Company director denied access to unfair dismissal application

Company director denied access to unfair dismissal application

Company director denied access to unfair dismissal application

The Fair Work Commission has upheld a jurisdictional objection that a former worker was not an employee of the company but rather a director of the company and consequently could not have been dismissed within the meaning of the Fair Work Act 2009.

The business, Strong Room Technology Pty Ltd (Strong Room), is a platform technology company largely operating in the pharmaceutical, health and aged care sectors. In late 2019, ‘MF’ was introduced to one of the founders of the company because of his experience and expertise in pharmaceutical and associated industries.

After undertaking an informal business assessment of the company, in December 2019, MF was presented with an opportunity to become a Director and to purchase shares in the company, which he accepted. For a twelve-month period, he undertook duties for Strong Room and was recognised as making a positive and valuable contribution to the business’s rapid growth.

In December 2020, the company agreed to formalise MF’s appointment and entered into a formal Non-Executor Director Agreement, signed and dated by both parties on 20 December 2020. In August 2021, the company agreed to a twelve-month extension of the agreement, but on 12 September 2023, a resolution was passed that MF be removed from the Board, and his relationship ceased on 15 September 2023.

During his employment, MF was paid for his services at an initial agreed amount of $120,000 per year, which had increased to $200,000 at the time when the relationship ended.

In evidence before Commissioner Scott Conolly, Strong Room argued that the rights and duties of the parties were enshrined in the written contract (consistent with the ruling in the ‘Personnel Contracting’ case. They highlighted that MF had invested in the business, the contractual reference to being ‘appointed’ as opposed to being ‘engaged’, the lack of control or direction by Strong Room in the pursuance of MF’s duties, and the non-inclusion of references to wages or salary.

As Commissioner Connolly noted,

“the Respondent submits that nothing in the written and complete agreement between the parties supports a finding that the Applicant was an ’employee’ within the meaning of the Act”.

In contrast, MF argued that he was performing a range of duties well beyond those performed by an executive director, often working in excess of 40 hours per week. He cited factors pointing towards an employment relationship, including company records referring to payments of superannuation and annual leave, the setting of KPIs to measure his performance, the requirement to attend meetings, and the obligation to directly report to Strong Room’s CEO and Executive Director.

In denying the application, Commissioner Connolly noted,

“I am not convinced, however, that the agreement he initially reached with the Applicant in December 2019; confirmed in writing in December 2020 and extended in August 2021, was ever anything more than a relationship between a Director and company in both intent and practice for its duration … (MF) was unable to provide any compelling evidence of an explicit conversation where he was confirmed of offered any other position than that of Executive Director”.

Commissioner Connolly further noted,

“Critically, there is no compelling evidence from the Applicant that he was required to perform work other than as set out in the ‘written agreement'”.

Ultimately, Commissioner Connolly concluded,

I am satisfied that the relevant relationship between the Applicant and the Respondent is the relationship recorded in the written agreement reached between them and signed in December 2020 … There is no suggestion, and it is accepted by both parties that the written document between them is not a sham. Therefore, the obligations established by the agreement are decisive of the character of the relationship”.

Mr MF v Strong Room Technology Pty Ltd (C2023/6110) 25 January 2024

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For questions about employment relationships, employees, directors, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 0417 622 178, 1300 WAL LAW 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.

Ref: 433.0524

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