Ms Vicky Lilwall v The Trustee for Smollen Family Trust T/A Ray White (Ferny Hills)

[2019] FWC 4571

[2019] FWC 4571

FAIR WORK COMMISSION

DECISION

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

Ms Vicky Lilwall
v
The Trustee for Smollen Family Trust T/A Ray White (Ferny Hills)
(U2019/4802)

COMMISSIONER SIMPSON BRISBANE, 7 AUGUST 2019

Application for an unfair dismissal remedy – Whether Respondent a small business – Whether The Trustee for Smollen Family Trust and Ray White Australia related entities – Respondent a small business – No jurisdiction.

[1] This matter concerns an application under section 394 of the Fair Work Act 2009 (the Act) by Ms Vicky Lilwall who alleges that the termination of her employment with The Trustee for Smollen Family Trust trading as Ray White (Ferny Hills) was unfair in accordance with section 385 of the Act. The application was filed on 28 April 2019.

[2] The Form F3 Response was filed by Cooper Jackson Estate Agents ACN 611 292 767 trading as Ray White Ferny Hills (RWFH) and the response indicated that RWFH raised two jurisdictional objections: that the Respondent is a Small Business Employer (as defined) and the Applicant does not have the minimum employment period of twelve months; and that the dismissal was in accordance with the Small Business Fair Dismissal Code.

[3] A conciliation conference between the parties was held on 5 June 2019 but the matter was not resolved.

[4] Correspondence was sent to the Applicant by the Unfair Dismissals Team on 13 June 2019 on behalf of Vice-President Catanzariti, highlighting the minimum employment period objection by the Respondent. A response was provided by the Applicant’s representative, Mr Ian Alcock from HR Advice Australia on 16 June 2019.

[5] A directions hearing was held on 1 July 2019 to determine the jurisdictional objections before the Commission. The Applicant was represented by Mr Alcock, who was granted leave under s.596 to appear on behalf of the Applicant for reasons given in transcript. Mr Kerry Smollen appeared on behalf of the Respondent.

[6] The Applicant indicated that Ray White (Queensland) Pty Ltd exercised control over the Respondent and that was the basis of the Applicant’s argument. The Applicant accepted that if the Respondent was a small business employer the application was beyond the jurisdiction of the FWC. At the directions hearing, both parties consented to the jurisdictional issue being dealt with on the material before the FWC and did not wish to file any evidence. The Applicant relied on the material in the Form F2 lodged on 28 April 2019 and the response referred to in [3] above. The Respondent relied on the Form F3 lodged on 28 May 2019.

[7] At the directions hearing, the Respondent referenced further material not before the Commission at this hearing and provided this material on the day of the hearing which included a page from the Franchise Agreement. I note that the Form F3 stated that the Applicant did not identify the correct legal name of the employer, however neither party raised the matter at the directions hearing and appeared to proceed on the basis that the matter was not in issue.

SMALL BUSINESS OBJECTION

[8] Section 23 of the Act reads as follows:

“23 Meaning of small business employer

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee's employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated."

[9] It was accepted by both parties that RWFH employed 4 people at the time of the Applicant’s dismissal.

[10] The Applicant submitted that the Respondent is an Associated Entity of Ray White (Queensland) Pty Ltd (‘Ray White’) which served as the Principal as defined under Section 50AAA of the Corporations Act 2001. The Applicant submitted that as an Associated Entity of the Principal, the Respondent is limited to a six month probationary employment period, not the twelve month period that is stated by the Respondent in the termination letter to the Applicant. As a result, the Applicant asserts she would have completed the requisite minimum employment period in accordance with the Act.

[11] The Applicant submitted that Ray White, as principal, exerts significant control over the Respondent, RWFH, and therefore should be considered an associated entity of the Respondent. The Applicant relies on seven grounds to support and substantiate her claims within her filed material:

“The full branding and signage of the Respondent’s business by the Principal;

1. The indirect advertising performed by the Principal on behalf of the Respondent’s business;

2. The obligation placed on the Respondent by the Principal that the Respondent must follow all of the Principal’s instructions, policies and procedures in all aspects of the operation of its business;

3. The exclusive use by the Respondent of the Principal’s business documentation and the inability of the Respondent under the licence granted by the Principal to do otherwise;

4. The ability of the Principal to withdraw its licence from the Respondent if the Respondent does not comply with the instructions, policies and procedures of the Principal;

5. The requirement of the Respondent to pay commissions and royalties directly to the Principal on income derived by the Respondent as the holder of a licence granted and exclusively controlled by the Principal;

6. The obligatory use by the Respondent of the support services provided by the Principal, including training, mentoring, payroll, advertising, marketing and HR services.” 1

[12] The Respondent submitted that Ray White was not an associated entity of RWFH and that the relationship between Ray White and RWFH was that of franchisor and franchisee. An ASIC Relational Company Extract indicates that Cooper Jackson Estate Agents Pty Ltd is an associate of The Trustee for Smollen Family Trust a discretionary trading trust.

[13] The Respondent also provided to the Commission a copy of page 47 of the Franchise Agreement between Ray White (Queensland) Pty Ltd and RWFH which included the following at clause 11.

“11.1 Relationship of the Parties

(a) No relationship

The relationship between the Franchisor and the Franchisee is as independent contractors, and does not involve any relationship of agency, fiduciary, servitude, employment, partnership, joint venture or association. Accordingly, the employees, agents and subcontractors of one Party are not for any purpose the employees, agents or subcontractors of the other Party.

…………………………..”

[14] The question before the Commission is to make a determination as to whether or not the Respondent had any associated entities at the time the Applicant was dismissed from her employment. If this question is founded in the affirmative, the Commission would then have to make a determination whether those associated entities employ any persons who should be counted in determining the number of employees employed by Respondent and associated entities at the time of the Respondent’s dismissal.

[21] Section 50AAA of the Corporations Act 2001 (“the Corporations Act”) reads as follows in relation to associated entities:

“(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection(2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(c) the interest is material to the associate.

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(c) the interest is material to the principal.

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[15] Section 50AA of the Corporations Act 2001 reads as follows in relation to control:

“(1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity’s financial and operating policies.

(2) In determining whether the first entity has this capacity:

(a) The practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and

(b) Any practice or pattern of behaviour affecting the second entity’s financial or operating policies is to be taken into account (even if it involves a breach of agreement or breach of trust).

(3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity’s financial and operating policies.

(4) If the first entity:

(a) Has the capacity to influence decisions and the second entity’s financial and operating policies; and

(b) Is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity’s members;

the first entity is taken not to control the second entity.”

CONCLUSION

[16] The FW Act at s.12 defines a “franchise” as having the meaning given by the Corporations Act 2001. The definition of a “franchise” under the Corporations Act 2001 is as follows:

"franchise" means an arrangement under which a person earns profits or income by exploiting a right, conferred by the owner of the right, to use a trade mark or design or other intellectual property or the goodwill attached to it in connection with the supply of goods or services. An arrangement is not a franchise if the person engages the owner of the right, or an associate of the owner, to exploit the right on the person's behalf.

[17] Section 558A of the FW Act provides definitions for a “franchisee entity” and a “responsible franchisor entity”. A franchise is a business arrangement in which a franchisee contracts with the franchisor and pays a fee for certain rights. There are protections for franchisees under the Competition and Consumer Act 2010.

[18] The nature of the relationship from the material put before the Commission is that of a typical franchise agreement and not a relationship that falls within that of associated entities as described in any of sub sections (2), (3), (4), (5), (6) or (7) of Section 50AAA of the Corporations Act 2001.

[19] Having considered the material before the Commission, I am satisfied that the Respondent is a Small Business Employer, within the meaning of s 23 of the FW Act.

[20] As the Applicant had not completed the twelve months minimum employment period with the Respondent, she is therefore not a person protected from unfair dismissal, within the meaning of s 382(a) of the Act.

[21] The jurisdictional objection has been made out and the application for an unfair dismissal remedy is dismissed.

COMMISSIONER

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<PR709901>

 1   Letter to Vice President Catanzariti, 16 June 2019.