Mr Paul Gausden v Silvan Pty Ltd T/A Silvan Australia

[2014] FWC 5337

[2014] FWC 5337

FAIR WORK COMMISSION

DECISION

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

Mr Paul Gausden
v
Silvan Pty Ltd T/A Silvan Australia
(U2014/6170)

COMMISSIONER SPENCER BRISBANE, 18 AUGUST 2014

Application for relief from unfair dismissal - jurisdictional objection - Minimum employment period.

Introduction

[1] This jurisdictional decision relates to the application made by Mr Paul Gausden (the Applicant) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy on the grounds that the termination of his employment from Silvan Pty Ltd T/A Silvan Australia (the Respondent) was harsh, unjust or unreasonable (the substantive matter).

[2] The Respondent raised a jurisdictional objection to the substantive matter, on the basis that the Applicant did not meet the minimum employment period, as per section 383 of the Act.

[3] Directions were issued for the filing of submissions and evidence in relation to the jurisdictional objection. Material was filed by both parties.

[4] After reviewing the material it was determined that the matter could be dealt with on the papers. It is noted that whilst not all of the evidence and submissions are referred to, in this decision, all have been considered.

Background

[5] The submissions filed by the Applicant stated that he commenced employment on 18 July 2013 as a casual store person with Davidson Recruitment. The Applicant stated that for the first six months of his employment he was outsourced by Davidson Recruitment in a labour hire arrangement to provide general warehouse duties for Silvan Pty Ltd. This contract finished on 25 January 2014. The Applicant was then employed by the Respondent until the date the dismissal took effect, recorded as 18 March 2014.

[6] The Applicant maintained his employment was initially outsourced by Davidson Recruitment until he was on-hired to the Respondent undertaking the same duties. In contrast, the Respondent stated on the Form F3 that the Applicant commenced his employment on a casual basis on 27 January 2014 and that the Applicant was dismissed on 18 March 2014, after a period of less than two months. Therefore, the Respondent submitted that the Applicant had not met the minimum period of employment as per s.383 of the Act. The Respondent emphasised that Davidson Recruitment was not an associated corporate entity and no transfer of business occurred, therefore the service with that employer was not included.

Legislation

[7] The jurisdictional objection has been made in relation to the Division 2 of the Act. Section 382 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

(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.

[8] Section 383 of the Act provides the meaning of minimum employment period:

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.

[9] Section 384 defines the meaning of a period of employment:

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; and

(b) if:

(i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and

(ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and

(iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised;

the period of service with the old employer does not count towards the employee’s period of employment with the new employer.

[10] Section 311 of the Act sets out the meaning of ‘transfer of business’ and ‘transferring employee’ as referred to in subsection s384(2)(b) as follows:

311 When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.

New employer ceases to outsource work to old employer

(5) There is a connection between the old employer and the new employer if:

(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and

(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.

New employer is associated entity of old employer

(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.

22 Meanings of service and continuous service

General meaning

(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(2) The following periods do not count as service:

(a) any period of unauthorised absence;

(b) any period of unpaid leave or unpaid authorised absence, other than:

(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or

(iii) a period of leave or absence of a kind prescribed by the regulations;

(c) any other period of a kind prescribed by the regulations.

(3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.

(3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.

Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2

(4) For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:

(a) a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:

(i) any period of unauthorised absence; or

(ii) any other period of a kind prescribed by the regulations; and

(b) a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and

(c) subsections (1), (2) and (3) do not apply.

Note: Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2 deal, respectively, with requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice.

(4A) Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.

When service with one employer counts as service with another employer

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

Note: This subsection does not apply to a transfer of employment between non-associated entities, for the purpose of Division 6 of Part 2-2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2-2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

Note: For example:

(a) the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and

(b) if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.

Meaning of transfer of employment etc.

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a) the following conditions are satisfied:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b) the following conditions are satisfied:

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(8) A transfer of employment:

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non-associated entities if paragraph (7)(b) applies.

Summary of the issues - Minimum Employment Period

[11] The Applicant submitted that he was employed by Davidson Recruitment to provide general warehouse duties for the Respondent at their premises as a casual store person. However, the Applicant noted that all instructions in relation to tasks and duties were provided by a Mr Brett Jones, Operations Manager of the Respondent.

[12] The Applicant contended that he was employed by Davidson Recruitment from 16 July 2013 until 25 January 2014 before then being on-hired to the Respondent on the next business day of 27 January 2014. He states that his duties were identical. The Respondent concedes the duties were similar.

[13] However, the Respondent states that the Applicant’s employment with them commenced on 27 January 2014 and ceased on 18 March 2014. The Respondent argued the separate employment with the Respondent does not represent continuous employment. The Respondent stated that Davidson Recruitment was used for supplementary labour during the high-demand times in the warehouse operations and therefore the Applicant’s employment period with the Respondent was less than the required 6 months.

[14] The Applicant submitted that at the time of his dismissal, the Respondent was not a small business, as it consisted of 106 employees. This is not disputed by the Respondent. Therefore, the Applicant contended that he was only required to serve a minimum of 6 months, as required by s.383(a) of the Act. The Applicant submitted that his employment with Davidson Recruitment counted toward this six month period of service with the Respondent as it was continuous service.

[15] Both parties agreed that the Applicant was covered by a modern award.

[16] The Respondent submitted that the nature of the labour hire arrangement whereby the Applicant was placed by Davidson Recruitment with a client, the Respondent, and then later has his employment terminated and was then employed directly and separately by the Respondent, did not meet the elements of s.311(1).

Reasonable expectation of continuous employment - s.384(2)(a)

[17] The Applicant submitted that as he was employed for the hours of 8am-4pm between Monday-Friday, his casual employment was on a regular and systematic basis in accordance with s.384(2)(a)(i). Further, that as he had worked at the Respondent’s premises for 8 months there was a reasonable expectation of continuing employment for 6 months, meeting the requirements of s.384(2)(a)(ii).

[18] The Respondent submitted that the Applicant did not have a ‘reasonable expectation of continuing employment on a reasonable systematic basis.’

[19] In support of this contention the Respondent referred to their labour hire agreement with Davidson Recruitment, which specified that Davidson Recruitment did not give any ‘representation or warranty that any On-Hire Employee....is or will be available to accept any Assignment’. Further, that the Agreement also made reference to “Replacement Guarantees” and “Satisfaction Guarantees” should an On-Hire Employee ‘not be available or suitable for the particular Assignment.’ 1 The Respondent submitted that these provisions effectively ‘extinguished’ the Applicant’s reasonable expectation of continuing employment.

[20] The Respondent also pointed to the Applicant’s Letter of Engagement with the Respondent which stated that the Applicant’s work “ceases at the end of that engagement” and that as a casual employee “there is no guarantee of ongoing or regular work.” 2Further, it was contended that as the Applicant had only served a period of two months with them, this could not lead to a reasonable expectation of continuing employment.

Transfer of Business - consideration of s.384(2)(b)

[21] To demonstrate that there has been a transfer of business and that there was continuity of service the Applicant must satisfy the elements of s.311(1). The Respondent summarised this by stating that the Applicant must prove that his employment with Davidson Recruitment was terminated under s.311(1)(a) and that he was employed by the Respondent within 3 months of this termination under s.311(1)(b). In addition, that the work performed for the Respondent is the same or substantially the same as that performed for Davidson Recruitment under s.311(1)(c) and that there is a connection between Davidson Recruitment and the Respondent as described in s311.(2) to (6) as required under s.311(1)(d).

[22] In relation to the transfer of his employment, the Applicant stated that as his employment was effectively terminated with Davidson Recruitment to perform the same duties with the Respondent, this satisfied the requirements of s.311(a), (b) and (c) in determining whether and when a transfer of business occurs.

[23] The Respondent submitted that the Applicant failed to provide evidence that his employment with Davidson Recruitment was terminated. Specifically, the Respondent stated that by the nature of a labour hire arrangement, the Applicant was ‘placed’ at the client site and then employed directly by the Respondent, and that this was not enough to constitute a termination by Davidson Recruitment.

[24] It is noted that the Respondent did not dispute that the duties performed by the Applicant were substantially the same as those he performed during his employment with Davidson Recruitment.

[25] The Applicant also contended that as the Respondent outsourced work to Davidson Recruitment instead of employing someone directly (as per s.311(5)(a) and (b)), therefore he had performed the outsourced work through his initial employer before the Respondent ceased outsourcing the work and employed the Applicant directly. The Applicant submitted that this meets the requirements of s.311(1)(d) by way of s.311(5)(a) and (b) and therefore meets the requirements of s.384(2)(b)(i).

[26] The Respondent denies that work was outsourced. They submitted that the Applicant would need to show that the warehouse work he performed for Davidson Recruitment was because the Respondent had outsourced that work to them and that this work was then performed by the Applicant as an employee of the Respondent because they had ceased to outsource the warehouse work to Davidson Recruitment, as per s.311(5) of the Act.

[27] In relation to the interpretation of s.311(5), the Respondent contended that ‘the natural and ordinary meaning of the phrase “had outsourced...work” is the ‘contracting out’ of a business function or process to a third-party entity.’ 3 The Respondent consequently submitted that Davidson Recruitment had no obligation to perform logistics and warehousing operations for the Respondent, that they were engaged purely as supplementary labour.

[28] The Respondent further submitted that the Applicant’s construction of the transfer of business provisions of the Act in relation to labour hire arrangements would be contrary to the object of Part 2-8 of the Act, which relates to the interests of employers in running their enterprises effectively.

[29] In support of their argument the Respondent referred to case law on the outsourcing of work in the context of s.318 and s.319 applications in transferring business.

[30] The Applicant asserted that s.311(5)(a) states that the work had been performed by one or more transferring employees and therefore it does not only apply to large scale, long standing arrangements. Further, that the cases relied upon by the Respondent were only in relation to s.313 of the Act and instead he referred to the decision in Thorne v Jura Australia Espresso Pty Ltd [2012] FWA 4954 as being a relevant precedent where a labour hire arrangement was counted as prior service.

[31] The Respondent submitted that the Thorne decision involved a different factual matrix to the present circumstances, particularly, in that case the Respondent’s parent company, JEAG which acquired a shareholding of the Respondent entity in that case in July 2011, had an arrangement to outsource labour to Global Coffee Solutions Pty Ltd (Global), which later ceased and was bought back ‘in house’ to the JEAG.

[32] The Respondent also submitted that the third party, Global, was not a labour hire company, which makes it factually distinct from the current situation. However, the Applicant asserted that the nature of the third party’s primary business function does not have a bearing on the meaning of ‘outsourcing’ in the Act. The Applicant further contended that ‘hiring labour’ from a third party and ‘labour hire’ from a third party is the same thing. 4

[33] The Respondent also submitted that the contract they had with Davidson Recruitment demonstrates that nothing was outsourced or contracted out by the Respondent and that such terms were commonplace in the labour-hire industry. At that time Davidson Recruitment was the Applicant’s employer.

[34] In the Applicant’s reply submissions, it was submitted that the contract referred to in the witness statement of Ms Tina Esler was actually a quote for services and Davidson Recruitment Service Standards.

[35] The Respondent further contended that as there was no outsourcing to Davidson Recruitment in the first place, there could therefore be no ceasing of outsourcing.

[36] In relation to s.384(2)(b)(ii), the Respondent submitted that Davidson Recruitment and the Respondent were never associated entities. It was also submitted that the Applicant failed to produce evidence demonstrating that there was a ‘transfer of assets’ in accordance with an ‘arrangement’ as per s.311(2) or s.311(6) which relates to a transfer of assets between associated entities.

[37] The Applicant submitted that the employment contract he signed with the Respondent did not state that the period of service with the old employer would not count towards the service with the new employer. Further, that the Applicant was not requested at any point to sign any documents to that effect. Therefore, the Applicant asserts that the requirements in s.384(2)(b)(iii) have not been met.

[38] Finally, the Applicant refers to s.22(5) in submitting that as he demonstrated that there was a transfer of his employment from Davidson Recruitment to the Respondent, his period of service with the first employer counts as service with the new employer as an uninterrupted period of service, as per s.22(5)(a) and (b).

[39] The Respondent rejected that a transfer of business occurred with Davidson Recruitment as no connection exists between the two entities as required by s.311(1)(d). Notwithstanding this, the Respondent submitted that the Applicant was notified in writing that his service with Davidson Recruitment would not count as part of his service with the Respondent.

[40] The Respondent maintained that Davidson Recruitment was not an associated entity and therefore s.22(7)(a) does not apply. Further, that s.22(7)(b) requires the Applicant to be a ‘transferring employee in relation to a transfer of business’. The Respondent noted that the onus is on the Applicant to positively satisfy the Commission that there was a ‘transfer of business’ to establish the Commission’s jurisdiction in this matter. This onus of proof has not been discharged by the Applicant.

Conclusion

[41] The Applicant in this matter sought that the period of employment with a separate entity, Davidson Recruitment (under a labour hire arrangement), should count toward the total period of employment. Whilst the work undertaken by the Applicant for Davidson Recruitment and the Respondent was similar, there is no connection between the entities except via the labour hire arrangement. Neither of the separate employers of the Applicant are associated entities and there is no evidence of a transfer of business or a transfer of assets, nor was the Applicant a transferring employee.

[42] The Applicant’s prior service with Davidson Recruitment is not relevant. No ‘transmission of business’ was evidenced, nor were the employers demonstrated to be associated entities. The evidence of Ms Esler, the Human Resources Manager of the Respondent, substantiates that the Applicant was contracted as a casual employee on separate casual engagements for supplementary labour with no substantiated reasonable expectation of continuing employment on a regular and systematic basis as per the contracts.

[43] Based on the aforementioned reasons, the Applicant has not completed the minimum period of employment, as required by s.383 of the Act and therefore the Applicant is not protected from unfair dismissal in accordance with s.382 of the Act. The Application is therefore jurisdictionally barred. The Application made pursuant to s.394 is dismissed. I Order Accordingly.

COMMISSIONER

 1   Respondent’s Outline of Submissions dated 27 June 2014, paragraph 80.

 2   Respondent’s Outline of Submissions dated 27 June 2014, paragraph 82.

 3   Respondent’s Outline of Submissions dated 27 June 2014, paragraph 37.

 4   Applicant’s Reply Submissions dated 9 July 2014, paragraph 7.

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