Brian Hamond v Terra Firma Pty Ltd

[2013] FWC 1229

[2013] FWC 1229

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Brian Hamond
v
Terra Firma Pty Ltd
(U2012/14909)

COMMISSIONER JONES MELBOURNE, 14 MARCH 2013

Application for Relief from Unfair Dismissal - Jurisdictional Objection - No Modern Award or Enterprise Agreement and the Annual Rate of Earnings is not less than High Income Threshold.

Introduction

[1] The Applicant, Mr Brian Hamond, lodged an application for remedy in relation to his dismissal on 8 November 2012. The Respondent, Terra Firma Pty Ltd, objects to the application on grounds that the Applicant is not a protected person under s.382 of the Fair Work Act 2009 (the Act) as he is not covered by a modern award or enterprise agreement and the annual rate of earnings is not less than the high income threshold.

[2] S.382 of the Act provides:

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.

Background

[3] There is no dispute that:

(a) The Applicant was employed by the Respondent from 6 September 2004 to 31 October 2012 (the date his dismissal took effect);

(b) The Applicant was employed for the minimum employment period within the meaning of the Act;

(c) An enterprise agreement did not apply to the Applicant;

(d) On 7 September 2004, the Applicant signed a contract of employment. 1 Clause 1.3 of the contract of employment provides that:

‘Your initial role will be as Project Manager...’

(e) The Applicant’s qualifications are:

(i) Diploma of Engineering (Electronic) - Swimburne Institute of Technology, 1978;

(ii) Graduate Diploma of Management - Deakin University, 1996;

(iii) Master of Business Administration - Deakin University, 1996;

(iv) Bachelor of Laws - Deakin University, 2003; and

(v) PRINCE2 Practitioner, 2003.

Evidence and Findings of Fact

[4] Mr Bartels is the Managing Director. His evidence, which was not contradicted by the Applicant, is that the Respondent is a business and management consultancy firm which provides its clients with business analysts and project managers to implement a particular strategy, often being a business outcome or project. 2

[5] He described project management as involving the areas of scope, time, cost, risk, change management and stakeholder management. The scope sets out the schedule; namely commencement and end point of the project and the milestones in between. The project manager reports regularly to clients on the performance of the project, including costs given the scope. Time involves the adherence to the schedule. 3 These are often referred to as deliverables. The scope of the project is initially determined by the client.4

[6] Change management was described by Mr Bartels as follows:

If scope doesn’t change from the very start of the project to the time you deliver it, it’s probably not that apt to the market given the way the world turns in IT. So managing scope is managing that change in the scope, it’s managing how that scope is broken down into what’s called a work breakdown structure, something which you can actually say, “Okay, well” - it’s compartmentalised so that you can say, “Well, these” - “this skilled person is going to do that piece of work. This type of skilled person is going to do that piece of work”. So you can actually hand out the packages of work to the different people that are on the project and they can then do that piece of work and you can actually check how they’re going against achieving that bit of scope. 5

[7] Risk management by a Project Manager was described as:

So I think you also mentioned risk management?---Yes. Obviously while running a project you want to be able to say, “Well, there are certain issues that arise”. Some issues remain issues and other ones turn into a risk. If a risk is apparent in the project you want to be able to identify what that risk is. You probably want to socialise what that risk is to the stakeholders and make them aware of it, and have a plan in place that if that risk does happen or come to light - it may not. But if it does you - you know, you’ve actually got an action plan around it so you can mitigate the impact of that risk on the project. 6

[8] Stakeholder management by a Project Manager was described as:

Well, they’re the people who are really asking you to do what you’re being paid to do. So you’d better keep them happy, informed and make sure that you did achieve what you said you’d achieve. So keeping the informed about where it’s up to, what are the risks, how much - and making sure they’re across any changes, make sure that they’ve signed off on those changes. So you get to the end of the project and it’s generally a lot smoother project if you’ve kept them informed with what changes have happened, so you don’t end up with a big argument at the end of the project. So stakeholder management is very important. 7

[9] I find, there being no dispute, that these are the elements of a project manager’s duties and responsibilities.

[10] Mr Bartels’ uncontroverted evidence is that the Respondent was a consulting firm and its clients were located across the information, communication technology, financial services and government industry sectors. 8 I find accordingly.

[11] The Applicant’s evidence is that he was recruited by a Mr Kharsis who stated to him he was selected for the interview by reason of his engineering qualifications, that the Respondent’s clients included those in industries where an engineering qualification was required for the performance of work its employees were hired to do. 9

[12] Mr Bartels stated that in recruiting employees, the type of degree held was not relevant, rather it was a proven track record in project management which was critical. 10 He conceded that he was unable to contend with the evidence of the Applicant regarding statements made by Mr Kharsis and noted Mr Kharsis had since left the firm.11

[13] The Applicant stated that, despite the description of his position in his contract of employment, he believed he was employed as an engineer project manager. 12

[14] The Applicant agreed that his career path, given the acquisition of his qualifications since his engineering degree, was from engineer to someone with business management skills. 13 The Applicant conceded that at the time he was employed he was able to demonstrate the following attributes:

• Successful delivery of previous project outcomes

• Ability to establish strong stakeholder relationships at all levels

• Sound understanding and experience with project management tools and techniques

• Self Starter

• Business and technical liaison skills

• An ability to lead and create organisational focus in (at times) ambiguous environments

• Ability to lead and influence teams

• A desire to add value as part of a team effort

• Clarity in verbal and written communications 14

[15] Notwithstanding the Applicant’s view of his position with the Respondent, I am not prepared to displace the clear terms of his contract of employment; namely, that he was employed as a Project Manager. The Respondent is a consultancy business providing the services of its employees who are project managers and business analysts to its clients. This is not a case where the employer is an engineering firm, employing engineers but designating certain engineers as managers. 15 I am satisfied, however, that the Applicant’s engineering qualification was relevant to the recruitment of the Applicant.

[16] Having considered the evidence, I find that:

(a) The Applicant was employed as a Project Manager, by the Respondent; and

(b) The Applicant’s engineering qualification was a relevant factor in the decision by the Respondent to offer the Applicant employment as a project manager.

[17] In the course of the Applicant’s employment with the Respondent, the Applicant provided his services in a range of projects to various clients including Telstra, the Department of Justice and VicRoads.

[18] Much evidence focussed on the duties undertaken by the Applicant in providing his services for the projects.

[19] The Applicant’s evidence is that his professional engineering qualifications and skills were essential to the duties on various projects undertaking during his employment with the Respondent. As an example, the Applicant stated that in providing his services for the Telstra NBN (Data Monitoring Tool) Project, he was responsible for the designing, planning and building of the data monitoring tool. 16 The Applicant stated that in the course of this project he exercised his engineering qualification to maximise data flow. 17

[20] The Respondent argues that the Applicant exercised a project management role in each of the projects, his engineering qualifications being helpful, not essential.

[21] Having considered the evidence, I am satisfied and I find that in the course of some of the projects, the Applicant relied on and utilised his professional engineering qualifications in order to carry out his duties of project manager.

[22] The Respondent characterised the Applicant’s role as one of coordination, managing design and risk, senior management reporting. The Applicant was described by the Respondent as senior project manager on each of the projects.

[23] The Applicant’s evidence is that the duties he engaged in on the projects included planning of the budget and timelines; responsibility for ensuring deliverables were met; communicating with clients; coordination of budget resources and works programs; ensuring schedules for works programs were met. 18 However, he generally characterised these duties as part of his role as technical expert or specialist with any management role confined to backfilling for client employees on leave. Any responsibility for the coordination of budget, resources and works program was described as a consequence of technical management and engineering planning. The Applicant states that the Respondent has various consultancy levels being Graduate Consultant, Associate Consultant, Consultant, Senior Consultant, Lead Consultant, Managing Consultant and Principal Consultant. He said that he was designated Lead not Management Consultant 19.

[24] He described his role in relation to the Department of Justice (DOJ) project as ‘lead engineer on the government side’ 20 bringing his expertise in engineering to a committee of experts overseeing the project. In cross-examination the Applicant agreed he was not the engineer doing the design of the software but his job was to ‘analyse, to challenge and to test’.21

[25] In evidence was a proposal prepared by the Respondent for the purpose of the DOJ project. 22 The Summary of Understanding set out in the project provided the project manager (being the Applicant) would (in summary):

• Manage and co-ordinate the project;

• Lead project team members who were representatives from the courts, administration; 23

• Build and maintain positive relationships with stakeholders;

• Report on and monitor the project against agreed milestones/deliverables;

• Liaise with Department of Justice management; and

• Provide focus for reporting of project status and generation of action designed to ensure achievement of project deliverables.

[26] The deliverables were set out in the proposal as:

• Deliver the project within the infringements activities program of work.

• Develop and implement a project management methodology complete with documented procedures with tools and templates applicable to the project which is consistent with DOJ processes and procedures.

• Provide routine and ad hoc status reports to DOJ Management, the Project Steering Committee and senior executive management as required.

• Establish the budgetary reporting framework for the projects operating budget.

• Make recommendations to DOJ Management and the Project Steering Committee on resolution of key issues as they arise. 24

[27] In cross examination, the Applicant stated the proposal did not come to him but conceded it was a summary of most of the things he did, 25 that it covered the majority of the things he did.26

[28] In reply the Applicant expanded on the element of the deliverable part of the proposal being, ‘lead project team members, manage and resolve more complex issues’ as follows:

What do you say that was intended to be about in substance?---Well, a team of - was provided by the department being people from the court, people being from administration. So it was - I was not their manager, they still had their normal line management for holidays and whatever. My role there was to ensure that we were meeting time lines, deliveries, targeting the particular work, using their expertise to fill in the blanks where I didn’t have particular knowledge. The managed part of it was to ensure we were heading towards a particular target, because there was a legislated date for this thing had to be in operation so we had to make sure we had no ability to slip and resolve more complex issues. Given that there was no possibility of slip it was a technical - very technical bit of coding that had to be written to make all this money move around in the right order and if we weren’t going to make all the aspects of it we had to know which ones were going to be - must be there for the - by legislation which we could fudge or fiddle. So it was a matter of monitoring the activity on a day to day basis and then analysing the output and say yes, we are still doing this and it’s still working. 27

[29] Similarly, the Applicant expanded on the deliverable described as ‘making recommendations to the DOJ and the committee on resolution of key issues as they arise’ as follows:

---Part of it goes from that previous answer, when we came across issues that - an issue is something that’s happened already. So you’ve got to work out what to do with that particular issue, so it was a matter of formulating what we could do - what changes were required or could we bring in more resources to do that or did we drop something else off to make that one fit in. It was - yes. So then you have to take that to the steering committee for them to - when you made your recommendation they would ultimately decide what was the path to be taken. 28

[30] The Applicant stated, in cross examination, that he took on the role of software engineer in the Telstra NBN project 29 and then described this as taking on the job of delivering the project as required.30 He disagreed with the proposition that there was a difference in a project manager and professional engineer.31 The Applicant’s view of the relationship of the two was expressed as:

Project management is a sub-set of a skill, it is not a highlight of someone’s career. Engineering is far and above what project management does. 32

[31] The Applicant stated that the project management aspects of the projects were 10% of the work. 33 He expressed it this way:

there are three parts to a project, there is the scope, the time and the cost. If you do not know what the scope is, the technical scope of the work, if you do not understand the engineering component of an engineering project, you cannot work out how much it takes - how much time it is going to take it. So you prepare your management plan, the deliverables listed here, you prepare those and then you do your costings against them and then that becomes the project, the engineering requirements, the engineering deliverables. Then as you go through the project you work out the time it takes and the cost it takes and you keep doing iterations and you adjust those which is the management aspect that you need to keep analysing, you need to keep reviewing, you need to keep preparing operational aspects so that when it roles out into operation. 34

[32] It is unnecessary to traverse the cross examination in relation to each and every project the Applicant worked on suffice to say that when taken to a description by him of duties he engaged in; such as ‘responsible for planning of budget and time lines’, ‘procurement and governance requirements’, the Applicant agreed they were standard project management functions but maintained they were engaged in by him as an engineer project manager. 35

[33] Mr Bartels conceded that he did not know what the Applicant was doing on a day to day basis on each of the projects. 36 He maintained, however, that the Applicant’s services were not provided to design the Telstra NBN monitoring tool, but to manage the process of design.37

[34] I note here that, in the course of cross examination, an issue arose as to whether the Applicant was engaging in duties outside his brief. 38 I have not taken into account this evidence as it was general and speculative.

[35] It is relevant to observe that in the Applicant’s professional profile 39 his capabilities are described as:

• Program Manager

• Project Director

• Project Manager

• Project Management Authority (CMMI, PMBOK, PRINCE2, Telstra TDP, OGC)

• Business Case Development

• Benefits Management

• Contract Management

• Personnel Manager

[36] I have carefully considered the Applicant’s evidence as to the duties or work he engaged in whilst project managing projects for client of the Respondent. Although the Applicant generally gave his evidence in a straightforward manner, I have formed the view that he was at pains to establish that the functions of project managing were subsidiary to his main function as an engineer. I cannot accept this characterisation of his role. On his own evidence he engaged in coordination, budget and planning, anticipating and taking action to address risks, ensuring the projects met milestones, were delivered on time and within cost parameters, he communicated with stake holders and reported to clients. These duties and responsibilities are in essence those of project management. There is no doubt that in discharging some of these duties the Applicant was required to utilise his engineering qualifications.

[37] I am not satisfied, having regard to the evidence, that project management was a subset of an engineering function he carried out, or that project management was 10% of his duties. Rather, I am satisfied that primarily he engaged in duties of project management.

[38] Accordingly I find that:

(a) The Applicant was primarily engaged in duties of project management in the course of providing his services to clients of the Respondent on various projects he was engaged in; and

(b) In performing particular duties of project manager, he was required to utilise his engineering qualifications.

Was the Applicant covered by a modern award?

[39] The Respondent submits that the Applicant is not covered by a modern award, including the Professional Employees Award 2010 (the Award). The Applicant submits he is covered by the Award.

[40] Clause 4 of the Award sets out its coverage. It provides:

4.1 This award covers employers throughout Australia with respect to their employees performing professional engineering and professional scientific duties who are covered by the classifications in Schedule B - Classification Structure and Definitions of the award and those employees.

4.2 This award covers employers throughout Australia principally engaged in the information technology industry, the quality auditing industry or the telecommunications services industry and their employees who are covered by the classifications in Schedule B.

[41] The Applicant submits 4.2 is not relevant, presumably because he argues that he is an employee performing professional engineering duties and he falls within Level 3 of the Schedule B - Classification Structure.

[42] The Respondent submits that the Applicant did not perform professional engineering duties consistent with Level 4 of Schedule B.

[43] I will deal with the question of Clause 4.1 shortly. I indicate here that I am satisfied, having regard to Mr Bartels’ evidence and the evidence of the projects in respect of which the Applicant’s consulting services were provided, that the Respondent is not principally engaged in the IT industry, quality auditing industry or telecommunications services industry.

[44] The issue is whether the Applicant is covered by the Award by virtue of its occupational coverage through Clause 4.1.

[45] It is to be noted that Clause 4.1 refers to employees performing professional engineering and professional scientific duties. However, I concur with the observation of Vice President Lawler in Halasagi v George Weston Foods Limited 40 (Halasagi) at [8] that the words, having regard to the context in which they appear, have a dispersive not conjunctive effect, meaning that the Applicant will come within the coverage if he performs professional engineering duties and is covered by the Award’s relevant classification structure.

[46] Clause 3.2 provides:

‘professional engineering duties means duties carried out by a person in any particular employment, the adequate discharge of any portion of which duties requires qualifications of the employee as (or at least equal to those of) a graduate member of Engineers Australia.’

[47] The meaning of this clause was considered by Lawler VP in Halasagi:

[23] I proceed on the basis that:

• Particular duties will not be “professional engineering duties” as defined unless it is almost invariably the case that a qualification of the sort referred to in the definition is needed for the adequate discharge of some portion of those duties.



• The qualification must relate directly to the duties in question. That is, it is not enough that an employee holds a qualification as (or at least equal to those of) a graduate member of Engineers Australia, the qualification must be a qualification of the sort that is almost invariably needed to perform duties of the sort that are said to be the “professional engineering duties” of the employee. In other words, an employee would generally not be able to rely upon, say, a degree in mechanical engineering to claim coverage by the Professional Employees Award 2010 in a position that involves duties in the field of chemical engineering.



• If the advertisement for an employee’s position identifies a relevant qualification as required this would be prima facie evidence that the position involved “professional engineering duties” for an employee who held that qualification.



• The reference in the definition to “the adequate discharge of any portion of” the relevant duties is intended to ensure that engineers who advance in their career and assume an increasing load of administrative duties remain covered if they still perform some engineering duties, the adequate discharge of which requires the relevant qualification and the definition should be construed accordingly.

[24] Of course, an applicant who seeks to establish that they are protected from unfair dismissal by virtue of being covered by a modern award needs to establish not only they are within the coverage clause of that modern award (the issue with which I am presently concerned), but also that they are employed in a classification in the award. That later question is determined by reference to the “principal purpose” test. I would note that, in relation to the Professional Employees Award 2010, care must be taken not to confuse these two questions because the definition of “professional engineering duties” can be satisfied by reference to “any portion” of the employee’s duties and does not require that the duties falling within that definition are the “principal purpose” for which the employee is employed. (footnotes omitted)

[48] I adopt the approach of the Vice President in this matter.

Issues in dispute

[49] The issues in dispute are:

(a) Whether the Applicant was performing professional engineering duties as defined in Clause 3.2 of the Award; and

(b) Whether the Applicant was covered by classification B.1.9 (Level 3) or B.1.11 (Level 4) - Professional, in Schedule B - Classification, Structure and Definitions of the Award.

Professional Engineering Duties

[50] There appears to be no dispute that the advertisement of the Applicant’s position did not require an engineering qualification.

[51] The question remains, does the adequate discharge of any portion of the Applicant’s duties require engineering qualifications?

[52] I have earlier found that the Applicant was required to utilise his engineering qualification (being one recognised by Engineers Australia) in relation to particular duties he was engaged in on the various projects for clients of the Respondent.

[53] Accordingly, I am satisfied that the holding of the Applicant’s qualification was required for the adequate discharge of any portion of his duties.

Classification structure - Coverage

[54] The approach in determining whether an award classification structure applies to an employee’s employment was considered by a Full Bench in Carpenter v Corona Manufacturing Pty Ltd. 41The Full Bench stated:

[9] In our view, in determining whether or not a particular award applies to identified employment, more is required than a mere quantitative assessment of the time spent in carrying out various duties. An examination must be made of the nature of the work and the circumstances in which the employee is employed to do the work with a view to ascertaining the principal purpose for which the employee is employed. In this case, such an examination demonstrates that the principal purpose for which the appellant was employed was that of a manager. 42 (references omitted)

[55] In Brand v APIR Systems Limited, 43 a Full Bench stated:

[13] We note that the Commissioner adopted and applied a test based on the principal purpose for which the applicant was employed. She relied upon the Full Bench decision in Carpenter v Corona Manufacturing Pty Ltd in that respect. An analysis of the authorities referred to in that case shows that industrial courts and tribunals have at different times adopted different formulations of the test to be applied in determining whether the work of an employee or group of employees is within a particular occupation or classification. One formulation requires that the question should be decided by reference to the major and substantial employment of the employee. Another formulation requires that the principal purpose or purposes of the employment be identified. In some cases the formulations have both been referred to. In one case a Full Bench of the Commission held that the principal purpose formulation was a refinement of the major and substantial employment formulation. A Full Court of the Federal Court of Australia, without reference to other authorities, adopted a test based on whether the employees were "engaged substantially" in the duties of the relevant occupation.

[14] In this appeal both parties accepted that the "principal purpose" formulation as stated in Carpenter v Corona Manufacturing Pty Ltd should be applied. We are content to decide this application on that basis. We should add, however, that we are satisfied that whichever of the formulations referred to might be applied, in this case the result would be the same. 44(references omitted)

[56] Having regard to these decisions it can be fairly stated that in determining whether an award classification applies, regard may be had to the following formulations of the approach:

(a) The principal purpose for which the employee was employed; and

(b) The major and substantial employment of the employee.

[57] The Respondent submitted that the relevant test is the principal purpose test and that the duties undertaken by the Applicant are not of the sort of administrative duties an engineer might do and referred to in Halasagi. The principal purpose of the Applicant’s employment is as a Project Manager not an Engineer. The duties specified in the classification structure must be reached in context; namely the award which is there to cover professional engineers. The Respondent submits that the decision in Hehir v Schweitzer Engineering Laboratories (Hehir) 45is apposite.

[58] The Applicant submits that all of his engagements required professional engineering qualifications and experience. He argues his work in these engagements is covered by Level 3 of the classification structure of the Award as follows:

So looking at the relevant sections that he believes his work fell into of the award in level 3, his duties required the application of mature professional knowledge - and there doesn't seem to be any doubt that he had mature professional knowledge - that there was scope for individual accomplishment; coordination of more difficult assignments; deals with problems of which it is necessary to establish or modify guides and devise new approaches; the work is carried out within broad guidelines, requiring conformity with overall objectives, priorities and necessary cooperation of other units; and informed professional guidance may be available. That's exactly what he described: the involvement of other technical specialists in the various committees in which he was involved; providing informed guidance. Finally, he outlined assigning work, reviewing it for technical accuracy - and he gave examples of that - and adequacy and planning, directing, coordinating, supervising the work of other professional and technical staff. Everything that he has described falls within that classification of level 3. 46

[59] The Applicant relied on the decision in Baxter and Anca Pty Ltd 47(Baxter) for the proposition that the mere fact an engineer undertakes administrative duties does not take him outside the coverage of the award. However, the facts in this matter were relevantly that the Applicant commenced employment with the company as a project manager for a particular project. Six months later the Applicant was appointed in a management position in a section of the engineering firm referred to as “sustaining products”. The issue before the Commission was whether this position fell within the classification structure of the then engineers award. It is to be noted that the Applicant’s evidence regarding the project manager’s position was:

... whilst that role required engineering technical ability in order to be able to discuss the product with potential customers the position did not involve the work of a professional engineer but rather involved project management skills which entailed the coordination of a significant amount of commercial and strategic information, the capacity to meet with quite senior management members of the company's significant customers in America, Europe and Australia. 48

[60] In Hehir the Applicant was a Project Manager employed by an electrical engineering firm. Commission Cloghan applied the principal purpose test and described the elements of the project management role (which included budgets, time schedules, communication with clients and providing inputs into other project proposals) as proactive, cooperation and communication to achieve a particular aim. This proactive role was contrasted with the Level 4 - Professional Engineer under the Award. 49 I concur with Commissioner Cloghan’s characterisation of project management as proactive and of Level 4 - Professional Engineer as:

[48] In contrast the Level 4 - Professional Engineer in the Award emphasises the performance of professional engineering work which demands independence of approach, originality, ingenuity and judgement in a technical sense. In my view, these duties are significantly different to those expected in an administrative position. 50

[61] Likewise, Level 3 - Professional Engineer - emphasises the performance of mature professional knowledge, problem solving, application of new professional approaches, standards and procedures and working within broad guidelines in a technical sense.

[62] I take it that the reference to ‘professional’ is as a professional engineer and must be read in this context. The Level 3 - Professional Engineer - is expected to be a person who:

• Applies mature professional knowledge, with scope for individual accomplishment and coordination;

• Deals with problems for which it is necessary to modify established guides and decide new approaches;

• Contributes or applies new professional approaches in a technical sense;

• Accorded respect for technical accuracy and is responsible for decisions on assigned matters;

• Outlines and assigns work, reviewing it for technical accuracy and may plan, direct, coordinate and supervise work of others with technical content.

[63] I am satisfied that the duties and role of the Applicant in providing services to various projects was a proactive one. On the Applicant’s own evidence it entailed meeting timetables, budgeting, enduring deliverable were met, communication with clients including senior management and risk assessment. As I have found earlier, whilst the Applicant’s role required, at times, engineering technical ability to ensure deliverables and communicate with the clients staff, the Applicant’s major and substantial employment was as project management. Put another way, the principal purpose of his employment was as a Project Manager.

[64] Accordingly, I find that the Applicant was not covered by the Award. I am further satisfied that the Applicant was not covered by any other Modern Award.

High Income Threshold

[65] The high income threshold at the relevant time was $123,300.

[66] A dispute exists between the parties as to the meaning of “annual rate of earnings” in the particular circumstances of this matter.

[67] These circumstances are that up until a short time before the Applicant’s dismissal his salary was $129,090.91 per annum.

[68] The Applicant’s hours of work are not specified in the contract of employment, although both parties agree that the Applicant worked a 5 day, 38 hour week until 21 October 2012. His salary was paid fortnightly and until the pay period ending 15 October 2012, the Applicant was paid $5,378.79 gross per fortnight.

[69] On 10 October 2012, the Applicant sent Mr Bartels an email requesting that he commence working “a four day week” until the start of his annual leave on 24 December 2012. The Applicant stated that if Mr Bartels approved his request he would return to a 5 day working week on Monday, 14 January 2013. He also stated he would make himself available to work a 5 day week if business circumstances required and he received reasonable notice. Mr Bartels agreed to this in an email dated 12 October 2012 specifying a start date of 22 October 2012.

[70] The new arrangement commenced. The Applicant’s employment was terminated on 31 October 2012. In the Applicant’s last pay period with the Respondent, he was paid a fortnightly gross figure of $4,385.93 reflecting the agreement reached.

[71] Properly so, both parties accept that the decision of the Full Bench in Zappia v Universal Music Australia Pty Ltd T/A Universal Music Australia 51(Zappia) is binding. The relevant facts in that case were that in the 12 months preceding the Applicant’s dismissal the Applicant’s salary was initially $90,000 per annum. The Applicant’s salary increased to $92,500 per annum in the course of the 12 months. At first instance the Applicant argued his annual rate of earnings was the amount he actually earned in the 12 months prior to his dismissal. At first instance this argument was rejected. On appeal the Full Bench held:

[9] On the appeal, Mr I Latham, of counsel, who appeared for the appellant both at first instance and on the appeal, submitted that his Honour had erred in his construction of the expression ‘annual rate of earnings’. In our view his Honour was clearly correct. Section 382 of the Act relevantly provides that a person is protected from unfair dismissal at a time if, at that time, 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. It is clear that the time at which the annual rate of earnings must be ascertained is at the time of the termination of the person's employment. What needs to be ascertained is the annual rate of earnings at that time, not the annual earnings to that time (the amount earned in the 12 months to that time). 52

[72] The issue in dispute is what was the Applicant’s annual rate of earnings at the time of termination.

[73] The Respondent submits that the Applicant’s annual rate of earnings at the time of his dismissal was $129,090.91. This is on the basis that his hourly rate ($65.32 per hour, derived from an annual salary of $129,090.91) remained constant and the Applicant’s fortnightly salary paid in the pay period when the new arrangement regarding the working week came into effect was calculated on this hourly rate. 53 The Respondent submitted that what is in substance an annual rate of earnings should not be displaced by a temporary arrangement regarding the hours worked each week.54

[74] The Applicant submits that the composite phrase must be construed so that the word ‘rate’ pertains to the ‘earnings’ and not ‘annual’:

Rate is the amount you earn at the date of the dismissal and that is the core basis on which the annual earnings are calculated. 55

[75] Thus, the Applicant argues the rate of earnings at the time of the Applicant’s dismissal was the fortnightly rate. This is then annualised to arrive at the Applicant’s annual rate of earnings at the time of dismissal. This approach produces an amount of $114,034.18.

[76] The Applicant’s contract of employment provides for an annual salary paid fortnightly. As I have stated, although not specified in the contract of employment, both the Respondent and Applicant approached the Applicant’s hours of work on the basis that, prior to 22 October 2012, the Applicant worked a 38 hour week. Both the Applicant and Respondent have approached the calculations of the Applicant’s earnings on the basis of an hourly rate. The Respondent stipulates this as $65.32 per hour 56 and the Applicant, in his written submissions, as $65.33 per hour.57

[77] I agree with the Applicant’s submission that the word ‘rate’ in s.382(b)(iii) refers to the person’s earnings; such that ‘rate of earnings’ are to be read as a composite whole. However, the word ‘rate’ connotes a measure or the basis for calculating an amount. 58 Thus, the rate of earnings is not an amount a person might be paid each fortnight as this must be the consequence of the application of the rate of earnings. Accordingly, I reject the Applicant’s submission that his annual rate of earnings is the amount he was paid during the fortnight when he was dismissed, annualised.

[78] A preferable approach, given the ordinary meaning of the words used and the circumstances of this matter, is to treat the Applicant’s rate of earnings as one calculated on his hourly rate of $65.32. The next issue which arises is how the ‘annual’ rate of earnings is to be ascertained. “Annual” connotes something reckoned by a year or period of a year. 59 It is to be reckoned at the time of the dismissal. Consequently, it must refer to the 12 month period preceding the date of the dismissal.

[79] Until the arrangement entered into regarding the reduction of the Applicant’s hours of work to 30.4 hours per week, the Applicant’s hours per week were 38. The arrangement between the Applicant and Respondent was temporary, lasting no longer than 2 months and subject to variation if the Respondent’s business required and the Applicant was given sufficient notice.

[80] Approaching the construction of the phrase ‘annual rate of earnings’ fairly and according to its ordinary meaning, I am satisfied that the calculation of the Applicant’s annual rate of earnings must be by the application of the rate of earnings ($65.32 per hour) to a 38 hour week which the Applicant normally worked in the year preceding the date of his dismissal..

[81] Accordingly I find that the Applicant’s annual rate of earnings at the time of his dismissal was $129,072.32.

[82] As I have found that the Applicant is not covered by a modern award and his annual rate of earnings exceeds the high income threshold, the Applicant is not a protected person.

[83] Consequently, I dismiss the Applicant’s application for remedy. An Order to this effect will be issued.

COMMISSIONER

Appearances:

Ms F. O’Brien appearing on behalf of the Applicant.

Mr J. Tracey of counsel appearing on behalf of the Respondent.

Hearing details:

2013.

Melbourne.

22 February.

 1   Witness Statement of Nicholas Bartels, Exhibit T2, Attachment A

 2   Transcript of Hearing at PN44

 3   Ibid at PN50-PN53

 4   Ibid at PN189

 5   Ibid at PN54

 6   Ibid at PN59

 7   Ibid at PN60

 8   Ibid at PN370

 9   Witness Statement of Brian Hammond, Exhibit H2 at [19]-[22]

 10   Transcript of Hearing at PN64

 11   Ibid at PN93 and PN99

 12   Ibid at PN354

 13   Ibid at PN441

 14   Ibid at PN389-PN399

 15   Cf San Remo (Southland) Pty Ltd v Farrell (1987) 22 IR 291

 16   Exhibit H2 at [27]

 17   Transcript of Hearing at PN335-PN337

 18   Exhibit H2 at [26] to [74]

 19   Exhibit H2 at [85] and 87

 20   Transcript of Hearing at PN340

 21   Ibid at PN454

 22   Exhibit T3.

 23   Ibid at p.3.

 24   Ibid.

 25   Transcript of Hearing at PN486

 26   Ibid at PN485

 27   Ibid at PN597

 28   Ibid at PN598

 29   Ibid at PN495

 30   Ibid at PN497

 31   Ibid at PN499

 32   Ibid at PN515

 33   Ibid at PN519

 34   Ibid at PN523

 35   Ibid at PN542-PN553, PN560-PN573

 36   Ibid at PN117

 37   Ibid at PN119

 38   Ibid at PN137-PN173, PN202-PN204

 39  Witness Statement of Nicholas Bartels, Exhibit T2, Attachment C

 40   [2010] FWA 6503

 41   PR925731

 42   Ibid at [9]

 43   PR938031

 44   Ibid at [13] and [14]

 45   [2011] FWA 3763

 46   Transcript of Hearing at PN744

 47   [2000] AIRC T4398

 48   Ibid at [6]

 49   Op Cit. At [48] and [49]

 50   Ibid at [48]

 51   [2012] FWAFB 6108

 52   Ibid at [9]

 53   Transcript of Hearing at PN698 - PN699

 54   Ibid at PN801 - PN802

 55   Ibid at PN707

 56   Exhibit T2, Attachment F.

 57   Exhibit H1 at 11.

 58   Concise Oxford Dictionary, 4th Edition.

 59   Ibid

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