Trusts – Who’s the employer and are they covered?
Generally speaking, in the case of trusts, the employer will be the trustee.
In one of the first cases to consider the coverage of WorkChoices in respect of trust arrangements, the South Australian Industrial Relations Commission (“SAIRC”) concluded that where the trustee is a natural person, or a number of natural persons, the employer is not a constitutional corporation: Dr IJ Hough Veterinary Surgery Veterinary Staff Enterprise Agreement 2006 and Glenelg Veterinary Clinic Veterinary Staff Enterprise Agreement 2006, SA IRC 10 (5 May 2006) (“Glenelg”).
In that case, the SAIRC was asked to approve two Enterprise Agreements covering employees of two South Australian veterinary surgeries pursuant to s 79 of the State’s Fair Work Act 1994. However, in hearing the applications, it was necessary for the SAIRC to first determine whether it had jurisdiction to approve the Agreements in light of WorkChoices.
The SAIRC found that the WR Act did not extend to cover a trust operating a veterinary clinic. In reaching this conclusion, Deputy President Hampton stated that:
“It is sufficient for present purposes for me to deal with these applications on the basis that on any view as adopted by the High Court to date, the concept of a constitutional corporation relevantly requires that the employer be a corporate entity. Unincorporated bodies or persons do not fall within this category notwithstanding the extent and substance of their financial and/or trading activities. These two applications involve trust arrangements”.
The Deputy President then went on to state:
“…it is necessary to consider the identity and nature of the trustee arrangements and potentially the beneficiaries. Where the trustee is a corporation, it might be necessary to consider whether it is the actual employer and whether it is a trading or financial corporation within the meaning of the Commonwealth Act. Where the trustee is a (non-corporate) family, partnership or individual trustee it might also be necessary to consider whether the beneficiaries include a trading or financial corporation and if so, to determine which entity is the actual employer of the employees for present purposes”.
In one of the agreements, the trust was nominated as the employer in the agreement although the SAIRC noted that it was likely that the two individuals, who were joint trustees of the family trust, were at law the employer.
In the other agreement, the employer nominated was a trust, the sole trustee of which operated a veterinary practice on behalf of himself and another person. The SAIRC formed the view that it was likely that this trustee was the employing entity.
In any event, as there were no corporate entities involved in either of the trust arrangements, the SAIRC approved the two agreements.
However it should be noted, where there is a trustee corporation, the issue becomes whether the corporation is a constitutional corporation – put simply, whether the trustee corporation carries on a business. The key principles identified by the NSWIRC in Garvey, above, may then become relevant.
Factors to consider in determining coverage
Some useful questions to ask in attempting to identify the correct employing entity and/or in determining whether or not an entity is a ‘constitutional corporation’ for the purposes of WorkChoices, include:
In relation to trust arrangements:
– Who is the trustee of the trust?
– What / who is the entity through which wages and other employee entitlements are paid?
– What / who is the employing entity identified in any employment records or documents?
– What / who is the employing entity identified for the purposes of employer’s statutory obligations (e.g. superannuation, workers compensation, insurance etc)?
In relation to incorporated associations:
– Is a significant part of its revenue derived from trading activities (i.e. activities involving the exchange of goods or services and which produce revenue for the entity)?
– Does the entity engage in financial activities to a substantial or significant extent?
As Deputy President Hampton stated in Glenelg, “considerable debate will no doubt ensue about the meaning and application of the concept of a constitutional corporation in the months and years to follow”. In the meantime, the slowly emerging body of case law in this area may provide some assistance.