FWA 1401
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Adam Salagaras
Fingal Glen Pty Ltd atf the Adelaide Riviera Trust T/A Comfort Hotel Adelaide Riviera
ADELAIDE, 3 MARCH 2011
Termination of employment - Jurisdiction - Whether small business employer - Whether other entities are associated entities under the Corporations Act 2001.
 This is an application by Mr Adam Salgaras (the applicant) pursuant to s.394 of the Fair Work Act 2009 (the Act) for a review of his termination of employment by Fingal Glen Pty Ltd as Trustee for the Adelaide Riviera Trust trading as Comfort Hotel Adelaide Riviera (the respondent).
 The applicant claims it was not a genuine redundancy as per s.389 of the Act. The respondent claimed in its response document, the Form F3, that the applicant was dismissed for various performance matters and deficiencies.
 Subsequently the respondent has further claimed a jurisdictional exemption in that they claim they are a small business employer and the applicant was employed for less than twelve months being the statutory requirement under section ss.382 and 383 of the Act.
 Conciliation failed in this matter and a hearing was subsequently arranged for 9 November2010 and the parties instructed to file the appropriate documentation.
 Mr Buff of Fingal Glen Pty Ltd, a company acting as managers for the respondent, appeared for them and Mr Wright of the Liquor, Hospitality & Miscellaneous Union for the applicant.
 This decision concerns the jurisdictional objection by the respondent as they assert they are a small business as defined in s.23 of the Act and that the applicant, once employed, did not complete the minimum period of employment for such a class of business specified in s.383 of the Act. It is not contentious that the applicant was employed for more than six months but for less than twelve months. The applicant was employed on 7 October 2009 and dismissed on 15 July 2010.
 The relevant sections of the Act read as follows:
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.
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.”
 Also relevant is Schedule 12A of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (FW (TP&CA) Act). It states:
1 Meanings of employee and employer
In this Schedule, employee and employer have their ordinary meanings.
2 Meaning of small business employer, for unfair dismissal purposes, prior to 1 January 2011
(1) For the purposes of the application of Part 3-2 of the FW Act in relation to the dismissal of a person before 1 January 2011, a national system employer is a small business employer if, and only if, the employer’s number of full-time equivalent employees, worked out under this item, is less than 15 at the earlier of the following times (the notice or dismissal time):
(a) the time when the person is given notice of the dismissal;
(b) immediately before the dismissal.
(2) The employer’s number of full-time equivalent employees at the notice or dismissal time is worked out as follows:
Step 1. For each person who was an employee of the employer at any time during the period of 4 weeks immediately preceding the day on which the notice or dismissal time occurs, work out the number of ordinary hours (including parts of hours) of the person as the employer’s employee during the period.
Note: Subitem (3) sets out what are a person’s ordinary hours.
Step 2. If, during the period, the person took leave to which subitem (4) applies, work out the number of hours of leave to which that subitem applies that the person took during the period.
Step 3. Add together all of the numbers of ordinary hours worked out under step 1, and subtract all of the number of hours of leave worked out under step 2.
Step 4. Divide by 152 the number worked out under step 3. The result is the employer’s number of full-time equivalent employees at the notice or dismissal time.
Note: The number 152 is based on the maximum number of hours that a full-time employee would work in 4 weeks (being 38 hours per week) excluding reasonable additional hours.
(3) For the purposes of step 1 of the method statement in subitem (2), the ordinary hours of work of a person as the employer’s employee are:
(a) to the extent that a modern award, enterprise agreement or workplace determination applied to the person, and the person was not a casual employee—the ordinary hours of work specified or provided for in that award, agreement or determination; or
(b) to the extent that a transitional instrument applied to the person, and the person was not a casual employee—the person’s ordinary hours of work under item 33 of Schedule 3; or
(ba) to the extent that a Division 2B State instrument applied to the person, and the person was not a casual employee—the person’s ordinary hours of work under item 48 of Schedule 3A; or
(c) to the extent that:
(i) a State industrial instrument applied to the person as a non-national system employee; and
(ii) the instrument specified, or provided for the determination of, the person’s ordinary hours of work; and
(iii) the person was not a casual employee;
the ordinary hours of work as specified in, or determined in accordance with, that instrument; or
(d) to the extent that no such award, agreement, determination or instrument applied to the person, and the person was not a casual employee:
(i) if the person was a national system employee—the person’s ordinary hours of work under section 20 of the FW Act; or
(ii) if the person was a non-national system employee—what would have been the person’s ordinary hours of work under that section if the person had been a national system employee; or
(e) to the extent that the person was a casual employee—the lesser of:
(i) 152 hours; and
(ii) the number of hours actually worked by the person.
(4) This subitem applies to leave, whether paid or unpaid, that the person took if:
(a) the person was entitled to the leave in connection with:
(i) the birth of a child of the person or the person’s spouse or de facto partner; or
(ii) the placement of a child with the person for adoption; and
(b) the duration of the period of leave has been at least 4 weeks;
whether or not the person took any other kind of paid leave while taking that leave.
(5) For the purposes of this item, a national system employer and the employer’s associated entities are taken to be one entity.
(6) This item has effect despite section 23 of the FW Act.”
 The tribunal has therefore, with regard to the facts of this matter and the above legislation, to determine whether the respondent is a small business as defined in regard to the number of full-time equivalent employees it had at the time of dismissal of the applicant.
Submissions and consideration
 The respondent asserts that the employer of the applicant, the Adelaide Riviera Trust, had less than fifteen employees calculated as per the approach specified within Schedule 12A of the FW (TP&CA) Act, at the time of the applicant’s dismissal.
 The respondent’s evidence is that in applying the formula set out in Schedule 12A, the number of full-time equivalent employees in the period before the applicant’s dismissal amounted to 14.96. They assert further this approach included all casual employees for cautionary purposes and that this would be “on a conservative basis” 1 and inflate the resultant figure as some employees may be irregular and hence do not need to be included.
 The applicant contends that the calculations are wrong in regard to the period of calculation, given the applicant was dismissed on 15 July 2010 and the respondent has calculated hours for the periods weeks ending 27 June, 4 July, 11 July and 18 July 2010.
 From the evidence this would seem to be correct and the applicant would have worked additional hours in the end period indicated by the respondent’s records (8 hours) being one working day, Friday 16 July 2010. However what was not pursued by either party is that the applicant’s hours would also be reduced by an adjustment for working days prior to the respondent’s considered period. The evidence by the respondent further indicated that the applicant’s dismissal would have resulted in further hours being covered by casuals and such hours were included in the calculations.
 Despite the above submissions Mr Wright agreed at one point with the respondent’s evidence that calculated the full-time equivalent employees at 14.96. 2
 Mr Wright however further submitted the tribunal should adopt the reasoning of Richards SDP in the matter Fisher v M & D Employment Services Pty Ltd, 3 which Mr Wright contended provided a persuasive principle for this tribunal to round up the 14.96 result to 15 and hence the respondent should fail in their jurisdictional objection.
 On consideration of these submissions and the decision of Richards SDP in the matter of Adams v Condamine Catchment Natural Resource Management Corporation Limited T/A Condamine Alliance, 4 notably at para 11, the tribunal declines to give effect to a rounding up of the calculation as proposed by the applicant as the decision in Fisher above is a clear differentiation and the tribunal cannot identify an indication in the legislation to provide for a rounding up during the transitional period.
 Mr Wright however further submitted that the respondent should not be allowed to rely on their erroneous calculations in that they were suspect in regards to overtime inclusions and that the chronology was incorrect in regard to the period of calculations.
 Mr Wright also submitted the respondent had not provided sufficient evidence to establish their case as to their jurisdictional position with the absence of sworn evidence from the principals and further comprehensive employment documentation.
 The tribunal finds that the respondent has not based their method of calculation of full-time equivalent employees on the correct dates being the four weeks immediately before the dismissal as per Schedule 12A, cl 2 (1) and (2) of the FW (TP&CA) Act.
 The respondent’s calculation method may therefore include various errors in respect to hours of work of their workforce. They assert their calculation method is conservative in that it includes all casual hours. Such submissions do not encourage a reliance on their results as being accurate for the tribunal’s purposes. The tribunal finds this error provides sufficient grounds for a finding that the respondent has not discharged the onus required under the Act. However the tribunal is conscious that to reject the jurisdictional point at this juncture and to proceed to a hearing on the correct method may consequentially repeat the process for the applicant. The respondent may provide further evidence to support their claim to be a small business.
 The tribunal therefore turns to the matter of associated entities, which is important in this matter given its relevance within Schedule 12A, cl 2 (5) of the FW (TP&CA) Act and the sworn evidence provided.
 The applicant contends the respondent has several associated entities, being two other hotels, an accountancy firm referred to as MBR and three unit trusts which own the respective hotels. The respondent contends it has no associated entities and that the relevant workforce has been established for section 383 purposes.
 Having regard to the decision in Adams where Richards SDP considered a similar matter, the prime reference for guidance on “associated entities” in this context is s.50AAA of the Corporations Act 2001 (the Corporations Act) which reads as follows:
(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.”
 In regard to the relationship between the respondent and the other named entities in this matter the tribunal was provided with the following facts.
 Having regard to the decision in Adams and Richards SDP’s consideration of s.50AAA of the Corporations Act, I find the above facts are persuasive in that the relationship between MBR and the unit trust trustee companies and the Unit trusts themselves falls within the description of an “associated entity”.
 Specifically in respect to s.50AAA (4) of the Corporations Act, the two individuals, Messrs Hammond and Buff, are effectively controlling these trusts and trustee companies as employees of MBR and the operations, resources or affairs of those entities are material to MBR.
 In respect to s.50AAA (7) of the Corporations Act, MBR being a third entity controls the trustee companies being the principals, as Mr Hammond, an employee of MBR is the sole director of such companies. The unit trusts, the associates are likewise controlled though the trustee companies by Mr Hammond. The operations, resources or affairs of the principal and the associate are both material to the third party.
 The tribunal has referenced the definition of “control” within s 50AAA of the Corporations Act and has formed the view that in this matter given the configuration of equities and cross membership of the unit trusts that MBR exercises control over the respondent employer for interests other than the contractual relationship which may exist between the Trustee company and MBR or the unit trust and MBR.
 On balance the tribunal identifies Mr Hammond as having influence and material interests in the unit trusts, the unit trust trustee companies and in MBR. As such it is concluded that MBR is an associated entity of the respondent company in this matter.
 On the basis of the findings that the respondent’s method of calculating their full-time equivalent workforce is in error and the conclusion that the respondent has an associated entity that has not been taken into account in determining the identification of their full-time equivalent employees under Schedule 12A – Unfair Dismissal of the FW (TP&CA) Act, the tribunal determines that the evidence in this matter would provide at least an additional two employees being Mr Hammond and Mr Buff to that which was submitted. Such figure is likely to be in excess of the submitted figure of 14.96 and indeed in excess of 15. Hence the respondent is not a “small business” as defined.
 Accordingly the jurisdictional objection to the applicant’s case for unfair dismissal must fail. The tribunal so orders and this matter shall be remitted for further hearing of the merit arguments. The parties shall be further advised as to those arrangements.
Mr A Wright for the applicant
Mr J Buff for the respondent
1 PN 582
2 PN 444
3  FWA 3588
4  FWA 5374
5 PN 163-174
6 PN 382
7 PN 176
8 PN 291
9 PN 502
11 PN 529-536
12 PN 553
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