Lawrie O'Bryan v Leading Edge Maintenance

[2018] FWC 6558

[2018] FWC 6558

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Lawrie O’Bryan
v
Leading Edge Maintenance
(U2018/8518)

DEPUTY PRESIDENT MASSON MELBOURNE, 14 NOVEMBER 2018

Application for an unfair dismissal remedy – whether applicant met minimum employment period – whether small business employer- whether related businesses are associated entities.

Introduction

[1] On 16 August 2018, Ms Lawrie O’Brien (the Applicant) lodged an application pursuant to s 394 of the Fair Work Act 2009 (the Act) in which she asserted that the termination of her employment with Leading Edge Maintenance (Leading Edge) was unfair.

[2] The Applicant, prior to her dismissal, was employed as the Chief Engineer - Licensed Aircraft Mechanical Engineer (LAME) for Leading Edge and claims that she was employed by Leading Edge from 15 August 2017 until her termination on 15 August 2018 1, a period of 12 months and one day. While there was no contest over the date of the Applicant’s termination, Leading Edge contested the date of commencement alleged by the Applicant.

[3] Leading Edge objects to the application on the basis that it was a small business employer and that the Applicant had not completed the 12 month minimum employment period at the time of her dismissal as required under s 383(b) of the Act. Leading Edge contend that the Applicant is not entitled to pursue an unfair dismissal remedy under the Act.

[4] Determination of Leading Edge’s jurisdictional objection was listed for telephone hearings on 26 October 2018 and 13 November 2018.

[5] After taking into account the wishes of the parties as to the manner in which the Commission would consider and inform itself in relation to the application, I decided to conduct a conference pursuant to s 398 of the Act to determine the jurisdictional objection raised by Leading Edge.

[6] The Applicant appeared at the conferences and gave evidence on her own behalf.

[7] Mr Daniel Pearson who is the CEO/Director of Leading Edge appeared for and gave evidence on behalf of Leading Edge. Ms Lindsay Villiers who is contracted to provide Financial Controller services for Leading Edge also gave evidence.

Legislative framework

[8] 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 as per s.382(a) of the Act which relevantly states as follows:

“382 When a person is protected from unfair dismiss

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

….”

[9] The minimum employment period is one year for a small business employer and six months for other employers as provided by s.383 of the Act which states 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.”

[10] Section 23 of the Act relevantly defines a small business as follows:

“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.”

[11] Necessary for the determination of whether there are associated entities for the purpose of s 23(3) of the Act is section 50AAA of the Corporations Act 2001 (Corporations Act) which 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.”

[12] 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.”

Submissions and evidence

Case for Leading Edge

[13] Leading Edge submits that the Applicant commenced employment on 21 August 2017. While no contract of employment was provided as evidence, Leading Edge sought to rely on the witness statement of Ms Lindsay Villiers 2 and the Applicant’s Employee Information sheet3 filled out on commencement of the Applicant’s employment. Leading Edge submits that both the witness statement of Mr Villiers and the Applicant’s Employee Information sheet identified the Applicant’s date of commencement as 21 August 2017.

[14] Mr Pearson gave evidence that Leading Edge employed three staff at the time of the Applicant’s dismissal, including the Applicant. Mr Pearson states that one employee identified in the Payroll Employee Summary 4, Mr Nathan Lang, was on a two week work trial in the period leading up to the Applicant’s dismissal and finished up on 3 August 2018.

[15] Leading Edge further submits that there were no “associated entities” that would increase the number of its employees to 15 or more. In evidence provided to the Commission, supported by ASIC Company Extracts, Mr Pearson stated that there are four companies in which he has an interest. They are:

(i) Leading Edge Maintenance Pty Ltd (ACN: 620 543 786) – Mr Pearson is the sole Director of that company and of the 100 Ordinary Shares issued Mr Pearson holds 100 shares.

(ii) PingCo Pty Ltd (ACN: 150 469 846) – Mr Pearson is the sole Director and Secretary of that company. Of the 100 Ordinary Shares issued in the Company Mr Pearson holds 88 shares.

(iii) TVSA Pilot Training Pty Ltd (ACN: 005 763 477) – Mr Pearson is one of three Directors and one of the two Secretaries of that company. Of the 501,000 Ordinary Shares issued Mr Pearson holds 100,200 shares.

(iv) Dandy Aircraft Pty Ltd (ACN 611 161 089) – Mr Pearson is one of three Directors. Of the 500 Ordinary Shares issued Mr Pearson holds 100 shares.

[16] In relation to each of the companies identified in which Mr Pearson has a financial interest, he states that the employee numbers of those companies at the time of the Applicant’s dismissal were:

(i) PingCo Pty Ltd (PingCo) – 3 employees.

(ii) Leading Edge Maintenance Pty Ltd (Leading Edge) – 3 employees.

(iii) TVSA Pilot Training Pty Ltd (TVSA) – 8 employees.

(iv) Dandy Aircraft Pty Ltd (Dandy) – no employees as it is an asset holding company.

[17] Mr Pearson conceded that, as sole director and majority shareholder, he has the capacity to determine the outcome of decisions of PingCo and Leading Edge. He acknowledged this effective control, notwithstanding his evidence that his shareholdings in PingCo and Leading Edge were held through a trust of which he was a beneficiary.

[18] Mr Pearson gave further evidence that he held only 20% of issued ordinary shares of TVSA. He submitted that he was unable to “determine the outcome of decisions” about TVSA’s “financial and operating policies”. This was despite his being the Chief Executive Officer (CEO) of TVSA. He stated that financial and operating decisions of TVSA were ultimately made by the shareholders of TVSA, which included himself as a minority shareholder through his trust.

Case for the Applicant

[19] The Applicant submits that she was first approached by Mr Pearson in May 2017 regarding employment with Leading Edge. She states that she was acting as Leading Edge’s Chief Engineer for the purpose of its Civil Aviation Regulations (CAR) 30 procedures manual which was submitted to the Civil Aviation Safety Authority (CASA) on 24 June 2018. The Applicant referred to a series of emails exchanged between her and Mr Pearson that supported her submissions. 5

[20] The Applicant further states that she commenced work at Yarrawonga airport on 15 August 2017 and was with Mr Jai Wright of Avright Aviation Professionals, assessing an aircraft she was due to finish in her new role with Leading Edge. She also states that she met with Mr Pearson on 16 August 2018 in Bacchus Marsh, during which she went through the proposed employment contract. The Applicant referred to a letter of offer which she states reflected the date she claimed to have commenced employment with Leading Edge, but she was unable to furnish a copy.

[21] The Applicant tendered a copy of a pay slip for the pay period 15 August 2017 to 14 September 2017 6 as evidence of her having commenced on 15 August 2017. The Applicant conceded that the payslip indicated that, while she had commenced employment within that pay period, it did not evidence the actual date of commencement. She further conceded that the remuneration received for that pay period was $5577.19 gross for 144 hours of work in that pay month, which was less than a full month’s pay. The payment equated to payment for 19 work days in that month. The Applicant explained the reduced monthly payment was due to her having had unpaid days off during that pay period.

[22] The Applicant states that Leading Edge’s evidence of the Employee Information Sheet indicating a commencement date of 21 August 2017 fails to accurately reflect the date on which she commenced performing work for Leading Edge. The Applicant was unable to reconcile payslip data or the commencement date of 21 August 2017 identified in the Employee Information Sheet with her claimed commencement date of 15 August 2017.

[23] The Applicant did not contest Leading Edge’s evidence regarding associated entities that should be included for the purpose of determining whether Leading Edge was a “small business employer.” She did however contest TVSA employee numbers as stated by Mr Pearson.

[24] The Applicant also contested Mr Pearson’s evidence that Leading Edge had three employees at the time of her dismissal. In doing so, she claimed that there was a fourth employee (Nathan Lang) that she claims had been employed at the time of her commencement of a period of leave on 2 August 2018.

Consideration

What was the Applicant’s period of employment?

[25] The Applicant submits that she commenced employment with Leading Edge on 15 August 2017 and refers to the pay slip for the pay period 15 August 2017 – 14 September 2017. The pay slip reveals that she received remuneration for that pay period of $5577.19 gross for 144 hours of work in that pay month. This equates to payment for 19 work days in a month in which there were 23 work days. An analysis of the pay period suggests that the Applicant received payment for the period 21 August -14 September 2017. The Applicant’s explanation that she had unpaid days off in that first pay period of her employment, for which she was not paid, was unconvincing and not supported by any other evidence.

[26] I am satisfied on the basis of the combined evidence of Ms Villiers’ statement, the completed Employee Information Sheet of the Applicant and an analysis of the Applicant’s first pay slip, that the Applicant commenced employment with Leading Edge on 21 August 2017 and not on 15 August 2018.

[27] It was not disputed that the Applicant was terminated with immediate effect on 15 August 2018. Consequently, she was employed for less than 12 months. It follows that if Leading Edge was a “small business employer” at the time of the Applicant’s dismissal, then she is not protected from unfair dismissal because she had not completed the minimum employment period of twelve months at the time of her dismissal.

Were there any associated entities?

[28] In order to determine whether Leading Edge was a “small business employer” at the time of the Applicant’s dismissal, it is necessary to consider whether there are any associated entities of Leading Edge that must be considered for the purpose of calculating the aggregate number of employees.

[29] I am satisfied on the evidence that subsections 50AAA (2), (3), (4), (5) and (6) of the Corporations Actare not satisfied or relevant in the present case. Section 50AAA(7) may, however, be relevant and I now turn to consider whether that subsection is satisfied.

[30] As succinctly summarised by Commissioner Saunders at paragraph [21] of his decision in Ms Janine Budden v Finke Enterprises Pty Ltd ATF M&L Carlson Family Trust T/A Fused Cafe Pender Place 7an “entity” is defined to include a “natural person”:

“[21] Section 64A of the Corporations Act defines “an entity” to include “a natural person”. It follows, in my view, that Mrs Carlson is “an entity (the third entity)” within the meaning of subsection 50AAA(7) of the Corporations Act. My conclusion in this regard is supported by a decision of Judge Riley of the Federal Circuit Court of Australia in Director of the Fair Work Building Industry Inspectorate v Vic Metro Brick and Blocklaying Pty Ltd [2015] FCCA 2266. In that case, Judge Riley held (at [85]) that a natural person who was the sole director and shareholder of two corporations was “an entity [who] controls both the principal and the associate” within the meaning of subsection 50AAA(7) of the Corporations Act.”

[31] It follows from the above that Mr Pearson may be a “third entity” for the purpose of establishing whether s 50AAA (7) of the Corporations Act is satisfied, if it can be established that he controls both Leading Edge and one or more other of the companies that he is identified as having a shareholding in.

[32] ASIC documentation submitted and Mr Pearson’s concession that he exercises “control” in respect of Leading Edge and PingCo satisfies me that those two companies are associated entities within the meaning of ss 50AAA(7) of the Corporations Act.

[33] While Mr Pearson was the CEO of TVSA, I am not satisfied that he controls that company. In reaching this conclusion, I have had regard to Mr Pearson’s 20% shareholding and his evidence that financial and operational decisions of the Company were the remit of the shareholders, of which he was a minority shareholder. There was no evidence as to the practical influence he was able to exercise, notwithstanding his minority shareholding.

Was Leading Edge a small business employer at time of Applicant’s dismissal?

[34] Based on my findings regarding Leading Edge and PingCo being associated entities, it is necessary for the employee numbers of both of those companies to be included in the calculation for the purpose of determining whether Leading Edge was a “small business employer”.

[35] While the Applicant challenged the number of Leading Edge employees stated by Mr Pearson, she conceded that she went on leave on 2 August 2018 and furnished no evidence to rebut Mr Pearson’s evidence that Mr Lang ceased employment on 3 August 2018. I accept that Leading Edge employed three staff at the time of the Applicant’s dismissal. There was no challenge to the number of PingCo employees.

[36] It follows from the above, that the number of employees of Leading Edge and the associated entity, PingCo, was six at the time of the Applicant’s dismissal.

[37] If I am wrong in my conclusions regarding TVSA not being an associated entity and that employees of that company should be included, the total number of employees would still fall short of 15. That is because the number of TVSA employees was eight, according to the evidence of Mr Pearson which the Applicant adduced no evidence to rebut.

[38] Having regard to my findings in respect of associated entities and aggregate employee numbers, I am satisfied that Leading Edge and its associated entities employed less than 15 employees at the time of the Applicant’s dismissal. I am consequently satisfied that Leading Edge was a “small business employer” at the time of the Applicant’s termination of employment.

Conclusion

[39] Having found that Leading Edge was a “small business employer” at the time of the Applicant’s termination of employment, I am satisfied that the Applicant has not completed the minimum employment period of 12 months with Leading Edge at the time of her dismissal as required under s 382(a) of the Act. I therefore uphold Leading Edge’s jurisdictional objection concerning the minimum employment period. The Applicant’s unfair dismissal application is dismissed. An Order to that effect will be issued with this decision.

DEPUTY PRESIDENT

Appearances:

L O’Bryan on her own behalf.

D Pearson on behalf of the Respondent.

Hearing details:

2018.

Melbourne.

October 26.

November 13.

Printed by authority of the Commonwealth Government Printer

<PR701702>

 1   Exhibit A10, Termination Notice dated 15 August 2018.

 2   Exhibit R2, Witness Statement of Ms. Lindsay Villiers, dated 15 October 2018.

 3   Exhibit R3, Employee Information Sheet for Ms. Lawrie O’Bryan.

 4   Exhibit R4, Payroll Employee Summary.

 5   Exhibit A2, Emails dated 15 May 2017.

 6   Exhibit A12, Pay slip for pay period 15 August 2017 – 14 September 2017.

 7   [2015] FWC 8675.