Fair Work Ombudsman v Ramsey Food Processing Pty Ltd looked at the issue of which company was liable to pay employee entitlements in circumstances where a separate company had been set up to supply workers to the first company.
The Ramsey Group of companies was set up for the purposes of running an abattoir. It was comprised of Ramsey Food Processing Pty Ltd (Ramsey Food) (which operated the abattoir), Ramsey Pastoral Company Pty Ltd (which acquired the pastoral land) and Ramsey Meats Pty Ltd (which sold the meat). Mr Ramsey was the “guiding mind” of the Ramsey Group.
As part of the operational arrangements set up by Mr Ramsey, separate companies were established to play the role of “employer” of staff at the abattoir. The “employer” company at the relevant time of these proceedings was Tempus Holdings Pty Ltd (Tempus).
Tempus supplied staff to Ramsey Food as necessary under what appeared to be a labour-hire arrangement.
In 2008, Tempus notified all staff that their employment was terminated and went into voluntary administration. Substantial money was owed to the employees. The Fair Work Ombudsman initiated proceedings against Ramsey Food for the outstanding employee entitlements.
Finding of the court
Buchanan J found that Ramsey Food was the true employer and liable to pay the outstanding employee entitlements. His Honour based his findings on the fact that Tempus was completely reliant on Ramsey Foods, had no assets or management structure and did not operate as an independent business. It was in essence a corporate shell to protect Ramsey Food from liability from employees.
The assessment of outstanding employee entitlements is an issue faced by all insolvency practitioners in relation to all types of administrations.
When a legitimate labour-hire arrangement exists, liability usually rests with the labour-hire company as the employer and, accordingly, the labour-hire company will be liable for employee entitlements.
The reason why this case is of note is because Buchanan J found that, despite a labour-hire arrangement being in place, the true nature of the employment relationship was not one of labour-hire and Ramsey Food was ultimately held liable for Tempus’ employees’ entitlements.
This could have ramifications for insolvency practitioners in determining the employee entitlements which a company (in all types of administration) is liable for. This case demonstrates that it may not always be clear based solely what employees are listed on the company’s books.
Whether the company is liable for employee entitlements will depend on the substance of the employment relationship between the company and the employee. An insolvency practitioner should not simply rely on the record of employees of a company in assessing potential liability of the company to pay employee debts and the value of those debts.
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