Can I be classified as an employee of a business if I’m a director or a partner in a business?

Can I be classified as an employee of a business if I’m a director or a partner in a business?

The Fair Work Act 2009 (Cth) and industry awards and/or enterprise bargaining agreements provide industry and national minimum standards and safeguards for employees. These safeguards apply to entitlements including leave, remuneration, and redundancy payment(s). The Fair Work Act 2009 (Cth) protects your rights via a means that your employer cannot contract out of.

The protection afforded by these mechanisms is desirable. In order for the protections and safeguards to apply to you, you must be considered an employee of the business. In most cases this will be non-contentious. However there are some circumstances where it may not be as clear cut if you are an employee of a business. For instance if you are a director or a partner in a partnership, then you may not be an employee of the business.

Partnership

A partnership is a group or association of people who carry on a business and distribute income or losses between themselves. While it is not essential that a written partnership agreement exist, it is usually a good idea to have a written document outlining:

  • The division of profit and loss
  • The length of the partnership, if applicable
  • How disputes will be resolved
  • Which partner will have authority for certain tasks
  • Which partner can bind the partnership in contracts
  • How the agreement can be terminated
  • What happens in the event of death of one of the partners
  • How assets etc. will be divided on the dissolution of the partnership

Partners in a partnership agreement, like sole-traders, are not considered employees for the purposes of the Fair Work Act 2009 (Cth) or any industry awards or enterprise bargaining agreements. However, you and your partners may employ other workers, who would be considered employees, and you would need to meet your obligations under the Fair Work Act 2009 (Cth) or any industry awards or enterprise bargaining agreements in relation to those employees.

This means that if there is a dispute you may need to commence legal proceedings under the partnership agreement, if you have one, or the Partnership Act 1958 (Vic). It would be advisable that you seek legal advice if there is a dispute in relation to your partnership.

Director

Companies differ from partnerships in that the director and the office that they hold does not prevent them from also being engaged in an employer/employee relationship with the company. As such a Director may also be considered an employee of a company and will therefore have access to the entitlements in the Fair Work Act 2009 (Cth) and industry awards and/or enterprise bargaining agreements to the extent of their employee/employer relationship.

 

 

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