A DECISION by the Full Bench of the Australian Industrial Relations Commission has serious industrial relations ramifications for professional services providers such as doctors and pharmacists.
A DECISION by the Full Bench of the Australian Industrial Relations Commission has serious industrial relations ramifications for professional services providers such as doctors and pharmacists.
The commission ruled it was possible for industrial disputes to be directed against trading entities rather than companies in a case brought before it that involved the sacking of an assistant by Northam Pharmacy.
Many professional services firms such as pharmacies, doctors and veterinarians opt to run their practice through a trading entity – sometimes a nominee company – that is controlled by another entity, such as a family trust or company, that they own.
This is usually done for tax purposes rather than to gain any industrial relations protection.
Blake Dawson Waldron partner David Parker said this was an important decision.
“There are a lot of businesses that run using a similar structure and this decision will cause those businesses to have a close look at what Federal industrial award they might apply to people employed in the business and any effect that might have on their operations,” Mr Parker said.
“Whether the decision has any impact in the context of more arm’s length labour supply arrangements remains to be seen.”
There is a concern amongst some IR practitioners that the ruling could provide a boon for unions because it effectively created a limited common rule award operation in the federal system.
Fallon Group partner Jim Loaring said such structures were designed to make income splitting easier, providing it was done in accordance with Australian Tax Office guidelines.
“They usually add a small percentage on top of the costs of hiring someone who adds to the business and use that percentage for profit shifting,” Mr Loaring said.
A single IRC commissioner case had previously decided in the pharmacy’s favour but the former employee appealed against this decision. The pharmacy’s owner was the sole director of a nominee company that provided labour and other services to the pharmacy.
The sacked assistant had worked for the pharmacy’s previous owner (another nominee company), and her employment continued without alteration under the new owner.
The assistant was dismissed for serious misconduct – failing to put takings in the pharmacy’s cash register, thereby breaking a cash-handling policy.
She was even charged by the WA Police Service with stealing but was acquitted of that charge.
The assistant then took the matter to the IRC.
The service company submitted the commission did not have jurisdiction to hear the case because the assistant was not a Federal award worker employed by a constitutional corporation.
In overturning the original commission decision, the full bench found it was possible to bind a business to an award, regardless of whether the ownership of that business changed.
The pharmacist and his nominee company were, in effect, joint venturers in conducting the pharmacy’s business, which meant the nominee company was bound by the relevant award as an assignee or transmittee of part of the business.
According to the IRC, it is the award obligation of an employer that attaches to the transmission of business.
While the transmitted business was not an employer, that obligation did not exist; but when the business was an employer, the commission said sufficient nexus to establish the transmission could be imputed from conduct or connection touching employment in the relevant activity.
The commission ruled it was possible for industrial disputes to be directed against trading entities rather than companies in a case brought before it that involved the sacking of an assistant by Northam Pharmacy.
Many professional services firms such as pharmacies, doctors and veterinarians opt to run their practice through a trading entity – sometimes a nominee company – that is controlled by another entity, such as a family trust or company, that they own.
This is usually done for tax purposes rather than to gain any industrial relations protection.
Blake Dawson Waldron partner David Parker said this was an important decision.
“There are a lot of businesses that run using a similar structure and this decision will cause those businesses to have a close look at what Federal industrial award they might apply to people employed in the business and any effect that might have on their operations,” Mr Parker said.
“Whether the decision has any impact in the context of more arm’s length labour supply arrangements remains to be seen.”
There is a concern amongst some IR practitioners that the ruling could provide a boon for unions because it effectively created a limited common rule award operation in the federal system.
Fallon Group partner Jim Loaring said such structures were designed to make income splitting easier, providing it was done in accordance with Australian Tax Office guidelines.
“They usually add a small percentage on top of the costs of hiring someone who adds to the business and use that percentage for profit shifting,” Mr Loaring said.
A single IRC commissioner case had previously decided in the pharmacy’s favour but the former employee appealed against this decision. The pharmacy’s owner was the sole director of a nominee company that provided labour and other services to the pharmacy.
The sacked assistant had worked for the pharmacy’s previous owner (another nominee company), and her employment continued without alteration under the new owner.
The assistant was dismissed for serious misconduct – failing to put takings in the pharmacy’s cash register, thereby breaking a cash-handling policy.
She was even charged by the WA Police Service with stealing but was acquitted of that charge.
The assistant then took the matter to the IRC.
The service company submitted the commission did not have jurisdiction to hear the case because the assistant was not a Federal award worker employed by a constitutional corporation.
In overturning the original commission decision, the full bench found it was possible to bind a business to an award, regardless of whether the ownership of that business changed.
The pharmacist and his nominee company were, in effect, joint venturers in conducting the pharmacy’s business, which meant the nominee company was bound by the relevant award as an assignee or transmittee of part of the business.
According to the IRC, it is the award obligation of an employer that attaches to the transmission of business.
While the transmitted business was not an employer, that obligation did not exist; but when the business was an employer, the commission said sufficient nexus to establish the transmission could be imputed from conduct or connection touching employment in the relevant activity.
