Jigishaben Patel v AAA Tools Pty Ltd T/A Total Tools Hoppers Crossing

[2016] FWC 6958

[2016] FWC 6958

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Jigishaben Patel
v
AAA Tools Pty Ltd T/A Total Tools Hoppers Crossing
(U2016/10174)

COMMISSIONER WILSON MELBOURNE, 29 SEPTEMBER 2016

Application for relief from unfair dismissal - minimum employment period not served - application dismissed.

[1] Jigishaben Gautam Patel was employed by AAA Tools Pty Ltd T/A Total Tools Hoppers Crossing (Total Tools Hoppers Crossing) in a bookkeeping and administrative capacity from 19 August 2015 until the date of her dismissal on 29 July 2016.

[2] Section 396 of the Fair Work Act 2009 (the FW Act) requires the determination of four initial matters to be considered before considering the merits of the application. This decision concerns one of those matters, and in particular whether, at the time of her dismissal, Ms Patel was a person protected from unfair dismissal. The question arises since it is contended by Total Tools Hoppers Crossing that at the relevant time it was a small business within the meaning of the Act and that Ms Patel had not completed the minimum period of employment.

LEGISLATION

[3] Section 382 of the FW Act provides that in order to be a person protected from unfair dismissal, they must have completed a period of employment with his or her employer of at least the minimum employment period. Section 383 of the FW Act provides that in the case of a small business employer the minimum employment period is one year, and six months for other employers.

[4] Section 23 provides that a national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time, with that section further providing the following in relation to the calculation of an employer’s number of employees;

“(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.”

[5] The FW Act’s Dictionary, s.12, then further provides that “associated entity” has the meaning given by section 50AAA of the Corporations Act 2001 (Cth), which provides the following;

“50AAA 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.”

[6] Section 50AA of the Corporations Act is also relevant to this consideration with that section defining the term “control” as follows;

“50AA 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.”

[7] Within the Corporations Act, the term “entity” has the following meaning, noting that neither s.50AAA or s.50AA are within Chapter 2E of that Act;

“Except in Chapter 2E, a reference to an entity:

(a) is a reference to a natural person, a body corporate (other than an exempt public authority), a partnership or a trust; and

(b) includes, in the case of a trust, a reference to the trustee of the trust.”

[8] Section 50 of the Corporations Act defines the term “related bodies corporate”;

“Related bodies corporate

Where a body corporate is:

(a) a holding company of another body corporate; or

(b) a subsidiary of another body corporate; or

(c) a subsidiary of a holding company of another body corporate;

the first-mentioned body and the other body are related to each other.”

BACKGROUND

[9] Ms Patel commenced employment with Total Tools Hoppers Crossing on 19 August 2015 and worked at the company’s premises performing bookkeeping and administrative duties. In her employment she worked closely with Giulia Jones, the wife of the business’ owner, Paul Jones, who had overall control of the business. Total Tools Hoppers Crossing is a franchisee of the nationwide business operating as Total Tools. It operates from premises at Hoppers Crossing in Melbourne’s west.

[10] Some months after starting work with the Respondent, Ms Patel was called upon to perform administrative and bookkeeping duties not only in respect of the business of Total Tools Hoppers Crossing at Hoppers Crossing, but also in respect of another Total Tools franchise, at Mornington, south-east of Melbourne. That business is operated by Mornington Peninsula Tools Pty Ltd, and Mr Jones has a beneficial interest in the business, held through a family trust arrangement.

[11] The parties do not agree the date from which Ms Patel commenced undertaking work associated with Total Tools Mornington. Ms Patel puts forward that her work with that business commenced in about October 2015. In contrast, Total Tools Hoppers Crossing submitted that the commencement of Ms Patel’s duties in respect of Total Tools Mornington began some months later, perhaps in January 2016, after Mrs Jones had relocated to Hoppers Crossing. Before relocating she had been performing work relating to the Hoppers Crossing and Mornington business, but did so from premises in Tullamarine. Despite the differences between the parties on this matter, the date on which Ms Patel started work in connection with Total Tools Mornington is not ultimately relevant to the disposition of this particular matter, with it being accepted by each that Ms Patel was performing duties on behalf of Total Tools Mornington while employed by Total Tools Hoppers Crossing at Hoppers Crossing.

[12] In late June 2016, Ms Patel and her husband needed to travel urgently to India in order to attend to family duties. On 25 June 2016, Ms Patel advised Mrs Jones of her needs, and as a result, Ms Patel was absent from the workplace from that date until her return to work on 29 July 2016. On 30 June 2016, Ms Patel emailed her employer to say that she sought to utilise her accrued annual leave during the period of her absence. While there is a difference between the parties as to whether or not Ms Patel was approved personal leave for the duration of the absence, it is unnecessary for me to resolve that matter in this decision.

[13] Upon Ms Patel’s return to the workplace on 29 July 2016 she was informed by her employer that she was dismissed.

CONSIDERATION

[14] The fundamental issue for determination in this matter is the number of people employed by Total Tools Hoppers Crossing or of any associated entities. If that number is 15 or greater, Ms Patel will be a person protected from unfair dismissal and thus able to continue with her unfair dismissal application.

[15] As referred to above, the Corporations Act defines the term “entity” to include a natural person, as well as a body corporate, a partnership or a trust.

[16] Total Tools Hoppers Crossing argues that there are no associated entities to be taken account of by the Commission and that, at the relevant time, being the date on which Ms Patel was dismissed, that entity employed only 8 people, including Ms Patel.

[17] In preparation for this hearing Total Tools Hoppers Crossing put forward a list of 9 people employed by it at the time Ms Patel was dismissed, including her. However, in the course of the hearing it submitted that one of those people, Daniel Jones, the son of the business owner, had not been employed in the business since October 2015 and that his name had been included in the initial list provided to the Commission in error. Ms Patel accepted this proposition and I take her also to accept that, to the extent that the Commission may be persuaded of the Respondent’s arguments about the absence of associated entities, the evidence would lead to a finding that Total Tools Hoppers Crossing employed only 8 people at the time of her dismissal, including Ms Patel.

[18] Ms Patel argues that she is a person protected from unfair dismissal and thus entitled to make an application for unfair dismissal remedy because she believes that, at the time of her dismissal, Total Tools Hoppers Crossing and its associated entities employed 15 or more people.

[19] In this regard Ms Patel put forward a list of 15 people, including herself, as being employees at the time of her dismissal either employed by Total Tools Hoppers Crossing or an entity associated with it, being Mornington Peninsula Tools Pty Ltd. The list of people Ms Patel put forward included the 8 referred to by the Respondent, Total Tools Hoppers Crossing, as well as a further 6 people whom she considered were employees of Total Tools Mornington. The list also included Daniel Jones.

[20] In the course of the hearing, Ms Patel submitted that she knew of further people employed at Total Tools Mornington but she did not have space to write them down on the Commission’s Outline of Arguments: Objections form. It was her consideration there were many other people employed at Total Tools Mornington.

[21] Two of the 6 additional people put forward by Ms Patel were Paul Jones, a Director of Total Tools Hoppers Crossing and who was present in the course of the hearing before the Commission, and his wife Giulia Jones. Ms Alicia Cartwright, who appeared and gave evidence and submissions on behalf of Total Tools Hoppers Crossing, put forward that neither Mr nor Mrs Jones were employees of either business, being Total Tools Hoppers Crossing and Total Tools Mornington. That position was corroborated by Mr Jones, who put forward that he and his wife drew their payment from the businesses in the form of a profit share instead of remuneration from a contract of employment.

[22] Despite the contention by the Respondent in respect of Mr and Mrs Jones, it conceded that on the common list of 8 employees of Total Tools Hoppers Crossing was Ryan Jones, who is a son of the proprietors, and who was an employee at the time of Ms Patel’s dismissal. The Respondent also accepted that Daniel Jones, also a son of the proprietors, had been an employee, at least until October 2015.

[23] In a matter of this type, which involves an argument that associated entities require being taken account of in calculating the number of employees employed by an employer, it will be necessary to assess the nature of the relationship between the claimed associates.

[24] Ms Patel’s fundamental argument is that the two businesses Total Tools Hoppers Crossing and Total Tools Mornington were associated entities because she performed work for both businesses; because she was subject to direction by Mrs Giulia Jones, who had an involvement with both businesses; and because she saw Mr Jones to have involvement with both businesses.

[25] Ms Patel supported that argument by tendering into her evidence ASIC Company Extracts referring to each of the companies. Those extracts show that Mr Jones is the Director and Company Secretary of Total Tools Hoppers Crossing Pty Ltd and that he is the only shareholder of the company. They also show that Mr Jones is a Director of Mornington Peninsula Tools Pty Ltd along with another person, Gerard Kelly, and that two other entities, which Mr Jones describes as trustee companies, are equal shareholders in the company, holding their shareholding beneficially on behalf of the respective directors and their families.

[26] It is possible in such an arrangement that the requisite features of an associated entity have been met, however the Company Extracts are not definitive in this regard. Instead, such will require analysis of the elements of s.50AAA of the Corporations Act.

[27] Before turning to that, I note that the Respondent described the relationship between the two entities as being one in which Mr and Mrs Jones would provide assistance to the operation of the Total Tools Mornington business, while acknowledging that Mr Jones was an investor in the business. The assistance to be provided by Mr and Mrs Jones could be different things at different times. Mrs Jones would assist in the form of providing bookkeeping and other administrative functions. Mr Jones would provide assistance about the operation and running of the business, as well as providing his expertise through his role as a Director of the company and would regularly complete the payroll processing for the store. Mr Jones, however, described his relationship with the Total Tools Mornington business as being somewhat arm’s-length, with the controlling mind of that business being Mr Kelly who would be the person to make decisions about day-to-day operations and decisions about choice of employee etc. Mr Jones gave an example of his arm’s-length involvement, whereby he learned of a significant sales campaign to be undertaken by Total Tools Mornington through its Facebook page, with him having different views to Mr Kelly about the benefit of what had been planned.

[28] The Respondent also conceded that from time to time assistance would be given by one of the businesses to the other, perhaps at the time of a major sale, and especially in the form of one proprietor working in the others’ premises for a period of time, but without payment. The Respondent also conceded that 8 people in total work at Total Tools Mornington, four of whom were full-time employees and four part-time employees.

[29] Taking all of the above matters into account, I turn to a consideration of the elements of s.50AAA and s.50AA of the Corporations Act. In such analysis it is necessary to take into account that an entity may well be a natural person, such as Mr Jones, or indeed some other person. It is also appropriate to note that the nature of the company structure for the two businesses is that there appear to be five or more entities involved; the two operating companies; Mr Jones, in respect of his shareholding in Total Tools Hoppers Crossing; and the two trustee companies which are the shareholders of Total Tools Mornington.

[30] In respect of s.50AAA, I note that subsection (1) does not require a determination to be made by me. Further I note that the evidence does not allow a finding that Total Tools Hoppers Crossing and Total Tools Mornington are “related bodies corporate” as that term is defined in s.50 of the Corporations Act. There is no evidence that either is a holding company or subsidiary of the other. With the exception of Mr Jones and his control of Total Tools Hoppers Crossing, which appears readily apparent, I am also not satisfied that, for the purposes of either subsection (3) or (4) that one of Total Tools Hoppers Crossing and Total Tools Mornington controls the other, or that the operations, resources or affairs of one is material to the other. Similarly, I am satisfied that Mr Jones, in his capacity as an entity, does not meet the requirements specified in the two subsections in relation to Total Tools Mornington.

[31] Subsections (5) and (6) require an analysis as to whether there is a qualifying investment by one entity in the other which has significant influence, with such interest being material. I do not find that that is the case. The evidence before me leads to a view that the involvement either of Total Tools Hoppers Crossing or Mr Jones in Total Tools Mornington is more arm’s-length than would be expected by the two subsections in order for a finding to be made that those subsections have been satisfied.

[32] There is no evidence before me that would lead to a view that the requirement within subsection (7) has been met, which requires control of both of two entities by a third. Again, the evidence would lead to a finding that while Mr Jones is a common investor, through a trustee company, and Director, it does not lead to a finding that he controls both Total Tools Hoppers Crossing and Total Tools Mornington. Instead the evidence shows that there is a more diffuse relationship between him and Total Tools Mornington. While he certainly is an investor and Director in the business, the material before me leads to a finding that the decisions about that business are made by Mr Kelly.

[33] Finally, the evidence does not lead to a finding that subsection (8) is enlivened, which is to do with whether there is a qualifying investment by one entity in another.

[34] In forming my views on these matters, I have taken into account the definition of “control” provided for in s.50AA of the Corporations Act.

[35] Because of these findings, it is unnecessary for me to consider further the question of the number of employees in total engaged by Total Tools Hoppers Crossing and Total Tools Mornington.

[36] The product of these findings is that I am satisfied that at the time Ms Patel was dismissed, being 29 July 2016, there was not an associated entity to be taken into account in making an assessment of whether Total Tools Hoppers Crossing was a small business employer or not and that at that time of Ms Patel’s dismissal Total Tools Hoppers Crossing employed only 8 people. Accordingly, I must find in turn that Total Tools Hoppers Crossing was a small business employer and that Ms Patel is not a person protected from unfair dismissal because she had not served the minimum employment period.

[37] It follows therefore that Ms Patel’s unfair dismissal application must be dismissed as being outside of the Commission’s jurisdiction. An Order to that effect is issued by me at the same time as this decision.

COMMISSIONER

Appearances:

Ms J Patel, Applicant

Ms A Cartwright and Mr P Jones for the Respondent

Hearing details:

2016.

Melbourne:

September 23.

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