Frequently asked questions
What is considered unfair dismissal?
Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner and not a case of genuine redundancy.
There needs to be a valid reason for the dismissal such as capacity to do the job or the employee's conduct.
The staff member must have been employed for the organisation for at least 6 months before they can apply for an unfair dismissal.
Case study: Ms Kaye Gooch v Proware Pty Ltd
Kaye was a bookkeeper. She told by email that her employment was dismissed because she did not produce a medical certificate.
The matter went to Fair Work Australia, who decided, that while the employer had a valid reason for dismissal, they should have given her the opportunity to provide a response before the decision to dismiss her.
This made the decision to dismiss her employment unfair. She was therefore unfairly dismissed. Her employer was ordered to pay her six weeks of pay.
Small businesses have more lenient rules for dismissal under the Small Business Fair Dismissal Code, including:
- The employee must be employed for at least 12 months before they can apply for unfair dismissal.
- If an employer follow the process set out in the code, the dismissal is deemed to be fair.
To work out if the Code applies to your business, the employer must have fewer than 15 employees. Count the number of employees at the time the person was dismissed including the employee and any employees dismissed at the time, casual employees who had regular and ongoing hours and employees of associated entity.
Should you have any questions, please do not hesitate contact me on email@example.com or (03) 8691 3128.
Principal Lawyer at Legal Enablers
Employee v Independent contractor- What's the difference?
Your obligations in law vary depending on whether the hire is an employee or an Independent contractor. For example, employees are owed superannuation payments and other entitlements while independent contractors are not. Your obligations may extend to different areas of law including superannuation law, taxation law and employment law.
There are multiple factors which determine who is an employee and who is a contractor. The Courts look at the whole situation and come to a decision based on a few key factors which are set out below.
The factors which determine if a person is an independent contractor or an employee are:
- Degree of control over how work is performed: If they perform work under your direction, they are more likely to be an employee. Whereas a contractor is more likely to have a high level of control in determining how work is performed.
- Hours of work: Employees generally work standard hours except casuals who can work on a variable casual basis. Whereas an independent contractor can decide their hours of work.
- Expectation of work: Employees generally have an expectation of work and contractors are generally engaged to complete a specific task.
- Risk: Employees bear no financial risk. Whereas an independent contractor is responsible for their own profitability and if something goes wrong, they are legally responsible for poor work or liability. Therefore independent contractors often take out their own insurance.
- Superannuation: Employees are entitled to superannuation payments. Generally, independent contractors are required to pay their own superannuation. There are some situations where independent contractors are entitled to superannuation payments.
- Tools and equipment: Employers usually provide tools of the trade (such as ladders, computers, software and tools) or a tool allowance is provided. Whereas independent contractors are required to provide their own tools.
- Tax: Employees have their income deducted by their employer. Whereas, independent contractors are responsible for allocating and paying their own tax.
- Method of payment: Employees are usually paid regularly (weekly, fortnightly or monthly). Independent contractors send an invoice for payment.
- Leave: Employees are entitled to leave, including sick leave, annual leave, personal/carers' leave, annual leave (and leave loading for casual employees). Whereas, Independent contractors do not receive paid leave.
Employers beware. Disguising an employment arrangement as an independent contractor relationship to avoid employee entitlements could be a sham contract. There are very serious penalties.
"Asking your new hire to get an ABN and putting a term in their contract that they are an independent contractor is not enough, it could put you in breach of the law." Caroline Mense, Principal Lawyer at Legal Enablers said.
Other legal tests: Superannuation, Tax and Payroll
So far this article was from an employment law perspective. The tests for tax, superannuation and payroll are different. We will go through the tests below.
Even if a person is an independent contractor, the superannuation laws can deem the worker to be an employee for your superannuation obligations. The Superannuation Guarantee (Administration) Act 1992 (Cth) could deem a worker to be an employee:
If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.
Most States and Territories of Australia deem payments to contractors to be 'taxable wages' and therefore subject to payroll tax, subject to some exemptions. Please note, Western Australia has very different legislation to the other States and Territories.
Summary The correct classification of your staff is important. Wrongly a person as an independent contractor when, in fact they are an employee can pose the following risks:
Superannuation may be owed.
Payroll tax plus penalties and interest may be owed to the Australian Tax Office.
Employee entitlements including Modern Award, Enterprise Agreement or minimum pay rates and penalties for breaches of the Fair Work Act and leave entitlements including leave loading. Back pay and penalties could apply.
Employees are entitled to protections under the Fair Work Act including unfair dismissal and general protections.
For help with the classification of your workers or any other legal questions, please do not hesitate to contact me on (03) 8691 3128.
Principal Lawyer at Legal Enablers
What do I need to do legally, when hiring staff?
Know the person's status. The Fair Work Ombudsman explains:
- "Full-time employees work 38 hours per week and have ongoing employment. They have a regular pattern of hours and can be asked to work additional hours if the hours are reasonable."
- Part-time employees: work less than 38 hours per week and have ongoing employment.
- Casual employees aren’t guaranteed a certain amount of hours of work a week. They are
usually paid an additional amount called a ‘casual loading’ because they don’t get other entitlements like paid sick leave or annual leave.
- Fixed term employees are engaged for a specified period of time, task or season, e.g. a fixed term employee may be used to cover a parental leave absence or to work on a particular project."
Throughout the hiring process, the Fair Work Act provides general protections to protect workplace rights.
- Check whether a Modern Award or an Enterprise Agreement applies. Where a Modern Award applies, it sets out what the minimum wages and entitlements for that industry and level of experience.
- Write a job description, job advertisement, selection criteria and interview questions.
- When interviewing, consistently ask the same questions to each candidate and record the candidate's answers. When assessing the candidates, grade their responses against the selection criteria. This creates a fairer system and reduces bias.
- Check references and record responses. If you need to contact referees who are not listed on the resume, contact the candidate and ask for their permission to contact their referee/former employer to ensure privacy compliance.
- Keep applications secure and confidential.
Provide the following documents:
- Letter of engagement- Employment agreement
- Fair Work Information Statement
- Company policies and procedures- eg: code of conduct, uniform, social media policies
- Tax file number declaration and superannuation choice forms.
- Employers are responsible for administering PAYG, withholding tax and superannuation on behalf of employees.
- Pay workers compensation insurance.
- Establish workflows, checklists, OH&S policies and procedures and key performance indicators so the employee is set up for success.
Should you have any questions, please do not hesitate to contact me on firstname.lastname@example.org or (03) 8691 3128.
What should a shareholders agreement include?
The key elements you need in a shareholder agreement are:
- Director appointments: How and when directors are appointed to the company and how and when they can be removed.
- How shares are paid for and issued: Shares can be paid for through paying money, sharing their IP or providing services ('sweat equity'),
- How the company is managed: The agreement should set out the types of decisions the director(s) can make on their own, which ones need to go to a vote, the voting procedures and whether they need a majority approval (50%), special majority (75%) or absolute majority (100%).
- Shareholder obligations: Where the shareholders are expected to provide services or IP for their shares, the conditions and requirement should be spelt out clearly.
- Shareholder rights: The shareholders are the owners of the company based on their percentage of ownership and share class. Different share classes have different rights. Examples of shareholder rights can include voting rights, participation in key company decisions such as appointment of directors and CEO, payment of dividends, a meetings, information access rights such as management reports and the company's financials.
- Share transfers: The agreement should set out when and how are shares sold. It should set out whether the shareholders can force another shareholder to sell their shares. These clauses are known as "drag along" and "tag along" rights.
- Disputes: The agreement should set out what happens if there is a dispute. This can relate to share sales, voting rights and dispute resolution processes.
- Exits: The agreement should set out an exit strategy. This makes people's rights clear from the outset. Examples of exits include buy outs of shares, listing the company for sale or the shares on the stock exchange. The agreement should set out both voluntary and forced sales of shares.
Should you have any questions, please do not hesitate to contact me on email@example.com or (03) 8691 3128. We offer free initial consultations.
Caroline Mense Principal Lawyer at Legal Enablers
Disclaimer: This article is generalist in nature. Seek legal advice tailored to your needs- contact us!
What is serious misconduct in employment?
Serious misconduct is defined in Fair Work Regulation 1.07 as:
1- Conduct that is wilful or deliberate and that is inconsistent with the continuation of the employment contract; and
2- Conduct that causes serious and imminent risk to the health and safety of a person or to the reputation, viability or profitability of the employer's business.
Examples include: theft, assault and failure to follow lawful and reasonable directions consistent with the employment contract.
What are the types of employment contracts?
Types of employment contracts and relationships:
- Full-time v part-time employment
- Fixed-term v ongoing (permanent) employment
- Casual employment contracts
- Labour hire employees
- External contractors and subcontractors