Elvina Florenca v Industrial Foundation for Accident Prevention T/A Ifap

[2019] FWC 144

[2019] FWC 144

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Elvina Florenca
v
Industrial Foundation For Accident Prevention T/A IFAP
(U2018/9067)

DEPUTY PRESIDENT BEAUMONT PERTH, 15 JANUARY 2019

Application for an unfair dismissal remedy.

[1] This decision concerns a jurisdictional objection raised by Industrial Foundation For Accident Prevention T/A IFAP (IFAP) to an unfair dismissal application brought by Ms Florenca under s 394 of the Fair Work Act 2009 (Cth) (the Act).

[2] The issue before the Commission was whether Ms Florenca’s ‘annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations,’ was less than the high income threshold. 1 This is a pertinent issue. Whether Ms Florenca was a person protected from unfair dismissal turns on this point.

[3] IFAP submitted that Ms Florenca was not protected, because she earned more than the high income threshold. It arrived at this conclusion on the basis that Ms Florenca worked part-time and received annual total earnings of $118,560, plus $600, which was an allowance for the use of a mobile phone. The amount of $118,560 was the pro rata amount of the full-time annual total earnings ($148,200). In light of the full-time annual total earnings and the $600 allowance, totalling $148,800, IFAP submitted that Ms Florenca earned more than the high income threshold.

[4] Ms Florenca disagreed with the position of IFAP, and submitted that the amount that should be considered for the purpose of the high income threshold was $118,650. The $600 allowance for mobile phone use was a reimbursement covering an out of pocket expense, and therefore did not form part of Ms Florenca’s earnings.

[5] I have found that Ms Florenca’s annual rate of earnings is less than the high income threshold ($118,560). Therefore, the application to dismiss the application for relief from unfair dismissal for lack of jurisdiction is dismissed. My reasons for arriving at this conclusion follow.

[6] The matter will now be listed and directions issued for the determination of the merits of the application.

Background

[7] Ms Florenca had been employed with IFAP on a permanent part-time basis as the Executive Manager Corporate Services. She commenced employment on 11 July 2017 and was dismissed on 21 August 2018. Award coverage was not in dispute and the parties appeared content that Ms Florenca was not covered by a modern award. There was no issue raised regarding Ms Florenca having not served the minimum period of employment.

[8] Ms Florenca’s part-time hours were 60 hours per fortnight and her annual full-time salary was equivalent to $148,200 which, when provided on a pro rata basis for the hours worked, amounted to $118,560. Ms Florenca was paid $50 a month toward the cost of a mobile phone, which she could use for business and private matters.

IFAP’s submissions

[9] Consistent with the provisions of s 392(2) of the Act, specifically, s 329(2)(c), IFAP contended that Ms Florenca was a high income employee under the Act because the annual rate of Ms Florenca’s guaranteed earnings would have exceeded the high income threshold at the relevant time if Ms Florenca was employed on a full-time basis at the same rate of earnings. As such, IFAP said, Ms Florenca was at all material times, a high income employee and not entitled to an unfair dismissal remedy.

Ms Florenca’s submissions

[10] Ms Florenca submitted that her annual rate of earnings in the amount of $118,560 was less than the high income threshold.

Legislation

[11] Section 382 sets out when a person is protected from unfair dismissal. For the purpose of this decision, the relevant subsection that speaks of the high income threshold is s 382(b)(iii) which provides:

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.

[12] There is no controversy concerning the meaning of the ‘high income threshold’. Section 333 defines the term and relies upon the Fair Work Regulations 2009 (Cth) (the Regulations) to prescribe the amount, or work out the manner by which the amount is then prescribed.

[13] Regulation 3.05 of the Regulations explains how to calculate the amounts for the purpose of assessing whether the high income threshold applies in relation to the dismissal of a person for the purposes of s 382(b)(iii). For present purposes, it is unnecessary to set the regulation out in detail.

[14] What constitutes the ‘annual rate of earnings’ appears to be the relevant question. Section 12 of the Act, whilst illuminating the meaning of the terms ‘annual rate’ and ‘earnings’, does not provide a definition of the terms together.

[15] ‘Annual rate’ is defined as:

annual rate of an employee’s guaranteed annual earnings: see subsection 330(3).

[16] I consider that the issue before me is not one that requires consideration of the ‘guaranteed annual earnings’, but for the sake of completeness it is observed that subsection 330(3) states:

(1)[Meaning of guarantee of annual earnings]

An undertaking given by an employer to an employee is a guarantee of annual earnings if:

(a) the employee is covered by a modern award that is in operation; and

(b) the undertaking is an undertaking in writing to pay the employee an amount of earnings in relation to the performance of work during a period of 12 months or more; and

(c) the employee agreement to accept the undertaking, and agrees with the amount of the earnings; and

(d) the undertaking and the employee’s agreement are given before the start of the period, and within 14 days after:

(i) the day the employee is employed; or

(ii) a day on which the employer and employee agree to vary the terms and conditions of the employee’s employment; and

(e) an enterprise agreement does not apply to the employee’s employment at the start of the period….

(3) [Meaning of annual rate]

The annual rate of the guarantee of annual earnings is the annual rate of the earnings covered by the undertaking.

[17] More importantly, the meaning of the word ‘earnings’ is set out in s 332, which states:

(1) [Meaning of earnings]

An employee’s earnings include:

(a) the employee’s wages; and

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

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

(d) amounts or benefits prescribed by the regulations.

(2)Excluded Amounts]

However, an employee’s earnings does not include the following:

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…

[18] In decision of Sam Technology Engineers Pty Ltd v Mr Andrew Bernadou (Sam Technology), 2 the Full Bench concluded that the definition of ‘earnings’ in s 332 was non-exhaustive and as such, ‘earnings’ should be given its ordinary meaning.3 In the course of its reasoning, the Full Bench qualified that the meaning of ‘earnings’, was subject to the payments and benefits referred to in s 332(1) being included in the meaning of ‘earnings’ and the payment and benefits referred to in s 332(2) being excluded from its meaning.

[19] While the Full Bench considered the word ‘earnings’ in the context of determining whether a car allowance fell within the scope of the word ‘earnings’, its reasoning remains relevant here. Drawing upon what Lord Davey expressed in Midland Railway Co v Sharpe, 4 the Full Bench stated:

Now what does a man earn? He earns the sum which is the fruit of his labour; whatever he receives by way of remuneration for the services he gives, or as Lord Macnaghten said in Abram Coal Co v Southern [1903] AC 306, a man’s ‘earnings’ are ‘the full sum for which the man is engaged to work’.

[20] Regarding the gender biased quotation, I would simply ask the reader to graciously excuse its use, noting that the statement dates back to 1903.

[21] The Full Bench in Sam Technology observed that Lord Davey’s definition of ‘earnings’ had been applied in a number of Australian cases. It reiterated that in the context of s 382(b)(iii), ‘earnings’ are what an ‘employee receives for the work done by the employee in the course of their employment….’. 5

[22] In Zappia v Universal Music Australia Pty Ltd T/A Universal Music Australia (Zappia), 6 the Full Bench considered circumstances where, in the 12 months preceding the applicant’s dismissal, the applicant’s salary was $90,000 per annum, however, it increased to $92,500 during that period. 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). 7

[23] The construction of the phrase ‘annual rate of earnings’ was considered by Commissioner Jones in Brian Hamond v Terra Firma Pty Ltd (Hammond). 8 Commissioner Jones was satisfied that the word ‘rate’ in s 382(b)(iii) referred to the person’s earnings, such that ‘rate of earnings’ was to be read as a whole.9

[24] The Commissioner continued that the word ‘rate’ connoted a measure or basis for calculating an amount. 10 On that basis, he adopted the position that the rate of earnings was not an amount a person might be paid each fortnight.11 With regard to the word ‘annual’, the Commissioner expressed that ‘annual’ connoted something reckoned by a year or period of year.12 The view was formed that annual was to be reckoned at the time of dismissal and therefore it must refer to the 12 month period preceding the date of dismissal.13

[25] The applicant in Hammond had contended that while he had previously worked a 38 hour week, his hours had dropped to 30.4 hours per week (for a temporary period of 2 months). The Commissioner rejected the applicant’s contention that the annual rate of earnings was the amount paid during the fortnight the applicant was dismissed, annualised. The Commissioner approached the construction of the phrase of ‘annual rate of earnings’ such that the rate of earnings were arrived at by the application of the hourly rate to a 38 hour week, which the applicant had normally worked in the year preceding the date of his dismissal.

Consideration

[26] The evidence pointed to Ms Florenca having had an annual salary of $118,560 per annum. Her employment contract provided:

Based on the details outlined in this offer, your annual full-time salary equivalent will now be $148,200 which, when pro-rata’d to the 60 hours per fortnight equates to an annual rate of $118,560 payable fortnight in arrears. 14

[27] It is clear from s 332 and the Full Bench decision in Sam Technology that the word ‘earnings’ is limited to those components of s 332(1) and excludes those payment and benefits referred to in s 332(2). Further, the ordinary meaning of ‘earnings’ is to be adopted, and from that it can be concluded that earnings are the fruit of labour, that is, they are whatever is received by way of remuneration for the services provided.

[28] There was no evidence before me to suggest that during the course of the 12 months preceding Ms Florenca’s dismissal she had worked hours other than those stipulated in her employment contract. It is apparent from Ms Florenca’s employment contract that on an annual basis Ms Florenca worked a 60 hour fortnight.

[29] It was uncontroversial that Ms Florenca did not provide services on a full-time basis. Ms Florenca’s earnings indicated as much, and were reflective of the ‘fruit of her labour’.

[30] Counsel for Ms Florenca submitted that if the Commission were to adopt the construction of s 382 advanced by IFAP, it would require the insertion of ‘full-time equivalent’ in s 382(b)(iii). As it is s 382(b)(iii) refers only to 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…’.

[31] In Sam Technology the Full Bench expressed that the purpose of s 382(b)(iii) was to exclude from protection against unfair dismissal a high income employee who was not covered by a modern award and/or did not have an enterprise agreement that applied to them. It was said that a ‘high income employee’ was excluded from protection against unfair dismissal by reference to their ‘annual rate of earnings’ (and any amount worked out under the regulations), and not by reference to their ‘base rate of pay’ or ‘full rate of pay’.

[32] Appreciative of the rules of statutory interpretation, 15 and having considered the phrase ‘annual rate of earnings’ as referred to in s 382(b)(iii), the relevant authorities that have considered the phrase and the words used within that phrase, I simply cannot read into that section a requirement to convert Ms Florenca’s earnings into that which she would have earned should she have worked on a full-time basis. Further, it is not apparent that the ‘manufactured’ amount of full-time equivalent earnings should thereafter be used for the purpose of determining whether Ms Florenca’s annual rate of earnings (and such other amounts as referred to in s 382(b)(iii)) were less than the high income threshold.

[33] I consider it unnecessary to determine whether to include the total amount of $50 a month ($600 annually), or a proportionate amount (reflective of the amount derived for personal benefit), of the mobile phone allowance in the ‘annual rate of earnings’ given my conclusion above. This is because whether it is added or not to Ms Florenca’s annual rate of earnings, those earnings would still remain less than the high income threshold. Nevertheless, for the sake of fulsomeness, I observe there was no evidence before me reflective of the proportion of business or personal use of the phone. In the circumstances, I am satisfied the amount of $600 annually constituted a reimbursement and should not be included in Ms Florenca’s annual rate of earnings.

Conclusion

[34] I have found that Ms Florenca’s annual rate of earnings is less than the high income threshold ($118,560). Ms Florenca is a person protected from unfair dismissal and the jurisdictional objection is not sustained.

DEPUTY PRESIDENT

Appearances:

Mr S Heathcote for the Applicant

Mr I Curlewis for the Respondent

Hearing details:

By telephone, Thursday, 20 December 2018

Printed by authority of the Commonwealth Government Printer

<PR703746>

 1   Fair Work Act 2009 (Cth) s 382(b)(iii).

 2   [2018] FWCFB 1767.

 3 Ibid [54].

 4 [1904] AC 349, 351.

 5   [2018] FWCFB 1767, [66].

 6   [2012] FWAFB 6108.

 7 Ibid [9].

 8   [2013] FWC 1229.

 9 Ibid [77].

 10   Ibid .

 11 Ibid [78].

 12   Ibid .

 13   Ibid .

 14   Exhibit R1.

 15   See Uniline Australia Ltd [2016] FWCFB 4969 [65] – [75].