16 December 2016

Spot the difference

Employment Law
Federal

Asked

A small business employer is one that employs fewer than 15 employees, including those of associated entities.

Are directors who work in the business but do not draw a wage (because they draw a dividend instead) included in the count?

Kind regards

Answered

Thank you for the question.

A director is not necessarily an employee. Under the Fair Work Act 2009 'employee' is defined as having its ordinary meaning. The fact that the directors do not draw a wage is not in itself enough to determine whether or not an employment relationship exists.

Whether an employment relationship exists will usually be obvious by reference to matters such as the duties performed by the director, regularity of hours worked, etc.

The approach currently being adopted by the courts is that it is only by making a balanced evaluation of all the features of a relationship that one can determine whether there is a sufficient quality and quantity of control by one party over another to indicate the existence of an employment relationship.

This test is known as the multiple-indicia test and the High Court of Australia considers it the primary test to be used.

The High Court in Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1 outlined the multi-indicia approach:

The existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment ... Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision of holidays, the deduction of income tax and the delegation of work by the putative employee.

Regards

Mentor