Aust company to pay overseas employee $600,000 entitlements

Cases

Aust company to pay overseas employee $600,000 entitlements

A Full Federal Court has ordered an Australian-based company to pay an overseas employee almost $600,000, to cover entitlements due under the applicable contract of employment.

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A Full Federal Court has ordered an Australian-based company to pay an overseas employee almost $600,000, to cover entitlements due under the applicable contract of employment.

The issue

The central issue in this appeal was: Who was the employer of the appellant? Was the appellant, Dr C, still employed by iSoft Group in 2011 or by another group of companies?
 
In the appeal, it was agreed that between 2000 and 2008 iSoft Group was Dr C’s employer. He had been based and lived with his family in Singapore since 1982. In 2006, Dr C began to work in Bangalore, India, under a written contract.
 
In late 2007, the first respondent seconded Dr C to work in Chennai. Subsequently, Dr C and iSoft Group negotiated the terms of an agreement that he executed on 12 June 2008 that identified the terms on which he would work while in Chennai.
 
iSoft Group contended, and the primary judge found, that the 2008 agreement changed Dr C’s employer to the second respondent, IBA Health Asia Pte Limited (IBA Asia), a Singaporean company.
 
Contracts ended but relationship continued
 
The Full Bench of the Federal Court found that the primary judge erred by construing each of the 2000, 2006 and 2008 agreements as self-contained, discrete contracts:
‘His Honour had not been referred to the decision Concut [2000] HCA 64; 176 ALR 693 and the parties did not refer to that decision in their written submissions on the appeal. The Full Court drew the parties’ attention to that decision before the hearing. Its reasoning is apposite and applicable to the present matter. While the term of the 2000 agreement expired on 15 February 2003, it could not be said that, as a consequence, Dr C’s employment by the first respondent came to an end. He and the first respondent continued in an employment relationship from where that agreement left off. Having regard to the context in which the parties dealt and all of the evidence, there is no reason to conclude that a different employer was introduced to Dr C’s activities, or that anything changed in the way in which he and the first respondent continued to deal with or regard each other after February 2003.’
Notice period
 
The Full Bench found that a six months period applied under the contract and stated:
‘When the first respondent gave Dr C three months’ notice on 17 June 2011, it was not acting in accordance with his contract of employment. The notice was ineffectual. Dr C chose to accept the first respondent’s breach of cl 10.1(a) of his contract as a repudiation when he left. The first respondent had told him his position was to be made redundant, but had failed to give him notice of the termination of his contract in accordance with its terms. Given that it did not pay Dr C his annual and long service leave entitlements either, the first respondent was evincing an intention not to be bound by the contract in the period after 17 June 2011: Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327 at 351–352 per Fullagar J with whom Dixon CJ, Williams, Webb and Kitto JJ agreed. Dr Cohen is entitled to damages of six months’ pay in lieu of notice.’
Annual leave and long service leave
 
Since the governing law chosen by the parties in the 2000 agreement was that of New South Wales, the Long Service Leave Act 1955 (NSW) applied to define Dr C’s entitlement to such leave.
 
Dr C’s entitlement to annual leave pay arose because of the promise in cl 7.1 that Dr C earned the right to four weeks annual leave as a component of the consideration that iSoft Group agreed to pay for his services.
 
Redundancy
 
No express term in the 2000 agreement, as amended in 2006 and 2008 and over the course of the relationship, dealt with redundancy. The primary judge’s reasoning that a term could be implied by custom depended on his finding that the custom on which Dr C relied obtained both before and after 2000. The Full Bench disagreed finding that company practice was to pay redundancy:
‘In our opinion, his Honour erred in that finding because, first, the first respondent could not be bound by a custom derived from events before it was incorporated or carrying on business, secondly, cl 13.3(a) was an entire agreement clause that meant what it said, and, thirdly, there was only evidence of one situation in which the first respondent had paid redundancy to departing employees after 2000, and that was an insufficient foundation for the implication of a custom in accordance with the principles in Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; (1986) 160 CLR 226 at 236–238, 240 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ.
Fair Work Act — no application
 
The Full Bench agreed with the primary judge’s conclusion that Dr C was not an Australian-based employee within the meaning of the Fair Work Act:
‘That was because he was excluded from the operation of that Act by s 35(3). Dr C argued that he had had some duties to perform from time to time in Australia, and so he fell outside that exclusion. On the material in evidence, those duties, whatever they were, were not sufficiently significant to displace the ordinary and natural construction of s 35(3), that excludes from the operation of the Act overseas based employees who might perform no more than an insubstantial part of their duties in Australia.’
Appeal allowed
 
The Full Bench concluded:
‘For these reasons, the appeal should be allowed. The parties should bring in draft orders to the effect of these reasons and to deal with the issue of costs.

Order 2 made by the primary judge on 19 October 2012 be set aside.

Within 28 days of the date of this order, the first respondent pay the appellant the amount of AUD516,830.35, consisting of:

(a) payment in lieu of six months’ notice on the redundancy of the appellant’s position (AUD228,062.50);
(b) long service leave (AUD167,248.75);
(c) annual leave (AUD114,469.83); and
(d) outstanding balance of salary for the month of September 2011 (AUD7,049.27).’
Interest of $68,378 was added.
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