Brian Cowan v I.P.C Pty Ltd
[2023] FWC 514
•10 March 2023
| [2023] FWC 514 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Brian Cowan
v
I.P.C. Pty Ltd
(U2022/12220)
| DEPUTY PRESIDENT BEAUMONT | PERTH,10 MARCH 2023 |
Application for an unfair dismissal remedy
Issue and outcome
This decision concerns a jurisdictional objection raised by I.P.C Pty Ltd (the Respondent) in response to an unfair dismissal application brough by Mr Brian Cowan (the Applicant) under s 394 of the Fair Work Act 2009 (Cth) (the Act).
The Respondent submitted that the Applicant earned more than the high income threshold and is therefore excluded from making this application by virtue of s 382(b)(iii) of the Act.
It is uncontentious that the Applicant was not covered by a modern award and an enterprise agreement did not apply to him in his employment. Therefore, the inclusions of s 382(b)(i) or (ii) are not triggered.
The Applicant rejects the assertion that at the time of his dismissal, on 15 December 2022, his annual income was above the high income threshold of $162,000.00 and maintains that he is eligible to make an unfair dismissal claim pursuant to s 382 of the Act. If this condition can be established, the Respondent’s objection will be dismissed. Therefore, the primary question to be determined is whether the Applicant’s annual rate of earnings exceeded the high income threshold. Briefly stated, I have found that they did not.
Background
The Applicant commenced employment with the Respondent in or around 2008 in a casual position. The Applicant commenced full-time employment with the Respondent in or around 2015 in the position of Mechanical Maintenance Supervisor and was subsequently promoted to Mechanical Superintendent in or around November 2019.
An employment agreement confirming the Applicant’s terms and conditions of employment was entered into by the parties on or around April 2016 (the Contract). According to the Applicant, with the exception of an increase to the Applicant’s hourly rate of pay entered into on or around 20 January 2020, no further agreement has been entered into by the parties to vary the terms and conditions of the Applicant’s employment.
Clause 4.1 of the Contract describes the Applicant’s remuneration as follows:
The Company will remunerate the Employee as follows:
a)An hourly base rate of $50.00 per hour;
b)An hourly overtime rate of $53.00 per hour for overtime worked in excess of 40 hours per week and outside of the normal business hours;
c)Rates of pay may be increased subject to suit business requirements, without prior consent. Rates of pay will not be decreased without prior consent;
d)provision of company vehicle;
e)superannuation in accordance with Australian statutory requirements in place from time to time, and at a minimum rate currently being not less than 9.5% of the Annual Salary set out in 4.1(a) above;
f)reimbursement for all travel and other business expenditure reasonably incurred by his in connection with the discharge of his duties in terms of this Agreement provided the claims are submitted and approved in accordance with the Company’s usual procedures from time to time; and
g)bonus is payable to the Employee at the absolute discretion of the Board.[1]
Clause 6 of the Contract set out the Applicant’s Hours of work, stating:
a)Your hours of work shall be flexible depending on the needs and requirements of the operations of the Company, but in any event you shall be available to work at least 40 hours per week.[2]
The Applicant’s payslips show that Applicant’s salary is $120,640.00, with the rate of pay for ordinary time being $58.00 per hour and for overtime $63.00 per hour (collectively, the Base Rates).[3] It is observed that in January 2020, the Applicant’s Base Rates were increased pursuant to an ‘Employee Change of Condition’ form.[4]
According to the Applicant, he negotiated an increase to his Base Rates in or around 13 July 2022 for periods when he was working on shutdowns for the Respondent’s client, CSBP. The Base Rates were increased to $80.00 per hour for ordinary time and $88.00 per hour for overtime periods.
In addition to the compulsory superannuation contributions made by the Respondent in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth) (Guarantee), the Applicant noted that he had a salary sacrifice agreement with the Respondent which provided that $100 of the Applicant’s wages per week would be allocated to his superannuation fund.
Respondent’s submissions
The Respondent claims that the Applicant’s earnings at the time of dismissal were $201,559.00 consisting of:
a)current year’s earnings to 14 December 2022 in the sum of $112,559.00;
b)balance of FY 22 excluding overtime (28 weeks, 40hrs per week, $58 per hour) in the sum of $64,960;
c)expected overtime minimum from December 2022 to June 2023 in the sum of $9000.00;
d)personal use of mobile $1000.00; and
e)private use of a vehicle (18,000kms at $0.78 per km) in the sum of $14,040.00.
The Respondent asserts that the Applicant earned $187,187.45 over the last 12 months of employment, plus private use of a motor vehicle and mobile phone.
Applicant’s submissions
The Applicant submits that the Respondent’s calculation of his annual earnings at the time of his dismissal is both misleading and presumptive. The Applicant observes that the Respondent’s calculations incorporate the payment of overtime that was not guaranteed, statutory entitlements paid out at the time of dismissal, presumptive calculations for future earnings and overtime, and a mobile phone and vehicle used primarily for business use.
It is the Applicant’s position that his guaranteed annual rate of earnings consisted of wages in the sum of $120,640.00 per annum, a vehicle and a mobile. The Applicant added that at the time of his dismissal on or around 16 December 2022, his total annual earnings amounted to $127,441.60.
Noting that there was no agreed monetary value allocated for the vehicle, the Applicant, adopting the Respondent’s sum of $0.78 per kilometre, concluded that the total annual cost per annum of the private use of the vehicle was $6,801.60 of his earnings.
Regarding the mobile phone, the Applicant confirmed he had been provided with a Samsung mobile phone and that no monetary value had been agreed between the parties. The Applicant stated that the mobile phone was primarily for business related purposes, including but not limited to receiving and making phone calls and text messages to customers, reviewing and sending emails to customers, and accessing the Respondent’s internal systems.
The Applicant said on minimal occasions he would use the mobile phone for private use.
As no monetary value was agreed to between the parties, the Applicant is unable to comment on the accurate value associated with the mobile phone and therefore the mobile phone should not be considered when calculating earnings.
Legislative framework
It was not disputed, and I am satisfied, that the Applicant had served the minimum employment period. Further, it was not pressed by either party that the Applicant was award-covered or that an enterprise agreement applied to him in his employment. Therefore, the issue that falls for determination is whether I am satisfied the Applicant’s annual rate of earnings was less than the high income threshold of $162,000.00. This question of jurisdiction is required to be decided before the merits of the Application can be considered.[5] Sections 396 and 382 relevantly provide:
396 Initial matters to be considered before merits
The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:
(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.
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.
The phrase ‘protected from unfair dismissal at a time if, at that time…’ in s 382 of the Act means that an employee must show that, at the time of their termination, their employment circumstances (i.e. coverage by a modern award, applicability of an enterprise agreement or amount of rate of earnings) met the criteria in s 382 of the Act.[6]
Was the Applicant’s annual rate of earnings and other amounts less than the high income threshold?
As observed, one of the criteria for a person to be protected from unfair dismissal, if not covered by an industrial instrument, is that the sum of their annual rate of earnings, and such other amounts (if any) worked out in relation to them in accordance with the regulations, is less than the high income threshold.
It has been accepted by the Commission that the term ‘earnings’ derives its meaning, in part, from s 332 of the Act.[7] The Act, at s 332, defines ‘earnings’ as follows:
(1) [Meaning of earnings]
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) [Excluded amounts]
However, an employee’s earnings does 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.
(3) [Meaning of non-monetary benefits]
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 valued has been agreed by the employee and the employer but does not include a benefit prescribed by the regulations.
(4) [Extent to which subsection applied to superannuation contributions]
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.
Whilst no regulations have been made for the purposes of s 332(1)(d) or s 332(2)(d) of the Act, regulation 3.05(6) of the Fair Work Regulations 2009 (Cth) (the Regulations) has been made in respect of s 382(b)(iii) of the Act. Regulation 3.05(6) provides:
If:
(a) the person is entitled to receive, or has received, a benefit in accordance with an agreement between the person and the person’s employer; and
(b) the benefit is not an entitlement to a payment of money and is not a non-monetary benefit within the meaning of subsection 332(3) of the Act; and
(c) the FWC is satisfied, having regard to the circumstances, that:(i) it should consider the benefit for the purpose of assessing whether the high income threshold applies to a person at the time of the dismissal; and
(ii) a reasonable money value of the benefit has not been agreed by the person and the employer; and
(iii) the FWC can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by the FWC is an amount for subparagraph 382(b)(iii) of the Act.
In the decision of Sam Technology Engineers Pty Ltd v Bernadou (Sam Technology), the Full Bench concluded that the definition of ‘earnings’ in s 332 is non-exhaustive and as such, ‘earnings’ should be given its ordinary meaning.[8] In the course of its reasoning, the Full Bench qualified that the meaning of ‘earnings’ was subject to the payments and benefits referred to in s 332(1) being included in the meaning of ‘earnings’ and the payment and benefits referred to in s 332(2) being excluded from its meaning.
The Full Bench in Sam Technology further explained that parliament had made a conscious choice to use an employee’s ‘earnings’, rather than their ‘base rate of pay’ or ‘full rate of pay, to define the cut-off point at which an employee is excluded from protection against unfair dismissal in circumstance where they are not covered by a modern award, or an enterprise agreement does not apply to their employment.[9] The Full Bench clarified that an employee’s ‘earnings’ are higher than the employee’s ‘base rate of pay’ but are narrower in scope than the ‘full rate of pay’ of the employee, because ‘earnings do not include the…payment of amounts which cannot be determined in advance’ such as incentive based payments, bonuses and overtime (unless the overtime is guaranteed).[10]
While the Full Bench in Sam Technology considered the word ‘earnings’ in the context of determining whether a car allowance fell within its scope, its reasoning remains relevant here. Drawing upon what Lord Davey expressed in Midland Railway Co v Sharpe,[11] the Full Bench in Sam Technology stated:
Now what does a man earn? He earns the sum which is the fruit of his labour; whatever he receives by way of remuneration for the services he gives, or as Lord Macnaghten said in Abram Coal Co v Southern [1903] AC 306, a man’s ‘earnings’ are ‘the full sum for which the man is engaged to work’.[12]
The Full Bench observed that Lord Davey’s definition of ‘earnings’ had been applied in a number of Australian cases. It reiterated that in the context of s 382(b)(iii), ‘earnings’ are what an ‘employee receives for the work done by the employee in the course of their employment, rather than an amount paid to an employee to meet an expense incurred by the employee in undertaking such work…’.[13]
6.1 Annual rate of earnings - salary
The term ‘annual rate of earnings’ in s 382(b)(iii) of the Act refers to the annual rate of earnings at that time, and not the annual earnings to that time (that is the amount earned in the 12 months to that time).[14] The law is clear on this point. 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.[15]
The Applicant’s payslips for the period of 19 December 2021 up to 15 December 2022 show that the ‘Salary’ of the Applicant was $120,640.00. I am content to find that this was the case.
6.2 Overtime
The Respondent has referred to the Applicant working overtime. At hearing, questions were asked of the Applicant as to whether he worked overtime for each year he had worked for the Respondent, and whether it formed an integral part of his salary. It is again observed that the Respondent attributed to the Applicant’s earnings expected overtime (for the period of December 2022 and June 2023) and apparently overtime earned over the last 12 months.
In accordance with clause 6 of the Contract, the Applicant states that he was expected to perform 40 hours of work per week. The Applicant submits that that the only guaranteed and predetermined overtime he was expected to undertake was the two hours per week over the prescribed 38 hours per week for a full-time employee. The Applicant clarified that there was no guarantee or agreement in advance of how much overtime would be worked over the duration of the year or the value of the payments to be made over the year as a result of the Applicant performing the overtime.
The Applicant acknowledged that during the period from June 2022 to 16 December 2022, he undertook a high quantum of overtime due to an increased number of shutdowns undertaken for customers. Whilst noting that it was common in the industry to undertake overtime, at no time during his employment was he in a position to predetermine the quantum of overtime he may have undertaken annually as overtime was subject to customers’ requirements.
The Applicant’s Contract provides for 40 hours of work per week with no reference to a guarantee with respect to overtime. While the Applicant speaks of working 38 hours plus two additional hours, presumedly those hours constitute two reasonable additional hours, again there is no reference to guaranteed overtime and it does not appear that the two hours are accounted for as overtime when calculating the Applicant’s annual gross salary.
The Contract is clear as to the rate of pay and the standard working week, and the Applicant’s payslips reference that the Applicant’s salary is $120,640.00, with the rate of pay for ordinary time being $58.00 per hour and for overtime $63.00 per hour. Based on $58.00 for a 40-hour week over the course of the year, this would amount to an annual gross salary of $120,640.00.
It is evident from the Applicant’s payslips that he was at times paid base rates of pay at $80.00 per hour and overtime at $88.00 per hour (see for example the Applicant’s payslip for the period 28 November 2022 until 4 December 2022). However, the Applicant noted that these hourly rates were afforded to him during periods of working on a shutdown, a type of work which was not guaranteed.
I am satisfied that higher hourly rates associated with shutdown work in addition to the overtime worked constituted the payment of amounts which cannot be determined in advance. It is not apparent from the evidence led by either party that overtime was guaranteed or that the increased hourly rate for shutdown work could be determined in advance. As such, these amounts constitute excluded amounts under s 332(2)(a) of the Act.
6.3 Vehicle
Section 332(1)(c) provides that earnings include the agreed money value of any non-monetary benefits. Regulation 3.05(6) of the Regulations provides that where there is no agreed amount for a non-monetary benefit, the Commission may estimate the value of the benefit.
As observed, there was no value agreed between the parties for the Applicant’s private use of the vehicle. As observed, regulation 3.05(6) allows the Commission to make a determination as to the value of the benefit of the vehicle. It relevantly provides:
Benefits other than payment of money
(6) If:
(a) the person is entitled to receive, or has received, a benefit in accordance with an agreement between the person and the person’s employer; and
(b) the benefit is not an entitlement to a payment of money and is not a non-monetary benefit within the meaning of subsection 332(3) of the Act; and
(c) the FWC is satisfied, having regard to the circumstances, that:
(i) it should consider the benefit for the purpose of assessing whether the high income threshold applies to a person at the time of the dismissal; and
(ii) a reasonable money value of the benefit has not been agreed by the person and the employer; and
(iii) the FWC can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by the FWC is an amount for subparagraph 382(b)(iii) of the Act.
It has been accepted that where an employee is provided with a fully maintained vehicle for use in the course of her or his employment and the employee also uses that vehicle for private use, the value of that private use can be included in the employee’s annualised earnings.[16]
In the absence of an agreed sum, the process generally used to determine the value of the use of a company vehicle is that described in Kunbarllanjnja Community Government Council v Fewings (Fewings).[17] The ‘Fewings approach’ is as follows:
a)determine the annual distance travelled by the vehicle in question;
b)determine the percentage of that distance that was for private use;
c)multiply the above two figures to obtain the annual distance travelled for private
purposes;
d)estimate the cost per kilometre for a vehicle of the type used. This information can be obtained from the RACV, NRMA or like motoring organisations; and
e)multiply the annual distance travelled for private purpose by the estimated cost per
kilometre. The result is the value of the motor vehicle component of the remuneration.
The Full Bench in Fewings further observed that the party advancing the proposition that an applicant is excluded from the relevant provisions of the Act (protection from unfair dismissal) carries the burden of establishing the evidentiary basis upon which such a determination can be made.[18]
In Sam Technology, the Full Bench observed that it did not take issue with the method of apportionment adopted by the Full Bench in Fewings and considered it entirely appropriate for circumstances in which an employee had a company-supplied vehicle (from which she or he derived a benefit) and a reasonable monetary value had not been agreed for its private use.[19] It continued that the Fewings method of apportionment was appropriate to enable the Commission to estimate the real or notional value of the benefit in the manner contemplated by regulation 3.05(6), which deals with benefits other than the payment of money.[20]
The Respondent has calculated that 18,000kms could be attributed to the Applicant’s private use of the vehicle.[21] Based on an amount of $0.78 per kilometre, the Respondent submitted that the amount of $14,040.00 constituted part of the Applicant’s earnings. It would appear that the amount of $0.78 cents per kilometre is derived from the Australian Taxation Office’s webpage that sets out the method for sole traders and partnerships to utilise when claiming for a car.[22]
The Applicant submitted that the Respondent provided him with a fully maintained 2016 Isuzu D’Max Ute. The Applicant pressed that the vehicle was primarily used for business purposes, noting that he maintained a separate vehicle for his private use. The Applicant stated that the monetary value of the benefit of the private use of the vehicle was not discussed between him and the Respondent at any time during his period of employment.
The Applicant submits that his private use of the vehicle primarily included:
a) approximately 64km per day from his personal residence to his primary place of business. The Applicant undertook this travel on approximately 120 days per annum. Therefore, the Applicant undertook approximately 7,680km per annum driving from his personal residence to his primary place of business. The Applicant submits on the other days of the year he travelled directly to the relevant customer’s work site to commence work; and
b) approximately 20km per week was undertaken for additional personal use, amounting to approximately 1,040km of distance travelled per annum.
It was therefore the Applicant’s position that the total private use of the vehicle was approximately 8,720km per annum. The Applicant submitted that to the best of his knowledge, his combined use for the business and private use of the vehicle amounted to approximately 22,000kms per annum.
There is disagreement between the parties with respect of the private use of the vehicle. The parties were placed on notice in respect to the inadequacy of the evidence regarding the private use of the vehicle – no direct evidence had been tendered. Whilst the Respondent offered to obtain further documents to support its contention with respect to 18,000kms being attributed to private use, leave was not provided to the Respondent to do so. It was highlighted to the parties that ample time had been provided to both for them to file their evidence in support of their respective cases. The time to address evidential deficiencies was not in the midst of a hearing. If a party decides to raise a jurisdictional objection, it is foolhardy to proceed on the basis that in each circumstance mere assertion will get them across the line. This is particularly the case when there is factual dispute regarding the matter.
Whilst I could adopt the methodology derived from Fewings (applied to the 12-month period) to determine the value of the benefit (private use of the vehicle), I am not persuaded that the exercise would provide cogent evidence upon which to advance this decision. The methodology from Fewings is dependent upon the evidence submitted. That evidence is supposition at best.
At its highest, the Respondent’s case is that the value of the vehicle amounted to $14,040.00.
Conclusion
If I was to accept the propositions that the value of the vehicle was $14,040.00 and the mobile phone amounted to $1000.00, and both formed part of the Applicant’s earnings, it would still be the case that the Applicant’s earnings did not exceed the high income threshold.
With respect to the salary sacrifice agreement between the Applicant and Respondent by which $100.00 of the Applicant’s salary per week would be allocated to his superannuation fund, the Respondent simply observed that compulsory superannuation contributions were made in accordance with the Guarantee. It is apparent that the $100.00 superannuation contribution was in excess of payment for ordinary hours, overtime hours and night shift, and was not a contribution in accordance with the Guarantee.
However, accepting that the Applicant’s salary was $120,640.00 and adding both the value of the personal use of the vehicle ($14,040.00), the mobile phone ($1000.00), and the superannuation contributions in excess of the Guarantee ($5,200.00), the Applicant’s earnings do not exceed the high income threshold as they amount to $140,880.00.
As the Applicant’s earnings did not exceed the high income threshold of $162,000.00, he is a person protected from unfair dismissal by virtue of s 382 of the Act. The Respondent’s jurisdictional objection cannot be sustained and is therefore dismissed. Directions will shortly issue to the parties and the matter will be set down for a hearing on merits and remedy.
DEPUTY PRESIDENT
Appearances:
Mr B Cowan, Applicant.
Mr D Carr, for the Respondent.
Hearing details:
2023.
Perth (by telephone):
7 March.
[1] Digital Hearing Book Part 1, 76.
[2] Ibid 78.
[3] Ibid 86.
[4] Ibid.
[5] Fair Work Act 2009 (Cth) s 396(b).
[6] Zappia v Universal Music Australia Pty Ltd (2012) 225 IR 122, 125 [9].
[7] Sam Technology Engineers Pty Ltd v Bernadou (2018) 275 IR 419 (Sam Technology).
[8] Ibid 432 [54].
[9] Ibid 435 [65].
[10] Ibid 435–6 [65].
[11] [1904] AC 349.
[12] Sam Technology (n 7) 433 [58], quoting ibid 351.
[13] Ibid 436 [66].
[14] Ibid.
[15] Darling v Bechtel Australia Pty Ltd[2015] FWC 1242, [7].
[16] Monteiro v Valco Group Australia Pty Ltd [2019] FWC 2410, [17]; Rofin Australia Pty Ltd v Newton (1997) 78 IR 78, 82.
[17] Kunbarllanjnja Community Government Council v Fewings (Australian Industrial Relations Commission, Ross VP, Watson SDP and Commissioner Bacon, 7 May 1998).
[18] Ibid.
[19] Sam Technology (n 7) 432 [48].
[20] Ibid.
[21] Form F3 Employer Response, [1.5].
[22] Digital Hearing Book Part 2, 131.
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