‘Employee’ claim rejected – he was a contractor, and a de facto director

A ‘employee’s’ claim for payment of unpaid wages by a company in liquidation was rejected by the department under the Fair Entitlements Guarantee Act 2012 (the FEG Act). The FEG Act provides financial assistance for employees who have not been fully paid for work done for a company to which a liquidator is appointed. Directors of a company cannot claim.

On appeal to the Administrative Appeals Tribunal (AAT), the departmental decision was upheld, on two bases, that the claimant, Sam, was a contractor, not an employee; and even if he were an employee, he was a de facto director of the company in liquidation.

There was no written contract or other sufficient evidence that Sam was ever an employee.  Among the evidence put forward by Sam was his tax returns.  But it was “telling” that it was not until July 2015 that he lodged documents with the Australian Taxation Office which recorded a salary. The AAT gave little weight to what it saw as

“self-serving documents lodged at around the same time as the applicant was first making his claim for monies under the FEG Act”.

There were 23 employees for whom tax was withheld and superannuation was paid, but this did not include Sam.

The AAT held that Sam was also a de facto director because he commonly performed tasks carried out by a director and held himself out as a director: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6. As general manager, he managed the money, cash flow, the staff and the clients. Over time, he played an active role in employing new staff and engaging service providers. He pursued business development and ‘worked on anything that came in’. His work was not monitored or supervised in his role as general manager.

Again, it was “very telling” that he signed numerous credit applications as a director, and he gave a director’s guarantee for credit given to the company for numerous suppliers.

His evidence that he

“did not realise he was signing as a director and that he signed a blank form without reading it and that they were completed after he signed them”

was rejected.

See McCann and Secretary, Department of Jobs and Small Business [2018] AATA 3030.


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