Caoilfhionn Brid Ni Mhorain v UON Pty Ltd

[2016] FWC 4427

[2016] FWC 4427

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Caoilfhionn Brid Ni Mhorain
v
UON Pty Ltd
(U2016/1083)

DEPUTY PRESIDENT CLANCY MELBOURNE, 4 JULY 2016

Application for relief from unfair dismissal – jurisdictional objection – high income threshold – genuine redundancy

[1] Ms Caoilfhionn Brid Ni Mhorain was employed as an Estimator by UON Pty Ltd (UON) from 30 May 2011 until her employment was terminated on 23 February 2016. She has lodged an unfair dismissal application (Application) and UON objects to the Application. While UON says the reason for termination was genuine redundancy, it also claims that Ms Ni Mhorain is not protected from unfair dismissal because she earned more than the high income threshold of $136,700. 1

[2] These questions of jurisdiction are required to be decided before the merits of the Application can be considered. 2

Is Ms Ni Mhorain protected from unfair dismissal?

[3] Section 382 of the Fair Work Act 2009 (the Act) outlines when a person is protected from unfair dismissal:

“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.”

[4] It was not disputed and I am satisfied that Ms Ni Mhorain has served the minimum employment period and was not covered by a modern award or enterprise agreement. The only issue I must determine in order to be satisfied that Ms Ni Mhorain is protected from unfair dismissal is whether her annual rate of earnings was less than the high income threshold of $136,700.

[5] A ‘high income employee’ is described in s.329 of the Act:

“329 High income employee

(1) A full-time employee is a high income employee of an employer at a time if:

(a) the employee has a guarantee of annual earnings for the guaranteed period; and

(b) the time occurs during the period; and

(c) the annual rate of the guarantee of annual earnings exceeds the high income threshold at that time.

(2) An employee other than a full-time employee is a high-income employee of an employer at a time if:

(a) the employee has a guarantee of annual earnings for the guaranteed period; and

(b) the time occurs during the period; and

(c) the annual rate of the guarantee of annual earnings would have exceeded the high income threshold at that time if the employee were employed on a full-time basis at the same rate of earnings.

(3) To avoid doubt, the employee does not have a guarantee of annual earnings for the guaranteed period if the employer revokes the guarantee of annual earnings with the employee’s agreement.”

[6] ‘Earnings’ are described in s.332 of the Act:

“332 Earnings

(1) An employee’s earnings include:

(a) the employee’s wages; and

(b) amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and

(c) the agreed money value of non-monetary benefits; and

(d) amounts or benefits prescribed by the regulations.

(2) However, an employee’s earnings do not include the following:

(a) payments the amount of which cannot be determined in advance;

(b) reimbursements;

(c) contributions to a superannuation fund to the extent that they are contributions to which subsection (4) applies;

(d) amounts prescribed by the regulations.

Note: Some examples of payments covered by paragraph (a) are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).

(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:

(a) to which the employee is entitled in return for the performance of work; and

(b) for which a reasonable money value has been agreed by the employee and the employer;

but does not include a benefit prescribed by the regulations.

(4) This subsection applies to contributions that the employer makes to a superannuation fund to the extent that one or more of the following applies:

(a) the employer would have been liable to pay superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 in relation to the person if the amounts had not been so contributed;

(b) the employer is required to contribute to the fund for the employee’s benefit in relation to a defined benefit interest (within the meaning of section 291-175 of the Income Tax Assessment Act 1997) of the employee;

(c) the employer is required to contribute to the fund for the employee’s benefit under a law of the Commonwealth, a State or a Territory.”

Background

[7] It is agreed that Ms Ni Mhorain commenced working at UON as an Estimator on a full time basis on 30 May 2011. It was also agreed that the contract of employment Ms Ni Mhorain and UON entered into in 2012 remained applicable at the date of her termination 3 (the employment contract) and her most recent pay increase took effect when her salary was increased to $120,000 gross per annum in or around October 2013. At this time, Ms Ni Mhorain was also provided with a company motor vehicle. She was advised a nominal value of up to $20,000 had been attributed to the motor vehicle in a letter confirming her increase in salary.4

[8] Soon after, in November 2013, the parties agreed to substitute the provision of the company motor vehicle with a car allowance. 5 This was as a result of UON changing its motor vehicle policy because of its cost to the business.

[9] On 13 January 2016, Ms Ni Mhorain’s contract of employment was varied and effective 11 January 2016, her hours of work changed from a 76 hour fortnight to a 68.4 hour fortnight.  6

[10] The parties agreed that the effect of s.329(2) of the Act is that in determining whether Ms Ni Mhorain is a high income employee, her earnings for the 68.4 hour fortnight are considered as if she were employed on a full-time basis at the same rate of earnings and this equates to $120,000 per annum. Neither party argued that the allowance was a “non-monetary benefit” (s.332(1)(c) of the Act), therefore Regulation 3.05(6) of the Fair Work Regulations 2009 is not applicable.

[11] Therefore, the issue to be determined for the purposes of deciding whether Ms Ni Mhorain is protected from unfair dismissal is how the $20,000 car allowance should be characterised and whether it forms part of Ms Ni Mhorain’s earnings.

Evidence of Ms Ni Mhorain

[12] Ms Ni Mhorain outlined the circumstances in which her salary was increased to $120,000 gross per annum and she was provided with a company vehicle, saying that Mr Tony Fayne, Contracts Manager for UON, had told her that UON had decided to increase her salary to $120,000 and provide her with the company vehicle because, in addition to her supervising responsibilities, she was being paid ‘under the market’ and may be headhunted. 7

[13] Ms Ni Mhorain said that when she had discussed the provision of a vehicle with UON, “there were no rules whatsoever” surrounding use of the company vehicle.  8 Ms Ni Mhorain tendered an unsworn statement from UON’s then Chief Financial Officer, Mr Con O’Halloran which made the same point.9

[14] Ms Ni Mhorain said the company vehicle was for her use, with servicing and a fuel card included and there was no requirement for her to keep a record of her travel. 10 She also said she was given a car parking space outside the UON office, which she submitted indicated that UON expected her to use her vehicle if it was required at any stage.11

[15] Shortly after these changes were confirmed by letter dated 4 November 2013, 12 Ms Ni Mhorain said she was advised by Mr O’Halloran that UON was changing its motor vehicle policy because it was costing too much.13 She said that in lieu of the company vehicle, Mr O’Halloran gave her the option of either a $20,000 car allowance or the opportunity to purchase the company vehicle, whereupon she decided to accept the car allowance.14 Ms Ni Mhorain confirmed she understood that the car allowance was a substitute for the company vehicle.15

[16] Ms Ni Mhorain also said that Mr O’Halloran did not say she was required to provide her own motor vehicle, but claimed it was an obvious requirement of her job. 16 She said there was no company policy that employees record all their time or their travelling expenses in the calendar17 and that throughout her employment, she was required to drive between the various UON premises, to clients in the Perth CBD, for supplier visits and the delivering of tenders.18

[17] Ms Ni Mhorain says she was required to do that travel both before and after she had received the company vehicle. 19

[18] Despite there being no requirement to keep a record of her travel, Ms Ni Mhorain kept a record for a seven month period in 2013-2014 and her calculations indicated that approximately 25% of her driving during that time was business related. 20

UON’s evidence

[19] Mr Stephen Bridges, Executive Director – Operations at UON, gave evidence that the reason UON changed its policy relating to ‘Company Provided Motor Vehicles’ was due to Fringe Benefits Tax (FBT) liability and UON’s need to reduce the total cost of motor vehicles. UON decided that where employees had a company vehicle as part of their remuneration package, it would be replaced with an allowance. 21 Mr Bridges said the payment of the car allowance was to be in addition to salary22 and only payable to those who had previously had a vehicle as part of their employment package.23

[20] Mr Bridges said the quantum of the allowance was based on the value of a company supplied vehicle 24 and that there was no requirement for Ms Ni Mhorain to keep a record of her travel for business purposes.25 He also said there was no requirement, policies or instructions for employees to provide their own vehicle.26

Ms Ni Mhorain’s Submissions

[21] Ms Ni Mhorain submitted that although it was not stated in her contract, she was required to have her vehicle at work.  27 Ms Ni Mhorain also submitted “there was no clear policy in the company I was employed by as to what the car allowance was for,”28 claiming it represented reimbursement for her use of her private vehicle.

[22] She submitted that the car allowance was an expense allowance to compensate her for using her own vehicle in connection with business-related purposes and not part of her earnings.

[23] Ms Ni Mhorain further submitted that the car allowance should not be included as part of wages because:

a) It was not part of ordinary pay;
b) It was expressly agreed (to) be an expense allowance for the purpose of compensating the applicant for using her own vehicle; and
c) There was no way of determining with any precision the amount of business usage particular(ly) given the applicant’s evidence concerning the company’s policy regarding the usage of the company vehicle and her use of her own vehicle for business purposes. 29

[24] Ms Ni Mhorain submitted her circumstances were similar to those considered in the decision of Commissioner Roe in Sinclair v Spotless Management Services Pty Ltd T/A WA Laundries 30 (Sinclair) in that there was no clear and quantifiable reimbursement for private as opposed to business purposes and that it was not possible to say what part of her car allowance was not a reimbursement.

[25] Ms Ni Mhorain submitted that UON made an error for paying her superannuation based on what was actually a reimbursement 31 but that this did not make the car allowance part of her earnings. She submitted that in this respect, the facts in her case were analogous to those in Hardman v Statewide Communications Australia Pty Ltd32 (Statewide), where it was found:

“…Statewide deducted income tax and paid superannuation contributions on an inaccurate understanding of Mr Hardman’s gross salary. Statewide’s mistake of fact concerning Mr Hardman’s salary package cannot convert a payment that would otherwise not be part of an amount calculated as earnings for the high income threshold into a payment which is part of that figure.” 33

[26] Ms Ni Mhorain says that the log book she tendered covered a period in 2013/2014 when she was based in a smaller office and when there were three estimators. She says she was the only estimator during 2015 and so she was required to do more travel.  34

UON’s Submissions

[27] UON submitted that it was not disputed that in or about October 2013, the parties had agreed that Ms Ni Mhorain’s salary would be increased to $120,000 and UON would provide her with a company vehicle. It submitted that the change from the company vehicle to the car allowance was due to considerations regarding FBT implications. UON submitted the $20,000 car allowance should therefore not be viewed as a reimbursement, but rather as an allowance in lieu of the benefit of a company provided vehicle that was part of Ms Ni Mhorain’s contract. 35

[28] UON submitted that the facts of this case were distinguishable from those in Sinclair. UON submitted that in Sinclair, the contract of employment was very clear in its terms on a vehicle allowance, which stated “[y]ou will be provided a vehicle allowance for the purpose of compensation for using your own vehicle in connection with official business related purposes.” 36 UON says because private use of the vehicle could not be determined in advance in Sinclair, it could not be considered as part of earnings and was a reimbursement.

[29] In Ms Ni Mhorain’s case, UON submitted, there was no specific term in the contract of employment regarding a car allowance but the intent behind it was to replace a contractual benefit that had been agreed because of its FBT implications. 37

[30] UON also submitted that the fact that the car allowance had been treated as income, with income tax having been deducted from it and superannuation having been paid, demonstrated that there was no intention that it was to be a reimbursement. 38

[31] UON submitted that should it be found the allowance was a reimbursement, the log book tendered 39 covering the period 21 November 2013 to 30 June 2014 could be used to estimate the approximate kilometres driven for business purposes and apportion an appropriate value to that. UON submitted that with appropriate extrapolations and using the ATO guidelines, $2,047.74 could be attributed to business purposes.40 Doing so would result in Ms Ni Mhorain’s earnings becoming approximately $138,000, which was above the high income threshold.

Consideration

[32] I am not persuaded the car allowance paid to Ms Ni Mhorain was a reimbursement contemplated by s.332(2)(b) of the Act to compensate her for using her own vehicle in connection with business-related purposes. Ms Ni Mhorain had been required to travel both before and after she received the company motor vehicle and the car allowance; there was no requirement for Ms Ni Mhorain to keep a record of her travel for business purposes and Ms Ni Mhorain stated that when she had discussed with UON the provision of a motor vehicle, “there were no rules whatsoever” surrounding use of the company motor vehicle.

[33] In Ms Ni Mhorain’s case, the employment contract had already provided for the reimbursement of travel expenses, outlining that ‘some travel may be required at Company expense and direction’ 41 and the entitlement for Ms Ni Mhorain to be reimbursed for ‘reasonable travelling and entertainment expenses in connection with business and affairs of the Company upon receipt by the Company of details…’42

[34] I am satisfied the evidence establishes that the reason Ms Ni Mhorain’s salary was increased to $120,000 and she was provided with a company motor vehicle was to reflect her supervisory responsibilities and address UON’s concern that she was being paid below market rates and vulnerable to being headhunted. I am also satisfied that the reason UON sought to change Ms Ni Mhorain’s arrangement, with the $20,000 car allowance to be paid in lieu of the company motor vehicle being provided, was due to FBT considerations. The car allowance was only paid to those UON employees who had previously had a vehicle as part of their employment package.

[35] Ms Ni Mhorain’s entitlement to be paid the $20,000 car allowance was unconditional and there was no suggestion that it was not paid from the time it was introduced until Ms Ni Mhorain’s employment was terminated. I am therefore not persuaded that Ms Ni Mhorain’s car allowance was a payment the amount of which cannot be determined in advance contemplated by s.332(2)(a) of the Act.

[36] The facts of this case are distinguishable from those in Sinclair, where it was found that a car allowance was a reimbursement. The contact of employment in Sinclair specifically stated the car allowance was not an amount that was guaranteed or part of ordinary pay:

“You will be provided a car allowance for the purpose of compensation for using your own vehicle in connection with official business related purposes. The amount of the allowance is $15,500 per annum payable in equal instalments in each pay period. The Car allowance is provided to you as an expense allowance and as such does not form part of your ordinary pay when calculating the value of other employment related entitlements. Further in the event your position or employment conditions change and as a consequence of this change the Company considers that regular use of your own vehicle is no longer required for you to perform your duties, then the allowance will cease.” 43

[37] While the allowance in Sinclair was provided as compensation for vehicle use in connection with official business related purposes and could have ceased if regular use of the Applicant’s vehicle was no longer required to perform his duties, Ms Ni Mhorain’s entitlement to the car allowance was not conditional in the same way and nor could it be unilaterally removed.

[38] Davidson v Adecco Australia Pty Ltd T/A Adecco, 44a case in whichthe Applicant received a $16,000 travel allowance only in accordance with company policy, is also distinguishable. Ms Ni Mhorain’s scenario was different to that case because “there were no rules whatsoever” surrounding use of the company motor vehicle subsequently changed to the car allowance and there was no requirement for her to keep a record of her travel for business purposes in order to receive it.

[39] I also consider Ms Ni Mhorain’s reliance on Statewide to be misplaced.The finding in that case was that the mistaken payment of superannuation contributions and deduction of income tax did not convert a payment that would otherwise not be part of an amount calculated as earnings for the high income threshold into one.The finding in Statewide was however based on an express contractual term for the Motor Car allowance, which stipulated it was to be paid to the employee to supply and maintain their own vehicle, including any repayments and servicing and running expenses. Ms Ni Mhorain’s circumstances are not the same. There was no mistake in the way the car allowance was administered. It operated as intended and agreed.

[40] Ms Ni Mhorain’s circumstances are analogous with those in Pasznicki v Expro Group Australia Pty Ltd 45 (Pasznicki). In Pasznicki a jurisdictional issue to be determined was whether an entitlement to a $15,600 per annum car allowance was part of the Applicant’s annual earnings. It was determined in that case the car allowance was unconditionally paid and not linked to the nature of the Applicant’s duties. There was also a separate company travel policy that provided:

“The company provides certain funds for employees travelling for the purpose of undertaking business on the company's behalf. The company may approve travel for the purpose of:

- attending conferences
- attending seminars, workshops, training or residential courses
- attending meetings
- performing normal work activities i.e. consulting with clients
- inspecting the operations of other organisations.
Expro accepts responsibility to cover reasonable out of pocket expenses of employees travelling on Expro business.
…

From time to time employees may be authorised by Management to use their own private vehicles on Company business in which case a charge per km may be claimed by the employee in accordance with the applicable rate.” 46

[41] As was the case in Pasznicki, Ms Ni Mhorain’s entitlement to the car allowance was unconditionally paid, had not been linked to the nature of her duties when introduced and UON had no contractual right to unilaterally withdraw it. As was found in Pasznicki, I consider the car allowance was in effect, an alternative way to describe a portion of Ms Ni Mhorain’s cash wages. The car allowance was payable to Ms Ni Mhorain irrespective of her use of her motor vehicle and it was not suggested or asserted that UON had a contractual right to unilaterally withdraw it.

[42] Based on my findings in relation to ss.332(2)(a) and 332(2)(b) of the Act and noting that ss.332(1)(c) and 332(1)(d) of the Act are inapplicable in this case, I am satisfied that the total value of the $20,000 car allowance should be included in Ms Ni Mhorain’s earnings for the purposes of s.332 of the Act. It should be added to the agreed salary, calculated at $120,000 gross per annum through the operation of s.329(2) of the Act. Consequently, I find that Ms Ni Mhorain’s earnings amounted to $140,000 per annum.

[43] As Ms Ni Mhorain’s earnings exceeded the high income threshold of $136,700 at the relevant time, she is not a person protected from unfair dismissal by s. 382 of the Act. Having made this finding, it is not necessary for me to decide the question of whether Ms Ni Mhorain’s dismissal was a case of genuine redundancy.

[44] An Order [PR582378] will be issued dismissing the Application.

DEPUTY PRESIDENT

Appearances:

C Ni Mhorain on her own behalf.

S Farrell for UON Pty Ltd.

Hearing details:

2016.

Melbourne and Perth (video hearing):

May 9.

 1 At the relevant time, $136,700 was the high income threshold pursuant to s.333(1) of the Fair Work Act 2009 and Regulation 2.13 of the Fair Work Regulations 2009.

 2   Fair Work Act 2009, s.396(b).

 3   Exhibit A1 – Annexure C and Exhibit R1 – Appendix A.

 4   Exhibit A1 at [22] and Annexure G.

 5   Exhibit A1 at [25] – [27].

 6   Exhibit A1 – Annexure J.

 7   Exhibit A1 at [15] – [16].

 8   Transcript PN139.

 9 Exhibit A2 at [14].

 10   Transcript PN140 – PN141.

 11   Transcript PN66.

 12   Exhibit A1 – Annexure G.

 13 Exhibit A1 at [25].

 14   Exhibit A1 at [25] – [27].

 15   Transcript PN63 and PN84.

 16   Transcript PN133.

 17 Exhibit A1 at [60].

 18   Transcript PN69.

 19   Transcript PN134 – PN135.

 20   Transcript PN63 – PN65.

 21   Transcript PN19.

 22   Transcript PN31.

 23   Transcript PN38 – PN39.

 24   Transcript PN33.

 25   Transcript PN31 – PN 32.

 26   Transcript PN40.

 27   Transcript PN193.

 28   Ibid.

 29   Applicant’s Outline of Submissions.

 30   [2015] FWC 4228.

 31   Transcript PN198.

 32   [2013] FWC 3118.

 33 Ibid at [12].

 34   Transcript PN198.

 35   Transcript PN185.

 36   [2015] FWC 4228 at [4].

 37   Transcript PN180.

 38   Transcript PN183.

 39   Exhibit A3.

 40   Transcript PN185 – PN191.

 41   Exhibit A1 - Annexure C, Clause 13.2(b).

 42   Exhibit A1 - Annexure C, Clause 13.3(c).

 43   [2015] FWC 4228 at [4].

 44   [2012] FWA 8393 at [34]

 45   [2016] FWC 2298 at [40].

 46 Ibid at [27].

Printed by authority of the Commonwealth Government Printer

<Price code C, PR582377>