FWC examines employment rights in cases of significant business ownership
The Fair Work Commission (FWC) recently dealt with a case where a worker claimed she was forced to resign after refusing to participate in a proposed business restructure. The worker, who had been with an accounting firm since 2008 and held positions as director and shareholder, argued her departure qualified as a dismissal under the Fair Work Act 2009.
On August 21, 2024, the worker lodged an application with the FWC under section 365 of the Fair Work Act 2009. She claimed that during a July 31, 2024 boardroom meeting, she was prevented from leaving and faced pressure regarding business arrangements that she believed could affect her professional standing with the Tax Practitioners Board.
The case examined whether someone holding both ownership and operational roles could be classified as an employee, and whether their departure constituted a dismissal under the Fair Work Act 2009.
The worker joined the accounting firm in November 2008. By July 2010, she was appointed director and purchased a 50% shareholding for $600,000 through bank financing. Her shareholding later changed to 20% through various transactions involving other shareholders.
A letter from October 2010 stated the worker "receives a Gross Annual Salary of $150,000 as of the 1st July 2010. This figure is inclusive of Salary Sacrifice of $50,000 per annum for the repayment of a Westpac Business Loan." The managing director later explained this letter was prepared by the worker for a rental application.
In mid-2018, a Securityholders' Deed was drafted to govern relationships between shareholders, though not all parties signed the document.
The firm operated as an incorporated entity while following the accounting industry convention of referring to owner-operators as "partners."
The FWC examined how control was exercised within the organisation. Evidence showed partners had significant autonomy over their work and client relationships. The worker's testimony revealed the management structure:
"[The staff] were responsible to the directors and/or partners... the budgets that were prepared by [a partner] for each of the senior accountants, including each of the partners, had their own budget."
In September 2023, the firm proposed director remuneration including $230,000 for those with over 10 years of service and $200,000 for others, plus benefits such as car allowances and technology provisions.
When questioned about reporting structures, the worker confirmed: "And the only people that you reported to, in relation to your performance in the practice, was the body comprised of yourself and the other directors?---Yes."
The Fair Work Act 2009 requires examining the "real substance, practical reality and true nature of the relationship." The FWC focused on two key aspects: the right to control work performance and whether someone operates within their own business or the employer's business.
The FWC noted: "The issue of control weighs heavily against a finding that [the worker] is an employee. While the partners of [the employer] are not partners according to a legal definition because the firm is incorporated, those partners have an independence and ownership that differs from an employee."
The Commission observed that "were liability eventually found, [the worker] would be 20% liable to herself" due to her shareholding position, highlighting the complexity of the relationship.
The FWC determined the worker was not an employee at any relevant time. They found that partners "have complete control over their clients and are not subject to direction in the performance of their work. They report only to their other partners as a group."
Even if employment status had been established, the FWC found no dismissal occurred, stating: "[The employer] did not engage in conduct with the intention of bringing the relationship to an end. The sole intention was for whatever relationship to continue, albeit with a different structure and shareholding. [The worker] had an effective and real choice as to whether to resign."
The application was dismissed, establishing that the worker's position as a shareholder and director placed her relationship with the firm outside the scope of traditional employment protections under the Fair Work Act 2009.
