How to correctly calculate the size of a business under the Fair Work Act 2009

Small businesses unsure about whether they qualify under the Fair Work Act 2009 as a Small Business Employer can now be guided by a recent decision from the Fair Work Commission.

According to the Act, a Small Business Employer is defined as being an employer with fewer than 15 employees.

Small Business Employers enjoy a number of concessions under the Act in relation to the termination of employees, such as an exemption from having to pay redundancy pay to eligible employees in addition to notice of termination; an increased period of 12 months’ continuous service an employee must complete before they can be eligible to bring an unfair dismissal claim against the employer; and an additional defence to an unfair dismissal claim by demonstrating compliance with the Small Business Fair Dismissal Code.

However, there was some uncertainty under the Act as to when casual employees count as an employee for the purposes of determining whether an employer qualifies for Small Business Employer status.

CASE STUDY

In the decision of Harry Grives v Aura Sports Pty Ltd (2012), the Fair Work Commission had to determine whether two casual employees had been employed on a “regular and systematic” basis.

Grives brought an unfair dismissal application against Aura Sports in respect of the termination of his employment on 16 December 2011.

Aura raised a jurisdictional objection to Grives’ application, claiming that it was a Small Business Employer at the date of termination and that, as Grives had only begun employment with Aura on 27 January 2011, he had not completed the 12 months of continuous service required to be eligible to bring an unfair dismissal complaint against the business.

The parties agreed that, at the date of his dismissal, Grives had not completed a full 12 months’ service with Aura, and that the business employed a total of 15 employees, two of which were casual employees by the names of Martin and Patterson.

During the seven months prior to Grives’ dismissal, Martin had worked a total of 1,230 hours for Aura; his fortnightly hours varied from 22 to 130, with a single period of four weeks during which he did no work for Aura.

In that same period Patterson had worked a total of 475.5 hours for Aura, with his fortnightly hours varying from six to 122 and for a period of 16 weeks he did not work at all for Aura.

EMPLOYMENT CRITERIA

During the case, the Commission outlined the following criteria to assist with establishing whether a casual employee was to be counted as an employee for the Small Business Employer status.

•  The employee need only have been employed on a “regular and systematic” basis at some stage during their employment with the employer;
•  The employee does not need to have a reasonable expectation of ongoing employment with the employer;
•  Employment on a “regular and systematic” basis does not require the employee to be able to foresee or predict when their services may be required by the employer; and
•  The pattern of employment must demonstrate the employer’s ongoing reliance on the employee’s services in the conduct of the employer’s business. _

By applying these guidelines to the employment histories of Martin and Patterson, the Commission found that Martin was employed on a “regular and systematic” basis and should therefore be counted as an employee of Aura, but that Patterson was not employed on the same basis and should not be counted as an employee.

The significant gaps in the periods of Patterson’s employment with Aura and the lack of any consistent pattern in the hours he worked for the company did not demonstrate the necessary reliance on Patterson’s services by Aura in the conduct of its business.

_This meant that, for the purposes of the Act, at the time of Grives’ dismissal, Aura employed a total of 14 employees and was indeed a Small Business Employer.

Grives’ unfair dismissal application was therefore dismissed by the Commission. _

LESSONS FOR EMPLOYERS

_The following classes of employee will be counted when determining whether an employer employs fewer than 15 employees at the date of a dismissal and is therefore a “Small Business Employer”:

1. All permanent part-time and full-time employees of the business;
2. All permanent part-time and full-time employees of the business of an associated entity (e.g. companies with common directors or ownership, including employees of such companies working overseas);
3. Casual employees of the business, or the business of an associated entity offered regular employment over a protracted period of service, regardless of:
   (a) any variation in the hours they may work; or
   (b) whether they have a reasonable expectation of ongoing employment with the business.

Paul Hardman is a partner and Ben Keenan a lawyer at Holding Redlich