Adam Jambanis v Warrikal Engineering Pty Ltd
[2022] FWC 1907
•25 JULY 2022
| [2022] FWC 1907 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Adam Jambanis
v
Warrikal Engineering Pty Ltd
(U2022/3567)
| COMMISSIONER SCHNEIDER | PERTH, 25 JULY 2022 |
Application for an unfair dismissal remedy
Mr Adam Jambanis (Mr Jambanis or the Applicant) applied under section 394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy in relation to the termination of his employment with Warrikal Engineering Pty Ltd (the Respondent).
The Respondent objects to the application on the grounds that the Applicant is not protected from unfair dismissal because he earns more than the high income threshold.
For the reasons that follow, I find that the Applicant’s annual rate of earnings was less than the high income threshold and that he is protected from unfair dismissal. The parties will be issued with directions for a hearing on the merits of the matter in due course.
Background
The Applicant commenced employment with the Respondent in January 2020.
The Applicant was originally engaged on a casual basis and later as a permanent HSE Superintendent based in the Respondent’s Perth office.
The Applicant was offered a revised contract (the Contract) on 1 July 2021, as a HSE Superintendent, which was signed by the Applicant on 2 July 2021. Under the Contract, the Applicant would be required to work in the Perth office and on various Fly-In Fly-Out (FIFO) roster rotations at client sites in the mining industry. The Contract came into effect on 5 July 2021.
The Contract stipulated the Applicant would receive a total salary package of $170,497.20. The Contract specifies that $154,997.40 of that total is the annual remuneration and that $15,499.74, the remaining sum, is the compulsory superannuation contribution.
Separate from the salary package, the Contract provides for a $25 phone allowance paid fortnightly.
The Contract contained the below terms and conditions which were agreed between the parties in July 2021.
· Clause 4.8 states “the total hours per annum stipulated in the schedule have been calculated on a 9 hour fly in day, 12.5 hour workings day and a 9 hour fly out day”.
· Clause 4.9 states “a surplus of hours needs to be taken as time off and is not to be converted to cash entitlements”.
· Clause 25 states – Roster – “the roster can be changed to suit the client’s needs and roster cycles by advising the employee verbally of the change and providing at least 48 hours’ notice of the change. Should the employee not agree to the roster change they should notify the employer”. This clause also notes that the employee (the Applicant) would be required to work 12-hour days.
The Applicant was not covered by an Enterprise Agreement or a Modern Award.
The Applicant’s employment was terminated on 2 March 2022.
A hearing on the objection was held on 27 June 2022 in Perth.
Relevant Legislation
“382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”
“332 Earnings
(1) An employee’s earnings include:
(a) the employee’s wages; and
(b) amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and
(c) the agreed money value of non-monetary benefits; and
(d) amounts or benefits prescribed by the regulations.
(2) However, an employee’s earnings do not include the following:
(a) payments the amount of which cannot be determined in advance;
(b) reimbursements;
(c) contributions to a superannuation fund to the extent that they are
contributions to which subsection (4) applies;
(d) amounts prescribed by the regulations.
Note: Some examples of payments covered by paragraph (a) are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).
(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:
(a) to which the employee is entitled in return for the performance of work; and
(b) for which a reasonable money value has been agreed by the employee and the employer;
but does not include a benefit prescribed by the regulations.
(4) This subsection applies to contributions that the employer makes to a superannuation fund to the extent that one or more of the following applies:
(a) the employer would have been liable to pay superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 in relation to the person if the amounts had not been so contributed;
(b) the employer is required to contribute to the fund for the employee’s benefit in relation to a defined benefit interest (within the meaning of section 291-175 of the Income Tax Assessment Act 1997) of the employee;
(c) the employer is required to contribute to the fund for the employee’s benefit under a law of the Commonwealth, a State or a Territory.”
Submissions
Respondent
The Respondent highlighted the below as key areas for consideration:
· Contract clauses and intent of the clauses in relation to rosters, hours of work, and time off in leu of pay (TOIL).
· The regular, systematic, and agreed in advance, hours of overtime to be worked by the Applicant.
· Valuation of overtime being able to be determined in advance and recorded by payroll.
· The signed Contract which included the TOIL agreement.
Applicant
The Applicant submits that his payslips, which were entered into evidence, confirm that the “overtime” paid per fortnight varied depending on the Respondent’s client’s operational requirements.
The Applicant therefore submits that pursuant to section 332(2)(a) of the Act, which specifies that an employee’s earnings do not include “payments the amount of which cannot be determined in advance”, the “overtime” and “site allowance” payments should be excluded from the calculation.
The Applicant submitted that, whilst there was an agreement as to how his TOIL and overtime payments would be managed, there was never an amount of TOIL or over time guaranteed in his contract of employment. Therefore, the overtime could not be determined in advance and should not be included in the calculation.
Consideration
There is no doubt that the Contract entered into by the parties was designed to cover a novel working arrangement whereby the Applicant would be required to complete work in the Perth Office and would also undertake site-based work on a FIFO roster.
It is clear from content of the Contract that there was significant consideration and discussion between the parties prior to its implementation. It was confirmed by the Respondent that the Applicant was the only employee on a contract with those arrangements.
The Contract that was signed by the Applicant in July 2021 clearly intended to cover a variety of working arrangements that the Respondent may require from the Applicant during his employment. The Contract contains an example roster that the Applicant may be required to work.
The primary question to be determined is whether the Applicant’s annual rate of earnings exceeded the high income threshold. The annual rate of earnings is to be assessed as at the time of dismissal. It is not an assessment of the actual earnings in the 12 months immediately prior to dismissal.
The sum most contested in this matter is that of the additional payments made to the Applicant as a result of accrued unpaid overtime while working on site.
Total Salary Package
The Contract stipulated the Applicant would receive a total salary package of $170,497.20.
The Contract provides for a $15,499.74 compulsory 10% superannuation contribution. This contribution is not included for the purpose of the calculation of the high income threshold.[1]
$154,997.40 of the package is defined as the annual remuneration, this sum is included in the calculation.
Phone Allowance
The Contract also provides for a $25 phone allowance paid to the Applicant fortnightly totalling to $650 per annum. I note the decision in Florenca, Elvina v Industrial Foundation For Accident Prevention T/A IFAP in which Deputy President Beaumont considered a similar allowance stating:
“I consider it unnecessary to determine whether to include the total amount of $50 a month ($600 annually), or a proportionate amount (reflective of the amount derived for personal benefit), of the mobile phone allowance in the ‘annual rate of earnings’ given my conclusion above. This is because whether it is added or not to Ms Florenca’s annual rate of earnings, those earnings would still remain less than the high income threshold. Nevertheless, for the sake of fulsomeness, I observe there was no evidence before me reflective of the proportion of business or personal use of the phone. In the circumstances, I am satisfied the amount of $600 annually constituted a reimbursement and should not be included in Ms Florenca’s annual rate of earnings.”[2]
In the circumstances before me, I echo the interpretation of the relevant authorities, and come to a similar conclusion, as put by the Deputy President.[3]
The phone allowance alone would not push the Applicant above the threshold. For completeness, I note that neither party adduced any evidence regarding phone use for professional or private purposes. Accordingly, I am not satisfied that this allowance can be included in the calculation and find the sum should be treated as a reimbursement.[4]
“Overtime” and “Site Allowance”
Firstly, it is necessary to note that the parties, and the materials submitted, refer to payments of “overtime”, “site allowance”, and TOIL. To avoid ambiguity, an explanation clarifying those terms as used by the parties follows.
The Applicant’s payslips reference both “site allowance” and “overtime”. These terms appear to be transposable, and the payments attributed to them reflect that the words “site allowance” and “overtime” do not strictly adhere to their usual uses.[5] I note the Contract does not contain a clause relating to a site allowance or uplift or reimbursement. The Contract also does not specify a higher rate for overtime or details regarding the payment of overtime in the usual way. The Applicant does not receive any loaded rates of pay or additional allowance for working on site. The Respondent clarified that the Applicant’s TOIL hours are paid at the same rate as his ordinary rate of pay.
From an assessment of the materials before me, it is clear that, while on site, the Applicant will work hours above the agreed ordinary hours in the Contract. These additional hours worked are overtime that, instead of resulting in an overtime payment in the relevant pay period, are recorded as TOIL hours in the payroll system. The TOIL arrangement, as described in the Contract, acts as a flexibility measure in response to the arrangement which assumes a varying number of hours worked week to week.
The Respondent explains that there is a limit on the accrual of TOIL, being 150 hours, and that if the limit is exceeded the employee is paid the surplus balance at their ordinary rate.
Simply put, the TOIL balance, as is standard, consists of the Applicant’s unpaid overtime hours.
The payments on the Applicant’s payslips labelled “site allowance” and “overtime” are simply the payment of the surplus TOIL balance to the Applicant after he reaches the 150-hour limit.
From here on, the additional payments will be referred to as relating to the TOIL balance of the Applicant.
The TOIL Surplus Payments
The Respondent has attempted to formulate a contract of employment which covered a variety of rosters and working arrangements for the Applicant which are outside the normal arrangements of the business. Whilst I appreciate that the Respondent has foreseen circumstances in which the Applicant will complete overtime, this does not mean that the overtime in question could be determined in advance or guaranteed as per section 322 of the Act.
As reflected on the payroll records provided by the parties, the Applicant worked significant overtime from the period of 5 July 2021 until the termination of the Applicant’s employment.
The Applicant’s payslips reflect the additional TOIL payments made to the Applicant. The data from the payslips is set out below.
| Pay Period Ending | TOIL Surplus Paid | TOIL Hours Balance |
| 04/07/2021 | $0.00 | 4.50 |
| 18/07/2021 | $0.00 | 40.60 |
| 01/08/2021 | $0.00 | 104.10 |
| 15/08/2021 | $2,714.02 “site allowance” | 150.00 |
| 29/08/2021 | $5,922.32 “site allowance” | 225.50 |
| 12/09/2021 | $0.00 | 86.00 |
| 26/09/2021 | $0.00 | 113.50 |
| 10/10/2021 | $0.00 | 148.50 |
| 24/10/2021 | $4,196.61 “rostered overtime” | 150.00 |
| 07/11/2021 | $0.00 | 154.00 |
| 21/11/2021 | $4,549.52 “rostered overtime” | 150.00 |
| 05/12/2021 | $7,255.61 “rostered overtime” | 150.00 |
| 19/12/2021 | $3,537.64 “rostered overtime” | 150.00 |
| 02/01/2022 | $0.00 | 96.80 |
| 16/01/2022 | $0.00 | 140.20 |
| 30/01/2022 | $5,577.18 “rostered overtime” | 150.00 |
| 13/02/2022 | $0.00 | 146.60 |
| 27/02/2022 | $0.00 | 138.60 |
| 13/03/2022 | $10,871.78 “rostered overtime” paid out on termination. | 0.00 |
The payroll records, as outlined above, show that the TOIL surplus payments received by the Applicant varied significantly each pay period. I find that this weighs in the Applicant’s favour that the payments, that occurred not infrequently, were not guaranteed, and could not be determined in advance. The payments varied based on the operational and client requirements of the Respondent and the hours accrued by the Applicant as a result.
The Respondent highlighted Foster v CBI Constructors Pty Ltd (Foster) as an authority which supported its position.[6] In Foster, the employee was required to work 30 minutes of overtime each morning to run a pre-start meeting which resulted in the employee receiving 2.5 hours of overtime each week.[7]
The Full Bench in Foster provided guidance on the construction of section 332(2)(a) of the Act as follows:
“However, there is a tension between the construction of the note advanced by the employee and the ordinary meaning of the words s.332(2)(a). Such ambiguity makes it appropriate to have resort to the explanatory memorandum (cf. s.15AB of the Acts Interpretation Act 1901 (Cth)). The explanatory memorandum relevantly provides:
“1327. An employee's earnings do not include payments for which a value is not ascertainable in advance (such as variable performance bonuses). This means that payments made, but which were not anticipated or agreed to in advance (either because the type of payment was not anticipated, or the value of the payment was not agreed), will not be included. A legislative note provides examples of payments that cannot be determined in advance. These payments include overtime (unless the overtime is guaranteed), commissions and incentive-based payments and bonuses.”
The explanatory memorandum makes it clear that s.332(a) is solely concerned with whether or not the payment can be determined in advance. Given the text of the s.332(a) and the guidance of the explanatory memorandum, it seems clear that the purpose of the legislative note is not to exclude all overtime payments as a broad category of payments except for overtime that falls within the terms of the exclusion explicitly set out in the note (that is, overtime that is guaranteed). Instead, it seems clear that overtime that cannot be determined (or ascertained) in advance is excluded from calculating an employee’s earnings for the purposes of s.332. Conversely, overtime that is guaranteed can be determined in advance, and therefore is included in calculating an employee’s earnings for the purposes of s.332.
The proper test is, in accordance with the text of s.332(a), whether the overtime payments that Mr Foster received for attending the regular pre-start meetings were able to be determined in advance. Whether or not the payments were guaranteed in the sense that the Respondent had a legal obligation to allocate 2.5 hours of overtime each week to Mr Foster, or whether Mr Foster had a legal right to the allocation of that overtime is of no assistance in determining whether or not the payments for the pre-start meetings could be determined in advance.” [8]
The Commission found that the payments in Foster could clearly be determined in advance.[9]
The matter currently before the Commission can be clearly distinguished from the circumstances in Foster. The employee in Foster was subject to an ongoing direction to perform a set amount of overtime at the beginning of every shift. I note that the matter currently before me does not strictly concern the payment of overtime worked in the same pay period like that in Foster. However, regarding the predictability of the overtime worked, and subsequent payments of overtime, I note the following differences.
In this matter, the Respondent submitted that the Applicant would know his roster and when he would be working on site 8-12 weeks in advance of scheduled works. The Applicant disagreed, submitting that, because of the nature of his role, he could be scheduled to work at short notice to address safety incidents. The Applicant’s Contract also states that the Applicant’s roster can be changed with 48 hours’ notice due to client needs and roster cycles.
It is clear that the amount of overtime worked, and associated payments of TOIL when the balance reached the limit, could not be clearly determined in advance. As stipulated in the Contract the Applicant’s site allocations and roster could be altered at short notice. Although the Contract indicates site work and the accompanying TOIL accrual will occur, there is no indication of the amount of site allocations and overtime the Applicant would undertake over his employment. The amount of overtime and value of each payment could also not be ascertained in advance.
I note that the Respondent submits that the TOIL hours were paid at the Applicant’s ordinary rate, however, knowing the rate at which the TOIL is paid still does not remedy the aforementioned issues relating to ascertaining the amount or value of overtime worked and subsequent payments.
The amount of overtime worked and the value of the payments and made to Mr Jambanis could not be ascertained in advance. As is clear from the payroll data, these varied depending on his TOIL balance and overtime worked on allocations.
Additionally, as is clear from the TOIL agreement, the unpaid overtime in the TOIL bank could also be taken as paid time off and may not always take the form of the “overtime” payments made when the Applicant hit the 150-hour limit.
The Respondent’s operational needs required the Applicant to be flexible with the rostered arrangements and he was required to work to suit the clients of the Respondent. Accordingly, the TOIL payments the Applicant received varied due to the work across various client sites. The payments in question could not be determined in advance and were not guaranteed.
In Cross v Bechtel Construction (Australia) Pty Ltd (Cross),[10] the employee was required to work an extended work week which required the employee to work 18 hours of rostered overtime each week.
Unlike in Cross, the Applicant was not compelled to work or guaranteed a specific amount of overtime each week which would increase his guaranteed earnings over the high income threshold. I accept some allocations would be known to the Applicant in advance, however, as clearly stipulated in the Contract these could be cancelled and scheduled at short notice.
The Applicant was guaranteed to receive the total salary package and phone allowance.[11] The Contract foresees that the arrangement will result in overtime and subsequent TOIL accumulation when the Applicant is directed to work on site. However, there is no guarantee or agreement in advance of how much overtime will be worked and accrued as TOIL over the duration of the year or the value of the payments to be made over the year as a result of the accrual and reaching the 150-hour limit.
On the materials before me, it is clear that the Applicant had no guarantee or agreement of when he would be allocated to site, how long he would be allocated to site, when exactly or how frequently his TOIL balance would reach the limit, when exactly the surplus would be paid out, and the amount of the TOIL surplus that would be paid each time. The value of the payments, and when the payments were to be made, could not be clearly ascertained in advance due to the flexible and varied working arrangement so clearly accommodated in the Contract.
Conclusion
Based on the evidence submitted, I am not satisfied that the Applicant’s TOIL surplus payments can correctly be classified as guaranteed overtime or earnings.
As a result, I find that the Applicant earned less than the high income threshold, being $158,500 at the time of his dismissal, and he is therefore a person protected from unfair dismissal under the Act. The Respondent’s jurisdictional objection is dismissed, and the matter will now progress to a hearing on the merits of the application.
COMMISSIONER
Appearances:
A Jambanis, Applicant.
F Smith for the Respondent.
Hearing details:
2022.
Perth:
June 27.
Final written submissions:
Respondent, 28 June 2022.
[1] Compulsory superannuation contributions are excluded from calculation; see [2010] FWA 8124, at [31].
[2] [2019] FWC 144, at [33].
[3] See [2019] FWC 144, at [18]-[21] and [2022] FWC 922, at [12]-[13]; the Deputy President discusses the Full Bench decision in [2018] FWCFB 1767 which observed the definition of “earnings” in [1904] AC 349. The Full Bench discusses the inclusion of allowances in the high income threshold calculation at [66].
[4] Fair Work Act 2009 (Cth), s332(2)(b).
[5] See [2022] FWC 981, at [34]-[42]; for discussion on site allowances and the calculation of the high income threshold. In the cases referenced, the site allowance takes the form of an uplift in usual pay while the worker was on site.
[6] [2014] FWCFB 1976.
[7] [2013] FWC 9536, at [30].
[8] [2014] FWCFB 1976, at [38]-[40].
[9] [2014] FWCFB 1976, at [43].
[10] [2015] FWC 3639.
[11] Phone allowance excluded, see [27]. Explanatory Memorandum, Fair Work Bill 2009 (Cth) [1304]; “A high income employee is an employee who has guaranteed annual earnings that are more than the high income threshold.”
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