Campbell v Linde Material Handling Pty Ltd
[2019] FCCA 2023
•2 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CAMPBELL v LINDE MATERIAL HANDLING PTY LTD | [2019] FCCA 2023 |
| Catchwords: INDUSTRIAL LAW – Small claims – applicant claims underpayment of commission – consideration of scope of court’s jurisdiction – application dismissed. |
| Legislation: Fair Work Act 2009 (Cth), ss.12, 61(2), 139(1), 458(1A), 548, 566 Federal Circuit Court of Australia Act 1999 (Cth), s.10 |
| Cases cited: Girardi v Allergan Australia Pty Ltd [2017] FCCA 163 |
| Applicant: | STUART GREIG MCGREGOR CAMPBELL |
| Respondent: | LINDE MATERIAL HANDLING PTY LTD |
| File Number: | MLG 3662 of 2018 |
| Judgment of: | Judge Mercuri |
| Hearing date: | 18 March 2019 |
| Date of Last Submission: | 18 March 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 2 August 2019 |
REPRESENTATION
| Advocate for the applicant: | In person |
| Solicitors for the applicant: | None |
| Advocate for the respondent: | Ms Kim |
| Solicitors for the respondent: | None |
ORDERS
The applicant’s application be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 3662 of 2018
| STUART GREIG MCGREGOR CAMPBELL |
Applicant
And
| LINDE MATERIAL HANDLING PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
This application came before the court in its small claims jurisdiction under the Fair Work Act 2009 (Cth) (“the FW Act”).
The respondent submitted that the court lacks jurisdiction to deal with this matter.
Background
The facts in this matter are not significantly in dispute. The applicant was employed by the respondent as a salesman from 4 May 2009 to 18 April 2017.
It was a term of the applicant’s employment contract that he was entitled to commission in accordance with the ‘standard LMH commission structure’.[1]
[1] Exhibit A.
In essence, the applicant claims that he was not paid the full commission to which he was entitled pursuant to his contract in respect of the sale of 15 warehouse forklifts which were sold in 2015 (“Caprice deal”).
Issues
The key issues in this proceeding are:
a)whether the court has jurisdiction to deal with this claim; and
b)if so, whether the applicant was paid the correct commission in respect of the Caprice deal.
Evidence
The applicant summarises his claim in the following terms:
The claim is based on the breach of a workplace agreement in October 2015. The respondent failed to pay the correct amount of commission based on a percentage of profit that was made from a rental agreement. The agreed amount of commission should have been paid at 17.5% of the total profit including any factory discounts that was made by the respondent.[2]
[2] Applicant’s application filed 3 December 2018.
The applicant claims that if the respondent had properly calculated his commission in relation to the Caprice deal in accordance with the applicable policy, he should have received a commission of $24,207.73. He only received $13,203.08. His claim is therefore for an underpayment of $11,004.65.
In essence, the applicant states that the shortfall arose from an inappropriate calculation of the profit made from the Caprice deal in circumstances where a factory discount which had been approved in respect of the sale, was subsequently not taken into account in calculating the profit in respect of which the bonus was payable.
The applicant gave evidence, which does not appear to be challenged, that the respondent sought and obtained a factory discount from its parent company when sourcing the forklifts as part of the Caprice deal. That discount was applied, resulting in the respondent increasing its profit margin from the Caprice deal.
Evidence was also given about the impact on the profitability of the Caprice deal as a result of the drop in the value of the Australian dollar as compared to the Euro, which was relevant because the fork lifts were purchased in Euros.
The respondent concedes that it paid the applicant $13,203.08 commission in respect of the Caprice deal. However, the respondent argued that either:
a)this court has no jurisdiction to consider the applicant’s claim for an underpayment; or
b)in the alternative, if the court does have jurisdiction, there has been no underpayment, because the respondent was entitled to calculate the commission payable to the applicant in the manner it did and therefore there has been no breach of the terms of the applicant’s employment.
The respondent relies upon an affidavit of Mr Pala, the respondent’s Managing Director. Mr Pala also gave evidence by telephone.
Mr Pala concedes that he was not employed by the respondent at the time of the Caprice deal. However, he states:
a)he received an email about this matter from the applicant in May 2018, some 12 months after the applicant ceased working for the respondent;
b)he made inquiries of the business in relation to the Caprice deal and the applicable policies which applied at the time;
c)at the relevant time, the applicant was entitled to commission in accordance with the 2014 Sales Commission Policy;
d)the factory discount ought not have been included in the applicant’s cost/matrix price calculation;
e)the allocation of any factory discount to the margin and thereby its inclusion in the calculation of any sales commission, is at the discretion of management; and
f)on review, the applicant was actually overpaid his commission in respect of the Caprice deal.
Mr Pala also gave evidence that in investigating the applicant’s claims, it became clear to him that:
The Sell (sic) price on the factory discount to Parentco had in fact been understated, resulting in what appeared to be a reduced margin which formed the basis for the discount later applied by Parentco.[3]
[3] Paragraph 11 of the affidavit of Arnaldo Pali sworn and filed 8 March 2019.
He further stated that this issue is currently the subject of an investigation by the respondent.[4]
[4] Paragraph 11 of the affidavit of Arnaldo Pali sworn and filed 8 March 2019.
There was a significant amount of time given during the parties’ evidence traversing the following issues:
a)whether the factory discount was retained by the respondent and, if so, what relevance this had to the present dispute;
b)the relevance, if any, of the drop in value of the Australian dollar at the time of the Caprice deal; and
c)whether it was appropriate for the respondent to include a fair market value adjustment in respect of returning vehicles and the impact of this on the calculation of the appropriate commission payable to the applicant.
For the following reasons, it is not necessary for me to determine these matters.
Jurisdiction
The court’s jurisdiction in this matter is subject to the provisions of the FW Act and the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”).
Section 10 of the FCCA Act relevantly provides:
The Federal Circuit Court of Australia has such jurisdiction as is vested in it by laws made by the Parliament:
(a)by express provision; or
(b)by the application of section 15C of the Acts Interpretation Act 1901 to a provision that, whether expressly or by implication, authorises a civil proceeding to be instituted in the Federal Circuit Court of Australia in relation to a matter.
Section 566 of the FW Act relevantly provides that this court has jurisdiction in relation to any civil matter arising under that Act.
In addition, section 548 of the FW Act sets out the types of matters which may be dealt with in the court’s small claims jurisdiction. Relevantly, section 458(1A) provides that for a matter to be dealt with in the small claims jurisdiction, it must relate to:
(a)an amount that an employer was required to pay to, or on behalf of an employer:
(i)under this Act or a fair work instrument; or
(ii)because of a safety net contractual entitlement; or
(iii)because of an entitlement of the employee arising under subsection 542(1);
(b)…
The respondent argues that the applicant’s claim, such as it is, arises from a contractual arrangement between the applicant and the respondent and therefore does not fall within any of the requirements of section 458(1A) and the court does not have the power to deal with it.
The applicant did not identify any provision under the Act or a fair work instrument under which he says he is entitled to the commission claimed. A ‘fair work instrument’ is defined in section 12 of the FW Act to mean:
(a)a modern award; or
(b)an enterprise agreement; or
(c)a workplace determination; or
(d)an FWC order.
In his application, the applicant makes reference to a ‘workplace determination’. However, the term ‘workplace determination’ is defined in section 12 of the FW Act to mean:
(a)a low-paid workplace determination; or
(b)an industrial action related workplace determination; or
(c)a bargaining related workplace determination.
There is no evidence before this court that any such instrument applied to the applicant’s employment. The applicant has not established that his employment and any commission entitlement arose under a ‘workplace determination’ as defined.
The question does arise however, as to whether the applicant’s entitlement to a commission payment arises because of a ‘safety net contractual entitlement’. A ‘safety net contractual entitlement’ is defined to mean:
an entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:
(a)subsection 61(2) … or
(b)subsection 139(1) …[5]
[5] Fair Work Act 2009 (Cth), section 12.
The matters described in section 61(2) are not relevant; however, the matters described in section 139(1) include ‘incentive based payments’. That term is not defined in the FW Act.
It is nevertheless arguable that it includes a commission structure which is intended to encourage sales representatives to maximise sales. The Macquarie Dictionary defines the term ‘incentive’ in the following terms:
1.that which incites or stimulates action.
2.an inducement such as extra money, better conditions, etc. offered to employees to encourage better work
3.…
Similarly, the Oxford English Dictionary defines the term to mean, among other things:
…
3.of or pertaining to a system of payments, concessions, etc. to encourage harder work or a particular choice of work.
It is common ground that it was a term of the applicant’s employment that he was entitled to an annual base salary and, in addition to that, he was entitled to a commission scheme in accordance with the ‘standard LMH commission structure.’[6] It is also common ground that the terms of the commission structure changed from time to time over the course of the applicant’s employment.
[6] Exhibit A.
The relevant terms of the commission structure which applied to the applicant’s employment are contained in Exhibit B. It is common ground that the applicant was paid pursuant to the 2014 commission policy.[7] Relevantly, the policy document refers to the commission structure as an ‘incentive commission’ and says ‘an incentive commission can be claimed on a quarterly basis by all ADMs who exceed respective quarterly order intake budget as measured by calendar quarter.’[8]
[7] Exhibit B.
[8] Exhibit B, page 2.
I am satisfied that the commission structure which applied to the applicant’s employment could properly be described as an entitlement that relates to an incentive based payment and as such, a contractual term dealing with that matter falls within the term.
The question therefore arises as to whether or not the applicant’s entitlement to a commission payment falls within the notion of an ‘incentive based payment’ and would fall within the definition of a safety net contractual entitlement for the purposes of the definition of that term in section 12 of the FW Act.
It was submitted on behalf of the respondent that as the commission structure does not arise under an award or other industrial instrument but rather solely arises from the contract between the parties, this is not a matter in respect of which this court has jurisdiction. The respondent referred to the decision in Girardi v Allergan Australia Pty Ltd [2017] FCCA 163 (“Girardi”).
In Girardi, the court concluded that although section 139(1)(a)(ii) refers to incentive based payments and bonuses:
(the section) does not assist (the applicant) … the effect of that section is to permit a modern award to include terms about those matters… the relevant Award does not include terms about incentive based payment or bonuses.
The SIP in question was an extra term of his employment conditions, which did not arise because of any term of the Award or by virtue of the FW Act. It was… part of a common law contract between the applicant and the respondent that operated in tandem with the Award.[9]
[9] Girardi v Allergan Australia Pty Ltd [2017] FCCA 163 at [14]-[15].
I am not bound by the decision in Girardi. Moreover, I take a different view of the effect of the definition of ‘safety net contractual entitlement’ in section 12. A matter will fall within that definition if it is:
a)an entitlement;
b)under a contract between the employer and employee;
c)relating to any of the subject matters identified in section 139(1).
In this case, it is conceded that the applicant:
a)had an entitlement to a an incentive commission; and
b)that entitlement arose under his contract with the respondent.
For the reasons set out above, I find that the said entitlement relates to an incentive based payment, for the purposes of section 139(1).
It is not necessary that an applicable award relevant to the applicant contains a provision for an incentive based payment. Indeed, if the award itself would need to contain such a provision, section 548(1A)(ii) would have no work to do. A breach of such a clause could be the subject of a small claims proceeding by virtue of section 548(1A)(i) as it would be a breach of a fair work instrument.
I therefore find that the court does have jurisdiction to deal with this claim.
Merits
I turn then to the merits of the applicant’s claim.
The applicant has failed to establish that he was not paid commission at the correct rate. Leaving aside issues of whether:
a)the fair market value component ought to have been included;
b)the respondent ought to have taken into account the drop in the exchange rate at the relevant period; and
c)whether it was appropriate for the respondent to have included the factory discount in calculating the commission;
it is common ground that the terms of the commission scheme are set out in Exhibit B.
It is not in dispute that the policy document which regulates the basis upon which the commission is payable contains the following clause:
Linde MH reserves the right to amend this Policy as seemed appropriate and further reserve the right to assess each deal and nominate an appropriate commission payment outside what is defined in this policy (emphasis added).[10]
[10] Exhibit B, page 5.
It was therefore a term of the contract that the respondent retained the right to ultimately determine the commission payable irrespective of what was otherwise contained in the policy. As such, the applicant has not established that the commission paid to him was in breach of the policy.
For these reasons, the applicant’s claim is not made out.
Conclusion
I therefore order that the applicant’s claim be dismissed.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Mercuri
Date: 2 August 2019
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