Calculating total number of employees for small business employer status under Fair Work Act 2009
A recent decision from the Fair Work Commission provides some useful guidance to small businesses on when to include casual employees in the total number of employees employed by the business to determine whether they qualify as “Small Business Employers” under the Fair Work Act 2009 (Act).
A “Small Business Employer” is defined in the Act as 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 the obligation to pay redundancy pay to eligible employees in addition to notice of termination;
- An increased period of 12 months’ continuous service an employee of a Small Business Employer 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.
The Act provides that a casual employee will only count as an employee for the purposes of determining whether an employer qualifies for Small Business Employer status if the employee has been employed on a “regular and systematic” basis.
In the decision of Harry Grives v Aura Sports Pty Ltd (2012), the Fair Work Commission had to determine whether 2 casual employees had been employed on a “regular and systematic” basis.
Mr Grives brought an unfair dismissal application against Aura Sports Pty Ltd (Aura) in respect of the termination of his employment on 16 December 2011. Aura raised a jurisdictional objection to Mr Grives’s application, claiming that it was a Small Business Employer at the date of termination and that, as Mr Grives had only commenced employment with Aura on 27 January 2011, he had not completed the 12 months’ 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, Mr Grives had not completed a full 12 months’ service with Aura, and that Aura employed a total of 15 employees, 2 of whom, Mr Martin and Mr Patterson, were casual employees.
During the 7 months prior to Mr Grives’s dismissal, Mr Martin had worked a total of 1,230 hours for Aura, during which period his fortnightly hours varied from 22 to 130, with a single period of 4 weeks during which he performed no work for Aura. During that same period, Mr Patterson had worked a total of 475.5 hours for Aura, with his fortnightly hours varying from 6 to 122 and a period of 16 weeks in which Mr Patterson did no work for Aura.
The Commission made the following useful observations about how to identify when a casual employee has been employed on a “regular and systematic” basis when determining whether Mr Martin and Mr Patterson should be counted as employees of Aura for the Small Business Employer threshold:
- 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.
Applying these guidelines to the employment histories of Mr Martin and Mr Patterson, the Commission found that Mr Martin was employed on a “regular and systematic” basis and should therefore be counted as an employee of Aura, but that Mr Patterson was not employed on the same basis and should not be counted as an employee. The Commission found that the significant gaps in the periods of Mr 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 Mr Patterson’s services by Aura in the conduct of its business.
This meant that, for the purposes of the Act, at the time of Mr Grives’ dismissal, Aura employed a total of 14 employees and was a Small Business Employer. Mr 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 under the Act:
- All permanent part-time and full-time employees of the business;
- 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);
- Casual employees of the business, or the business of an associated entity offered regular employment over a protracted period of service, regardless of:
- any variation in the hours they may work; or
- whether they have a reasonable expectation of ongoing employment with the business.