Can a Director also be an Employee?

On 5 August 2025, the Full Bench of the Fair Work Commission (“Full Bench”) delivered a decision in Christina Sawyer (“Ms Sawyer”) v Wards Accounting Group Pty Ltd (“Wards Accounting”) [2025] FWCFB 167. This decision is an important authority on a question that frequently arises in professional services firms, being: When can a director and shareholder also be regarded as an employee?

Further, the decision provides clarification in respect of when a purported resignation will not amount to a valid resignation, and instead constitute a dismissal at the employer’s behest.

Background

Ms Sawyer commenced employment with Wards Accounting in 2008 as a professional accountant. In 2010, she became a director of the company and acquired shares in the business.

Importantly, after becoming a director and shareholder, she continued to perform professional accounting services for the firm’s clients. She received:

1.       a regular salary;

2.       superannuation;

3.       leave entitlements; and

4.       allowances.

On 31 July 2024, a meeting occurred between Ms Sawyer and another principal of the firm, Mr Ward. The discussion concerned restructuring arrangements and shareholding changes. The meeting became heated and at its conclusion, Ms Sawyer said:

“I’m leaving and I won’t be back, especially after your behaviour today.”

The company treated those words as a resignation. That evening, it disabled her email and computer access. The following day, it wrote to her confirming her resignation and requesting the return of company property.

Ms Sawyer filed an application under s 365 of the Fair Work Act 2009 (Cth) (“FW Act”) alleging unlawful dismissal.

At first instance before the Fair Work Commission, the Deputy President found that Ms Sawyer:

1.       was not an employee; and

2.       was not dismissed.

On appeal, the Full Bench overturned both findings.

Can a director also be an employee?

Dual Capacity

The Full Bench confirmed a foundational principle, that a person can simultaneously be:

1. a director;

2. a shareholder; and

3. an employee,

of the same company.

This proposition has previously been established in High Court authority (“Court”), including Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28 and Peate v Federal Commissioner of Taxation [1964] HCA 84

The Court has previous found, and the Full Bench here found, that provided the company is not a sham and is properly incorporated, there is no barrier to a person taking on dual roles.

The key question then becomes not whether it is legally possible, but whether, on the facts, a separate employment relationship exists.

Determining whether a director is also an employee

The Full Bench articulated a two-step approach for determining whether a director/shareholder is also an employee.

Step 1: Is There a separate agreement to perform work?

The first inquiry is whether there exists, either expressly or by implication, an agreement under which the person performs work for the company distinct from their role as director.

This requires asking whether the person was simply performing ordinary director functions, or whether they were performing operational or professional work beyond ordinary directorial responsibilities, which might indicate a separate contractual arrangement.

Step 2: Characterising the nature of that agreement

If a separate agreement exists, the next question is whether it is properly characterised as employment.

The Full Bench noted the importance of the Court’s reasoning in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 275 CLR 165 and Jamsek v ZG Operations Pty Ltd [2022] HCA 2; (2022) 275 CLR 25, emphasising that characterisation depends on the legal rights and obligations created by the contract.

However, the Full Bench made an important distinction:

1. In contractor cases, the inquiry is binary (employee or independent contractor).

2. In director cases, a person may function in dual capacities.

This means factors, such as the person’s level of control in the business, must be analysed carefully, recognising that an individual may exercise control in one role while being subject to direction in another.

Ms Sawyer’s employment status

The Full Bench identified several decisive features in determining that Ms Sawyer was an employee.

Scope of work

The Full Bench determined that Ms Sawyer performed work beyond the scope of a director, including professional accounting services, client-facing advisory work, and day-to-day operational functions. Her role was not merely focussed on governance but, rather, she performed substantive revenue-generating work and accordingly, the Full Bench found this strongly supported the existence of a separate employment agreement.

Remuneration

The Full Bench determined that Ms Sawyer’s remuneration was consistent with employment, in that she received a regular salary, superannuation, leave entitlements and allowances. This payment structure resembled employment rather than director remuneration, which is typically paid as director’s fees, which was further reinforced by the continuity of salary after she ceased being a director.

Securityholders Deed

The Deputy President at first instance had treated the Securityholders Deed as militating against an employment relationship. The Full Bench disagreed and determined that the Deed governed relationships “as securityholders”, expressly contemplated that securityholders might also be employees and did not purport to terminate or exclude employment.

Control

The Full Bench determined that control, which is significant when distinguishing employees from independent contractors, was over-emphasised at first instance. The Full Bench acknowledged that control remains relevant. However, in a small company directors may exercise significant influence and the absence of strong day-to-day supervision is unsurprising. Ultimately, it was determined that a person may exercise control as a director while simultaneously being subject to the company’s direction as an employee, which the Deputy President had failed to account for.

Titles

The Full Bench determined that titles are not determinative. While Ms Sawyer was referred to as a “partner”, the business was incorporated and it was not a legal partnership. Ultimately, titles are not determinative and substance prevails over terminology.

Dismissal

The Full Bench was required to determine whether Ms Sawyer was dismissed pursuant to s 386 of the FW Act. The Full bench considered the two limbs of dismissal clarified in Bupa Aged Care Australia Pty Ltd (t/as Bupa Aged Care Mosman) v Tavassoli [2017] FWCFB 3941; (2017) 217 IR 245, which found that a person is dismissed if:

1. Employment is terminated at the employer’s behest; or

2. The employee resigns but was forced to do so due to their employer’s conduct.

Resignation

The Full Bench was required to determine whether the words “I’m leaving and I won’t be back”

constituted a clear resignation. The Full Bench held they did not because:

1. The words were spoken in a heated exchange;

2. The words were ambiguous and equally consistent with leaving the meeting;

3. Ms Sawyer continued working until 5pm that day; and

4. There was no formal written resignation.

The Full Bench concluded that a reasonable person would not necessarily understand those words to communicate a final intention to terminate employment. Resignation must be objectively clear and unambiguous, which was not the case here.

Employer Initiative

The Full Bench was required to determine whether the termination was at the employer’s initiative. After the meeting, the employer:

1. Disabled Ms Sawyer’s systems access;

2. Confirmed her resignation in writing; and

3. Demanded return of company property.

As there had been no effective resignation, those steps brought the employment to an end, which was determined to constitute termination at the employer’s initiative.

Practical Implications

The decision confirms that employers must take care to manage dual roles and exit risks.

Structure of dual capacity

A dual role must be properly structured to minimise uncertainty. Where a director performs operational work:

1. A separate employment agreement should be executed.

2. Director duties should be clearly distinguished from employee duties; and

3. Remuneration streams should be separated (director fees vs salary).

Employee entitlements

Employee entitlements can be a significant indicator of a role’s character. Even in the absence of a formal agreement, it may be difficult to argue a director is not an employee if they receive employee entitlements such as:

1. Fixed periodic wages;

2. Superannuation contributions; and

3. Annual leave and personal leave;

Shareholder or Securityholder Agreements

Shareholder or securityholder agreements do not, without express language, override employment. Companies should avoid assuming that equity participation removes employment protections.

Control

Control and day-to-day oversight must be viewed in context. In founder-led or small companies, directors may operate with significant autonomy and formal supervision may be minimal. However, that does not negate employment and the focus in determining whether an employment relationship exists must be on contractual rights and obligations.

Resignations

Resignations that are ambiguous, particularly when made in heated exchanges, should be treated with caution. Where an employee:

1. Uses ambiguous language;

2. Appears emotional or distressed; and/or

3. Makes statements capable of multiple meanings,

the prudent course is to seek written clarification after the passing of some time. Simply “accepting” an ambiguous statement may expose the business to a finding that an employee has been dismissed.

Objective assessment

The Full Bench reiterated that resignation is assessed objectively and does not depend on either:

1. What the employee later says they meant; or

2. What the employer subjectively believed.

It depends on what a reasonable person would understand in that particular context.

Legal characterisation

Professional service firms often blur the lines between ownership and employment by doing things such as:

1. Referring to principals as “partners”;

2. Operating through companies; and

3. Relying on informal governance structures.

This decision reinforces that courts will focus on the substance of the relationship rather than its label, so companies should:

1.       Clearly document dual roles;

2.       Separate governance from employment functions; and

3.       Avoid assuming that ownership status removes employment protections.

Conclusion

The Full Bench decision in Christina Sawyer v Wards Accounting Group Pty Ltd confirms two important propositions:

1. A director and shareholder can also be an employee where there is a distinct agreement to perform operational work for reward.

2. Ambiguous words spoken in the heat of the moment will not necessarily amount to a resignation.

Accordingly, in companies, particularly where working relationships and ownership structures overlap, clarity in employment documents is essential risk management.

The legal team at BlackBay Lawyers can provide specialised and detailed advice pertaining to employment law. Please feel free to contact BlackBay Lawyers on (02) 9100 0889 or via www.blackbaylawyers.com.au for a confidential discussion with one of our solicitors.

The content in this Article is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. It should not be relied upon as such. You should seek legal or other professional advice before acting or relying on any of the content.