The recent Supreme Court of Victoria decision in Re National Personnel Pty Ltd (in liquidation) [2012] VSC 508 confirms that the Court will take a broad approach in determining the true employer where the employer-employee relationship is confused and the liquidator is in doubt as to the identification of the employer.

Background

National Personnel Pty Ltd (in liquidation) (NPL) conducted a business supplying security personnel to various clients (National Personnel Business).  At the time NPL was placed into liquidation in 2005, it had up to 3,000 employees.

From around February 2004 until February 2005, NPL conducted the National Personnel Business in its capacity as trustee of two trusts:

  • the “NPL Trust”, which employed all of the relevant security personnel; and
  • the National Personnel Trust, which conducted the business.

In February 2005, NPL was replaced as trustee of the NPL Trust.  But the employees were not transferred and it appeared that from that time onward, wages were paid by NPL in its capacity as trustee of the National Personnel Trust.

Based on his review of the records of the company, the liquidator was not able to conclusively determine whether NPL was the true employer of security personnel.  Accordingly, he sought directions that he was entitled to:

  • treating the security personnel as employees of NPL; and
  • paying any employee entitlements incurred by NPL up to and including 21 February 2005 out of the NP Trust, and from 22 February 2005, out of the assets of the National Personnel Trust.

Decision

His Honour Justice Robson confirmed that the Court takes a wide view of the employer-employee relationship and looks beyond the contractual documentation where the identification of an employer is in doubt.  In that situation, the Court focuses on how parties have conducted themselves in practice and whether the reality of the situation indicates the identity of the employer.

Notwithstanding that many security personnel had no written contract of employment with NPL, the Court agreed with the liquidator’s contention that NPL was the true employer.  Some of the relevant factors were that:

  • the employees believed and had indicated to the liquidators staff that they were employees of NPL;
  • the employees ultimately reported to and were under the direction of the sole director of NPL; and
  • NPL’s bank accounts indicated that the employees were paid by NPL in its capacity as trustee of the NP Trust up to and including 21 February 2005 and by NPL in its capacity as trustee of the National Personnel Trust from then on.

The Court also agreed that it was appropriate for employee entitlements to be paid out of the assets of the NP Trust for the period up to February 2005 and from the assets of the National Personnel Trust thereafter.  The Court was satisfied that:

  • the tax, superannuation and insurance records of NPL were consistent with employee entitlements being incurred in the manner asserted by the liquidator; and
  • from February 2005 onward, any employment expenses of NPL had to be in its capacity as trustee of the National Personnel Trust as its main activity in that period was its role as trustee of that trust.

Comment

This case confirms that the Court will look at substance over form in deciding whether an employer-employee relationship exists and that many factors will be relevant in determining who the true employer is.