Mrs Julie Edmonds v Telethon Speech & Hearing Centre for Children WA (Inc) T/A Telethon Speech & Hearing
[2014] FWC 1037
•12 FEBRUARY 2014
[2014] FWC 1037 |
FAIR WORK COMMISSION |
DECISION AND REASONS FOR DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mrs Julie Edmonds
v
Telethon Speech & Hearing Centre For Children WA (Inc) T/A Telethon Speech & Hearing
(U2013/11905)
COMMISSIONER CLOGHAN | PERTH, 12 FEBRUARY 2014 |
Application for relief from unfair dismissal.
[1] This is an application by Mrs Julie Edmonds alleging that she was unfairly dismissed from her employment with Telethon Speech and Hearing.
[2] Telethon Speech and Hearing has responded to the application asserting that it is not a national system employer, and accordingly, Mrs Edmonds is not protected from unfair dismissal pursuant to the Fair Work Act 2009. Consequently, it is necessary for the Commission to determine if Telethon Speech and Hearing is a “constitutional corporation” within the meaning of the Australian Constitution.
PROCEDURAL BACKGROUND
[3] On 25 July 2013, Mrs Julie Edmonds (Mrs Edmonds or Applicant) made application to the Fair Work Commission (Commission) seeking a remedy for alleged unfair dismissal from Telethon Speech and Hearing Centre for Children WA (Inc) T/A Telethon Speech & Hearing (TSH or Employer).
[4] The application is made pursuant to s.394 of the Fair Work Act 2009 (FW Act).
[5] The application was unable to be resolved at conciliation and was referred to me for arbitration on 29 August 2013.
[6] In response to the application, the Employer asserts that the Applicant is not protected from unfair dismissal because:
● the Employer is not a national system employer and consequently Mrs Edmonds is not a national system employee in accordance with Part 3-2 of the FW Act.
[7] The application was the subject of a conference on 23 September 2013 but remained unresolved.
[8] The parties agreed that the jurisdictional objection be dealt with by written submissions and procedural directions were issued for this purpose.
[9] Both parties are unrepresented.
[10] Having received the submissions of both parties, this is my decision and reasons for decision.
QUESTION FOR DETERMINATION
[11] The primary question for determination is whether the Employer is a national system employer within the meaning of s.14(1) of the FW Act. To answer this question, it is necessary to determine whether TSH is a “constitutional corporation” within the meaning of the Commonwealth of Australia Constitution Act (Australian Constitution).
EMPLOYER’S CASE
[12] The Employer submits that:
● it is not a constitutional corporation but a not-for-profit charitable organisation incorporated in Western Australia pursuant to subsection 18(6) of the Associations Incorporation Act 1987 (WA);
● its income is primarily obtained from activities other than trading for reward, goods or service; and
● its employees are covered by an enterprise bargaining agreement of the Western Australian Industrial Relations Commission.
APPLICANT’S CASE
[13] The Applicant submits that:
● the Employer is a trading organisation within the meaning of the FW Act due to the revenue it receives for a number of services and products.
RELEVANT LEGISLATIVE FRAMEWORK
[14] For Mrs Edmonds to be protected from unfair dismissal pursuant to the FW Act, it is necessary that she be a national system employee who has been dismissed by a national system employer.
[15] A national system employee is a person who is employed by a national system employer.
[16] A national system employer is, relevantly for the purposes of this application, a “constitutional corporation”.
[17] A constitutional corporation is defined in s.12 of the FW Act as “a corporation to which paragraph 51(xx) of the Constitution applies”.
[18] The Australian Constitution defines, at paragraph 51(xx), constitutional corporations as “foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”.
[19] Simply put, a constitutional corporation is either a “foreign corporation” or a “trading” or “financial” corporation formed within the Commonwealth.
[20] However, having sourced a definition of a constitutional corporation, it still remains to be determined whether TSH is a constitutional corporation.
[21] The first question to be determined is whether the Employer is a corporation. On the basis of the documentation provided, I find that the Employer is an incorporated entity pursuant to the Western Australian Associations Incorporation Act 1987, and as such, is a corporation.
[22] The second question to be determined is whether the Employer can be considered to be a “trading” or “financial” entity. No material was submitted to the Commission to suggest that the Employer is a “financial” corporation, and consequently, it is necessary to determine whether the Employer is a ‘trading” entity.
[23] Following the decision in R v Federal Court of Australia, Ex parte WA National Football League (1979) 143 CLR 190 (Adamson), courts have adopted a broad non-technical approach to whether an incorporated body can be regarded as a “trading” organisation.
[24] In Adamson, the question for determination, among others, was whether the Western Australian National Football League (Inc) and the West Perth Football Club (Inc) were trading corporations within the meaning of the Australian Constitution.
[25] Barwick CJ in Adamson decided:
“In conformity with the principles of constitutional construction, the description “trading corporation” in s.51(xx) must be given its full content, generously rather than restrictively construed...” 1
[26] Further, the Chief Justice observed:
“...The full connotation of the description "trading corporation" cannot be displaced by the denotation it may have had at any past time. It is a power evidently intended to be available in circumstances current in future times. Like other descriptive expressions in the Constitution, e.g. telephonic communication, the description “trading corporation” must be allowed to embrace all that may fall within it according to its natural meaning and the circumstances of the time at which a decision as to validity or constitutional power has to be made.” 2
[27] Importantly, at paragraph [53] of Adamson, the then Chief Justice states:
“...the nature of a company may not be discernible from a perusal of its memorandum. The only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities.” 3 (my emphasis)
[28] In examining what the West Perth Football Club was “in fact engaged in doing”, the then Chief Justice determined, “trade for constitutional purposes cannot be confined to dealing in goods and commodities. Its full parameters may be difficult of definition. But the commercial nature of an activity is an element of deciding whether the action is in trade or trading.” 4
[29] The Chief Justice disposed of the argument that the West Perth Football Club, “was merely conducting sport and therefore could not be regarded as being in trade” with the following, “of course, football of any code may be a sport, as distinct from trade, when played solely for its own sake as a past time upon an amateur footing. But what the Club and the League conduct is far removed from any such concept of sport.” 5
[30] While Gibbs J arrived at a different decision to Barwick CJ, in examining s51(xx) of the Constitution, he was of the view, “I do not dissent from the proposition that the words of the constitution should not be restrictively construed...” 6
[31] At this point, it is useful to set out the “Objects” of TSH as set out in its own Constitution:
● the education and development of children with hearing, speech or language difficulties, either in exclusive school age programmes or early intervention programmes;
● the education and development of hearing impaired children by auditory and/or oral methods;
● the well being of people with impaired hearing who rely in spoken language, including lip reading;
● provision of facilities designed to educate and inform parents and other interested others on the education and development of children, especially those with hearing, speech or language difficulties;
● the provision of access to early intervention services for children and families in remote and rural areas;
● the provision of medical, paramedical and ancillary services to children and adults with either a permanent or temporary hearing loss;
● the protection, preservation and improvement of hearing;
● the provision of information and advice on hearing aids, cochlea implants and other assistive devices;
● research into any matters related to the association’s programmes or services, including support for scientific efforts aimed at the prevention and cure of deafness;
● collaboration with like organisations with similar objects and the generation of income to pursue the association’s objects provided the seeking or obtaining of such income does not conflict with the attainment of the association’s objects.
[32] The powers of TSH are set out in Clause 4 of its Constitution as follows:
“In attainment of its objects, the Association [TSH] may:
(a) acquire, hold, improve, manage, develop, mortgage, sell, exchange, lease or otherwise deal with any real or personal property;
(b) employ, engage, pay and dismiss employees, agents and consultants;
(c) operate and open bank accounts;
(d) invest any money not immediately required for its objectives:
(i) in any security in which trust moneys may be invested; or
(ii) in any other manner authorised by this constitution
(e) raise funds by subscriptions, donations, grants, legacies, appeals and other means upon such terms and conditions as the association thinks fit;
(f) accept donations, bequests and devices of real and personal property and invest and deal with such property in such manner as may be considered appropriate;
(g) give such security for the discharging of liabilities incurred by it as it thinks fit;
(h) borrow or raise money for or in connection with the association’s objects in any manner whatsoever and in particular by mortgaging or charging the property of the association or any part thereof;
(i) appoint agents to transact any business of the association on its behalf;
(j) enter into any other contracts it considers necessary or desirable;
(k) act as trustee and accept and hold real and personal property upon trust, but does not have the power to do any act or thing as a trustee that, if done otherwise than as a trustee, would contravene the Act or this Constitution; and
(l) make use of submissions, appeals, the media, public meetings, sales or distribution of advertising materials, or otherwise as may be necessary for raising funds to enable the association to pursue its objects.
[33] The majority in Adamson departed from the previous purpose test. By that I mean an examination of the purpose of why the corporation was formed in the first instance. The majority in Adamson applied what is described as the activities test; that is, a contemporary examination of the activities of the organisation to determine whether or not it is a trading organisation.
[34] In the judgement of Mason J, in Adamson, his Honour particularly refers to the remarks of Barwick CJ in the R v Trade Practices Tribunal Ex parte St George County Council case (St George) 7 when the Chief Justice stated that to fall within s.51(xx) of the Constitution:
“...it is not necessary that a corporation be formed for trading or financial purposes and that “the activities of the corporation at the time a law of the Parliament is said to operate upon it will determine whether or not it satisfies the statutory and therefore constitutional description”” 8.
[35] Further:
““Trading incorporation” is not and never has been a term of art or one having a special legal meaning. Nor, as the Chief Justice pointed out, was there a generally accepted definition of the expression in the nineteenth century. Essentially it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities to merit its description as a trading corporation.” 9 (my emphasis)
[36] Mason J in Adamson further states in his judgement that even if the description of a trading corporation was more narrowly applied in 1900, “this Court [High Court] should in applying the expression, give effect to the content which it is recognised as having at this time” 10.
[37] Finally, Mason J concludes his discussion on what is a constitutional corporation with the following:
“Not every corporation which is engaged in trading activity is a trading corporation. The trading activities of a corporation may be so slight and so incidental to some other principle activity, viz religion or education in the case of a church or school, that it could not be described as a trading corporation. Whether the trading activities of a particular organisation are sufficient to warrant its being characterised as a trading organisation, is very much a question of fact and degree”. 11
[38] It is notable in Adamson that Mason J came to the determination that “trading” is not limited to buying and selling at a profit - “it extends to business activities carried on with a view to earning revenue”. 12
[39] Adamson was followed in Quickenden v Commissioner O’Connorof the Australian Industrial Relations Commission (Quickenden) (2001) 109 FCR 243 which involved the consideration of whether the University of Western Australia was a trading corporation. In the appeal to the Full Court of the Federal Court, Black CJ and French J observed:
“...The University was not established for the purposes of trading and at another time, closer to the time of its creation it may not have been possible to describe it as a trading corporation. But at the relevant time to this case and at present it does fall within that class.” 13
[40] Carr J in a separate judgement in Quickenden came to the conclusion:
“...whether one has regard to his Honour’s calculation of about 18% or my own assessment of at least 28% the trading activities of the university were substantial and formed a significant proportion of its overall activities.” 14
[41] In United Firefighters’ Union of Australia and Ors v Metropolitan Fire and Emergency Services Board (“the Board”) (1998) 83 FCR 346 the Federal Court of Australia came to the view that the Board was a constitutional corporation on the basis that 5.11% of total revenue was generated from the commercial servicing of fire equipment.
[42] The RSPCA have been found to be a trading corporation even though the income was used for charitable purposes rather than to create a profit (Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals Vic (2002) 120 FCR 191).
[43] Finally, in E v Australian Red Cross Society and Ors (1991) 27 FCR 310 the Federal Court found that both the Australian Red Cross Society and Royal Prince Alfred Hospital were held to be trading corporations on the basis that both generated substantial income from trading activities even though the purpose of that income was not relevant.
[44] The Employer refers to the fact that its employees are covered by an “enterprise bargaining agreement of the Western Australian Industrial Relations Commission”. However, the majority in Eley v Potato Marketing Corporation of Western Australia (2013) WAIG 219 referred to, and adopted, Adamson when determining whether the Potato Marketing Corporation was a trading corporation within the meaning of s.51(xx) of the Australian Constitution. 15
[45] Put shortly, what is determinative of whether an entity is a constitutional corporation is not that it is a not-for-profit organisation or what the organisation’s predominant purpose is. What is determinative is whether the entity engages in, to a sufficient degree, trading activities at the time the question is posed. It does not matter that the organisation does not conceive of itself to be involved in trading activities or does not see trading activities as its core purpose - what matters is that they be carried out to a substantial proportion.
[46] The Employer is a not-for-profit organisation that provides a range of services to support persons with speech, language, hearing or ear health concerns.
[47] TSH began as a group of parents with profoundly deaf children who decided, in 1966, to start a school with five students, no premises and little money. In the following year, 1967, the Speech and Hearing Centre was established.
[48] By 2012, TSH had a total enrolment of 137 students, 16 (11.2 FTE) teaching staff and 41 (20.9 FTE) non teaching staff.
[49] The Employer has provided its operating income for year ended 2012. For convenience, I have separated the sources of income into two categories; “grants” and “other”.
Operating Income | $ |
Grants Grants received for operating activities | 4,746,921 |
Other Fees collected | 630,570 |
Medical services income | 898,601 |
Interest income | 147,201 |
Fund raising events and donations | 590,768 |
Rental income | 245,044 |
Other | 38,074 |
Total operating income | $7,297,179 |
[50] The Employer’s non operating income for year ended 2012 was as follows:
Non Operating Income | $ |
Grants Grants received for non operating activities | 641,964 |
Other Building appeal fund | 3,688,147 |
Interest earned on non operating funds | 16,201 |
Total non operating income | $4,346,312 |
[51] In 2012, TSH had net assets of $12.2m and an operating income of approximately $7.3m. Of the approximately $7.3m, 65% or $4.746m were grants received for operating income.
[52] In addition, in 2012 TSH had a non operating income of approximately $4.35m as outlined in paragraph [50] above. Of the $4.35m, approximately $3.7m was received into what is described as the “building appeal fund”.
[53] Of the $4.35m non operating income, $642,000 was from grants received for non operating activities. When expenses are deducted from non operating income, the net non operating income was approximately $3.1m. The $3.1m went towards total equity held by the TSH of just over $12.2m.
[54] The purpose of setting out the beginnings of TSH and its financial position in 2012, is to demonstrate its changing nature.
[55] Not-for-profit organisations have generally been distinguished from profit entities due to their pursuit of “social” rather than “economic” aims. However, in my view, increasingly not-for-profit organisations have taken upon themselves many characteristics of “for profit” entities. The fact is that despite their historical origins (with some key differences such as profits not going to the shareholders) not-for-profit and for profit organisations are becoming indistinguishable - no more so than when it comes to generating income.
[56] Managerial professionalism, information and communication technology and client expectations, have led to the continuing commercialisation of many not-for-profit organisations. Gone is the reliance on “chook” raffles, lamington drives and car boot sales to be replaced by discrete and dedicated resources to generate income from a variety of sources. Much of the traditional community raising of monies from clients, family and friends has been replaced by targeted cost benefit marketing analysis and action. Many of these activities to raise money, is now outsourced to specialised organisations.
[57] Having considered the judgement of Mason J in particular, in Adamson, I am satisfied for the reasons outlined above that the trading activities of TSH are not slight or incidental. While the purpose for which TSH was formed continues, it is engaged in trading activities which comprise a significant proportion of its overall income. In the context of operating income, 35% is from sources other than grants - this is a significant proportion. When total income is considered, approximately 41% is from grants - the remainder is generated from commercial activities.
CONCLUSION
[58] In accordance with the case law I have cited and TSH trading activities, the Employer must be regarded as a constitutional corporation within the meaning of the Australian Constitution. Accordingly, the Employer is a national system employer within the meaning of s.14(1) of the FW Act.
[59] Having found that TSH is a national system employer, Mrs Edmonds is protected from unfair dismissal. It is now necessary to determine the substantive issue of whether Mrs Edmonds was unfairly dismissed.
[60] I will shortly issue procedural directions to assist the parties in an arbitral hearing into the Applicant’s assertion that she was unfairly dismissed from TSH.
COMMISSIONER
Final written submissions:
Applicant: 6 November 2013.
Respondent: 23 October 2013 and 11 November 2013.
1 Adamson paragraph [51]
2 Adamson paragraph [52]
3 Adamson paragraph [53]
4 Adamson paragraph [57]
5 Adamson paragraph [60]
6 Adamson paragraph [4]
7 (1974) 130 CLR at pp542-543
8 Adamson paragraph [30]
9 Adamson paragraph [31]
10 Adamson paragraph [32]
11 Adamson paragraph [33]
12 Adamson paragraph [36]
13 Quickenden paragraph [51]
14 Quickenden paragraph [109]
15 Adamson paragraph [59]
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