australia (although two directors of the respondent are employees of BG Israel).

[9] The submissions also contained the following contentions:

“20. Section 23 is found in Part 1-2 of the Act, which comprises sections 10 through 23A. Section 11 of Part 1-2 provides that, for the purposes of Part 1-2, ‘employee’ has its ordinary meaning. That ordinary meaning is notorious: employee for the purposes of section 23 includes any person engaged by the respondent and its associated entities pursuant to a contract of service.

21. It was open to the legislature to prescribe that only national system employees were employees for the purposes of the calculation. It did not. Instead it chose to locate the definition of small business employer within a Part expressly defining ‘employee’ as having its ordinary meaning. Had the legislature intended that only national system employees were to be counted for the purposes of section 23 the legislative device by which that outcome could have been achieved was readily available to it. Again, it did not, and it is manifestly clear that all employees are to be included.
...
23. Further, at [21] the respondent contends that, were section 23(3) read to include employees of foreign corporations employed outside Australia, the Commonwealth would be legislating in excess of the power conferred on it by section 51(xx) of the Constitution.

24. That contention fails for the simple reason that section 23 of the Act does not regulate the affairs of foreign corporations save to the extent that they are national system employers.
...
29. .... section 23 regulates only national system employers. There is nothing in section 23 that imposes any rights, duties or obligations on a foreign corporation save and to the extent that they are a national system employer. Rather, section 23 operates to define a particular class of national system employer by the number of employees of that employer, including employees of associated entities.

30. The criterion in section 23(3) of the Act is directed to the manner in which the number of employees employed by the relevant national system employer is to be counted for the sole purpose of determining whether the employer is a small business employer within the meaning of the Act and conditions, in part, the rights conferred on national system employees.
...
36. Critically for present purposes, it can be seen that section 23 does not in terms, or by implication, impose any right, duty or obligation on any other employer, including any associated entity within the meaning of the Corporations Act (whether a foreign corporation or otherwise). Rather, it regulates the obligations of national system employers by reference to, in part, the number of employees of associated entities of those employers. That is plainly within the legislative power of the Commonwealth, whether pursuant to section 51(xx) or otherwise.
...
39. Contrary to the contention of the respondent at [22] that the phrase ‘associated entity’ in section 23 must be read down so as not to include foreign companies, the applicant does not contend that the term ‘associated entity’ must be ‘extended’ to foreign corporations: rather it contends that foreign corporations fall within the ambit of that term axiomatically from the plain and ordinary meaning of section 23(3).
...
45. In truth, the respondent’s contention rest on the proposition that the term ‘employee’ within the meaning of the Act must be read down so as to exclude employees employed outside Australia, alternatively, that the words ‘employed in Australia’ be read into the section (and, since at least Taylor v Owners – Strata Plan No 11564 the question of how the submission is characterised may be moot). The question of whether a court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgement of matters of degree. In the present case, no such addition is justified for the reasons that follow.

46. First, the legislative scheme, adopting as it does a definitional duality, evidences substantial attention to the meaning to be attributed to the word ‘employee’. In the face of such attention, the construction contended for by the respondent is ‘too big’ or ‘too much at variance with the language in fact used by the legislature’.

47. Second, in adopting the definition of ‘associated entity’ given by the Corporations Act, the legislature conferred on it the same meaning as that found in earlier legislation that has been subject to substantial judicial consideration and in which it is unambiguous that the definition includes foreign corporations. It is to be assumed that the legislature knew of these matters when determining to adopt that definition.

48. Third, if the legislature intended to exclude employees of associated entities employed outside of Australia it could have achieved that outcome by clear words. It did not do so.

49. In the premises, the respondent is not a small business employer within the meaning of the Act and that the applicant’s minimum period of employment was six months. The applicant is therefore protected from unfair dismissal within the meaning of section 382 of the Act.”

Consideration

[10] Having considered all of the submissions of both the Respondent in support of its objection and of the Applicant in response, I make the following findings.

[11] I rely on the Respondent’s construction of s.23 of the Act in finding that BG Israel is an associated entity of the Respondent within the meaning of the Corporations Act 2001. What flows from that is a finding that, as BG Israel employs in excess of 15 employees, the Respondent is not a small business pursuant to s.23 of the Act. As such I find that the minimum employment period of the Applicant, being in excess of six months but less than 12 months, meets the requirements of s.383(a) and that the Applicant is protected from unfair dismissal pursuant to s.382 of the Act.

[12] I order accordingly.

[13] As such the substantive matter will be referred back to the unfair dismissals Team to be listed for conciliation in the normal manner.

COMMISSIONER

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