Does the Small Business Fair Dismissal Code apply to big business franchisees?

By Portner Press on August 19th, 2019
  1. Industrial Instruments
  2. Fair Work Act

To qualify as a small business under the Small Business Fair Dismissal Code, a business must employ fewer than 15 employees, including:

  • employees in related entities, e.g. subsidiaries or parent companies, including those outside Australia;
  • part-time employees; and
  • casual employees employed on a regular and systematic basis.

So does this apply to franchisees of large businesses?

This question was raised in a Fair Work Commission (FWC) hearing earlier this month when a Ray White franchise in Brisbane’s Ferny Hills made a jurisdictional objection to a property manager’s application for unfair dismissal remedy.

The employer submitted that it was a small business as it only employed four people and the employee had not served the 12-month minimum employment period under the Small Business Fair Dismissal Code to qualify for unfair dismissal protection.

However, the employee argued that her employer was not a small employer as it was an associated entity of Ray White (Queensland) Pty Ltd.

The employee submitted that as the franchisor exerted significant control over her employer in the way that it conducted its business – including training, mentoring, payroll and HR services – her employer was limited to a six-month probationary employment period like the parent company, which the employee had completed.

In its defence, the employer produced a copy of page 47 of its franchise agreement which included the following clause:

11.1 Relationship of the Parties

(a) No relationship

The relationship between the Franchisor and the Franchisee is as independent contractors, and does not involve any relationship of agency, fiduciary, servitude, employment, partnership, joint venture or association. Accordingly, the employees, agents and subcontractors of one Party are not for any purpose the employees, agents or subcontractors of the other Party.

FWC Commissioner Chris Simpson said that with this evidence he was satisfied that the employer was a Small Business Employer within the meaning of section 23 of the Fair Work Act.

“The nature of the relationship from the material put before the Commission is that of a typical franchise agreement and not a relationship that falls within that of associated entities as described in any of sub sections (2), (3), (4), (5), (6) or (7) of Section 50AAA of the Corporations Act 2001,” Commissioner Simpson said.

He upheld the employer’s jurisdictional objection and dismissed the employee’s application for unfair dismissal remedy.

Are you a small business?

Do you know how legal obligations for small employers differ to other employers when it comes to:

  • unfair dismissal;
  • redundancy pay;
  • flexible work arrangements;
  • anti-discrimination (for some partnerships);
  • gender equality reporting; and
  • workers’ compensation insurance?

Find out by reading chapter S8 Small Business Employers in the Employment Law Practical Handbook.

You can access it on a free, no-obligation trial if you aren’t a subscriber.

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