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Barry Lane
1 October, 2007  
To be, or not to be, a company director

Little Johnnie’s workplace laws bring out fabulously creative solutions by bosses to screw the unions – such as making employees company “directors”. Who said we’re not a clever little country? The trouble with these scams, as the AIRC discovered, is that the employers have to pay more attention to the details


imageWhen Gary Forsyth answered an ad in the paper for a job as a labourer with a fencing contractor it’s unlikely he would have expected that the managing director of Hi Security Fencing Systems Pty Ltd, Robin Hancock, would have invited him to join the company’s board of directors at his first interview.

But that’s what happened.

Even so, there remained strong indications that Forsyth was an employee: his work was supervised by a leading hand or foreman; he was subject to the direction of his supervisor; he had no capacity to delegate his work; he was paid weekly a flat hourly rate of $23.31; and the company deducted tax at an average rate of about 25 per cent.

As Brian Lacy, a senior deputy president of the Australian Industrial Relations Commission, shrewdly observed:

“All of this points to a relationship of employment independent of any role or responsibility Mr Forsyth might have had as a director of the company.”

Hancock insisted that he discussed with Forsyth what was involved in being a director, the variety of work and projects undertaken by the company, the involvement of interstate work and the potential range of financial returns and that he could obtain advances on a share of dividends for work undertaken.

In his evidence-in-chief, Hancock acknowledged that Forsyth asked whether he would be on wages because he needed a weekly income. He said he told his new “director” that the balance of the advances on share dividends would be distributed at the end of each job or the end of the financial year, whichever came first.

All the hallmarks of a fundamental breach of contract were looming. Forsyth thought he was going to be employed as a labourer at $23.31 an hour payable weekly whereas Hancock thought he was taking on a director and project manager for work involving interstate travel with a “potential range of financial returns including advances on share dividends”.

Despite this initial confusion and Forsyth’s rejection of Hancock’s offer of a directorship he started work on October 19, 2006. But it all ended in tears for Forsyth when he went to the CFMEU over some issue with his entitlements. This inflamed Mr Hancock and he was sacked on February 1, 2007.

Indeed, Hancock told Forsyth during negotiations for the job that “he was not really union” and that he “put everyone on as a director to get round the union and enterprise agreement”, notwithstanding that Hi Security Fencing Systems had entered into the Building and Construction Enterprise Agreement with the union in December 2005.

Hancock appears to be a keen supporter of Little Johnnie’s brand of workplace “choice”.

Even though Forsyth rejected the offer of a directorship, Hancock went through the motions of having him appointed. Paperwork was belatedly lodged with ASIC on January 17, 2007 which also coincided with the appointment of a new director and company secretary, a Mr Wallace.

Field work, job quotes for APEC and preparation of taxation and other returns probably distracted Hancock, who was company secretary at the time Forsyth was “appointed” a director, from actually lodging the necessary returns with ASIC.

imageOf course, there was the usual fancy footwork. The notice of Forsyth’s cessation as a director was recorded on February 2, 2007, but not lodged until February 9, 2007 and backdated to the same date as Wallace’s appointment on January 17, 2007.

SDP Lacy (pic) concluded:

“I find that Mr Forsyth was an employee of the company on and from October 19, 2007. Further, I find that on February 1, 2007 the company terminated his employment by telling him that he was to produce a written apology from the CFMEU to the company and could not return to work or the worksites until he had a written apology from the union. I also find that Mr Hancock’s evidence in respect of Mr Forsyth’s engagement and termination was unreliable.”

Fancy that. The written apology was required, no doubt, to assuage Hancock’s delicate feelings of hurt and shame following a scandalous allegation from the union that his company “was not abiding by the law”.

Leave to appeal against Lacy’s determination was dismissed – see Hi Security Fencing Systems Pty Ltd v Forsyth [2007] AIRCFB 729 (Senior Deputy President Watson, Deputy President Hamilton and Commissioner Simmonds – August 31, 2007).

The full bench thought there was no error in Lacy’s finding that Forsyth was an employee and not a director.

imageAnd what of that section in the Corporations Act that mandates the obligation of a company to obtain a “signed consent” from a prospective director before that person is appointed? This tiresome detail was nowhere to be found in the Hi Security Fencing case.

Hancock might find that not only is the CFMEU accusing his company of “not abiding by the law”, but the corporate plods from ASIC and the Workplace Ombudsman, Nicholas Wilson (pic), could be on his case as well.

In the human resources management department, Hancock reminds me of a couple of other up-and-coming entrepreneurs I wrote about on March 12.

Is it possible that Carl Williams, Steve Vizard and Robin Hancock all went to the same management school?