Mr Jong Kap Lee v Klean King Pty Ltd

[2013] FWC 6759

[2013] FWC 6759

FAIR WORK COMMISSION

DECISION

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

Mr Jong Kap Lee
v
Klean King Pty Ltd
(U2013/10242)

COMMISSIONER SPENCER BRISBANE, 20 DECEMBER 2013

Application for relief from unfair dismissal - jurisdictional objection - not an employee - genuine redundancy.

Introduction

[1] This decision relates to an application made by Mr Jong Kap Lee (the Applicant) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy alleging that the termination of his employment from Klean King Pty Ltd (the Respondent) was harsh, unjust or unreasonable.

[2] The Respondent has raised two jurisdictional objections in relation to the Applicant’s application: the Applicant was not an employee of the Respondent and in the alternative the termination of the Applicant’s employment was a genuine redundancy.

[3] This decision considers the two jurisdictional objections only.

[4] Directions were issued for the filing of submissions in relation to the jurisdictional objections only. The Respondent consented to the matter being determined on the papers, however the Applicant sought a hearing and the matter was listed for Hearing. An interpreter was organised by the Fair Work Commission (the Commission) to assist the parties.

[5] Both parties were legally represented. The Applicant was represented by Mr Fisher, of Counsel, instructed by Southport Lawyers. The Respondent was represented by Mr Black, of Counsel, instructed by PM Lee and Co.

[6] Following the close of the evidentiary case Directions were issued, by consent, for the filing of written closing submissions, with a further Hearing requested for supplementary oral submissions.

[7] While not all of the evidence and submissions in the matters is referred to in this decision all of such have been considered.

Relevant Legislation

[8] The application has been made pursuant to s.394 of the Act, which provides 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.

Note 1: Division 4 sets out when the FWC may order a remedy for unfair dismissal.

Note 2: For application fees, see section 395.

Note 3: Part 6 1 may prevent an application being made under this Part in relation to a dismissal if an application or complaint has been made in relation to the dismissal other than under this Part.

(2) The application must be made:

(a) within 21 days after the dismissal took effect; or

(b) within such further period as the FWC allows under subsection (3)...”

[9] Prior to considering the merits of the matter the Commission must decide those matters prescribed by s.396 of the Act 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.”

[10] There is no dispute that the application was filed within the time period prescribed. The Commissions’ file indicates that the application was filed on 5 June 2013. The originating application, and the subsequent employer’s response, stated that the dismissal took effect on 17 May 2013. The application was filed on the 19th day after the date the dismissal took effect. The Commission is satisfied that the application was made within the period required in s.394(2) of the Act.

[11] The Respondent has not raised any objection to the application on the basis of those matters set out in s.396(c) of the Act, being that the dismissal was consistent with the Small Business Fair Dismissal Code.

[12] The Respondent has raised an objection to the Commission’s jurisdiction on the basis of a genuine redundancy. In accordance with s.396(d) the Commission must consider this matter prior to consider the merits of the application.

[13] A genuine redundancy is one within the meaning of s.389 of the Act which states:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[14] A person is protected from unfair dismissal, at a time, if that person satisfies those matters prescribed by s.382 of the Act, 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; and

(b) one or more of the following apply:

(i) a modern 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.”

[15] The Respondent also objects to the application on the basis that the Applicant was not an employee of the Respondent, and therefore, was not person protected from unfair dismissal. This decision also deals with this jurisdictional objection.

Summary of Respondent submissions and evidence

[16] The Respondent submitted that the Applicant was employed as a Director of the Respondent and was not an employee within the meaning of the Act.

[17] The Respondent identified that the Act does not contain an explicit definition of “employee” and that in resolving the jurisdictional objection, resort is had to the common law principles.

[18] As a general proposition the Respondent submitted that a Director stands in a fiduciary relationship to a company for whom he/she is Director. The Respondent submitted that where no explicit contract is entered into between a Director and a company the relationship is “regulated” by the company’s constitution. In this circumstance, the Respondent submitted that the Director is not an employee of the company.

[19] The Respondent did concede that it is possible for a Director to be an employee of a company as well as the holder of the office of Director, but did not concede that this was the case in this matter; the Applicant was a Director only.

[20] The Respondent submitted some of the features of the relationship between the Applicant and the Respondent included that the Applicant has been a Director since 23 November 2007 and that until 30 June 2011, no director’s fees or wages were paid to either the Applicant or any of the other Directors. That the Directors resolved to pay themselves an amount per annum with instalments to be made monthly. There was no change to what the Applicant has done for the Respondent since becoming a Director in 2007. There was no employment contract or evidence of any written contract between the parties. The Applicant was conducting and running his business. The Respondent paid its employees fortnightly whereas the Directors were “paid” monthly. The Applicant was referred to by employees of the Respondent as “Director”. There was no right help by, or attributed to, the Respondent to control or direct the Applicant in his work. This included no right to direct the Applicant to attend work or do work whilst attending the business. The Applicant did not report to any of the Respondent’s employees or Directions and the Applicant had business interests outside of the Respondent’s enterprise.

[21] In support of its submissions the Respondent filed a statutory declaration of Mr Paul Hyun Soo Shim a company director of the Respondent. The declaration advises that Mr Soo Shim is authorised to make the declaration on behalf of the Respondent as a company. Mr Soo Shim began as a Director with the Respondent in November 2008.

[22] Annexed to the declaration of Mr Soo Shim was a printout of the ASIC extract in relation to the Respondent’s company details. This document indicated that the Applicant was formally recorded as a Director of the Respondent for the period of 23 November 2007 to 17 May 2013.

[23] Mr Soo Shim stated that prior to 1 January 2011 none of the Directors of the Respondent received any fees or wages from the Respondent. He further stated that the Directors loaned money to the company to build up the business and when the Respondent company had money available the loans were to be repaid.

[24] In January 2011 Mr Soo Shim stated that the Directors at the time resolved to pay themselves $30,000 gross per annum; to be paid in monthly instalments. Mr Soo Shim concedes that these payments were styled “wages” by the Directors and the Respondent but stated that in Korean culture there is no distinction between directors’ fees and wages. In this regard it was stated that Korean culture nominates any payment by a company, either a wage or a bonus.

[25] Mr Soo Shim distinguished between the payments that the Respondent made to Directors versus the payments made to employees, where he stated that employees of the Respondent were paid “fortnightly for performing specific jobs” 1. This was distinguished from the amounts paid to directors, which were not for performing a specific job but because “we were doing work as directors and wanted to be paid for the work that we did as directors”2. Mr Soo Shim stated that after receiving accounting and legal advice, he “realised” that these were actually director’s fees.

[26] Mr Soo Shim stated that the “company” did not consider that the directors were being “employed in any capacity other than as a director” 3. The company did not have employment contracts in place with any of the Directors.

[27] Mr Soo Shim stated that the Directors were given “pay slips” for the monthly “fees” which were “not different” to the template pay slips issued to employees.

[28] During the period of November 2008 (when Mr Soo Shim commenced as a Director) until the Applicant was removed as a Director (by the members of the company in a general meeting) Mr Soo Shim stated that the Applicant’s role did not change.

[29] It is Mr Soo Shim’s evidence that when the Applicant did attend at the premises of the Respondent he did not have any particular task to perform or hours to work or even any specific days on which he was required to attend the office. When the Applicant did attend at the Respondent’s offices Mr Soo Shim stated that the Applicant played computer games and occasionally made a delivery for the Respondent, sometimes bought lunch for employees and frequently had a sleep after lunch.

[30] Mr Soo Shim stated that the Applicant did not report to a “boss” as he was one of the “bosses”.

[31] Mr Soo Shim stated that there was a dispute between the Applicant and the other Directors commencing in about February 2013. During the period from February 2013 to April 2013 Mr Soo Shim stated that the Applicant was “absent” from the premises for about 50% of the time and that further for the period between April 2013 to the Applicant’s termination, the Applicant was absent 100% of the time. In relation to this last period however the further evidence of Mr Soo Shim, is that the Applicant did not attend at the premises because he was requested not to attend by the remaining three Directors.

[32] Mr Soo Shim stated, that in April 2013, the members of the company convened to consider removing the Applicant form his position as Director. Mr Soo Shim does not give evidence about how this meeting came about, or the reasons the members sought to take this step. However the Applicant was asked, by the other three Directors, not to attend the Respondent’s premises until the members’ meeting of 17 May 2013, at which the Applicant was subsequently removed from his position. The Respondent’s evidence is that this was the case, because the remaining Directors had concerns about the Applicant taking steps to steal the intellectual property of the Respondent, if he were allowed to attend because it was “clear” that the members would remove the Applicant from his position.

[33] Mr Soo Shim gave evidence that the breakdown of the relationship between the Directors has been “bitter” and has resulted in litigation in various jurisdictions including the Supreme Court and this jurisdiction.

[34] The Respondent also filed a statutory declaration of Mr Ben Sung-Jun Her who deposes that he has read the statement of Mr Soo Shim and agreed with Mr Soo Shim in relation to his understanding of the “director’s fees” that were being paid. A further statement of Jin-Tae Kim, another Director of the Respondent, agrees with the evidence of the previous two Directors.

[35] The submissions and evidence in chief, made by the Respondent, as to the objection relating to the allegation that the Applicant’s dismissal was a case of genuine redundancy were very limited, consisting of two points, which essentially restated s.389 of the Act and no evidence in support. This is despite the Commission having clarified with the Respondent, by way of correspondence of 23 July 2013, that the Respondent sought to rely on both objections and then subsequently the Respondent being directed to give submissions in this regard by the Directions of 24 July 2013.

[36] The Respondent also sought costs pursuant to s.611(2)(b) of the Act on the basis that it should have been reasonably apparent that the application had no reasonable prospects of success. It has not been necessary to give this matter consideration given that there was no application before the Commission, and this was a matter dealing with the jurisdictional objections of the Respondent.

Summary of Applicant submissions and evidence

[37] The Applicant submitted that he was an employee of the Respondent and that further his dismissal was not a case of genuine redundancy.

[38] The Applicant submitted that, based upon his job description (which was not in evidence before the Commission) he was an integral part of the business of the Respondent undertaking:

“a. Purchase and Import Research and Execution - Price and Quality research and import of products from China, Korea and Vietnam, which also entailed business trips overseas;

b. Sales and Marketing - Meeting with Korean clients for sales promotion and product clearance;

c. Management work - Managing the branches of Klean King at Acacia Ridge; and

d. General Work (as and when required from time to time) - delivery service and repair works in the Company (Respondent).” 4

[39] The Applicant disputed the allegation of the Respondent that the Directors did not receive any payment from the Respondent until January 2011. The Applicant stated that since January 2009 the Directors received “wages” from the company but conceded that prior to this the Applicant did not receive any payment from the Respondent as he “took into account the long term benefit that the Company promised to give him” 5.

[40] The Applicant also disputed the Respondent’s submissions as to rights of control. The Applicant submitted that he was given “much flexibility” due to the nature of his “work description” (again not in evidence before the Commission) but that he was required to report to the Board of Directors and decisions were made by the Board.

[41] The Applicant submitted that during the period he was with the Respondent, the Applicant did not have other business interests as he sold his interests, which were situated in South Korea, when he started work with the Respondent.

[42] The Applicant submitted that he received Payslips and wages during the “major portion” of his employment with the respondent.

[43] The Applicant conceded that there was no written employment contract between the parties but submitted that there is no legal requirement to have one.

[44] The Applicant submitted that it is the substance, not the form, of the relationship which is the guiding principle when determining the nature of the legal relationship and that any expression of the relationship, used by the parties, is not determinative upon a Court or Tribunal in construing that relationship. 6

[45] The Applicant submitted that the fact of payment, in relation to the employment, and other entitlements are to be taken into account in considering the relationship in its totality.

[46] In regards to the genuine redundancy objection the Applicant submitted that the dismissal was not a genuine redundancy. The Applicant submitted that the Applicant was terminated by way of a termination letter dated 21 May 2013. The Applicant submitted that the termination was not due to the “operational needs” of the Respondent but rather a break down in the relationship between the parties. The Applicant referred to the following paragraph of the Notice Letter dated 24 April 2013:

“Discussion have been taking place between you and the other three shareholder directors as to your purchase of their shares or their purchase of your shares. No agreement has been reached as to a sale of shares. Indeed, negotiations appear to have broken down. These negotiations have been taking place in the context of a breakdown of the relationship between you and the other three directors, which affects the ability of the company to operate and which has prompted these negotiations.

The other three shareholders have called a general meeting for 17 May 2013 at which time a resolution for your removal as a director will be considered. The current intention of the three shareholder directors is to vote to pass the resolution at the meeting. As you are a salaried director, it follows that the passing of the resolution will have the consequence that your employment will be terminated” 7

[47] The Applicant submitted that this was all brought about by the Applicant emailing the other Directors about the Applicant’s concerns regarding ATO compliance and compliance with sub-class 457 visa employees.

[48] The Applicant submitted that there was no consultation with the Applicant regarding any proposed redundancy and that the Respondent did not consider alternative roles for the Applicant.

[49] The Applicant made submissions as to the conduct of the general meeting of members and the effect of the Applicant’s proxy at that meeting but those matters are not necessary for the resolution of this matter.

[50] The Applicant’s wife gave a statutory declaration in the matter and she deposes to matters regarding correspondence to the Applicant and her appointment as the Applicant’s proxy for the purposes of the members’ meeting on 17 May 2013.

[51] A statutory declaration of the Applicant was filed in the proceedings. The Applicant stated that he had over 30 years experience in South Korea in the cleaning retail industry and that it was this experience which lead the Applicant to being “invited to work” for the Respondent in 2007.

[52] At the time of this approach the Applicant stated that he was promised a minority share in the Company and would be appointed to the position of Director. The Applicant submitted that he started work for the Respondent in July 2007 and was appointed a Director in November 2007.

[53] The Applicant conceded that from the beginning of his time with the Respondent until January 2009 (a period of some 18 month) he did not receive any payment for his work. 8 The Applicant stated that this was because he knew of the tight cashflow situation of the Respondent and because of the long term benefits he would receive.

[54] The Applicant stated that he reported to the Board of Directors and that during his term, he had undertaken travel to Vietnam and China for research and marketing.

[55] Despite the “considerable freedom” the Applicant was granted by the Respondent the Applicant stated that he always considered that he was an employee of the Respondent. 9

[56] The Applicant stated that he received $3,000 nett per month from the period of January 2009 to December 2010 from the Respondent. These payments sometimes included part-payment in cash from the Respondent “off record”. Annexure 1 to the Applicant’s statement was a statement of account issued by St George Bank addressed to “Mr Jong K Lee”. As an example the statement for the period 28/10/2009 to 27/01/2010 shows a transaction on 28 October with the transaction description “KLEANKING WAGE” and is in the amount of $3000.00. 10 Additional deposits with the same transaction description can be seen to occur on a roughly monthly basis.

[57] Annexure 2 to the Applicant’s statement were what appear to be payslips issued to the Applicant by the Respondent. These payslips show income tax being debited and in some instances public holiday entitlements being paid to the Applicant.

[58] The Applicant stated that his wage was ordinarily split into two parts. One part paid in accordance with taxation obligations (ie PAYG) and another part paid in cash.

[59] The Applicant stated that the Board of Directors have never discussed a reduction in the operation of the Respondent’s enterprise or that the Respondent would close a branch.

[60] The Applicant referred to his termination letter which said, in part:

“Based on your length of service, your notice period is 4 weeks, instead of receiving that notice, you will be paid the sum of $ 2,509.62 plus the redundancy entitlement set out below. Due to your employment ending because of redundancy you will also be paid redundancy pay of $ 3,764.42 in accordance with National Employment Standards” 11

[61] The Applicant has also made submissions regarding remedy however this decision is dealing with the jurisdictional objections only and the parties were directed that this was the case. These submissions have not been considered except in so far as they may be relevant to consideration of the jurisdictional objections.

Consideration

[62] The Respondent’s jurisdictional objection, contending that the Applicant was not an employee and hence not covered by the unfair dismissal provisions of the Act, arises from the wording of s.382 of the Act.

[63] Section 382 of the Act provides 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; and

...

(emphasis added)

[64] For the purposes of Part 3-2 of the Act, relating to unfair dismissals, s.380 of the Act defines an employee and employer as:

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

[65] It is accepted that the Respondent is a national system employer. The contention is that the Applicant was not an employee of the Respondent; was not a national system employee and is not covered by Part 3-2 of the Act, which relates to unfair dismissals.

[66] The material provided by both parties has been reviewed to assess the nature of the relationship between the parties.

[67] The review of whether the Applicant is an employee has been undertaken based on each of the indicia, to conclude the nature of the overall working relationship. No single criterion is determinative of the outcome; all of the indicia and other relevant factors must be weighed in informing the overall view of the working relationship. The relationship has been considered against these following indicia: control, the right to work for others, place of work, arrangements as to tools and equipment and expenses, right as to delegation of subcontracting, right to suspend or dismiss, emanation of the business, taxation and related payment arrangements, leave arrangements, development of goodwill or assets, and other factors have all been assessed. The evidence and submissions of the parties on all of the elements have been taken into account.

[68] The approach set out in French Accent 12 is adopted; the consideration of the indicia is not a ‘mechanical exercise’13 but requires an appreciation of the whole of the relationship.

[69] The characterisation of the relationship by those parties to it, may simply be a product of ‘convenience’ or how one party views it. However the label put on the contract is of less influence than ‘the rights and obligations created by the contract’ 14.

[70] The indicia are relevant to an employment contract and are examined in light of the whole ‘picture’ of the relationship. That is, was the nature of the contract, control, work, supervision and payment matters commensurate with a contract of employment.

Contract

[71] The following, extract from Ace Insurance refers to the contentions relevant to a contract of employment:

“Contracts of employment (contracts of service traditionally so-called) are contracts for personal service. Benefits and obligations of contracts of individual service of this kind are not unilaterally assignable by either party... The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment. Thus, contracts with corporations, contracts with partnerships, contracts permitting unlimited delegation and contracts which do not actually compel the performance of work but pay only on results, are each prima facie not contracts of the necessary quality...” 15

[72] The starting point would normally be to look at the contract that existed between the parties, to assist in the examination of whether the relationship of the parties was that of an employee and employer. In this matter there is an absence of such a document. Therefore it does not assist the Commission, however whilst the contract is a matter to take into account it is not determinative. This is well settled on the relevant case authorities in relation to the question of whether a person is an employee. 16

Control

[73] No reliance in this matter can be placed on the terms of the contract between the parties as evidence of the actual and theoretical control in the matter.

[74] There was no evidence of actual control placed over the Applicant by the Board of Directors. The Applicant was not able to point to evidence of any specific instance of the Board exercising control over the Applicant in terms of directing him as an employee. The Applicant relied upon the general reporting relationship that exists between Directors and Boards of Directors.

[75] The only evidence of control exerted by the Respondent over the Applicant was in relation to the normal requirements of Directors, to attend such meetings as may be required to discharge the functions of an Officer of a corporation. The payments received by the Applicant were in accordance with the Directors’ resolution, when they agreed to commence such payments to Directors. The evidence does not reflect the regular and periodic payment of wages, paid in return for agreed, prescribed and controlled duties. This was not the nature of the Applicant’s attendance and activity at the workplace.

Work for others or has the right to work for others

[76] There was no definitive evidence that the Applicant performed work for any other organisation or person during the time he was with the Respondent. However that was no evidence he was prevented from doing so, and no evidence that the Applicant discharged a regular pattern of duties and functions that would accord with an employee’s normal attendance and functions.

Separate place of work and/or advertises to the world

[77] The Applicant submitted that he attended at the place of operation of the Respondent on a regular basis. However the Respondent’s evidence was that he was not engaged in, or required to undertake, duties within the enterprise. On the evidence the Applicant did undertake some deliveries.

Significant tools and equipment

[78] The Applicant was not required to maintain any significant tools or equipment. No duties were required of him.

Can work be delegated or subcontracted

[79] The evidence and submissions indicated that the Applicant was able to act independently; in terms of the nature of his independence to attend the workplace, and there was no specific duties required of him, as per the role of a Director.

Right to suspend or dismiss

[80] The right to suspend or dismiss the Applicant was reserved to the Respondent, but was undertaken in accordance with the Corporations Act in dealing with a Director. The evidence regarding the alleged redundancy of the Applicant, overlaps with this consideration.

[81] The Applicant submitted that, he was an employee and that the dismissal of his position was a case of genuine redundancy. The Applicant submitted that the Respondent concocted the idea of a genuine redundancy, at a late stage, to attempt to circumvent a possible unfair dismissal claim.

[82] However, given the finding of the Commission that the Applicant was not an employee of the Respondent it is not necessary to consider this matter in full. The evidence demonstrates that the Applicant was removed as a Director in accordance with Corporations law. The termination of a Director’s role is not equivalent to making an employee’s position redundant.

Does the employer present the worker as an emanation of the business?

[83] The Applicant’s evidence was that he undertook some business travel, undertaking marketing and research for the business.

Periodic wage or salary by reference to tasks and Income tax deducted

The money paid to the Applicant was clearly in the form of Directors fees, as was resolved by the Directors, and paid to all of them using the template payslips.

[84] Ace Insurance is authority for the proposition that this was the least important of all indicia. On the current material, these payments made to the Applicant do not denote that he was an employee.

[85] The payment of fees to the Applicant was on the same terms as the other Directors and is not in line with a periodic wage being indicative of an employment relationship.

Work of a professional, trade or distinct calling on the part of the person engaged

[86] The work undertaken by the Applicant was not characterised by regular duties at the direction of the Respondent.

Paid holidays/sick leave

[87] There was no evidence that the Applicant was entitled to a specific provision or payment for holidays or that prescribed authorised leave was accrued and or taken. This weighed against the relationship being considered as that of employee and employer.

[88] Whilst the payslips had entries for leave etc, there was little correlation between such entries and the discharge of such in line with an employment contract. The evidence that the template payslips were simply used as a vehicle to record the payment of the Directors fees is preferred. No formal accruals, or usage of leave, as per an employment relationship was in evidence.

Did the worker create goodwill or saleable assets?

[89] There was no evidence that the Applicant created goodwill or saleable assets.

Conclusion

[90] This matter sits distinct from the regular assessment of whether the Applicant is an employee or contractor. While the tests used in the assessment of those different relationships are helpful to the exercise at hand. However, the Applicant submits that those authorities are beside the point, because the dichotomy is not between being an employee and an independent contractor or between whether the Applicant, being a company Director, can also be an employee. The Respondent notes that a company Director can, simultaneously, be engaged as an employee of the company.

[91] It cannot be concluded, on the evidence relating to the activities undertaken by the Applicant at the workplace, and the general nature of the relationship between the parties, that it was under ‘economic reality’ or ‘economic integration’ or work that was part and parcel of the required discharge of duties for the Respondent. The activity undertaken by the Applicant was consistent with a significant shareholder, who had invested in the company, attending on the business and maintaining his presence.

[92] It is recognised that the Director’s used the terms of, sending the Applicant on ‘gardening leave’ and ‘redundancy’ and “notice payments in accordance with the NES”. The mere use of these terms, which are normally associated with an employment relationship, does not convert an otherwise Director’s position, to that of an employee. The previous correspondence between the parties, in evidence, accords with a shareholder’s dispute. The Commission has taken into account the use of the word ‘employment’ in the correspondence, and the following matters identified by the Applicant’s submissions:

“A. The payslips to annual leave and holiday leave

B. The payslips referred to superannuation

C. Mr Lee travelled overseas on company business” 17

[93] However, the evidence was that these terms were generically used, and did not, in fact, correlate with any specific entitlements to the Applicant as an employee. The choice of the parties to use these terms is not determinative and is still consistent with the payments to a Director and his activities therein. The Applicant was not an employee requiring leave and was not subject to direction or authorisation of his duties. The Applicant also did not receive payments associated with his work and the meeting of associated travel expenses.

[94] The Respondent’s characterisation of the Applicant’s role as a Director, and not an employees, as follows is also accepted:

“The Applicant also appears to place reliance on the pay slips that were issued to the Applicant. It is submitted that the Commission would not find that issue to be of assistance, because:

(a) The Applicant is described only as a “director” in the payslips, which is consistent with that being his only role. He was treated differently to employees, in that he was paid monthly and employees were paid fortnightly (PN376-PN378).

(b) The payslips were created by accounting staff who downloaded an example from a website (PN379-PN381).

(c) The hourly rate recorded on the payslips is identical for all entries, including those described as base rate, annual leave, and public holidays. That is consistent with the evidence that directors were paid the same amount regardless of the work they did (PN957) or the holidays they took (PN687; PN973) and that the directors were only interested in the total amount paid (PN514).

(d) Superannuation was paid on behalf of the Applicant, which is consistent with him being only a director because under s 12(2) of the Superannuation Guarantee (Administration) Act 1992, a member of the board of directors is deemed to be an “employee” for the purposes of that Act.

(e) Income tax was deducted on behalf of the Applicant, 18 which is consistent with him being only a director because under s 12-40 of Schedule 1 of the Taxation Administration Act 1953, the Respondent was to withhold tax from “remuneration it makes to an individual … as a director of the company”.19 The “PAYG” deductions had no particular meaning for the Applicant (PN930).”20

[95] I concur with the following summation of the character of the Applicant’s duties and “role” submitted by the Respondent, that concludes that the Applicant’s position was that of a Director only:

“Two particularly significant points arise from the Applicant's evidence. First, other than the statutory and common law duties of a director, there was no obligation on the Applicant to undertake any particular work:

There was no document describing what tasks he was to perform (PN947).

He had no “specific job” to do for the Respondent (PN107), and was not engaged to perform any particular duties (Exhibit 1, para 10; Exhibit 4, para 3(xviii)).

He was not managing a branch (PN214).

He had a lot of freedom in what he did (PN946; Exhibit 6, para 10), and he was more free to rest or “read the news or the internet” than the employees (PN965).

When it was suggested to the Applicant that there were no particular tasks he was required to perform, he could only identify general importing, market research, setting up the business, and business trips (PN948). These are simply broad level descriptions of what might be expected of a director and investor in a business.” 21

[96] In addition, the following supports an assessment of the ‘indicia’ that confirms that the Applicant was not an employee:

“On the other hand, it is submitted that the evidence demonstrates significant factors that point against an employment relationship; namely:

The Respondent accepts that a director of a company can also be an employee of the company. 22 However, by operation of law a company's constitution (if any) and the Corporations Act 2001 replaceable rules operate as a contract between the company and each director: Corporations Act 2001, s 140(1)(b). That statutory contract regulates matters such as the appointment (s 201G), removal (s 203C) and remuneration (s 202A) of directors. Without something more, the mere appointment and remuneration of a director would not create an employment relationship.

Evidence was given that directing a company is not the same thing as managing a company (PN220-PN221). That accords with common knowledge and the statutory recognition of the role of a “managing director” as distinct from other directors (Corporations Act 2001, s 198C).

The work that the Applicant did was consistent with that to be expected of a director. He attended board meetings (PN217). He talked about business with Korean customers a few times (PN212-PN213), went to Melbourne about two times (PN242), went overseas for the Respondent three or four times (PN253-PN254), and attended to some of the Respondent's business in Korea when travelling there for other reasons (PN258).

As a director, the Applicant had a “full amount of freedom to use annual leave, to holiday, whatever” (PN525 and PN553). Directors were not required to put in a holiday leave form (PN549), but would simply tell the other directors when going to be away (PN550). Directors' holidays are not recorded (PN555), or at least not always recorded (PN560).

The Respondent had no control over what work the Applicant carried out, the manner in which he carried it out, nor the place or hours of his work (PN107; Exhibit 1, para 10; Exhibit 4, para 3(xviii). The Applicant chose when and how he undertook work. The Respondent did not impose requirements regarding work to be done, hours of work, or methods of work. Nor was the Respondent entitled to impose such requirements. Even when the Applicant attended at the workplace, he in fact spent much of his time undertaking activities unrelated to the Respondent's business (PN965).” 23

[97] Further the, Respondent’s summation about the lack of contractual obligation, upon the Applicant, compelling the performance or work, and the Applicant’s role within the overall circumstances of the Respondent:

“In circumstances where a contract does “not actually compel the performance of work”, it will generally be easy to conclude that there is no employment relationship. 24 It is submitted that this is such a case.

Second, the Applicant's primary interest in the Respondent was as an investor and director:

From the start of the Applicant's involvement in the business, the Respondent looked to him to lend money to the business (PN891).

He began working in the business knowing that by building up the business he might be able to get a profit from that business (PN897).

His concern or interest was to build up the business (PN899). That was important to him as a shareholder and director (PN900-PN901).

In cross-examination, it was suggested to the Applicant that once he decided that he would not be a shareholder any more, he started going into work less. The Applicant responded: “Because the price was all set, how much to get from getting the stock, it was already set, that's why I was told them I don't need to come again – to work again...” (PN1003).

After a further question, the Applicant continued: “I told the other directors that it was all agreed – they all agreed that I didn't come to work any more. It was all good by the other directors not to come to work anymore” (PN1005). This was in the context of the time period from February 2013 (PN987; PN991) and the time when there were negotiations about selling of shares (PN996).” 25

[98] The Commission has considered the effect of the totality of the evidence before the Commission.

[99] The following matters, as set out in the case of ACE Insurance, are all relied on in support of concluding the nature of the relationship of the Applicant is not an employee:

“[9] There is no one single criterion that will necessarily be determinative of the issue. The issue will be decided by weighing all the relevant factors.

...

[17] In my opinion, the primary judge was right in concluding that, absent the respondents’ own belief that they were not employees and their structuring of their financial affairs to that effect, there were no other indicia to support the appellant’s contention that they were independent employees.

...

[25] ...The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment.

...

[32] ...The parties may agree the terms of their contract, but any statement by them about the character of their relationship, or of their contract, has consistently been held not to be decisive of the true legal character of either.

...

[36] ...although conventionally some weight is given to how parties have represented their relationship, as I have already said, what they have stated is not conclusive. In many cases, a decision by the parties about how to characterise the relationship merely accords with what is thought to be the characterisation of greatest convenience to one party, or both.

[103] ...Of the indicia of employment it is clear that a right of control remains an important consideration in many cases. It may be found in a right of organisation and allocation of work, as much as in some theoretical right to say how actual work should be done. ” 

[100] The indicia, as set out in Abdalla 26and French Accent (referred to above), favour the conclusion that the Applicant is not an employee but was rather a non-employee Director.

[101] The Applicant was subject to little or no control as could be expected of an employee; even potentially a senior employee who also held the role of Director. While the Applicant relied upon the asserted fact that he “reported” to the Board of Directors, this is no more than would otherwise be expected of a non-employee Director, discharging their obligations as a Director under Corporations Law.

[102] The Applicant was not responsible for performing any regular duties or otherwise participating in the day-to-day operations of the Respondent’s enterprise. The Applicant’s physical presence at the workplace, is not sufficient enough to evidence such an obligation. The Applicant was not required to attend the workplace, and did so of his own volition.

[103] On the basis of the material presented before the Commission, and on the balance of probabilities, the Applicant was not an employee of the Respondent, and therefore not a person protected from unfair dismissal. Given this finding it is unnecessary for the Commission to consider the second jurisdictional objection relating to an alleged case of genuine redundancy.

[104] Therefore the Applicant is not found to be an employee. the jurisdictional objection is upheld; the Applicant was not a person protected from unfair dismissal.

[105] Accordingly, the Applicant’s application, filed pursuant to s.394 of the Act, is dismissed.

[106] I Order accordingly.

COMMISSIONER

 1   Statutory Declaration of Mr Paul Hyun Soo Shim at 6.

 2   Ibid.

 3   Ibid at 7.

 4   Applicant submissions at 1.

 5   Ibid at 2(b).

 6   For example: Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR.

 7   Statutory declaration of Jong Kap Lee, Annexure 4.

 8   Ibid at 5.

 9   Ibid at 10.

 10   Ibid annexure 1.

 11   Ibid annexure 7.

 12   Ibid at [30](5).

 13   Ibid.

 14   French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307 at [10]-[29]; TNT Worldwide Express (NZ) Ltd v Cunningham (1993) 3 NZLR 681 at 699.

 15 (2013) 295 ALR 407; [2013] FCAFC 3, per Buchanan J at [25].

 16   For example ACE Insurance Limited v Trifunovski (2013) 295 ALR 407; [2013] FCAFC 3.

 17   Applicant’s closing submissions at paragraph 24.

 18   This was further confirmed by Exhibit 2 (the PAYG summary).

 19  See also Personnel Contracting Pty Ltd trading Tricord Personnel v CFMEU [2004] WASCA 312, [33], [123].

 20   Respondent’s closing submissions at paragraph 8.

 21   Respondent’s closing submissions at paragraph 11.

 22   Treloar v Bearings Incorporated (Australia) Ptd Ltd [1999] AIRC 1537.

 23   Respondent’s closing submissions at paragraph 10.

 24   ACE Insurance v Trifunovski (2013) 295 ALR 407, [25].

 25   Respondent’s closing submissions at paragraph 12 to 13.

 26 (2003) 122 IR 215.

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