Unfair dismissal; what is an associated entity

 

The size of an employer is important in several areas of the Fair Work Act, and thus the system of industrial relations in Australia. For example there are substantially different rules which apply in an unfair dismissal case depending upon whether the employer is a small business employer or not.

Sec 23 of the Act defines a small business employer if at the particular time relevant to the case the employer has fewer than 15 employees at that time ie 14 or less. In making that calculation, associated entities of the employer are “taken to be one entity. What is an associated entity. Here is the answer.

 

“Legislative framework

In order for Ms Johnstone to be protected from unfair dismissal she must have completed a period of employment with EPFS of at least the minimum employment period. The minimum employment period is one year for a small business employer and six months for other employers. 1

A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at the time. 2 For the purpose of calculating a number of employees employed by the employer at a particular time:

(a) all employees employed by the employer at the time (including the dismissed employee who has made the unfair dismissal application) are to be counted subject to the caveat that a casual employee is not to be counted unless, at the time, he or she has been employed by the employer on a regular and systematic basis 3; and

(b) associated entities are taken to be one entity 4. The expression “associated entity” has the meaning given by section 50AAA of the Corporations Act 2001 (Cth) (the Corporations Act).

Section 50AAA of the Corporations Act provides as follows:

‘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.’

Section 50AA of the Corporations Act defines “control” as follows:

‘(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.’

Except in chapter 2E of the Corporations Act, a reference to an “entity” in the Corporations Act is a reference to “a natural person, a body corporate (other than an exempt public authority), a partnership or a trust” (s.64A of the Corporations Act).”

 

Johnstone v EPFS Holdings Pty Ltd T/A Advice Partners Financial Planning (2018) FWC 892 delivered 12 February 2018 per Hunt C