Nicole Finch v Titles Strata Management Pty Ltd T/A Titles Strata Management

[2020] FWC 3675

[2020] FWC 3675

FAIR WORK COMMISSION

DECISION

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

Nicole Finch
v
Titles Strata Management Pty Ltd T/A Titles Strata Management
(U2019/13842)

COMMISSIONER CAMBRIDGE SYDNEY, 14 JULY 2020

Unfair dismissal - jurisdictional objection - s. 382 (a) - whether applicant had completed minimum employment period - whether employer was a small business - employees of associated entities - Director as an employee - s. 23 meaning of small business employer - 15 or more employees - employer not a small business.

[1] This matter involves an application for unfair dismissal remedy made pursuant to section 394 of the Fair Work Act 2009 (the Act). The application was lodged at Sydney on 10 December 2019. The application was made by Nicole Finch (the applicant), and the respondent employer has been identified to be Titles Strata Management Pty Ltd T/A Titles Strata Management ABN: 32 001 111 931 (the employer).

[2] The application stated that the applicant began working for the employer on “15/01/2019” and the date that the applicant’s dismissal took effect was 29 November 2019. Consequently, the application was made within the 21 day time limit prescribed by subsection 394 (2) of the Act. Further, the application indicated that the applicant had been employed for more than 6 months but less than 12 months.

[3] On 19 February 2020, the employer provided an employer's response (Form F3) to the application for unfair dismissal remedy which confirmed that the applicant had been employed for between 6 and 12 months. Further, the employer’s response raised jurisdictional objections on the basis that: 1; the dismissal of the applicant was a case of genuine redundancy (the genuine redundancy objection), and 2; the applicant’s employment did not meet the minimum employment period (the minimum employment period objection), and 3; the employer is a small business and the dismissal of the applicant was consistent with the Small Business Fair Dismissal Code (the SBFD Code objection). The employer’s response at paragraph 1.7, stated that the employer had 10 employees at the time the applicant was dismissed.

[4] Following unsuccessful conciliation of the claim, on 5 March 2020, Catanzariti VP of the Fair Work Commission (the Commission) sent a letter to the applicant which inter alia, required the applicant to provide a statement together with documents or evidence to support her claim that she had served the minimum employment period. The correspondence from Catanzariti VP did not require the applicant to address either the genuine redundancy objection or the SBFD Code objection.

[5] On 12 March 2020, the applicant sent a response to Catanzariti VP which inter alia, provided 16 names of people who were asserted to be employees of the employer at the time that the applicant was dismissed. The correspondence from the applicant relevantly stated, “…Under the Fair Work Act 2009 Titles Strata Management Pty Ltd is not a small business employer and I was employed for the minimum time period requirement. They did in fact have 16 staff members at the time of my termination.”

[6] Later on 12 March 2020, the employer provided an email to the Commission which challenged the list of names of employees contained in the correspondence from the applicant. Relevantly, the employer asserted that one of the individuals named by the applicant was a contract bookkeeper, and that three other named individuals were “…contractors that work overseas through Strata Support, my son Jonathan goes to University and only works casual basis, Veronica works for Blacktown Real Estate.”Subsequently, I have been allocated the matter to determine the contested issue as to whether the applicant had completed the minimum employment period.

[7] The matter was listed for Pre-Hearing Conference/Conciliation by telephone on 30 March 2020. At the proceedings held on 30 March, the Parties confirmed that the minimum employment period objection would require determination to be made of the number of employees of the employer at the time of the dismissal of the applicant. Directions were issued for the employer to provide evidence and submissions to support its minimum employment period objection, and upon which it would rely as basis to establish that it was a small business employer. The applicant was Directed to provide any evidence and submissions in opposition to the employer’s assertion that it was a small business employer at the time of the dismissal of the applicant.

[8] Subsequently, the Parties have provided documentary material in support of their respective positions on the minimum employment period objection. The documentary material provided by the Parties has included respective Statutory Declarations that have represented evidence of the contest as to the number of employees of the employer at the time of the dismissal of the applicant. Further, the Commission has confirmed that it was the agreed position of the Parties that the determination of the contested minimum employment period objection would be made upon the filed documentary material, and without the requirement for any formal Hearing.

[9] Accordingly, this Decision has been confined to the determination of the employer’s minimum employment period objection, and it has been made upon examination and consideration of the documentary material that has been filed by the Parties. The determination of the employer’s minimum employment period objection has involved a requirement to make a finding as to the number of employees of the employer at the time of the dismissal of the applicant for the purposes of any satisfaction of the meaning of small business employer as stipulated by s. 23 of the Act.

The Employer’s Case

[10] The material provided by the employer in support of the minimum employment period objection comprised three Statutory Declarations. Two Statutory Declarations, respectively dated, 20 April and 5 June 2020, were provided by John Ivica Koprivnjak. Mr Koprivnjak is the sole director of the employer. A further Statutory Declaration of Bernard Story dated 18 April 2020 was also provided as material upon which the employer sought to advance the minimum employment period objection. The material contained in the Statutory Declarations that were provided by the employer included factual assertions together with supporting documentary annexures, and submissions.

[11] In summary, the materials provided by the employer asserted that at the time of the dismissal of the applicant, the employer employed 11 personnel including full-time, part-time and casual employees who were employed on a regular basis. Consequently, according to the employer’s submissions, the employer was a small business employer pursuant to the Act.

[12] The employer’s materials included a payroll employee summary for the period 1 November 2019 to 30 November 2019 for Titles Strata Management Pty Ltd (“JK-09”). The payroll employee summary “JK-09” contains 13 names including John Koprivnjak and Tim Webb. However, according to Mr Koprivnjak, he and Mr Webb whose names appear on “JK-09” were not employees of the employer.

[13] Mr Koprivnjak said that he received a director’s fee and was listed on the payroll summary for accounting purposes, and he was not an employee as he did not receive a wage or salary and did not receive entitlements such as holiday pay or sick leave. Further, Mr Koprivnjak said that Mr Timothy Webb is a secretary of Titles Strata Management and receives a secretarial fee from the company. Mr Koprivnjak said that Mr Webb was not an employee of the employer and he did not receive a wage or salary, nor did he receive any entitlements such as holiday pay or sick leave and he was included on the payroll summary solely for accounting purposes.

[14] Consequently, Mr Koprivnjak stated that when his name and that of Mr Webb were removed from the payroll summary (“JK-09”), the employer had only 11 employees at the time of the dismissal of the applicant.

[15] The materials provided on behalf of the employer also included a payroll employee summary for the period 18 November 2019 to 30 November 2019, for a company named Gearwest Pty Ltd (Gearwest) ABN: 29 003 441 558(“JK-05”). Gearwest trades as Blacktown Real Estate. Mr Koprivnjak is also the sole director of Gearwest. Gearwest (Blacktown Real Estate) has 3 employees which are identified in “JK-05”.

[16] Mr Koprivnjak stated that “I believe that pursuant to Section 50AAA of the Corporations Act 2001, Title [sic] Strata Management Pty Ltd and Gearwest Pty Ltd T/As Blacktown Real Estate are not associated entities.” Mr Koprivnjak also stated; “The only similarity between the two companies is that I am a director of both companies.”

[17] In summary, the employer advanced the minimum employment period objection on the basis that at the time of the dismissal of the applicant the employer had only 11 employees, and further, Gearwest (Blacktown Real Estate) was not an associated entity of the employer and therefore the three employees of Blacktown Real Estate could not be included for the purposes of establishing whether or not the employer was a small business. Additionally, the employer asserted that even if the employer and Blacktown Real Estate were associated entities, the three employees of Blacktown Real Estate when added with the 11 employees of the employer, would aggregate to only 14 employees, and therefore the employer had fewer than 15 employees at the time of the dismissal of the applicant and was thus a small business employer.

The Applicant’s Case

[18] The applicant provided material in opposition to the minimum employment period objection in the form of a Statutory Declaration made by the applicant on 25 May 2020, together with documentary submissions. The applicant asserted that at the time of her dismissal the employer had 15 or more employees and was not a small business.

[19] The applicant’s material included a list of names that were asserted to be employees of the employer at the time of the dismissal of the applicant. This list of names broadly corresponded with the names that were included in the employer’s payroll summary “JK-09” except that it included the name of one of the individuals found on the payroll summary for Blacktown Real Estate, “JK-05”.

[20] The applicant asserted that both Gearwest Pty Ltd t/a Blacktown Real Estate and another company, Strata Support Pty Ltd (Strata Support), were associated entities of the employer, and that employees of these associated entities needed to be included with the names of the employees of the employer such that there were 15 or more employees of the employer and its associated entities at the time of her dismissal. The applicant asserted that there were 14 employees of the employer, two employees of Blacktown Real Estate, and a further three employees of Strata Support. Therefore, according to the applicant the number of employees of the employer and associated entities totalled 19.

[21] The submissions made by the applicant referred to s. 50 AAA of the Corporations Act 2001 and made particular reference to subsection (7) thereof, regarding an entity that controls the principal and the associate in order to establish that the principal and the associate are associated entities. The submissions made by the applicant also referred to the definition of “control” found in s. 50 AA of the Corporations Act 2001.

[22] According to the submissions made by the applicant, Mr Koprivnjak as the sole director of both the employer and Gearwest Pty Ltd t/a Blacktown Real Estate, had financial control, influence and conducted the strategic running of these businesses in satisfaction of the definition of control found in s. 50AA of the Corporations Act 2001. Therefore, according to the applicant’s submissions, the employer and Gearwest Pty Ltd t/a Blacktown Real Estate were associated entities and the employees of both those entities should be counted for the purposes of determining whether the employer was a small business at the time of the dismissal of the applicant.

[23] In summary, the applicant submitted that there was sufficient connection between the employer and associated entities including Gearwest Pty Ltd t/a Blacktown Real Estate, to establish that at the time of her dismissal the number of employees of the employer and its associated entities was not fewer than 15. Therefore, it followed that the employer was not a small business employer and it could not rely upon its minimum employment period objection.

Consideration

[24] The minimum employment period objection taken by the employer in this instance has required determination of the issue of whether the applicant was a person protected from unfair dismissal. This issue arises from subsection 382 (a) of the Act.

[25] Section 382 of the Act is in the following terms:

“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.”

[26] Section 383 of the Act provides a meaning of minimum employment period and is in the following terms:

“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.”

[27] In this case there was no dispute that the applicant's period of employment was more than 6 months but less than 12 months. Therefore, the determination of the minimum employment period objection was confined to a determination as to whether the employer was a small business employer at the time that the applicant asserted that she was unfairly dismissed, 29 November 2019.

[28] Section 23 of the Act provides a meaning of small business employer and is in the following terms:

“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.”

[29] The evidence that was provided by the employer in the form of the payroll employee summary document that were attached to the Statutory Declaration of Mr Koprivnjak and marked as “JK-09” has represented the most accurate presentation of the number of employees of the employer as at 29 November 2019. That document, “JK-09” contains 13 names. Consequently, even if all of the individuals identified in “JK-09” were employees of the employer, there would not be a sufficient number of employees, namely 15, for the employer to be established to be other than a small business.

[30] However, the applicant has asserted that there were employees of associated entities of the employer that also needed to be included for the purposes of establishing whether or not the employer satisfied the meaning of a small business employer as stipulated by s. 23 of the Act. It is clear from subsection 23 (3) that employees of associated entities of the employer are to be included in any calculation of the number of employees determined for the purposes of s. 23.

[31] Section 12 of the Act provides a meaning for “associated entity” and is in the following terms: “associated entity has the meaning given by section 50AAA of the Corporation Act 2001.”

[32] Section 50AAA of the Corporations Act 2001 defines an associated entity in the following terms:

“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.”

[33] It is also relevant to refer to section 50AA of the Corporations Act 2001 which provides a meaning for “control” in the context of inter alia, any operation of s. 50AAA. Section 50 AA is in the following term:

“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 an agreement or a breach of trust).

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

(4)  If the first entity:

(a)  has the capacity to influence decisions about the second entity's financial and operating policies; and

(b)  is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members; the first entity is taken not to control the second entity.”

[34] Mr Koprivnjak is the sole director of both the employer and Gearwest Pty Ltd t/a Blacktown Real Estate. As the sole director of both companies, Mr Koprivnjak would clearly have capacity to determine the outcome of decisions about the financial and operating policies of both the employer and Gearwest Pty Ltd t/a Blacktown Real Estate. Consequently, subsection (7) of section 50 AAA of the Corporations Act 2001 is satisfied, and therefore the employer and Gearwest Pty Ltd t/a Blacktown Real Estate are associated entities.

[35] Subsection 23 (3) of the Act operates such that associated entities are taken to be one entity. Therefore, the number of employees of the employer must include the employees of Blacktown Real Estate.

[36] Although the employer and Blacktown Real Estate have been found to be associated entities, the employer asserted that two individuals whose names appear on “JK-09” were not employees of the employer and should not be counted for the purposes of s. 23 of the Act. Mr Koprivnjak asserted that he and Tim Webb were not employees of the employer and should effectively be removed from the 13 names that appear in “JK-09”. Somewhat conveniently, if Mr Koprivnjak and Tim Webb are not counted then the combined number of employees of the employer and Blacktown Real Estate would be 14.

[37] Mr Koprivnjak stated that he was not an employee because he received a director’s fee rather than a wage or salary, and he did not receive entitlements such as holiday pay or sick leave. However, upon the evidence that was presented, Mr Koprivnjak should be correctly held to be an employee of the employer. The evidence that strongly supports a finding that Mr Koprivnjak is an employee includes that; (a) “JK-09” shows that Mr Koprivnjak has tax and superannuation deduced from remuneration that he was paid, even if he describes that to be a “directors fee”, and (b), Mr Koprivnjak signed the applicant’s letter of dismissal as the employer’s Managing Director and it is clear that he exercises a role in managing the day to day business operations of the employer as opposed to simply participating in a non-managerial capacity as a director.

[38] The evidence regarding the position involving Tim Webb was provided by Mr Koprivnjak who stated that “Mr Timothy Webb is a secretary of Titles Strata Management and receives a secretarial fee from the company. Mr Webb is not an employee of the company and does not receive a wage or salary from the company. Mr Webb does not receive any entitlements such as holiday pay or sick leave and is listed on the payroll summary solely for accounting purposes.” It was clear from “JK-09” that unlike Mr Koprivnjak, no tax or superannuation was deducted from the remuneration paid to Mr Webb. However, it appeared that the level of remuneration paid to Mr Webb would have been beneath the tax free threshold. Although a person may be receiving little in the way of remuneration, and providing only limited services as a secretary, there would nevertheless appear to be an employment relationship in existence.

[39] Consequently, although the position in respect of Mr Webb was not as clear as that for Mr Koprivnjak, on balance there was sufficient basis to find that Mr Webb was also an employee of the employer and should be counted for the purposes of s. 23 of the Act. In any event, the inclusion or exclusion of Mr Webb is not vital to establishing that the number of employees of the employer including its associated entity, Blacktown Real Estate, was at least 15 at the time of the dismissal of the applicant.

[40] On the evidence that has been provided by the Parties, the Commission is satisfied to make a finding that as at the date of the applicant’s alleged unfair dismissal, 29 November 2019, the employer had 13 direct employees and the associated entity of the employer, Blacktown Real Estate, had 3 employees. Therefore, by virtue of the operation of subsection 23 (3) of the Act, the employer had 16 employees at the time of the dismissal of the applicant.

[41] Consequently, for the purposes of s. 23 of the Act, at the time of the alleged unfair dismissal of the applicant, 29 November 2019, the employer employed 16 employees. Therefore, the employer was not a small business employer at the time of the applicant’s alleged unfair dismissal, and as the applicant had completed the relevant minimum employment period of 6 months, she was a person protected from unfair dismissal. The minimum employment period objection raised by the employer must be rejected, and the application for unfair dismissal remedy must be permitted to proceed.

[42] The matter will be listed for further proceedings by way of Mention and Directions fixed for 10 am on 24 July 2020.

COMMISSIONER

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