Are company directors also employees?

Recently I have been surprised at the number of occasions when I have been required to sort out whether company directors are employees of the company for the purposes of fair work law. The answer of course is that it all depends upon the acts. There is no inherent reason why a company director cannot be an employee at the same time, in fact I suspect that is normally the case from a legal perspective.

To determine the position in any particular case, it is necessary to go back to basic principles. See for example Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 per Katzman J. And here is a practical example of this process at work.

“To be able to pursue an application for unfair dismissal, Mr and Ms Middleton had to be employees at the time they assert they were dismissed. As at 19 October 2016, they had not been paid for some five months. The evidence of Mr Gray indicates that they both held directorships of the business over that time. However, that evidence also indicates that, whilst Mr and Ms Middleton had controlled the business and had elected not to claim payments over that period of time, they had continued to have access to business property in the form of vehicles and tools.

On the evidence before me, I am unable to characterise the arrangement that Mr and Ms Middleton had with Build West as a form of voluntary arrangement and it seems to me that they must be regarded as employees. This does not imply that they have any legitimate claim to particular additional payments over that time as that issue is not a matter which I need to determine. Had it been the case that the evidence demonstrated that Mr and/or Ms Middleton had ceased working for Build West in May or June 2016, the unfair dismissal claims would have been made substantially outside of the 21 day legislative time limit. However, the correspondence to both Mr and Ms Middleton of 19 October 2016 clearly suggests that they were regarded by Build West, until that date to be employees. Those letters commence with the following statement:

“I write to advise you that you have been made redundant from Build West Pty Ltd, effective immediately, and as such, your employment has terminated. I have exercised my rights in accordance with the Memorandum and Articles of Association of Build West Pty Ltd as sole member (shareholder and owner) of Build West, and by ordinary resolution you are no longer a director, effective 17th October 2016.

…”

As a result, I have concluded that, until 19 October 2016, Mr and Ms Middleton were regarded as employees and that the letter of that date purported to dismiss them. Accordingly, I am not prepared to accept the Build West contention that Mr and Ms Middleton could not be regarded as employees”.

Middleton and Middleton v Build West Pty Ltd ATF The Leverett Trading Trust T/A Build West (2017) FWC 1473 delivered 15 March 2017 per O’Callaghan SDP