Federal Court Grants Leave to Appeal to Previously Excluded Employee

The Federal Court has granted leave to appeal to a worker previously denied the opportunity to pursue unpaid employee benefits after his employer and related entitles were placed in voluntary administration.

The granting of the appeal reinforces the principle established in the recent cases of 'Personal Contracting' and 'Jamsek' that compels courts to focus on the terms of the contractual arrangements entered into between the parties when seeking to establish the nature of the employment relationship.

'BR' worked for Ralan Property Services Pty Ltd (RPS), a member of the Ralan Group of companies controlled by his older brother. His two other brothers worked in various roles for entities in the group. BR held the title of 'Commercial Property Manager' and has a Class One real estate licence. He was a director of the company and engaged under a salary.

On 17 December 2019, RPS was wound up. BR then made a claim for financial assistance pursuant to the Fair Entitlements Guarantee Act 2012 (the Act), which is designed to allow the Commonwealth to pay advances on account of unpaid employee entitlements of former employees of employers in cases where the employers are insolvent.

His claim was initially denied on the basis that he was not an employee of RPS and, therefore, excluded under the Act. The decision was then affirmed by the Administrative Appeals Tribunal (the Tribunal). The Tribunal found that there was no written contract between the parties but did find some evidence of an oral contract.

In deeming him ineligible, the Tribunal noted,

"I am not satisfied that the manner in which BR performed the duties of his office marked him as an employee, as well as a director and shareholder … He was a shareholder who received regular dividend payments, which were declared for income tax purposes. He was essentially an equity partner."

In allowing the appeal, Justice Scott Goodman highlighted the failure of the Tribunal in adopting a multifactorial approach when assessing the status of the relationship rather than the contractual issues as identified in both Personnel Contracting and Jamsek. In Justice Goodman's decision, he noted that the Tribunal's approach failed to consider

"whether the terms of that contract gave rise to an employment relationship".

Justice Goodman restated the key principles of the recent cases that

"the focus of the inquiry is upon the legal rights and obligations created by the contractual relationship between the parties, rather than upon the history of the relationship between them" and "there is no reason to distinguish between written and other contracts".

As he summarised,

"Thus, the fundamental task – the ascertainment and construction of the terms of the legal rights and obligations of the parties, rather than an assessment of the history of the relationship between the parties throughout the life of the contract, including the manner and performance of the contract – remains the same regardless of the form of the contract in question. In these circumstances, the Tribunal erred in law by failing to consider whether the rights and obligations created by the oral contract gave rise to an employment relationship and instead adopted an approach that was not confined to a consideration of those rights and obligations and included factors such as the manner of performance of the contract".

Consequently, Justice Goodman determined the appeal should be allowed.

For queries about independent contractors, salaried employees, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 925 529, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.