Benjamin Lindsay v H T Bawden (NSW) Pty Ltd

[2018] FWC 1693

[2018] FWC 1693

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Benjamin Lindsay
v
H T Bawden (NSW) Pty Ltd
(U2017/13038)

COMMISSIONER CAMBRIDGE SYDNEY, 23 MARCH 2018

Unfair dismissal - jurisdictional objection - s. 382 (b) whether sum of applicant’s annual rate of earnings is less than the high income threshold - objection dismissed.

[1] This matter involves an application for unfair dismissal remedy made pursuant to section 394 of the Fair Work Act 2009 (the Act). The application was lodged at Sydney on 7 December 2017. The application was made by Benjamin Lindsay (the applicant), and the respondent employer has been identified to be H T Bawden (NSW) Pty Ltd (the employer).

[2] The application stated that the date that the applicant was notified of his dismissal was 17 November 2017. Consequently the application was made within the 21 day time limit prescribed by subsection 394 (2) of the Act.

[3] The employer raised a jurisdictional objection to the application, and the matter was the subject of unsuccessful conciliation. Consequently, the matter has proceeded to a Jurisdictional Hearing before the Fair Work Commission (the Commission) conducted in Sydney on 7 March 2018.

[4] The Jurisdictional Hearing involved the employer’s assertion that the applicant’s employment was not governed by a Modern Award or an Enterprise Agreement and that his annual rate of earnings exceeded the high income threshold. Consequently, the employer said that the applicant was not a person protected from unfair dismissal because of the operation of subsection 382 (b) of the Act, (the s. 382 (b) objection).

[5] The Commission granted permission for the Parties to be represented by lawyers or paid agents as the requirements of s. 596 of the Act had been satisfied. At the Jurisdictional Hearing the employer was represented by Mr S McIntosh, a solicitor from the firm HWL Ebsworth, and the applicant was represented by Mr N Chadwick, a solicitor from Chadwick Workplace Law. The employer adduced evidence from one witness, Mr Barry Cawthorn, the employer’s Managing Director. Mr Chadwick called the applicant who also gave evidence as a witness.

[6] There was no dispute that a Modern Award did not cover the applicant, and that an Enterprise Agreement did not apply to the applicant’s employment.

The Employer’s Objection

[7] The s. 382 (b) objection concentrated upon that aspect of subsection s.382 (b) (iii) involving the sum of the applicant’s annual rate of earnings and such other amounts not being less than the high income threshold of $142,000.

[8] Section 382 of the Act is in the following terms:

“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.”

[9] The employer based the s. 382 (b) objection upon a calculation which included various amounts which it said represented earnings as contemplated by s. 332 of the Act. Section 332 of the Act is in the following terms:

“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 292-175 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.”

[10] The primary submission made on behalf of the employer by Mr McIntoshwas that the sum of the applicant's annual rate of earnings as comprehended by s. 332 of the Act should recognise that the applicant had a variable wage rate (referred to as a “variable wages agreement”). Consequently, according to the submissions made on behalf of the employer, the annual rate of earnings of the applicant should not be derived by reference to the actual rate applicable at the date of dismissal, but instead, to the average that was paid during the twelve month period before dismissal.

[11] The s. 382 (b) objection raised by the employer was anchored upon the somewhat unusual factual circumstances whereby the applicant’s base wage rate was reduced twice in the five months prior to his dismissal. The applicant commenced employment in July 2015 on a base wage rate of $143,835 per annum which was supplemented with 9.5 % superannuation, a car allowance of $20,000, and a telephone allowance of $2,500. At this time, the total annual remuneration package for the applicant was $180,000.

[12] On 1 July 2017 the applicant’s remuneration was reduced. The reduction was made to the base wage rate figure and the corresponding 9.5 % superannuation figure. The base wage rate was reduced to $130,137 and the total annual remuneration package for the applicant became $165,000.

[13] On 5 October 2017 the applicant’s remuneration was further reduced. The further reduction was made to the base wage rate figure and the corresponding 9.5 % superannuation figure. The base wage rate was reduced to $89,041.10 and the total annual remuneration package for the applicant became $120,000.

[14] The employer acknowledged what it described as the “starting point” for determining the annual rate of earnings for the purposes of s. 382 (b) (iii) which involved the annual rate of earnings at the time of the dismissal, and not the actual amount of earnings in the 12 months prior to dismissal. In this regard reference was made to two Decisions; one being a Full Bench Decision of Fair Work Australia in the case of Zappia v Universal Music Australia Pty Limited  1(Zappia); and the other was a Decision of the Commission in the matter of Darling v Bechtel Australia Pty Limited 2 (Darling).

[15] The employer submitted that although at the time of dismissal the applicant had a base wage rate of $89,041.10 and a total annual remuneration package of $120,000, the Commission should have regard for the variable nature of the applicant’s wage rate. Mr McIntosh referred to various Decisions in which the Commission had calculated the annual rate of earnings for s. 382 (b) purposes, by an extrapolation that used the actual earnings of the particular applicants over certain periods of time.

[16] Consequently, according to the submissions made by Mr McIntosh, the Commission should calculate the applicant’s annual rate of earnings taking into account the higher wage rates that were paid to the applicant in certain periods during the 12 months prior to dismissal. The submissions of Mr McIntosh referred to three separate periods during the 12 months prior to dismissal, and for which an annual average figure was calculated. All three of these annual average figures exceeded the high income threshold. Mr McIntosh submitted that the annual average figure that was calculated for the entire 12 months prior to dismissal should be adopted as the applicant’s annual rate of earnings. This figure was described in the employer’s submissions as being “the nominal amount of the Applicant’s annual rate of earnings was $156,126.94.”

[17] In summary, Mr McIntosh submitted that the calculation that should be made for the applicant's annual rate of earnings for the purposes of s. 382 (b) (iii) of the Act, should recognise the variable nature of the wages paid to the applicant. Therefore, according to Mr McIntosh, the calculation should apply an averaging for some period which included wage rates that were higher than that actually applying at the time of dismissal.

[18] Mr McIntosh urged the Commission to adopt a 12 month averaging method for calculation of the applicant’s annual rate of earnings. The resultant amount, $156,126.94, exceeded the high income threshold. Mr McIntosh said that as the applicant’s annual rate of earnings exceeded the high income threshold, he was not covered by a Modern Award, an Enterprise Agreement did not apply to his employment, and therefore the applicant was not a person protected from unfair dismissal. Mr McIntosh submitted that the s. 382 (b) objection should be upheld and the unfair dismissal claim should be dismissed.

The Applicant’s Case

[19] Mr Chadwick who appeared for the applicant, made submissions which rejected the method that the employer proposed as a means to determine the applicant’s annual rate of earnings for the purposes of s. 382 (b) of the Act. Mr Chadwick said that the approach that the employer advanced had been rejected in the Decisions in the Zappia and Darling cases.

[20] Mr Chadwick submitted that the annual rate of earnings had to be determined at the time of the dismissal not by reference to some period or periods before the dismissal. Mr Chadwick submitted that at the time of dismissal the applicant’s base salary was $89,041.10 which was less than the high income threshold of $142,000.

[21] The submissions made by Mr Chadwick also rejected the alleged existence of the applicant’s variable wage agreement. Mr Chadwick said that the term “variable wage agreement” had been invented by the employer, and in any event, even if there was such an agreement it was not relevant for the purposes of determining the applicant’s annual rate of earnings in accordance with the principles established in the Zappia Decision.

[22] Mr Chadwick submitted that the level of remuneration for the purposes of s. 382 of the Act and the high income threshold had to be determined at the time of the dismissal, being 17 November 2017. Mr Chadwick referred to a copy of the pay advice 3 that was provided to the applicant at the time of dismissal. Mr Chadwick said that the pay advice document established that at the time of his dismissal, the applicant was on an annual salary of $89,041.10, and a total remuneration package of $120,000.

[23] In summary, Mr Chadwick submitted that the correct calculation of the applicant’s annual rate of earnings totalled approximately $111,500 which was less than the high income threshold of $142,000. Mr Chadwick rejected the basis upon which the employer had attempted to calculate the applicant’s annual rate of earnings. Mr Chadwick submitted that the correct calculation produced an annual rate of earnings less than the high income threshold and therefore the applicant was a person protected from unfair dismissal.

[24] Consequently, Mr Chadwick urged that the Commission dismiss the employer’s jurisdictional objection.

Consideration

[25] In this instance, the s. 382 (b) objection taken by the employer has involved a contest about the applicant’s annual rate of earnings. The employer has made a calculation of the applicant’s annual rate of earnings which has included earlier periods when the applicant was paid at higher rates of remuneration than that paid at the time of his dismissal.

[26] The employer has asserted that it was appropriate to take account of what it described as the variable nature of the remuneration paid to the applicant. The employer has contended that the variable nature of the remuneration paid to the applicant was akin to circumstances of casual employment, and it referred to cases where the Commission had determined the annual rate of earnings for the purposes of s. 382 (b) (iii) of the Act, by calculation of the average that was generated by the particular working patterns that often involved variation when compared with the actual amount paid at the time of dismissal.

[27] The employer contended that the figure of $156,126.94 should be applied. This figure was calculated by reference to the average paid to the applicant in the 12 months prior to his dismissal. This approach to the calculation of a person’s annual rate of earnings for the purposes of s. 382 (b) (iii) of the Act is plainly contrary to the approach established in the Zappia and Darling Decisions. It is relevant to note the following succinct summary provided by Hatcher VP in the Darling Decision:

“The annual rate of earnings is to be assessed at the time of dismissal. It is not an assessment of the actual earnings in the 12 months immediately prior to dismissal.” 4

[28] The applicant was employed in a salaried position of General Manager, and the variations that occurred to his remuneration in the period prior to his dismissal are in no way analogous with circumstances such as casual employment where the rate actually paid at the time of dismissal may not be an accurate reflection of the person’s annual rate of earnings. If, in circumstances of salaried employment, the remuneration had been increased on two occasions over a five month period prior to the dismissal, the rate at the time of the dismissal would be the figure that would be applied so as to determine the annual rate of earnings. There would be no averaging to take account of the lower figures that applied at points in time prior to the dismissal. Similarly, in the applicant’s circumstances, there could be no averaging that would take into account the higher figures that applied at points in time prior to the dismissal.

[29] The employer raised concern about what it identified as an inconsistency whereby the applicant asserted that the employer had no right to reduce his remuneration and thus he contended that he should have been paid a total remuneration package of $180,000. However, the applicant relied upon the lower total remuneration package of $120,000 in order to establish that he was a person protected from unfair dismissal. Consequently, it was said that the applicant adopted contradictory approaches which suited different particular purposes. The applicant claimed an entitlement to be paid a total remuneration package of $180,000 but if that was correct then his claim to be protected from unfair dismissal must fail.

[30] There would appear to be some potential for an ethical offence to be created if the applicant subsequently obtained a level of remuneration which would have meant that he was not protected from unfair dismissal, yet he managed to proceed with an unfair dismissal claim in reliance upon a lower level of remuneration that was less than the high income threshold at the time of his dismissal. It would, in my view, be plainly wrong if the applicant succeeded in obtaining a remedy for unfair dismissal and then he subsequently prosecuted a case which provided him with an entitlement that would have prevented him from making any unfair dismissal claim.

[31] Despite any concerns about the potential for some ethical dilemma to arise in respect of the particular circumstances of the applicant, the Commission must apply the correct method of calculation to determine the sum of the applicant’s annual rate of earnings for the purposes of s. 382 (b) (iii) of the Act. That calculation must be made at the time of the dismissal, and it should not include any averaging for periods prior to the dismissal which involved different levels of salaried remuneration.

Conclusion

[32] Consequently, as a result of the foregoing analysis, the sum of the applicant’s annual rate of earnings at the time of his dismissal on 17 November 2017, has been determined by way of the following calculation:

a. Base salary = $89,041.10

b. Car allowance = $20,000.00

c. Telephone allowance = $2,500

Total: $111,541.10

[33] The sum of the applicant’s annual rate of earnings was $111,541.10 which is an amount less than the high income threshold of $142,000.00. Therefore, the applicant is a person protected from unfair dismissal. I also note that, although it does not alter the outcome, there may have been some potential for reduction of the total car allowance figure of $20,000 to account for the percentage of business versus private use of the vehicle.

[34] The s. 382 (b) objection raised by the employer must be dismissed and the application for unfair dismissal is listed for further proceedings by way of Directions fixed for 10:00am on 29 March 2018.

COMMISSIONER

Appearances:

Mr S McIntosh of HWL Ebsworth appeared for the employer.

Mr N Chadwick of Chadwick Workplace Law appeared for the applicant.

Hearing details:

2018.

Sydney:

March, 7.

Final written submissions:

Applicant: 18 January 2018 and 5 March 2018.

Respondent: 3 March 2018.

Printed by authority of the Commonwealth Government Printer

<PR601397>

 1   Francesco Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia [2012] FWAFB 6108.

 2   Kerry Darling v Bechtel Australia Pty Limited [2015] FWC 1242.

 3   Exhibit 2 – Annexure “C”.

 4   Kerry Darling v Bechtel Australia Pty Limited [2015] FWC 1242 @ [7].