Case examines `Employer of Record’ vs `True Employer’

Case examines `Employer of Record’ vs `True Employer’.png

Case examines ‘Employer of Record’ vs ‘True Employer’   

A 2020 New South Wales case examined key indicia courts will consider when required to determine who is the true employer of employees within a related group of companies instead of merely being an `Employer of Record’. The case involved several companies within the Branded Media Group, being Branded Media Holdings (`Holdings’), who were in liquidation, and Brand New Media Group Pty Ltd (BNM), subject to a deed of arrangement.

Particular interest was held by the Commonwealth, who were seeking to recover over $1m in respect of unpaid entitlements to specified employees under the Fair Entitlements Guarantee Act 2012, on the basis of claiming that BNM was the true employer.

The employer status was surrounded in uncertainty as Holdings were identified as the employer in most documentation, but BNM appeared to provide most employment functions on an ongoing daily basis. For example, Holdings issued written offers of employment to employees. However, it did not, in fact, pay specified employees, nor did it conduct any business by which it generated income.

Similarly, Holdings did not remit income tax, payroll tax, or make superannuation contributions on behalf of the specified employees.

All of these legal payment requirements were undertaken by BNM. This was not surprising given that Holdings did not have a bank account.

As summarised by Justice Black,

employees’ contracts of employment were with Holdings but it did not appear that Holdings conducted any business external to the Group; the Liquidators had not located any written agreements between Holdings on the one hand and BNM or other Group entities on the other for employees of Holdings to provide services to other entities; Holdings did not operate a bank account and only BNM operated a bank account so that it paid the Specified Employees for their services”.

Justice Black also noted, “the fact that Holdings was named as the employer on documentation such as contracts, payslips and PAYG summarises cannot override the practical reality of the relationship”. He rejected a suggestion that BNM could be providing a service to Holdings as it was unable to be charged for services as it had no income, adding further weight to the argument that BNM was the true employer.

As he stated, “The documentation of the relationship is consistent with Holdings being an `employer of record’…it seems to me that BNM rather than Holdings was the true employer of the Specified Employees”.

Consequently, he determined BNM to be the employer of the Specified Employees.

In the matter of Branded Media Holdings Pty Limited (in liquidation); In the matter of Brand New Media Pty Limited (subject to a Deed of Company Arrangement) [2020] NSWSC 557 (13 May 2020) (austlii.edu.au)

For queries about determining employment relationships or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 WAL LAW, 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.

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