The following is a summary from a recent decision of the Federal Court of Australia in Cohen v iSOFT Group Pty Limited.
A corporation in Singapore hired a medical doctor from NSW, Australia. The contract was to last for two years and it provided that the laws of NSW would apply in case of any dispute arising from the terms of his job contract. While the contract was in force, the Singapore corporation was bought by a conglomerate although it continued its corporate existence. The MD’s contract was renewed for another two years, this time, the employer appearing in the second contract was the conglomerate that bought the Singapore corporation. The MD travelled to India to discharge his functions there.
When his second contract ended, it was renewed once more by the Singapore corporation who became his new employer under the third contract. He continued working for the Singapore corporation for two more renewals of contract. Through all these renewals of contracts, the contracts all provided that all other terms under the former contracts would remain in force and effect.
Before the end of the last contract, the MD was terminated for redundancy. For this reason, the MD filed a claim for his entitlements for his accrued annual leave, his long service leave, the amount of his notice and redundancy entitlements. Predictably, the Singapore corporation denied any liability for the claims of the MD as it claimed that although the first and last contracts were entered into by the Singapore corporations, the contracts in between the original and the latest contract was entered into by the conglomerate. There was no continuity of employment and thus, no entitlement to long service leave or accrued annual leave.
The Federal Court ruled that the Singapore corporation was the employer of the MD. At the outset, it was the Singapore corporation that originally hired the MD. When the first contract ended, no new contract was entered into by and between the parties, instead, the same contract was merely ‘renewed’ by the conglomerate, which by then owned the Singapore corporation, all the terms and conditions in the first original contract were carried over to this renewed (2nd ) contract. The same thing happened when the contract was renewed for another term (3rd contract). The contract carried over the same terms and condition from the 2nd contract which were only carried over from the original contract. The 3rd contract was entered into again by the Singapore corporation with virtually the same terms and conditions as the original contract.
The Federal Court noted that contracts are now ‘fluid’ in that ownership of corporations change hands fast in today’s modern business practices. The Singapore corporation which first hired the MD and the conglomerate which continued the contracts are two corporations that are closely linked as one owned the other.
More importantly, the intent of the parties was to engage the MD under virtually the same terms and conditions of his original contract as evidenced by the carry-over of the terms and conditions from contract to contract. It was also evident from the language of the contracts that the Singapore corporation and the conglomerate were interchangeable as both considered themselves employers of the MD as the MD invariably rendered services for both the corporations as their ownership was one and the same. The subsequent contracts were, in effect, merely supplementary contracts to the original contract.
What is important to remember here? The intention of the parties to observe a ‘continuity of service’ to different corporations which are all closely related is given more weight by the court than the contractual provisions which merely supplemented an original contract. The court noted that a worker who is shifted between companies without any prior notice to him gives evidence that all the employers listed in the various contracts were one and the same. When a worker rendered the same services under virtually the same terms and conditions, the number of different companies appearing in the various contracts all gives evidence that the different employers were really one and the same. The worker is entitled to his long service leave and his accrued annual leave.
