James Pasznicki v Expro Group Australia Pty Ltd

[2016] FWC 2298

[2016] FWC 2298

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

James Pasznicki
v
Expro Group Australia Pty Ltd
(U2015/17012)

DEPUTY PRESIDENT BINET PERTH, 19 MAY 2016

Application for relief from unfair dismissal - jurisdiction - genuine redundancy – high income threshold

[1] Mr James Pasznicki (Mr Pasznicki) has lodged an application pursuant to section 394 of the Fair Work Act 2009 (FW Act) in which he has asserted that the termination of his employment with Expro Group Australia Pty Ltd (Expro) was unfair (Application).

[2] Expro have raised two jurisdictional objections to the Application. Firstly, that the termination of Mr Pasznicki’s employment was a case of genuine redundancy and secondly, that Mr Pasznicki earned more than the high income threshold (Objections). The Objections have been referred to me for determination.

[3] In accordance with Directions issued on 15 March 2016, the parties filed and served outlines of submissions, witness statements and documentary evidence in relation to the Objections. Consideration of the Objections proceeded through a Determinative Conference convened on 11 April 2016. At this Determinative Conference Mr Pasznicki represented himself. Ms Jacquie McGovern (Ms McGovern), the HR Manager of the Respondent, represented Expro. Expro called Mr Callan Souter (Mr Souter), Expro Area Manager as a witness.

Background Facts

[4] The following facts were agreed or not disputed by the parties:

a. Mr Pasznicki commenced employment with Expro on 5 January 2015 as an Operations Supervisor pursuant to a written offer of employment (Offer of Employment).

b. Mr Pasznicki’s Offer of Employment provided that his gross salary would be $120,000 per annum and he would be eligible for a vehicle allowance of AUD 15,600 per annum. The Offer of Employment also provided that he was entitled to the benefit of single health cover under the Company Scheme.

c. Mr Pasznicki’s duties were:

• Ensuring the efficient utilisation of equipment and ensuring that it is properly maintained, serviced and fit for purpose.



• To assist in developing and consolidating the CHL Business within the Australia Area.



• To provide Technical and Engineering Support in-house and to clients through the Australia Area.

d. On 7 December 2015, Mr Pasznicki was told that the forecast for the next year was grim and that his job was no longer required to be performed by anyone due to changed operational requirements. His dismissal took effect the same day.

[5] Mr Pasznicki claims that Expro restructured the department he managed, blaming a down turn in the industry to financially support the relocation and redeployment to Australia of a South African based employee, Mr Eddie Le Roux.

[6] Expro claim that Mr Pasznicki’s dismissal was a case of genuine redundancy but that, in any event, his earnings exceed the high income threshold test preventing him from accessing the unfair dismissal regime.

Statutory Framework

[7] Section 396 of the FW Act requires that the Fair Work Commission (FWC) decide four preliminary issues before considering the merits of an application for unfair dismissal.

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.”

[8] I am satisfied that the Application was made within the twenty one day period required by subsection 394(2) of the FW Act. I am also satisfied that the Small Business Fair Dismissal Code which applies to employers of fewer than fifteen employees does not apply to Mr Pasznicki’s dismissal.

[9] What is contested is whether Mr Pasznicki’s dismissal was a case of genuine redundancy and whether he was a person protected by the FW Act from unfair dismissal.

High Income Threshold

[10] Section 382 of the FW Act provides that for a person to be protected from unfair dismissal the person must be an employee who has been employed by their employer for a minimum period of employment and one or more of the following must apply:

a. A modern award covers the person.

b. An enterprise agreement applies to the person.

c. 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 Fair Work Regulations 2009 (Cwth), is less than the high income threshold.

[11] The high income threshold is currently $136,700.

[12] The parties agreed that Mr Pasznicki had completed the minimum period of employment required by subsection 382(a) of the FW Act and that neither an award or enterprise agreement applied to Mr Pasznicki’s employment.

[13] Mr Pasznicki is therefore unable to access the unfair dismissal regime unless his annual rate of earnings at the time of his dismissal was less than the high income threshold.

[14] Section 332 of the FW Act defines earnings as:

“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.

(1) 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).

(1) 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.

(1) 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.”

[15] Mr Pasznicki’s Offer of Employment provided that:

“In this position your total gross salary will be AUD 120,000 per annum …. In addition to base salary you will be eligible for a vehicle allowance of AUD 15,600 per annum.” 1

[16] The Offer of Employment also provided that:

“In addition to the salary the employee is entitled to the benefits of single health cover under the Company Scheme (deductions can be made from salary to upgrade to family cover at the employee’s own expense).” 2

[17] Expro assert that both the car allowance and health insurance premiums constitute ‘earnings’ as defined by section 332 of the FW Act and that Mr Pasznicki's earnings for the purposes of section 382 of the FW Act totalled $138,536.44 and therefore exceed the high income threshold of $136,700. Mr Pasznicki disputes this.

Are health insurance premiums ‘earnings’ for the purposes of section 332 of the FW Act?

[18] Expro assert that the private health insurance premiums referred to in Mr Pasznicki’s Offer of Employment was an amount which were applied or dealt with on Mr Pasznicki’s behalf as contemplated by subsection 332(1)(b) and were not exempted from ‘earnings’ by virtue of subsection 332(2).

[19] Ms McGovern gave evidence that the private health insurance premiums were paid for by Expro under a company scheme, however the policy was in Mr Pasznicki’s name and he was issued with a membership card.

[20] Ms McGovern also gave evidence that the value of the health insurance benefit was determined in advance with annual increases effected on 1 May each year. 3 Expro tendered evidence revealing that:

• On 13 January 2015 Mr Pasznicki signed correspondence confirming the cost of the 2014 health insurance premium was $2375.76 per annum. 4



• On 19 May 2015 Mr Pasznicki signed correspondence confirming the cost of the 2015 health insurance premium was $2936.44 per annum. 5

[21] Mr Pasznicki did not dispute these facts.

[22] Instead, Mr Pasznicki asserted that the health insurance premiums should not be deemed to be part of his earnings by virtue of section 332(1)(b) because he says he did not obtain a benefit from the policy because he did not make any claims on it. He also says that the premiums were not applied or dealt with on his behalf or his direction because the entitlement was a component of his remuneration package provided by the company in his contract of employment and not sought by him.

[23] Mr Pasznicki accepted employment on the terms set out in his Offer of Employment. Those terms included a provision that Expro would pay his health insurance premiums on his behalf. By entering into the contract of employment Mr Pasznicki agreed, and by implication directed, Expro to apply a part of his remuneration package to the payment of the premiums.

[24] Section 332 does not impose a requirement that the amounts applied on an employee’s behalf or direction deliver some benefit to the employee, however, in any event, I reject Mr Pasznicki’s assertion that the provision of health insurance does not provide him with a benefit if he does not make a claim on the policy. A benefit of peace of mind that unforeseen medical expenses will be met in part or full is an undeniable benefit to an employee of health insurance.

[25] Health insurance premiums were found to be ‘earnings’ for the purposes of section 332 by Commissioner Cloghan in Calvin Tipene v Norton Goldfields Limited[2014] FWC 2752. I find no grounds on which to distinguish that case from Mr Pasznicki’s circumstances and therefore I find that the sum of $2936.44, paid by Expro for health insurance on Mr Pasznicki’s behalf, should be included in the calculation of Mr Pasznicki’s earnings for the purposes of section 382(b)(iii) of the FW Act.

Is Mr Pasznicki’s vehicle allowance ‘earnings’ for the purposes of section 332 of the FW Act?

[26] Expro assert that Mr Pasznicki’s vehicle allowance was a part of Mr Pasznicki’s wages for the purposes of 332(1)(a) and was not exempted from ‘earnings’ by virtue of subsection 332(2). Expro point out that the Offer of Employment does not place any restrictions, conditions or obligations on Mr Pasznicki’s use of the vehicle allowance or require Mr Pasznicki to provide a vehicle or to use a vehicle rather than other forms of transport such as taxis or public transport. The allowance is also payable regardless of whether any vehicle expenses are incurred.

[27] Expro pointed out that the Company Travel Policy provides that:

“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” 6

[28] Ms McGovern gave evidence that in the case of travel undertaken using an employee’s private vehicle, employees are reimbursed at the ATO rate per km, which covers fuel usage and wear and tear of private vehicles for business purposes.

[29] According to Ms McGovern, additional details about making expense claims, including expense claims in relation to the use by employees of their private vehicles, was circulated to employees via a memo dated 21 September 2015. 7

[30] Ms McGovern tendered evidence that Mr Pasznicki had sought and received reimbursement in accordance with the policy for mileage and parking in the Perth area in January, February, March, April and May 2015. This reimbursement was sought and paid separately to Mr Pasznicki’s vehicle allowance. 8

[31] Both parties agreed that Expro had available a number of pool company vehicles which employees could access if necessary.

[32] Mr Pasznicki objected to the inclusion of the vehicle allowance in the calculation of his annual rate of earnings for the purposes of determining whether he earned more than the high income threshold. Mr Pasznicki asserted that his vehicle was a tool of trade which he was required by Expro to provide to perform his duties. Mr Pasznicki claimed the vehicle was necessary to perform duties such as attending client meetings, site integration tests, monthly explosives inventory checks and occasionally collecting supplies and equipment. According to Mr Pasznicki, his vehicle allowance was a reimbursement for the use of his private vehicle to perform his duties.

[33] Mr Pasznicki’s vehicle allowance is not a non-monetary benefit because it is an entitlement to the payment of money and it is not an amount applied or dealt with in any way on his behalf. There is no relevant regulation in respect to section 332 of the FW Act. The amount of the vehicle allowance has been determined in advance. Therefore the vehicle allowance can only be regarded as part of his earnings for the purposes of section 332 if it is wages and it does not come within the exclusion for reimbursements.

[34] In Davidson v Adecco Australia Pty Ltd T/A Adecco[2012] FWA 8393 (Davidson Case), Commissioner Booth found in the circumstances of that case that the travel allowance paid to the employee was not wages because the allowance was paid in contemplation of offsetting the employee’s expenses in providing, running and maintaining his own vehicle for the purposes of performing his duties. According to Commissioner Booth, the allowance recompensed the employee for business related costs and therefore could not be categorised as a payment for his work or services.

[35] In the Davidson Case the employee’s contract provided that a travel allowance of $16,000 must be used in accordance with the company policy. The contract went on to provide that, pursuant to the relevant company policy, the employee was not entitled to claim reimbursements for any work related travel. The employee in question was employed as a sales agent. He was required to travel between 20,000 – 30,000 km per year over a large geographical area on company business. At the hearing he tendered at statutory declaration claiming all the travel he undertook in his vehicle was business related and he undertook little or no personal travel. There was also evidence tendered that the entire travel allowance was spent on business related travel.

[36] Mr Pasznicki's circumstances were very different. On Mr Pasznicki’s own evidence, travel was far more incidental to his role and he undertook substantially less business related travel. Furthermore, the Expro travel policy provided employees with the opportunity to use different modes of transport for business related travel other than their private vehicles, such as taxi’s and public transport. Where an employee did use their private vehicle, travel was separately compensated via Expro’s Travel policy. In these circumstances I am satisfied that the vehicle allowance paid to Mr Pasznicki should be categorised as a payment for his work or services and therefore must be considered as wages for the purposes of section 332(1)(a).

[37] Mr Pasznicki sought to rely on the decision of Commissioner Roe in Mark Sinclair v Spotless Management Services Pty Ltd T/A WA Laundries[2015] FWC 4228 (Sinclair Case) in support of his assertion that his vehicle allowance was a reimbursement and was therefore excluded from ‘earnings’ by virtue of section 382(2)(b). In that case, Commissioner Roe was satisfied the vehicle allowance paid to the employee in question was in the nature of a reimbursement because the employee’s contract stated that:

1. The purpose of the payment was compensation for the employee using his own vehicle for work purposes.
2. The payment was described as an expense allowance.
3. The payment was expressly excluded from the employee’s ordinary pay.
4. The allowance could be withdrawn if the employee’s role changed and he no longer required the vehicle to perform his duties.

[38] Mr Pasznicki’s circumstances were quite different. Company policy provided that Mr Pasznicki could separately seek reimbursement for the use of his private car on a per km basis. Evidence was tendered that Mr Pasznicki sought and received reimbursement in accordance with the policy for mileage and parking in the Perth area in January, February, March, April and May 2015. This reimbursement was sought and paid separately to Mr Pasznicki’s vehicle allowance. Unlike the Sinclair Case, Mr Pasznicki’s entitlement to his allowance was not linked to the nature of his duties and Expro had no contractual right to unilaterally withdraw Mr Pasznicki’s vehicle allowance.

[39] I am satisfied that in Mr Pasznicki’s case his car allowance was not a reimbursement.

[40] In Mr Pasznicki’s case the vehicle allowance was, in effect, simply an alternative way to describe a portion of his cash wages. Mr Pasznicki gave evidence that there was no restriction on his use of his vehicle for private purposes. I therefore find that the value of vehicle allowance should be included in Mr Pasznicki’s earnings for the purposes of section 332.

[41] Based on my findings above I conclude that Mr Pasznicki’s ‘earnings’ for the purposes of section 382(b)(iii) amounted to $138,536.44 and therefore exceeded the high income threshold of $136,700. Mr Pasznicki is therefore not a person protected by unfair dismissal by section 382 of the FW Act.

Was Mr Pasznicki’s Dismissal a case of genuine redundancy?

[42] Expro claim that Mr Pasznicki’s dismissal was as a result of a genuine redundancy and that therefore the FWC does not have jurisdiction to hear and determine Mr Pasznicki’s application for unfair dismissal. Mr Pasznicki says that the redundancy was contrived and instead occurred in order for Expro to fund the redeployment and relocation of a South African employee.

[43] The term ‘genuine redundancy’ is defined in section 389 of the FW Act as follows:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[44] The parties agreed that no modern award or enterprise agreement applied to Mr Pasznicki’s employment that would impose an obligation to consult under section 389(1)(a). Therefore Mr Pasznicki’s dismissal will constitute a case of genuine redundancy if Expro no longer required his job to be performed by anyone because of changes in Expro’s operational requirements and it would not have been reasonable in the circumstances for Mr Pasznicki to be redeployed within Expro or one of its associated entities.

Did Expro no longer require Mr Pasznicki to perform his job because of changes in Expro’s operational requirements?

[45] Expro say that the current economic climate of the oil and gas industry resulted in a downturn in trade on a global basis which has impacted on the CHL Department in which Mr Pasznicki was employed. Expro tendered evidence claiming a 36% decline in actual gross profit for the CHL Department for the period 1 April to 31 December 2015 and a 35% decline in forecast gross profit form 1 April 2015 to 31 March 2016. 9

[46] Expro say that they implemented a number of initiatives to address the down turn. These initiatives included restructuring the CHL Department, allocating Mr Pasznicki’s duties to other employees which removed the need for Mr Pasznicki’s role. Ms McGovern gave evidence as to which employees were allocated the duties which Mr Pasznicki previously performed.

[47] The parties agreed that Mr Pasznicki was originally paid from a different profit centre which was more profitable than the CHL Department. Mr Souter, Area Manager Expro (Mr Souter), gave evidence that internal company auditing identified that Mr Pasznicki's costs were not being attributed to the correct profit centre and directed that this be corrected. Mr Pasznicki says that this was done to justify making his position redundant.

[48] I am satisfied that it was not unreasonable for the organisation to ensure Mr Pasznicki’s costs were attributed to the CHL Department for which he was responsible. I am also satisfied that a downturn in the profitability of the CHL Department had occurred as claimed by Expro.

[49] As Ryan J observed in Jones v Department of Energy and Minerals (1995) 60 IR 304 at 308, a job involves “… a collection of functions, duties and responsibilities entrusted as part of the scheme of the employer’s organisation to a particular employee.” An employee may still be genuinely redundant when there are aspects of the employee’s duties still being performed by other employees: see Dibb v Commissioner of Taxation (2004) 136 FCR 388, 404-405.

[50] I am therefore satisfied that there was a change in the operational requirements of Expro arising from the reduction in income which lead Expro to no longer require Mr Pasznicki’s job to be performed, because those duties were reallocated to other employees to minimise cost.

[51] Mr Pasznicki says that the redundancy was contrived and instead occurred in order for Expro to fund the redeployment and relocation of a South African employee.

[52] Expro say that the individual concerned was offered and accepted his position several months before a decision was made to make Mr Pasznicki’s position redundant. According to Expro, the transfer was necessary because a client with an offshore project required the highly specialised offshore skills the employee in question possessed. According to Expro, Mr Pasznicki does not possess the relevant qualifications, skills or experience for the role and the role was occupied before a decision was made to make his position redundant.

[53] Mr Pasznicki conceded he was uncertain whether the decision to redeploy the South African employee was made prior to or subsequent to the decision to make his position redundant.

[54] In final submissions, Expro provided a chronology of the events leading to the redeployment and relocation of the South African employee in Australia. Based on the evidence before me I am satisfied that the decision to redeploy the South African employee was made independently of, and prior to, the decision to make Mr Pasznicki’s position redundant.

Was it reasonable in the circumstances that Mr Pasznicki be redeployed within Expro or an associated entity?

[55] Ms McGovern gave evidence that she explored redeployment opportunities for Mr Pasznicki across Expro’s global business and was unable to identify any suitable roles. 10 Mr Souter also gave evidence that he also explored redeployment opportunities for Mr Pasznicki in Asia

[56] Mr Pasznicki was also unable to identify any vacant roles in which it would have been reasonable to redeploy him.

[57] I am satisfied that it was not reasonable in the circumstances for Mr Pasznicki to be redeployed within Expro or any associated entity.

Conclusion

[58] In conclusion I find that Mr Pasznicki’s earnings for the purposes of subsection 382(b)(iii) of the FW Act exceed the high income threshold and consequently he is not protected from unfair dismissal. Although having made this finding, it is not strictly necessary for me to do so, I also find that Mr Pasznicki’s dismissal was a case of genuine redundancy and therefore the FWC is unable to consider the merits of his application for a remedy from unfair dismissal.

[59] An Order [PR578981] will be issued dismissing the Application.

DEPUTY PRESIDENT

Appearances:

Mr Pasznicki on his own behalf

Ms McGovern for the Respondent

Hearing details:

2016

Perth:

April, 11

Final written submissions:

Applicant, 25 April 2016

Respondent, 18 April 2016

 1   Exhibit R2.

 2   Exhibit R2.

 3   Exhibit R5.

 4   Exhibit R6.

 5   Exhibit R8

 6   Exhibit R10 pages 17-20.

 7   Exhibit R10 page 36.

 8   Exhibit R10 page 26-27.

 9   Exhibit R11.

 10   Exhibit R10 Page 47.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR578980>