Jacqueline Welfelt v Cantina Mobil Pty Ltd

[2013] FWC 4668

[2013] FWC 4668

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Jacqueline Welfelt
v
Cantina Mobil Pty Ltd
(U2013/7870)

Ben Goodman
v
Cantina Mobil Pty Ltd

(U2013/7871)

DEPUTY PRESIDENT BOOTH SYDNEY, 22 JULY 2013

Termination of employment - alleged unfair dismissal - small business - minimum employment period - whether less than 15 employees.

[1] On 25 March 2013 Mr Ben Goodman and Ms Jacqueline Welfelt (the applicants) each lodged an application pursuant to s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy in respect to the termination of their employment from Mobil Cantina Pty Ltd (the respondent) on 5 March 2013.

[2] The respondent objects to the application being heard on the basis that it is a small business in terms of the Act and the applicants were employed for less than one year. Accordingly the respondent contends that each of the applicants is not a person protected by the unfair dismissal provisions of the Act.

[3] The matter came before me on 21 June 2013 and further material was provided subsequent to the hearing at my request. The respondent provided their further submissions on 28 June 2013 and the applicants responded to these on 4 July 2013. The respondent provided further submissions on 9 July 2013 as well as a statement from Ms Kathleen Parkes.

[4] Mr Goodman was self represented, Ms Welfelt was represented by Mr Goodman and the respondent was represented by Ms Amina Porobic, Restaurant and Catering Australia. Evidence was given for the applicants by Mr Goodman and Ms Welfelt and for the respondent by Mr Rode Vella. A Statutory Declaration was provided by Mr Glenn Henry referring to the payroll ledger for the period 1 March 2013 to 30 March 2013 and this was provided to the Commission subsequent to the hearing.

Background

[5] The respondent is owned by Stephanie Raco and Rode Vella and retails “Mexican Street Food” from a mobile van and a restaurant located on Oxford Street, Sydney.

[6] Mr Goodman was employed on 27 April 2012 as the manager of the Oxford Street restaurant reporting to Ms Raco, Director and Mr Vella, Shareholder of the respondent. Ms Welfelt was employed in June 2012 working on the mobile food van and in the restaurant reporting to Mr Goodman. Both were dismissed on 5 March 2013 on conduct grounds, which they contest.

Contentions

[7] The respondent contends that at the time of the applicants’ dismissal it employed 13 employees, including the applicants. As the applicants were employed for less than one year the respondent contends that they were not employed for the minimum employment period for a small business and accordingly are not protected from unfair dismissal by the Act.

[8] The applicants contend that the respondent’s employees did not number fewer than 15 at the time of their dismissal. They claim that there were 17 employees, that the respondent is not a small business employer and because they were employed for more than 6 months their applications are competent.

Statutory framework

[9] An application for an unfair dismissal remedy is made pursuant to s 394 of the Act. Section 394(1) reads as follows:

394 Application for unfair dismissal remedy

(1) A person who has been dismissed may apply to the FWC for an order under Division 4 granting a remedy.

[10] As long as a person has been dismissed in terms of the Act, the Fair Work Commission (the Commission) must then consider certain matters before proceeding to deal with the merits of an application. These are contained in s396 as follows:

396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.

[11] Section 396(b) requires the Commission to consider whether the person making the application is protected from unfair dismissal.

[12] In so far as these applications are concerned s.382(a) of the Act addresses this 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.

[13] A “period of employment” is defined in s.384 of the Act which provides:

384 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.

(2) However:

(a) a period of service as a casual employee does not count towards the employee’s period of employment unless:

(i) the employment as a casual employee was on a regular and systematic basis; and

(ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis.

[14] The “minimum employment period” is defined in s.383 of the Act as follows:

383 Meaning of minimum employment period

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.

[15] The “minimum employment period” is one year for a small business or 6 months for an employer which is not a small business.

[16] To establish whether an employer is or is not a small business requires consideration of s.23 of the Act which is in the following terms:

23 Meaning of small business employer

(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.

Consideration

[17] The parties agree on the employment of 13 employees, including the co-owner of the business, Rode Vella. These employees appear on the payroll ledger that was certified as correct by Mr Glenn Henry of Jaques Stanmore Business Ltd in a Statutory Declaration declared on 17 June 2013 at Brookvale, NSW.

[18] There are four persons in dispute. If more than one of these persons is found to have been an employee at the time of the applicants’ dismissal then the applicants’ contention will be upheld and the respondent will not be a small business in terms of the Act.

[19] They are as follows:

• Lucy Armstrong



• Hayden Scullin



• Kathleen Parkes



• Stephanie Raco

[20] In relation to Lucy Armstrong it was the evidence of Mr Vella that Ms Armstrong was a marketing consultant, in effect engaged under a contract for services by the respondent, that she resides in Melbourne and invoices the respondent for services rendered pursuant to an invoice with an Australian Business Number (ABN). A sample of invoices corroborating this evidence was provided to the Commission. Ms Armstrong was not named in the payroll ledger for the period up to and including the date of the applicants’ dismissal. It was the evidence of the applicants that they had observed Ms Armstrong being trained and working in the respondent’s restaurant and that she identified herself as Head of Design with the respondent on the professional social media site LinkedIn, where she also used the term “Freelance Designer/Management” as the heading for that entry. These observations are not inconsistent with Ms Armstrong being engaged under a contract for services and I find that she was not an employee at the relevant time.

[21] In relation to Hayden Scullin it was the evidence of Mr Vella that Mr Scullin was a family friend of the owners, Stephanie Raco and Rode Vella, who in effect, volunteered his services to the business while staying in the home of the owners prior to going overseas in late February or early March. He conceded that he performed work and wore a uniform but denied that Mr Scullin ever received wages. The applicants gave evidence that Mr Scullin was on a roster, was deployed in the mobile van working his rostered hours (and only those hours, according to Ms Welfelt) and they believed he received cash payments. Mr Scullin was not named in the payroll ledger for the period up to and including the date of the applicants’ dismissal. Given the conflicting evidence and Mr Scullin’s departure for overseas, likely before the applicants’ dismissal, I find that it is more likely than not that he was not an employee at the relevant time.

[22] In relation to Kathleen Parkes it was the evidence of Mr Vella that Ms Parkes was employed by the respondent as Personal Assistant to Stephanie Raco on 20 or 21 March 2013, over a fortnight after the applicants’ dismissal. It was the applicants’ evidence that she was trained in a customer service role, was introduced as an employee, was wearing a uniform (something Ms Welfelt said was not evident in the case of others on work trials) and performing tasks for three (Mr Goodman) or several (Ms Welfelt) weeks before they were dismissed. Ms Welfelt said she saw Ms Parkes ten times in the period leading up to her dismissal. It was Mr Vella’s evidence that to the extent that she had been on the premises of the respondent for the weeks leading up to the applicants’ dismissal it was because she was undertaking an unpaid work trial. This was corroborated by Ms Parkes in her statement provided to the Commission in the respondent’s submissions of 9 July 2013. This is most concerning if it is true, because such an employment practice is not lawful. I intend to draw Mr Vella’s evidence to the attention of the Fair Work Ombudsman (FWO).

[23] Ms Parkes was not named in the payroll ledger for the period up to and including the date of the applicants’ dismissal and the first entry for her payment was the pay period identified in the patrol ledger as 26 March 2013. I conclude that Ms Parkes was deployed in the business of the respondent at the time of the applicants’ dismissal however on the available evidence it is difficult to determine her employment status. It is inconsistent with a contract of employment for the person the subject of the contract not to receive payment. If Ms Parkes was an employee she would be the fourteenth employee, however in the light of my finding below in relation to Ms Raco, such a finding would not mean that the respondent was not a small business so it is not necessary for me to come to a conclusion about her employment status.

[24] Ms Stephanie Raco is the sole director of the company. It was the evidence of Mr Vella that she was not receiving a wage and this is confirmed by the payroll ledger for the period up to and including the date of the applicants’ dismissal.

[25] It is instructive to refer to Macken’s Law of Employment. 1

[26] At paragraph 2.380 the authors say:

“The company director can have the dual status of an “officer” for purposes of corporations legislation and at the same time be an employee of that company. This is the case even if it is a one-person company and the director its sole employee. This is because the company is a separate entity and has capacity to enter into contracts even with its sole director/shareholder.”

[27] And further on in that same paragraph:

“Under the Corporations Act 2001 (Cth), s.198A(1), unless the company's constitution provides otherwise, directors are given power to manage the business of the company; they can confer any of their powers on a managing director (s.198C) and they may appoint a director as managing director who will be involved in the day-to-day running of the company. Whether the managing director qualifies as an employee is to be tested by reference to the normal tests for determining whether a contract of employment exists.”

[28] There is no evidence that a contract of employment existed between Ms Raco and the respondent. The applicants gave evidence that Ms Raco was on the roster and performed work. However this is not inconsistent with the common practice of owner operators working in their own business.

[29] In a recent decision of the Commission, Kuat Chee v Renown Business Solutions Pty Ltd (the Renown Business Solutions case), Jones C was required to determine whether a sole director and shareholder of a business was an employee of the business. 2 She reviewed the authorities on the distinction between an employee and independent contractor. In paragraphs 14 - 16 she said:

“[14] A succinct summary of the approach of the common law to the determination of whether an individual is an employee or an independent contractor provided in ACE Insurance Ltd v Trifunovski [2011] FCA 1204 by Flick J:

‘... first, the distinction between an employee and an independent contractor is “rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own” (Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the ‘totality’ of the relationship (Hollis at 33 [24]); thirdly, a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.’

[15] In Abdalla v Viewdaze Pty Ltd, a distillation of the ‘indicia’ which have guided courts in relation to this issue was set out as follows (footnotes excluded):

‘Following Hollis v Vabu, the state of the law governing the determination of whether an individual is an employee or an independent contractor may be summarised as follows:

· Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.

Control of this sort is indicative of a relationship of employment. The absence of such control or the right to exercise control is indicative of independent contract. While control of this sort is a significant factor is not by itself determinative. In particular, the absence of control over the way in which work is performed is not a strong indicator that a worker is an independent contractor where their work involves a high degree of skill and expertise. On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weights significantly in favour of the worker being an employee.

“The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions. [B]ut in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd v Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.”

· Whether the worker performs work for others (or has a genuine and practical entitlement to do so)

The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, if the individual also works for others (or the genuine and practical entitlement to do so) then this suggests independent contract.

· Whether the worker has a separate place of work and or advertises his or her services to the world at large.

· Whether the worker provides and maintains significant tools or equipment.

Where the worker’s investment in capital equipment is substantial and a substantial degree of skill or training is required to use or operate that equipment the worker will be an independent contractor in the absence of overwhelming indications to the contrary.

· Whether the work can be delegated or subcontracted.

If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.

· Whether the putative employer has the right to suspend or dismiss the person engaged.

· Whether the putative employer presents the worker to the world at large as an emanation of the business.

Typically, this will arise because the worker is required to wear the livery of the putative employer.

· Whether income tax is deducted from remuneration paid to the worker.

· Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.

Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.

· Whether the worker is provided with paid holidays or sick leave.

· Whether the work involves a profession, trade or distinct calling on the part of the person engaged.

Such persons tend to be engaged as independent contractors rather than as employees.

· Whether the worker creates goodwill or saleable assets in the course of his or her work.

· Whether the worker spends a significant portion of his remuneration on business expenses.

This list is not exhaustive. Features of the relationship in a particular case which do not appear in this list may nevertheless be relevant to a determination of the ultimate question.’

[16] In relation to these indicia the Full Bench observed:

‘(5) If the indicia point both ways and do not yield a clear result the determination should be guided primarily by whether it can be said that, viewed as a practical matter, the individual in question was or was not running his or her own business or enterprise with independence in the conduct of his or her operations as distinct from operating as a representative of another business with little or no independence in the conduct of his or her operations.

(6) If the result is still uncertain then the determination should be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu.’”

[30] In forming her view about the employment status of the sole director/shareholder in this case she said at paragraphs 33-34:

“[33] I am satisfied that, on balance, having regard to the totality of evidence, that Ms Perrin was an employee of the Respondent. The indicia which I have had particular regard to are:

● The fact that Ms Perrin was under the direct control of the Respondent in relation to the actual duties she performed;

● The arrangement was in all respects (other than the gross amount paid and the absence of annual leave and sick leave and the like) that of a part-time employee working regular hours (27.50 hours) each week other than holiday periods;

● Ms Perrin held herself out an emanation of the Respondent;

● Ms Perrin predominantly performed the duties for the Respondent at its premises and any bookkeeping services she provided for her husband and others appear to have been done in the evenings.

[34] In all I have adopted, consistent with the authorities, a practical view of the relationship and formed the view that Ms Perrin was not running her own business with independence in the conduct of her operations whilst providing services for the Respondent, but rather as a representative of another business with little or no independence in the conduct of her operations.”

[31] Assessing the available evidence in this case against the tests set out in the Renown Business Solutions case reveals a very different picture. Ms Raco appears to have had freedom to work when and where she wished, was not paid wages and delegated the task of recruiting and managing to Mr Goodman. Her business partner Mr Vella was explicitly engaged as an employee and it would be expected that if it was the intention of the company to employ Ms Raco under a contract of service the arrangements would have been similar to Mr Vella. I find, on the balance of probability, that Ms Raco was not an employee at the relevant time. I conclude, viewed as a practical matter, that Ms Raco was running her own business or enterprise with independence in the conduct of her operations.

Conclusion

[32] I have considered the submissions and evidence in this matter and I conclude that the respondent had less than 15 employees at the time of the applicants’ dismissal and is therefore a small business pursuant to the Act. Since the applicants were employed for less than one year they are not protected from unfair dismissal pursuant to s.396 of the Act. Their applications are dismissed.

DEPUTY PRESIDENT

Appearances:

J Welfelt and B Goodman, the Applicants

A Porobic, Restaurant & Catering, for Cantina Mobil Pty Ltd

Hearing details:

2013.

Sydney/Melbourne (Videolink):

June 21.

Final written submissions:

9 July 2013

 1   Sappideen, C., O’Grady, P., Riley, J. and Warburton, G., Macken’s Law of Employment, Seventh Edition, Lawbook Co., Sydney, 2011.

 2   [2012] FWA 5137

Printed by authority of the Commonwealth Government Printer

<Price code C, PR538898>