Charles Dickerson v It Now Group Pty Ltd t/a It Now
[2010] FWA 1712
•4 MARCH 2010
[2010] FWA 1712 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
v
IT Now Group Pty Ltd t/a IT Now
(U2009/5074)
COMMISSIONER BISSETT | MELBOURNE, 4 MARCH 2010 |
Jurisdiction – earnings.
Introduction
[1] Mr Dickerson was dismissed from his employment with IT Now Group Pty Ltd t/a IT Now Group (IT Now) on 5 November 2009. Mr Dickerson commenced employment on 29 August 2007.
[2] Mr Dickerson made an application for an unfair dismissal remedy to Fair Work Australia (FWA) on 19 November 2009.
[3] IT Now objects to Mr Dickerson’s application on the grounds that, at the relevant time, he was not protected from unfair dismissal by the Fair Work Act 2009 (the Act) because the sum of his annual earnings and other relevant amounts calculated in accordance with the Fair Work Regulations 2009 (the regulations) exceeded the high income threshold. Mr Dickerson contests this objection.
Statutory Framework
[4] Section 394(1) of the Act allows for a person who has been dismissed to apply to FWA for an order under Division 4 of Part 3-2 of the Act. Section 396(b) requires that FWA must decide whether a person is protected from unfair dismissal prior to determining the merits of an application under s.394(1). Section 390(1) allows FWA to order a person’s reinstatement or the payment of compensation to the person if FWA is satisfied the person is protected from unfair dismissal and the person has been unfairly dismissed.
[5] Section 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.”
[6] Earnings specified in s.382(b) are dealt with in s.332:
“332 Earnings
(1) An employee’s earnings include:
(a) the employee’s wages; and
(b) amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and
(c) the agreed money value of non-monetary benefits; and
(d) amounts or benefits prescribed by the regulations.
(2) However, an employee’s earnings do not include the following:
(a) payments the amount of which cannot be determined in advance;
(b) reimbursements;
(c) contributions to a superannuation fund to the extent that they are contributions to which subsection (4) applies;
(d) amounts prescribed by the regulations.
Note: Some examples of payments covered by paragraph (a) are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).
(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:
(a) to which the employee is entitled in return for the performance of work; and
(b) for which a reasonable money value has been agreed by the employee and the employer;
but does not include a benefit prescribed by the regulations.
(4) This subsection applies to contributions that the employer makes to a superannuation fund to the extent that one or more of the following applies:
(a) the employer would have been liable to pay superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 in relation to the person if the amounts had not been so contributed;
(b) the employer is required to contribute to the fund for the employee’s benefit in relation to a defined benefit interest (within the meaning of section 292-175 of the Income Tax Assessment Act 1997) of the employee;
(c) the employer is required to contribute to the fund for the employee’s benefit under a law of the Commonwealth, a State or a Territory.”
[7] Regulation 3.05 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) FWA 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) FWA can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by FWA is an amount for subparagraph 382(b)(iii) of the Act.”
[8] The high income threshold at the relevant time was $108,300 per annum.
Submissions
[9] IT Now, through their representative, submitted in writing on 18 January 2010 that Mr Dickerson’s salary package was valued at $117,925 plus $8,334 in superannuation. The $117,925 was made up as follows:
Salary | $92,600 |
Car allowance | $10,200 |
Fringe benefits of: | |
Fuel | $2,211 |
Vehicle maint | $2,032 |
Entertainment | $1,575 |
Phone (wife) | $240 |
Home phone/ Internet | $408 |
Travel | $860 |
Total | $7,326 |
Grossed up value | |
($7,326 x 2.0647) | $15,125 |
Total Salary Package | $117,925 |
Superannuation | $8,334 |
[10] On the basis of a total salary package of $117,925 IT Now argue that Mr Dickerson’s earnings were in excess of the high income threshold and he therefore was not protected from unfair dismissal.
[11] IT Now submitted that at the time of reviewing the 2009 accounts they, in consultation with their accountant, realised the benefits paid to Mr Dickerson should be subject to fringe benefits tax (FBT). 1
[12] Mr Dickerson claims that there was no mention of fringe benefits in his employment contract. 2
[13] At the hearing before me on 5 February I provided both IT Now and Mr Dickerson with a further opportunity to substantiate the payments made and make any submissions with respect to the definition of earnings as set out in s.332 of the Act. IT Now subsequently provided further material to me on 16 February 2010 that showed the benefits paid to Mr Dickerson. This indicated that the benefit amounts listed above were paid in the 12 months preceding Mr Dickerson’s termination. No further information was provided with respect to the effect of s.332 of the Act.
[14] The information provided by IT Now indicated that the home phone/internet amount assumes 50% private usage and that they attribute $20.00 per month of calls from the mobile phone provided to Mr Dickerson’s wife as being private usage. These amounts were not justified.
[15] No reason was given for the payment of Mrs Dickerson’s mobile phone nor was any submission made as to how I should treat this payment apparently to the Applicant’s wife.
[16] IT Now provided no reason for or evidence to support their claim that the fringe benefit amounts attributed to Mr Dickerson or the fringe benefits tax (the grossed up amount) should be treated as earnings for the purpose of s.332 of the Act.
[17] In the material presented at the 5 February hearing Mr Dickerson provided PAYG payment summaries for both himself and his wife. It was never explained why I was given his wife’s salary details or what I should do with that information. These showed that, for the financial year ending 30 June 2008 Mr Dickerson received gross payments of $41,223 with no other income or reportable fringe benefits amount. Mrs Dickerson’s summary for the same period indicated she had received gross payments of $41,223 with no reportable fringe benefits amount. For the year ending 30 June 2009 Mr Dickerson received a gross payment of $51,642 plus $1,176 as car allowance and Mrs Dickerson received a gross payment of $40,957. Neither has a reportable fringe benefits amount listed.
[18] Mr Dickerson also provided a number of pay slips for the September quarter 2009. These indicate that his gross pay per fortnight was $3,561.54 plus $392.30 car allowance. These figures would indicate that Mr Dickerson’s annual salary is $92,600 plus a car allowance of $10,200.
[19] In accordance with the directions issued by me Mr Dickerson provided additional material with respect to his earnings and payments from IT Now for the 12 month period prior to his termination. This is in the form of copies of his (and his wife’s) payslips for the period November 2008 – September 2009. Again nothing was submitted on what I should do with the information of his wife’s income. Had it been necessary to seek further submissions on this issue I would have done so. For the reasons given below this was not necessary.
[20] I note in this material that the pay slip for 6–19 August 2009 is duplicated and the payslip for the following fortnight (20 August–3 September 2009) is missing. I take this to be an oversight and take that the pay rate and allowance rate for the missing fortnight will be the same as all other fortnights post 13 May 2009 (there being no variation in the payslips for this period). Mr Dickerson states in his further material that he has not received a pay slip for the fortnights ended 14 October 2009, 28 October 2009 or 11 November 2009. On the basis of the material provided I take that the pay and allowance for the fortnights ending 14 and 28 October are the same as for the fortnight ending 30 September 2009 and that the ordinary payment and allowance received for the fortnight ended 11 November will be 60% of a normal fortnight. (Based on a pay period starting on a Thursday, Mr Dickerson’s employment ended six days into the fortnight).
[21] The payment of wages to Mrs Dickerson requires comment. During part of the period relevant to this decision Mrs Dickerson and Mr Dickerson each received payment of wages from IT Now of $1,780.77 (gross) per fortnight. This continued until the pay period ending 29 April 2009. From this date onwards Mr Dickerson received a salary of $3,561.54 whilst no pay slips were provided for his wife. Mr Dickerson’s salary from this point equated to his previous salary and Mrs Dickerson’s salary combined. Neither party has addressed me on this matter or what I should make of it. Ultimately, for reasons outlined below, whether Mrs Dickerson’s wages were actually wages for Mr Dickerson does not require further consideration.
[22] On the basis of the material received and my view with respect to the last 3 pays, for the 12 months prior to his termination Mr Dickerson received wages of $68,915.79. His wife received wages of $24,040.39. If this amount is, in fact, wages to Mr Dickerson his total wages for the 12 months prior to termination is $92,955.98.
[23] Over the same period, according to his pay slips, Mr Dickerson received a car allowance of $4,942.98.
[24] Mr Dickerson has also provided a response to a number of matters raised by IT Now. In particular Mr Dickerson disputes a number of benefit payments attributed to him including vehicle, travel and entertainment expenses. Again, for the reasons outlined below, this is not a matter I need to make findings on.
Issues for determination and findings of fact
[25] A number of matters in this case are disputed and require me to make findings. The matters requiring determination go to the wages Mr Dickerson earned, how the car allowance should be treated, what level of benefits were actually received by Mr Dickerson and how much of these were attributable to his private benefit, and how fringe benefits tax should be treated with respect to the determination of earnings as set out in s.332 of the Act and reg.3.05.
Wages
[26] On the basis of the material provided to me Mr Dickerson’s wages for the 12 months prior to his termination are between $68,915.79 and $92,955.98. The difference between these two figures being the amount paid to Mrs Dickerson for part of the relevant period. I make no finding as to whether Mrs Dickerson’s wages were in fact wages for Mr Dickerson. In any event, it makes no difference to my findings.
[27] I note that the upper figure is slightly higher than the $92,600 IT Now claim is Mr Dickerson’s wages.
Car allowance
[28] The car allowance, as was put in the hearing by Mr Dickerson and not disputed by IT Now, was paid to compensate Mr Dickerson for the use of his own motor vehicle. 3 On the material presented to me that allowance has only been paid since 14 May 2009. I find therefore that the amount of the car allowance is $4,942.98.
[29] The allowance was a regular amount paid to Mr Dickerson. It was to compensate Mr Dickerson for the use of his own car. He was not required to acquit any of it nor prove any expenditure to receive it. It was not paid to meet the costs of fuel or servicing of the car – all of which were paid in addition under the benefits paid. The car allowance was paid as part of salary and taxed accordingly.
[30] The issue to be determined with respect to the motor vehicle is how much use of the motor vehicle was private and how much was work related. An apportionment of the car allowance attributed to Mr Dickerson’s private usage is all that should be included in the determination of earnings.
[31] Mr Dickerson maintains that the car was used 50% for work and 50% privately. No alternative submissions have been put. In any event however I do not need to make a finding as to what proportion of the allowance is attributable to private usage of the car.
[32] I do not take the car allowance to be a reimbursement of any kind. To be so would require some acquitting of the amounts expended. There is no evidence that this occurred.
Fringe Benefits Tax
[33] IT Now argued that the ‘grossed up’ amount of the benefits received by Mr Dickerson should be used in calculating the total earnings of Mr Dickerson. That is, the fringe benefits tax should be included in Mr Dickerson’s earnings.
[34] The question of whether fringe benefits tax should be included in determining an employee’s earnings was considered by a Full Bench of the Australian Industrial Relations Commission in Rofin Australia Pty Ltd v Newton 4:
“There are, of course, employment arrangements whereby the employer pays, on behalf of the employee or at the employee’s direction, specified amounts out of the salary payable to the employee to a person other than the employee. Examples of such payments would be the payment of union and health fund subscriptions. “Salary packaging” may also include the payment of education expenses for the employee or the employee’s children. In such cases, generally those payments, although not paid directly to the employee, would be considered to form part of the employee’s remuneration.
Fringe benefits tax is, however, a tax imposed upon an employer and is payable by an employer, not by the employee. It is imposed upon a fringe benefit provided by an employer to an employee. The employer is free to choose whether or not to provide a particular fringe benefit to an employee. If it does so, it incurs the tax liability. Such liability is to pay an amount other than to the employee. Generally, where an amount is paid by an employer other than to an employee and other than on behalf of or at the direction of the employee, such an amount would not fall within the ordinary meaning of the word “remuneration”.
In a genuine ‘‘salary sacrifice’’ situation, the payment of fringe benefits tax would still nominally be a payment by the employer of a tax imposed upon the employer. However, it might possibly be viewed as the payment by an employer, at the direction of and by arrangement with the employee, to a person other than the employee of an amount that would otherwise be part of the employee’s total salary package. If that were the case, then such a payment may arguably be included in calculating the ‘‘remuneration’’ for the purposes of s 170CC(3).” 5 (italics added)
[35] I do not consider that the arrangement between Mr Dickerson and IT Now was a genuine ‘salary sacrifice’ arrangement nor is there any evidence of ‘salary packaging’. Mr Dickerson submitted that fringe benefits tax was never mentioned in his contract of employment.
[36] Further, I am not convinced that fringe benefits tax was ever intended to be considered as part of Mr Dickerson’s total salary. The submissions of IT Now that it was on reviewing the 2009 accounts that it realised the benefits should be subject to fringe benefits tax does not suggest that this was a prior arrangement or that the payments were part of a salary packaging or salary sacrifice arrangement.
[37] That it had been agreed that there would be benefits paid to directors from time to time suggests to me that the employer chose what benefits to pay and could have altered this arrangement at any time.
[38] I therefore find that the fringe benefits tax amount IT Now seek to attribute to Mr Dickerson’s total salary should not be included. The amount achieved by grossing up the benefits will not be used.
Fringe benefits
[39] The next issue to be resolved is how the fringe benefits paid to Mr Dickerson should be treated. Mr Dickerson disputes some of these payments. In addition there is an issue as to how I should treat these amounts for the purposes of s.332 of the Act.
[40] Section 332 of the Act includes in specified earnings, in addition to wages and relevant to the specific matters under consideration here, ‘amounts applied or dealt with in any way on the employee’s behalf or as the employee directs.’ 6 The section excludes from the calculation of an employees earnings payments the amount of which cannot be determined in advance and reimbursements.7 A legislative note with respect to ‘payments which cannot be known in advance’ indicates that some examples of such payments are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).
[41] Given the decision I have reached with respect to wages, car allowance and fringe benefits tax I do not need to consider the amount of the benefits and I make no findings. Should I have been required to do so I would have considered each payment on its own merits to determine the character of the payment and therefore whether it was a payment such that it should be included in Mr Dickerson’s earnings.
Superannuation
[42] Mr Dickerson’s pay records show that he was contributing to superannuation an amount of 9 per cent of his salary. Following the receipt of Mr Dickerson’s additional material, IT Now suggested that Mr Dickerson’s car allowance, in addition to the statutory 9 per cent of wages, was, prior to May 2009, being paid into his superannuation fund. There is no material to support this assertion. Mr Dickerson’s pay slips for the previous 12 months are clear on his superannuation payments.
[43] The superannuation contributions paid on behalf of Mr Dickerson are not earnings as defined in the Act. 8 The amount paid is no more than the liability under the Superannuation Guarantee Charge Act 1992 (Cth) of nine per cent.
Benefits other than payment of money
[44] There are no benefits of the type referred to in reg. 3.05 to which I should have regard.
Total earnings of Mr Dickerson
[45] I have calculated Mr Dickerson’s minimum and maximum earnings based on the inclusion or exclusion of Mrs Dickerson’s earnings. The car allowance is as indicated in my findings above. The benefits paid to Mr Dickerson I have based on the amount provided by IT Now without making any finding as to the correctness or otherwise of the allocation of those benefits to earnings.
[46] On this basis I find that Mr Dickerson’s earnings for the purpose of s.332 of the Act are between $81,184.79 and $105,224.98. This is made up of wages, car allowance ($4,943) and benefits ($7,326). The difference between the amounts is the wages paid to Mr Dickerson’s wife.
[47] I find therefore that Mr Dickerson’s earnings are below the threshold of $108,300.
Conclusion
[48] I find that Mr Dickerson’s earnings, for the purpose of s.382(b)(iii) are less than the high income threshold. Mr Dickerson therefore is protected from unfair dismissal.
[49] The jurisdictional objection of IT Now is dismissed. Mr Dickerson’s s.394 application will be further dealt with by FWA.
COMMISSIONER
Appearances:
R.Boyle with D.Zappa and M.Maling for IT Now Group Pty Ltd
C.Dickerson representing himself
Hearing details:
2010
Melbourne
5 February
1 Transcript PN 28.
2 Transcript PN 62-64.
3 Transcript, PN 44 and PN 76.
4 (1997) 78 IR 78.
5 (1977) 78 IR 78, 82.
6 s.332(1)(b)
7 s.332(2)(a)
8 s.332(2)(c) and s.332(4).
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