In the recent case of Travis Barnes v Castlemaine Church of Christ  FWC 2493 the application of the Small Business Fair Dismissal Code (“the Code”) was found not to apply despite being a small church with limited part time staff as the number of employees of the associated movement of the employer were included in the count. As such the unfair dismissal case bought by the employee was considered in respect to the more stringent standards required of a larger entity under the Fair Work Act 2009 (“Act”). In short, a small business or small church may not be able to rely on the Code in the event they dismiss an employee where they are closely associated with a larger entity.
Pastor Travis Barnes was employed as the Associate Minister of the Castlemaine Church of Christ (“CCC”) for two and half (2.5) years. He was dismissed on the basis of alleged serious misconduct. Pastor Barnes was in conflict with the Senior Minister over the direction of the Youth Ministry. Neither party were respectful towards one another. Throughout a period of 6 months, Pastor Barnes changed his mind frequently about resigning. When Pastor Barnes finally decided he wanted to stay, the Board had already acted upon the prior instruction of his resignation by reinstating the Senior Minister on a full-time basis (he was previously working part-time). The Board further pressed for his resignation to avoid further internal division and to fulfill their commitment to the Senior Minster. The Board later sent Pastor Barnes a “show cause” letter, which he failed to adequately respond to, then sent him a formal termination letter. Once the decision of the Board to terminate Pastor Barnes’ employment was communicated to the members of CCC, one-third (1/3) of CCC’s members signed a petition for his reinstatement.
The Alleged Misconduct
Pastor Barnes had engaged in conversations with members of the congregation about his conflict with the Senior Pastor. These members were in a pastoral relationship with Pastor Barnes and had their own issues with the Board, making them an unhealthy basis for objective advice. By seeking counsel from members of CCC, Pastor Barnes let his personal interests get in the way of his duty to serve the best interests of the members of the congregation and CCC. As the congregation began to take sides in the conflict the unity of CCC began to fracture. Throughout this period, CCC reviewed Pastor Barnes’ employment, arranged various meetings with the Board, however, no mediation was agreed to between the parties.
Small Business Employer Decision and Implications
The commissioner determined that CCC was not a small business employer, so the Code did not apply. Pursuant to s 23 of the Act, a small business employer must employ fewer than fifteen (15) employees. However, the employees of associated entities must be considered when counting the primary businesses’ number of employees.
The following circumstances convinced the commissioner that the Churches of Christ in Victoria and Tasmania Incorporated (“CCVT”) was an associated entity with substantial control over CCC pursuant to ss 50AAA and 50AA of the Corporations Act 2001 (Cth):
- CCC was a member (affiliate) of the registered association CCVT.
- CCC’s constitution required they be an affiliate with CCVT.
- CCC’s constitution requires CCC pay annual membership fees to CCVT.
- CCC had limited autonomy as they had to comply with CCVT’s values, purposes, constitution and disciplinary measures.
- CCC had to rely on CCVT’s guidance regarding significant financial and operational matters.
- CCTV had the power to deal with CCC property as it saw fit.
- CCVT has significant influence over the administration of CCC, particularly given they have control over various Codes of Ethics and Policies that must be implemented by CCC.
CCC was considered not to be a small business in accordance with the Code as it together with the associated entity, CCVT, at the time of the dismissal, had more than fifteen (15) employees.
For reference, s 50AAA of the Act is set out as follows:
s 50AAA Associated entities
(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.
(2) This subsection is satisfied if the associate and the principal are related bodies corporate.
(3) This subsection is satisfied if the principal controls the associate.
(4) This subsection is satisfied if:
(a) the associate controls the principal; and
(b) the operations, resources or affairs of the principal are material to the associate.
(5) This subsection is satisfied it:
(a) the associate has a qualifying investment (see subsection (8) in the principal; and
(b) the associate has significant influence over the principal; and
(c) the interest is material to the associate.
(6) This subsection is satisfied if:
(a) the principal has a qualifying investment (see subsection (8) in the associate; and
(b) the principal has significant influence over the associate; and
(c) the interest is material to the principal.
(7) This subsection is satisfied if:
(a) an entity (the third entity) controls both the principal and associate; and
(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.
(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:
(a) has an asset that is an investment in the second entity; or
(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.
For reference, section 50AA of the Act is set out as follows:
s 50AA Control
(1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity’s financial and operating policies.
(2) In determining whether the first entity has this capacity:
(a) the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and
(b) any practice or pattern of behavior affecting the second entity’s financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).
(3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity’s financial and operating policies.
(4) If the first entity:
(a) has the capacity to influence decisions about the second entity’s financial and operating policies; and
(b) is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity’s members;
the first entity is taken not to control the second entity.
Churches with associations to larger organisations should exercise caution when relying on the lower standard of the Code to dismiss an employee. Instead, Churches need to align their processes with the more stringent principals of unfair dismissal set out within the Act. Alternatively, Churches need to show some level of autonomy and independence from the associated entity if they wish to rely on the Code.
Autonomy and independence can be demonstrated where:
- There is no related bodies corporate.
- The Constitution does not require affiliation between the entities.
- The Church has substantial control over significant financial and operational matters, including but not limited to the appointment and accreditation of Ministers or Pastors, property use, good governance, strategic direction, and church planting.
- The associated entity has limited practical influence and input over the financial and operative matters of the Church.
- The Church has their own mission and set of values they follow.
- The Church is subject to limited or no disciplinary action from the associated entity.
The commissioner determined that the dismissal was unjust and so, unfair, even though the reason was valid, and the process followed by CCC was fair. Pastor Barnes was notified of the reason for dismissal, he was given opportunity to respond to the notice, he was permitted a support person in meetings, the CCC’s expectations about his activities were clearly communicated to him, and CCC called upon advice from lawyers and CCVT in respect to the matter.
The reason for dismissal was valid because Pastor Barnes lead members of the congregation whom he was in a pastoral relationship with to believe things that were not as they were. His actions sowed the seeds of division and were not reconciliatory, which was inconsistent with the Code of Ethics for Ministers. However, this reason was not sufficient to empower the Board to terminate the employment of Pastor Barnes as they did not comply with CCC’s Constitutional requirements for terminating a Minister, in particular Clause 8.1 (a)(iv).
For reference, see below excerpt of sub-clauses 8.1(a)(ii) to(iv) of CCC’s Constitution:
A Minister’s appointment can be terminated by the Board in three ways:
- By recommendation from the Board presented to a Special Business Meeting for endorsement by the Church. The recommendation must be carried by at least seventy five percent (75%) of the votes cast. Voting shall be by a secret ballot over two (2) consecutive Sundays following the Special Business meeting; or
- At a Special meeting calling for the termination of the Minister. The motion must be carried by at least seventy five percent (75%) of the votes cast. Voting shall be by as secret ballot over two (2) consecutive Sundays following the Special Business Meeting; or
By the Official Board, effected immediately, in cases of extraordinary circumstances. Any such extraordinary circumstances must be outlined in the Minister’s Workplace Agreement.
It was decided that reinstatement of Pastor Barnes was an inappropriate remedy as it would further aggravate existing divisions within CCC. Instead, compensation was deemed the appropriate remedy. Since CCC was associated with CCVT, they were held to have the appropriate funds to compensate Pastor Barnes for the unfair dismissal. Having regard to the fact that one-third (1/3) of CCC’s members signed a petition in support of Pastor Barnes, had the constitutional process for termination been followed, it is likely a recommendation from the Board to terminate the appointment of Pastor Barnes would have been endorsed. Therefore, the compensation awarded was calculated in accordance with the pay he would have received in his final four (4) weeks of employment. Twenty percent (20%) of the compensation was then reduced to account for Pastor Barnes’ misconduct. No further reduction was made even though Pastor Barnes was paid three months’ salary in lieu of notice of termination.
This article was written by Lauren Hooper