Unfair dismissal claim allowed after company found not to be a small business employer

The Case

Alison Garner v Redmako RTO T/A Red Aussie (2015)

Ms Garner was employed by Red Aussie from 14 July 2014 until her dismissal on 7 July 2015. Following this, Ms Garner filed an unfair dismissal claim in the Fair Work Commission (FWC). Red Aussie objected to the claim, saying it was a small business employer and that Ms Garner had not served the 12-month minimum employment period required to bring an unfair dismissal claim.

To be a small business employer, the employer and any associated entities must employ fewer than 15 employees.

The Verdict

The FWC found that while Red Aussie only employed 14 employees at the time Ms Garner was dismissed. People Partners BPO (BPO), an incorporated company based in the Philippines, was an associated entity of Red Aussie, pursuant to section 50AAA of the Corporations Act 2001 (Cth).

BPO was found to be an incorporated entity of Red Aussie for the following reasons:

the Master Services Agreement between the two companies showed that BPO provided offshoring and outsourcing services to Red Aussie;
the two companies had common directorships; and
the operations, resources or affairs of BPO were material to Red Aussie, and vice versa.

Given this finding, BPO employees were included in the count of employees used to determine whether Red Aussie was a small business employer. The combined total of Red Aussie and BPO employees was more than 15, meaning that Red Aussie was not a small business employer.

Therefore, the minimum qualifying period for Ms Garner to bring an unfair dismissal claim was only 6 months. As Ms Garner had been employed for more than 6 months, she could continue with her unfair dismissal claim.

The Lesson

In determining whether you are a small business employer, you need to examine your business relationship with any other companies – whether in Australia or overseas – that are involved in the administration and running of your business.

Once this has been determined, you need to carefully monitor the relevant minimum employment period in relation to your employees, i.e. 12 months for a small business employer and 6 months for all other employers.

If you are having problems with any employees, you need to examine this early and determine whether or not to continue their employment beyond the relevant minimum employment period. If you do, that employee may be eligible to bring an unfair dismissal claim if you dismiss them.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.