Is my employer a small business if it has associated entities?

What is a small business?

A Small Business is a business that employs fewer than 15 employees.  The number of employees is determined by a head count of all full-time and part-time employees.  Casual employees employed on a regular or systematic basis are also included in the count.

Are associated entities included in the ‘head count’?

Associated entities of the business are included in the head count.[1]  Entities will be associated if their relationship falls within the definition of section 50AAA of the Corporations Act 2001 (Cth).  A common and straightforward example of associated entities is related companies.  Two entities will be related if they have a subsidiary-holding company relationship, or if they are subsidiaries of the same holding company.[2]  In plain English, this means that two companies are related if one company owns the other, or both companies are owned by the same parent company.

Two companies will also be related entities if one entity controls the other, or they are both controlled by the same entity.  Control is defined by section 50AA of the Corporations Act 2001 (Cth) as the practical capacity to determine the outcome of decisions regarding financial and operating policies.  Determining whether one entity controls another is significantly more complex than determining whether they are related, and will depend largely on the factual circumstances of the two entities.  Therefore it is recommended you seek legal advice for any matters in relation to control.

Why does it matter?

If your employer is a Small Business, then for the purpose of the Fair Work Act 2009 (Cth) it will be bound by different and less onerous rules when dismissing employees. However, even if your employer is a Small Business, you can still be unfairly dismissed and be entitled to compensation and there is no restriction in relation to making a general protections application.  Accordingly, if you have been dismissed unfairly, we recommend you seek urgent legal advice whether your employer is a Small Business or not.

[1] See e.g. Pretorius v Gardens of Italy Pty Ltd [2016] FWC 2503 (O’Callaghan SDP, 22 April 2016).

[2] Corporations Act 2001 (Cth), s 50AA.