25 Feb Fair Work Commission: Employment and Non-Executive Director
The Fair Work Commission’s decision (Commission) in Feldschuh v Strong Room Technology Pty Ltd [2024] FWC 216 (Feldschuh v SRT) dealt with the issue of whether a paid non-executive director was an employee in certain circumstances.
Facts
The Commission’s decision of Feldschuh v SRT was made in the procedural context of Mr Feldschuh making a general protections involving dismissal and the Strong Room Technology Pty Ltd (SRT) raising jurisdictional objections to the application on the basis that Mr Feldschuh was not an employee and could not have been dismissed.
For more information on general protections applications, see our page here.
The facts in Feldschuh v SRT were uncontentious and seem to show common practices by smaller organisations when dealing with directors.
By way of a brief summary:
1. Mr Feldschuh commenced a non-executive director role with SRT in 2019. His appointment was initially not subject to any written agreement. He received $120,000.00 per year with the option to be paid in shares or cash.
2. Mr Feldschuh signed a written non-executive director agreement with SRT in 2020. Clause 7 of the agreement included that the agreement “constitutes the entire agreement and understanding”.
3. Mr Feldschuh’s directorship was extended for a further 12 months in August 2021.
4. On 12 September 2023, the board of directors unanimously voted to remove Mr Feldschuh as a director of SRT. Mr Feldschuh ended his directorship on 15 September 2023.
5. Mr Feldschuh received payslips from SRT which referred to annual leave, superannuation, salary, wages, employment details and PAYG.
Application of the Law for a Non-Executive Director
The Commission found that Mr Feldschuh was not an employee of SRT and so could not have brought a general protections application.
In making this decision, the Commission referred to the Full Bench of the Fair Work Commission decision of Broadway Homes Pty Ltd [2022] FWCFB 129, which considered the key propositions of the case Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1. These key propositions were as follows:
1. When characterising a relationship regulated by a wholly written, comprehensive contract which is not a sham or otherwise ineffective, the question is to be determined solely by reference to the rights and obligations under that contract. It is not permissible to examine or review the performance of the contact or the course of dealings between the parties.
2. The subsequent conduct of the parties may be considered to ascertain the existence of variation of contractual terms.
3. The multifactorial approach only has relevance in respect of the required assessment of the terms of the contract.
4. It is necessary to focus on those aspects of the contractual relationship which bear more directly upon whether the workers work was subordinate to the employer’s business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise. The question is: whether, by the terms of the contract, the worker is contracted to work in the business or enterprise of the purported employer.
5. Existence of contractual right to control activities of the worker (including how, where and when the work is done) is a major signifier of an employment relationship.
6. The label characterisation placed on the relationship is not relevant even as a “tie breaker”, or at least it is not determinative.
In determining that Mr Feldschuh was not an employee of SRT, the Commission provided, among other things, that “the written agreement indicates that no such employment relationship that is contended by the Applicant was in existence”, Mr Feldschuh had “not provided any evidence to the contrary” and “there is nothing… to suggest that this written agreement did not accurately record the duties [of] Mr Feldschuh.”
Conclusion
Feldschuh v SRT is another case since the High Court of Australia’s decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG operations Australia Pty Ltd v Jamsek [2022] HCA 2 that highlights the importance of a written contract when it comes to employment relationships.
If you have any questions about director agreements, please feel free to contact one of our staff.
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