DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Stephen Pretorius
v
Gardens of Italy Pty Ltd
(U2016/4947)

Application for relief from unfair dismissal – jurisdiction – underpayment claim no impediment to unfair dismissal action – small business definition – minimum employment period.

[1] On 29 February 2016 Mr Pretorius lodged an application pursuant to s.394 of the Fair Work Act 2009 (the FW Act) in which he asserted that the termination of his employment with Gardens of Italy Pty Ltd (Gardens of Italy) was unfair. This decision deals with two jurisdictional issues associated with the application. It follows a determinative conference convened on 15 April 2016. In that conference, Mr Pretorius represented himself and Mr and Ms Schmidt represented Gardens of Italy.

[2] The background to the somewhat acrimonious circumstances surrounding this application can be simply summarised. Mr Pretorius was engaged by Gardens of Italy in June 2015. The exact date of the commencement of his employment is disputed. The termination of his employment occurred, again on a disputed date, in mid-February 2016.

[3] Gardens of Italy objected to the application on the basis that it asserted that Mr Pretorius had made another claim relative to his employment which had been dismissed. Additionally, in its response to the application, Gardens of Italy advised that it had only one employee at the time of the termination of Mr Pretorius’ employment.

[4] In a directions conference convened on 30 March 2016 I advised that the determinative conference, which was listed for 15 April 2016, would consider both the extent to which Mr Pretorius was precluded from further pursuing his application by an earlier claim, and the extent to which Gardens of Italy was a small business such that Mr Pretorius had not completed the requisite minimum employment period specified in s.383 of the FW Act. I confirmed that this determinative conference would not address the merits of the application.

[5] Prior to the determinative conference, both Mr Pretorius and Gardens of Italy provided an extensive number of emails which went to both the jurisdictional issues and the merits of the application. Consistent with my advice to the parties I have noted these advices. I have however, not taken into account a purported Certificate issued by the Registrar of Companies and Close Corporations of South Africa on 12 April 2016, as the basis upon which this document was obtained is a matter in dispute between the parties. In any event, the evidence of Mr Schmidt makes reliance on this document unnecessary.

[6] In the determinative conference on 15 April 2016 both Mr Pretorius and Mr Schmidt gave evidence. I have taken this evidence into account in reaching a conclusion about the jurisdictional matters.

The initial jurisdictional objection

[7] Mr Pretorius made an application to the Fair Work Ombudsman (the FWO) relative to his employment. It appears that this application was made with respect to concerns about payments he believed were due to him. It appears that this application was investigated by the FWO but may now be the subject of a separate underpayment claim being pursued by Mr Pretorius. This underpayment application does not represent an impediment to the pursuit of this unfair dismissal application. Consequently, to the extent that Gardens of Italy assert that this means that Mr Pretorius is unable to make this application, that assertion must be dismissed.

The Small Business objection

[8] To be protected from unfair dismissal Mr Pretorius must have completed the minimum employment period. 1 Section 383 of the FW Act states:

“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 23 of the FW Act defines a small business employer 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.”

[10] There is no dispute that, at the time of the termination of Mr Pretorius’ employment, he was the only employee engaged by Gardens of Italy. However, the parties dispute the extent to which another entity, Gardens of Italy Close Corporation, which operates in South Africa, should be regarded as an associated entity for the purpose of the employee count under s.23.

[11] Mr Schmidt’s evidence confirmed that he and his wife were the two and only shareholders in Gardens of Italy. Mr Schmidt’s evidence also confirmed that he and his wife were the two and only directors of Gardens of Italy Close Corporation in South Africa and that this South African corporation employed 21 people at the time of the termination of Mr Pretorius’ employment. Mr Schmidt’s evidence also disclosed two other corporations with which he was associated but as neither of these entities employed people I have not taken them into account.

[12] Section 12 of the FW Act states:

“associated entity has the meaning given by section 50AAA of the Corporations Act 2001.”

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

“50AAA 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.”

[14] For the purposes of the Corporations Act, an entity is defined in s.9 in the following terms:

“entity: for the purposes of Chapter 2E an entity is any of the following:

(a) a body corporate;

(b) a partnership;

(c) an unincorporated body;

(d) an individual;

(e) for a trust that has only 1 trustee—the trustee;

(f) for a trust that has more than 1 trustee—the trustees together.

Otherwise, entity has the meaning given by section 64A.”

[15] I note that s.64A of the Corporations Act states:

“64A Entities

Except in Chapter 2E, a reference to an entity:

(a) is a reference to a natural person, a body corporate (other than an exempt public authority), a partnership or a trust; and

(b) includes, in the case of a trust, a reference to the trustee of the trust.”

[16] Chapter 2E of the Corporations Act does not apply to the circumstances here.

[17] If the number of employees engaged by Gardens of Italy Close Corporation are required to be taken into account because this corporation must be regarded as an associated entity, then Gardens of Italy cannot be defined as a small business for the purposes of s.383 and, as Mr Pretorius had worked for more than six months, he would then have completed the six month minimum employment period.

[18] Gardens of Italy Close Corporation manufactures and sells garden products in South Africa. Gardens of Italy sells garden products, some of which are apparently made by Gardens of Italy Close Corporation. Even more significantly, the evidence of Mr Schmidt confirms that he and his wife control both corporations in a manner consistent with s.50AAA(7) of the Corporations Act. There is nothing in that section, nor for that matter, in s.23 of the FW Act which permits or requires that employees engaged by Gardens of Italy Close Corporation not be taken into account in counting the employees of Gardens of Italy for the purposes of the small business definition. This finding should not be misconstrued in that it does not suggest that employees of Gardens of Italy Close Corporation have any form of access to the jurisdiction established by the FW Act. It is simply the case that, notwithstanding that Gardens of Italy is, by itself, a small business, the Corporations Act requires that I take into account the employees of the related, but overseas operated, Gardens of Italy Close Corporation.

[19] Given the definitions in the FW Act and the Corporations Act, I am obligated to conclude that Gardens of Italy does not meet the definition of a small business. Accordingly, I am satisfied that Mr Pretorius has exceeded the requisite minimum employment period so that he is able to pursue this application.

[20] The application will be referred for conciliation. I confirm my advice to the parties that my conclusions with respect to this jurisdictional issue do not represent any form of conclusion about the merits of the application. If the application is not resolved through the conciliation process, an arbitration on the merits will take into account Mr Pretorius’ behaviour as an employee, the process followed to effect the termination of his employment, issues associated with the size of the Gardens of Italy business and other factors that may be relevant in accordance with s.387 of the FW Act.

Appearances:

S Pretorius on his own behalf.

M Schmidt for the respondent.

Hearing details:

2016.

Perth:

April 15

 1   See s. 382 of the FW Act

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