J McDonnell v Qube Ports & Bulk Pty Ltd T/A Qube Ports

[2013] FWC 702

[2013] FWC 702

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

J McDonnell
v
Qube Ports & Bulk Pty Ltd T/A Qube Ports
(U2012/13262)

SENIOR DEPUTY PRESIDENT WATSON MELBOURNE, 6 FEBRUARY 2013

Section 394 - Application for unfair dismissal remedy - Within jurisdiction.

[1] This decision arises from an application, made pursuant to s.394 of the Fair Work Act 2009 (the Act), by Mr J McDonnell, in relation to the termination of his employment by Qube Ports & Bulk Pty Ltd T/A Qube Ports (Qube).

[2] Mr McDonnell was employed by Qube as a Shift Manager from September 1999 to 3 September 2012.

[3] Qube has raised a jurisdictional objection to the application that pursuant to s.382(b)(iii) of the Act, Mr McDonnell’s earnings exceeded the “high income threshold” in s.333 of the Act. The high income threshold applying at the time of the termination was $123,000 per annum.

[4] The relevant statutory provisions are found in s.382 of the Act - When a person is protected from Unfair Dismissal; s.332 of the Act - Earnings; s.333 of the Act - High Income Threshold; and Regulation 3.05 of the Fair Work Regulations 2009 (Regulations) - When a person is protected from Unfair Dismissal - High Income Threshold.

[5] Section 382(b) of the Act provides that for a person to be protected from unfair dismissal, one or more of the following must 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] In relation to earnings, s.332 of the Act provides that:

“(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] Section 333 of the Act provides that “the high income threshold is the amount prescribed by, or worked out in the manner prescribed by, the regulations”.

[8] With regard to benefits other than the payment of money, Regulation 3.05(6) of the Regulations provides:

“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.”

[9] Section 333 of the Act provides a follows:

“(1) Subject to this section, the high income threshold is the amount prescribed by, or worked out in the manner prescribed by, the regulations.

(2) A regulation made for the purposes of subsection (1) has no effect to the extent that it would have the effect of reducing the amount of the high income threshold.

(3) If:

(a) in prescribing a manner in which the high income threshold is worked out, regulations made for the purposes of subsection (1) specify a particular matter or state of affairs; and

(b) as a result of a change in the matter or state of affairs, the amount of the high income threshold worked out in that manner would, but for this subsection, be less than it was on the last occasion on which this subsection did not apply;

the high income threshold is the amount that it would be if the change had not occurred.”

Consideration

[10] Two issues arise for determination in relation to s.382(b) of the Act:

● Whether “a modern award covers the person” (s.382(b)(i)); and

● Whether “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” (s.382(b)(iii)).

[11] Mr McDonnell concedes that no enterprise agreement applied to him.

Was Mr McDonnell covered by a modern award?

[12] In relation to modern award coverage, Mr McDonnell submitted 1 that he was covered by the Stevedoring Industry Award 20102 (the modern award), with Qube falling within the coverage of the modern award (clause 4) as an employer engaged in the “stevedoring industry” which is defined in clause 3 as “the loading and unloading of cargo into or from a ship including its transporting and storage at or adjacent to a wharf”. Mr McDonnell submitted that he fell within coverage of the modern award as an employee in a classifications listed in clause 13 of the modern award, specifically Level 7, which is defined in clause B7 of Schedule B of the modern award as follows:

“A Grade 7 employee is an employee who has attained the level of stevedoring employee Grade 6 and who has:

(a) completed additional training and has demonstrated competence in the skills required at this grade and performs such functions as are required by the employer from time to time in relation to:

(i) planning, controlling, co-ordinating and integrating stevedoring operations (including maintenance operations) and stevedoring employees in connection with vessels and or cargoes as allocated by the employer from time to time and compiles records, reports and information in connection therewith; and

(ii) operational, clerical and maintenance functions on an incidental basis; and

(iii) where appropriate, performs functions associated with a higher grade as part of a training program;

(b) having been trained and selected for appointment to the classification of stevedoring employee Grade 7 in accordance with the operational requirements of the employer’s enterprise.”

[13] Qube conceded that it was covered, as an employer, by the the modern award, but thatthe modern award did not cover the employment of Mr McDonnell.

[14] Mr McDonnell’s position was variously described as:

1. Operations Supervisor - in pay records 3 and Mr McDonnell’s letter of offer from P & O4 (Qube took over the P & O Ports (P & O) contract during the course of Mr McDonnell’s employment); and

2. Shift Manager - in the position description. 5

[15] It appears that whilst the position and its duties were the same, P & O described the position as Operations Supervisor, whilst Qube, described it as Shift Manger, although the Operations Supervisor title remained in the pay records.

[16] The title given to the position does not establish the nature of the work and is not determinative as to whether the position fell within Grade 7 of the modern award. It is necessary to consider the evidence as to the nature of the work.

[17] Evidence as to Mr McDonnell’s work came from his evidence as to the nature of his work, the Performance Management and Development documentation, 6 the position description for the position of Shift Manager7 and evidence from Mr N Pearse, Qube’s General Manager, Human Resources and Industrial Relations.

[18] Mr McDonnell’s evidence was that his work involved supervision of staff members, with a hands-on role in stevedoring functions, largely based around the supervision of employees, 8 although it involved liaison with clients and agents9 and paper work, keeping work logs up to date and emailing management, other supervisors and agents.10

[19] The position description extended beyond the Grade 7 classification description within the modern award in that it extended to client and agent liaison. The Performance Management and Development documentation, dated 13 June 2012, included responsibilities for change management, labour to revenue and earnings Before Income Tax targets, performance management and the establishment and maintenance of client relationships.

[20] Mr Pearse’s evidence was that Mr McDonnell was a Manager, rather than a Supervisor. Mr McDonnell participated in a management incentive scheme, provided with a mobile telephone and laptop computer for business use and underwent, performance management development. 11

[21] Mr McDonnell gave evidence that when a Shift Manager was not available, Grade 6 employees under the modern award acted in the Grade 7 position, performing the full range of duties of the Shift Manager. Mr Pearse’s evidence is that Qube employs no employees within Grade 7 on an ongoing basis. 12 Mr Pearse’s evidence is that there is a fundamental difference between Shift Managers and Grade 7 employees under the modern award.13 His evidence was that the Enterprise Agreement in respect of Qube’s non-managerial employees - the Qube Ports Pty Ltd and Maritime Union of Australia Enterprise Agreement 2011 (the Port of Melbourne) (the Agreement)14- does not contain the Grade 7 position. His evidence was that Grade 6 employees do occasionally fill in for Shift Manger’s undertaking only their supervision responsibilities - for which they are entitled to an additional allowance under the Agreement.15

[22] On the evidence, I find that Mr McDonnell’s role was a managerial role, extending beyond the planning, controlling, co-ordinating and integrating stevedoring operations and stevedoring employees and the compilation of related records, reports and information of the supervisory position reflected in Grade 7 of the modern award I find that Mr McDonnell was not covered by the modern award.

Were the earnings of Mr McDonnell less than the high income threshold?

[23] It is necessary to determine whether Mr McDonnell’s annual rate of earnings and such other amounts worked out in relation to the person in accordance with the regulations, is less than the high income threshold. I doing so, I refer to the composite phrase “annual rate of earnings” and such other amounts worked out in relation to the person in accordance with the regulations in s.382(b)(iii) of the Act, as earnings.

[24] It is agreed that the salary of Mr McDonnell at the time of the termination for the purpose of determining earnings was $108,857 per annum. It is also agreed that Mr McDonnell received superannuation contributions of 3% in excess of thatrequired by the Superannuation Guarantee Charge Act 1992, so that the additional 3% superannuation contribution would form part of his earnings. 16 It was agreed that the salary and additional superannuation together constituted earnings of $111,852.

[25] The difference between the parties as to the Mr McDonnell’s earnings arises in respect of the value attributed by each party to the private usage of a company owned motor vehicle supplied to Mr McDonnell by Qube. A proposition initially advanced by Qube, that the value of Cabcharges incurred by Mr McDonnell after the employment was terminated formed part of the earnings, was withdrawn. 17

[26] In or around mid 2009, Mr McDonnell was provided with a Ford Crew cab, 18 the vehicle which was fully maintained and fuelled by Qube. The remaining issue for determination in this matter is the value of the private usage of that vehicle which should be included in the earnings of Mr McDonnell.

[27] Given the agreement between the parties that the relevant salary was $111,852 per annum and the absence of any other relevant elements of earnings other than the private usage of the motor vehicle, the question is whether the value of the vehicle component exceeded $11,448.

[28] Qube submitted that the relevant value of the vehicle was, alternatively:

1. $17,400 the value attributed by Qube to the vehicle “having regard for the fact that company vehicles deployed by the Respondent are not Fringe Benefit Tax assessable and a (sic) classified for tax purposes as tools of trade”; 19

2. $18,219 a value based on private usage derived from records in relation to the use of the vehicle by Mr McDonnell in the two months after the termination of his employment, using the Australian Taxation Office travel allowance per kilometre; 20 and

3. $26,014 derived by applying the method in H.W. Fewings and Kunbarllanjnja Community Government Council (Fewings), 21on the basis of private usage of the vehicle by Mr McDonnell in the two months after the termination of his employment.22

[29] Mr McDonnell estimated the value as $11,333, derived by using the methodology applied in (Fewings), 23 that private usage constituted the sum of travel to and from work and, otherwise, 5% of the total usage of the vehicle.

Was the vehicle provided to Mr McDonnell as a “tool of trade”?

[30] In Rofin Australia Pty Ltd v Newton, (Rofin) 24a Full Bench of the Australian Industrial Relations Commission (AIRC) drew a distinction between the provision of a motor vehicle as part of a salary package and the provision of a motor vehicle as a piece of equipment supplied by the employer to enable the employee to perform the job. The AIRC stated:

“Where a motor vehicle is provided to an employee in lieu of salary that might otherwise have been paid, it is appropriate that the private benefit derived by the employee from the provision of the motor vehicle be counted as part of the employee’s remuneration. Where, however, the vehicle is provided for business purposes and the employee’s entitlement to private use is purely incidental, the provision of the motor vehicle should be treated no differently to the provision by the employer of any other tool or piece of equipment essential to the performance of the job.” 25

[31] In the circumstances of the current matter, Qube argued that the vehicle was provided to Mr McDonnell both as part of a salary package and as a “tool of trade”. Mr Pearse’s evidence was that employees were supplied with a vehicle on the basis that the employee has the option in favour of an additional salary payment of $17,400 per annum. 26 Mr McDonnell’s evidence is that he was at no stage offered the option of an additional amount of $17,400 as salary instead of the supply of the vehicle.27 Mr Pearse accepted that Mr McDonnell was not advised in writing or verbally of that option.28 The P & O offer of employment makes no mention of the supply of a vehicle29 and no contract was tendered containing advice of the provision of a vehicle (or the basis upon which it was supplied).

[32] On the other hand, Qube treated the vehicle as a “tool of trade” for taxation purposes 30 and Mr Pearse, in his evidence, described the vehicle as a “tool of trade”.31 The vehicle is “not Fringe Benefit Tax assessable”, being exempt from Fringe Benefits Tax because it is “classified for tax purposes as tools of trade”.32 The exemption under ss.8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (Cth)33 applies where the private use of certain vehicles is limited to certain work related travel and non-work related use that is minor, infrequent and irregular. The Australian Taxation Office Miscellaneous Taxation Ruling MT2024, explains:

“Generally speaking, a liability for FBT arises where an employer’s motor vehicle is used by an employee for private purposes or is available for the private use of an employee. However, under sub-sections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act (‘the Act’), a liability for FBT will not arise where the private use of certain vehicles by employees during a particular year of tax is limited to certain work-related travel and non-work-related use that is minor, infrequent and irregular. 34

. . .

Accordingly provided that employee use of these dual cab vehicles in a particular FBT year is restricted to travel to and from work and any travel that is incidental to travel in the course of performing duties of employment, there will be no FBT liability.” 35

[33] Mr Pearse’s evidence is that, when employees are supplied with a vehicle on a Fringe Benefit Tax exempt basis, “there’s a general acceptance that the vehicle is provided as a tool of trade”. 36

[34] Mr McDonnell’s evidence as to the private usage of the vehicle - for use travelling to and from work and otherwise for very minimal private usage 37 - and the work related usage of the vehicle by himself and other employees (and managers)38 is consistent with that expectation and the requirements for the Fringe Benefit Tax exemption.

[35] Mr Pearse, in his evidence referred to an estimate from Mr Roberts, Qube’s State Manager for Victoria and Tasmania who worked out of Mr McDonnell’s usual place of work at Appleton Dock, that less than “20% of a shift manager’s vehicle would be utilised during the day by other people”. 39 This evidence must be discounted on two bases:

● It is hearsay evidence - Mr Roberts was not called to give evidence or subject himself to cross examination;

● The estimate by Mr Roberts that less than 20% of the usage of the vehicle whilst at work was by persons other than Mr McDonnell provides very little assistance in determining the extent of private usage of the vehicle by Mr McDonnell and, if anything, confirms Mr McDonnell’s evidence that the vehicle was available for general use whilst at the work-site.

[36] There is no evidence of the contractual basis of the supply of the vehicle to Mr McDonnell. The evidence otherwise clearly supports a finding of fact that the vehicle was supplied to Mr McDonnell as a “tool of trade”. I find that the vehicle was supplied as a “tool of trade” and apply Rofin. Mr McDonnell’s entitlement to private use is incidental. That private benefit does not form part of Mr McDonnell’s earningsfor the purpose of s.382(b)(iii) of the Act. Accordingly, I find that the earnings of Mr McDonnell were less than the high income threshold and he is a person protected from unfair dismissal under s.382(b) of the Act. His application is within jurisdiction.

[37] Should I be wrong in that conclusion, I find, in any case, that if a value is attributable to the private use of the vehicle by Mr McDonnell for the purpose of s.382(b)(iii) of the Act, the earnings of Mr McDonnell fall, nonetheless, below the high income threshold of $123,300.

[38] While the personal value of the company vehicle does not form part of the applicant’s earningsas defined by s.332 of the Act (because there has been no agreement as to the monetary value of this benefit) the Fair Work Commission has the discretion to estimate the real or notional money value of the benefit in accordance with Regulation 3.05(6) of the Regulations.

[39] I am satisfied, having regard to the circumstances, that I should consider the benefit for the purpose of assessing whether the high income threshold applies to Mr McDonnell, a reasonable money value of the benefit has not been agreed and I can estimate a real or notional money value of the benefit.

[40] The proper approach for doing so is set out by the Full Bench in Fewings, an approach recently endorsed by a Full Bench in Francesco Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia: 40

“1. Determine the annual distance travelled by the vehicle in question.

2. Determine the percentage of the annual distance travelled which was for the applicant’s private purposes.

3. Multiply the figures from 1. and 2. This provides the annual distance travelled for private purposes.

4. Estimate the cost per kilometre for a vehicle of the type used. This information can be obtained from the RACV, NRMA or like motoring organisations.

5. Multiply the annual distance travelled for private purposes by the estimated cost per kilometre. The result is the value of the motor vehicle component of the applicant’s remuneration.”

[41] Applying the approach in Fewings, Mr McDonnell estimated the private value of the motor vehicle as $11,333. In doing so, he estimated the total annual kilometres of travel of the vehicle, attributed travel to and from work to private usage and estimated the private usage in respect to the remaining usage of the vehicle, on the basis of his evidence that he and other Qube employees and managers used the vehicle for work purposes and that he made limited private use of the vehicle beyond travelling to and from work.

[42] Qube advanced three estimated values of private usage of the vehicle.

[43] The first value proposed by Qube was based on the proposition that the vehicle was provided instead of salary, with the notional cash value reflecting the fact that the vehicle is not Fringe Benefit Tax assessable and classified as a “tool of trade”. This suggests that Qube believed that the private usage of the vehicle supplied to Mr McDonnell was limited. Further, no specific basis was advanced as to the cash value of $17,400 applied by Qube, other than that it was a historically applied figure. 41 No satisfactory basis for accepting that valuation as appropriate has been established.

[44] The second and third valuations advanced by Qube are based on an estimate of the private usage of the vehicle derived entirely from kilometres travelled and fuel purchased in relation to Mr McDonnell’s usage of the vehicle over a period of two months after the termination, which was clearly private usage. It follows that, it sheds no light on the private usage of Mr McDonnell during his employment and cannot be relied upon as reflecting the private usage of the vehicle by Mr McDonnell, whilst in employment.

[45] The evidence of Mr McDonnell in relation to this period establishes that his usage of the vehicle during the two months following the termination was not reflective of the private usage during his employment. 42

[46] I am not satisfied that any of the three estimates of the private usage of the vehicle advanced by Qube is reasonably based or supported by the evidence. It is clear that there is no agreed valuation on the value of the private benefit of the motor vehicle.

[47] I agree with the submissions of Mr McDonnell that the approach adopted by the Full Bench in Fewings should be applied and utilised. I accept the evidence of Mr McDonnell as to the total usage of the vehicle and the proportion of private usage. Mr McDonnell correctly treated travel to and from work as private usage. 43 There is no evidence to challenge Mr McDonnell’s evidence that he and other Qube employees and managers used the vehicle for work purposes and that he made limited private use of the vehicle beyond travelling to and from work. Mr McDonnell’s evidence is consistent with the Fringe Benefit Tax exempt status of the vehicle utilised by Qube. The application of ss.8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (Cth) suggests that Qube supplied the vehicle on the basis that the private usage was minor, infrequent and irregular. Mr Pearse’s evidence as to Mr Roberts’ estimate cannot be relied upon to displace Mr McDonnell’s evidence for the reasons stated above. I accept the evidence of Mr McDonnell as to the extent of and valuation of the private usage and the application by him of the approach in Fewings on the basis of that evidence.

[48] I find that the value of the private usage of the motor vehicle was $11,333.

[49] Accordingly, if I am wrong in my earlier finding that the vehicle was supplied as a “tool of trade”, I find, for the purposes of s.382(b)(iii) of the Act, that the sum of Mr McDonnell’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the Regulations was $111,852 (salary and non-statutory superannuation) plus $11,333 (vehicle), an amount of $123,185. The earnings of Mr McDonnell is less than the high income threshold of $123,300.

Conclusion

[50] I find that Mr McDonnell was not covered by a modern award.

[51] I find that the motor vehicle was supplied by Qube to Mr McDonnell as a “tool of trade” and the value of incidental private usage should not be included as earnings for the purpose of s.382(b)(iii) of the Act.

[52] If I am wrong in finding that the vehicle was provided as a “tool of trade”, I find by estimating the value of the private usage of the vehicle using the approach set out in Fewings and having regard to the evidence as to the usage of the vehicle, that the sum of Mr McDonnell’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.

[53] On either basis (in relation to the vehicle), I find that Mr McDonnell was a person protected from unfair dismissal under s.382(b) of the Act. His application is within jurisdiction.

[54] The application will be listed for substantive arbitration.

SENIOR DEPUTY PRESIDENT

Appearances:

G Pinchen for the applicant.

D Reid for the respondent.

Hearing details:

2013.

Melbourne:

January 18.

 1   Transcript, at paras 333-336.

 2   MA000053.

 3   Exhibit CL1, attachment B and Exhibit M2, in Exhibit A.

 4   Exhibit CL6.

 5   Exhibit CL7.

 6   Exhibit M2, at Exhibit B.

 7   Exhibit CL7.

 8   Exhibit M2, at para 22.

 9   Exhibit M2, at para 21.

 10   Exhibit M2, at para 23.

 11   Transcript, at para 387.

 12   Transcript, at para 344.

 13   Transcript, at para 343.

 14   AE898477.

 15   Clause 5.1.1 - G7 Upgrades - in Part B of the Qube Ports Pty Ltd and Maritime Union of Australia Enterprise Agreement 2011 (the Port of Melbourne).

 16 See s.332(4) of the Fair Work Act 2009 and Transcript at para 607.

 17   Transcript, at para 586.

 18   Exhibit M2, at para 3.

 19   Exhibit CL2, at para 9.

 20   Exhibit CL1, at para 23 and Transcript, at para 577.

 21   Print Q0675.

 22   Exhibit CL3, at para 10.

 23   Print Q0675.

 24 [1997] 78 IR 78.

 25   ibid., at pages 82-83.

 26   Exhibit CL1, at para 5.

 27   Exhibit M2, at para 4.

 28   Transcript, at paras 180-182.

 29   Exhibit CL6.

 30   Exhibit CL1, at para 4 and Exhibit CL2, at para 9.

 31   Transcript, at paras 193 and 298.

 32   Exhibit CL2, at para 9.

 33   Australian Taxation Office, Miscellaneous Taxation Ruling (MT 2024).

  Australian Taxation Office, Miscellaneous Taxation Ruling (MT 2024), Preamble.

  Australian Taxation Office, Miscellaneous Taxation Ruling (MT 2024), clause 20.

  Transcript, at para 298.

 37   Exhibit M2, at para 9 and Transcript at paras 451-452 and 458.

 38   Exhibit M2, at paras 7-8.

 39   Transcript, at para 342.

 40   [2012] FWAFB 6108.

 41  Transcript, at para 295.

 42   Transcript, at paras 457-458.

 43   Francesco Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia [[2012] FWAFB 6108], at para 11.

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