Jerome Monteiro v Valco Group Australia Pty Ltd T/A Valco Group Australia
[2018] FWCFB 3280
•20 JUNE 2018
| [2018] FWCFB 3280 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
Jerome Monteiro
v
Valco Group Australia Pty Ltd T/A Valco Group Australia
(C2018/1920)
| Vice President Catanzariti | Darwin, 20 JUNE 2018 |
Appeal against decision [2018] FWC 1520 of Commissioner Bissett at Melbourne on 21 March 2018 in matter number U2017/13650 – permission to appeal granted – appeal upheld – decision quashed – matter regarding high income threshold remitted.
Mr Jerome Monteiro was employed by Valco Group Australia Pty Ltd T/A Valco Group Australia in a senior role with control and management of the operations of the Valco Group in Australia.
Mr Monteiro was dismissed from his employment on 6 November 2017.[1] He made an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (Cth) (the Act). The Valco Group raised a jurisdictional objection that Mr Monteiro earned more than the $142,000 high income threshold applicable at the time. This question of jurisdiction fell for consideration by Commissioner Bissett.
The Commissioner accepted Mr Monteiro’s earnings were:
Salary: $126,250.08
Private health insurance: $3,934.44
Car allowance: $21,311.48
Total: $151,496.00
Relevant to the car allowance paid to Mr Monteiro, it is noted that the arrangement between the parties is that Mr Monteiro was to receive $13,000 net. The amount of $21,311.48 appears to include taxation in addition to the $13,000 net.
The Commissioner determined that Mr Monteiro’s earnings were greater than the high income threshold and she dismissed the application. Mr Monteiro has applied for permission to appeal that decision.
On 2 May 2018 we heard the parties on the question of permission to appeal. In the hearing, Mr Monteiro appeared on his own behalf and Mr N. Burmeister, of counsel, was granted permission to appear on behalf of the Respondent pursuant to s.596(2)(a) of the Act.
We determined to grant permission to appeal principally for two reasons:
(a) We were persuaded that there was at least an arguable case of error in the decision at first instance, to the extent that the Commissioner had not undertaken an examination of the distances travelled by Mr Monteiro in the 12 months prior to the dismissal, relevant to business and personal travel. This consideration would appear to us to have helped guide the Commissioner in apportioning some of the car allowance as earnings, but not necessarily all of the amount; and
(b) It was explained in the hearing before us that in addition to the car allowance, Mr Monteiro was reimbursed by the Valco Group for fuel on certain business trips in the car travelled by him. This appeared to us to be an unusual circumstance where an employee was paid a car allowance for at least some business travel, and the fuel expense was paid by the employer in addition to that.
On 5 June 2018 we heard the parties in relation to the appeal. In the hearing, Mr Monteiro appeared on his own behalf and the Respondent, having previously been granted permission for its counsel to appear chose on the substantive appeal to represent itself.
Permission to Appeal
An appeal under s.604 of the Act is an appeal by way of rehearing and the Commission’s powers on appeal are only exercisable if there is error on the part of the primary decision maker.[2] There is no right to appeal and an appeal may only be made with the permission of the Commission.
This appeal is one to which s.400 of the Act applies. Section 400 provides:
“400 Appeal rights
(1) Despite subsection 604(2), FWA must not grant permission to appeal from a decision made by FWA under this Part unless FWA considers that it is in the public interest to do so.
(2) Despite subsection 604(1), an appeal from a decision made by the FWC in relation to a matter arising under this Part can only, to the extent that it is an appeal on a question of fact, be made on the ground that the decision involved a significant error of fact.”
In the Federal Court Full Court decision in Coal & Allied Mining Services Pty Ltd v Lawler and others, Buchanan J (with whom Marshall and Cowdroy JJ agreed) observed that the test under s.400 is “a stringent one”.[3] The task of assessing whether the public interest test is met is discretionary involving a broad value judgment.[4] In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of the Commission identified some of the considerations that may attract the public interest:
“... the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters.”[5]
It will rarely be appropriate to grant permission to appeal unless an arguable case of appellable error is demonstrated. This is so because an appeal cannot succeed in the absence of appellable error.[6] However, the fact that the member at first instance made an error is not necessarily a sufficient basis for the grant of permission to appeal.[7]
We granted Mr Monteiro permission to appeal for the two reasons set out above in [6].
Moreover, for the reasons disclosed below, we have decided to uphold Mr Monteiro’s appeal and to quash the Decision of Commissioner Bissett.
Decision under appeal
In the Decision at first instance, the Commissioner stated:
“[52] The next matter to consider is if the health insurance “reimbursement” paid monthly to the Applicant on presentation of a receipt was the agreed value of a non-monetary benefit. Non-monetary benefits are defined in s.332(3) as a benefit to which the employee is entitled in return for work and for which a reasonable money value has been agreed.
[53] In this case the Respondent agreed to provide a non-monetary benefit to the Applicant in the way of health insurance. They had agreed that this would be to the value of $200 per month at the time the contract of employment was signed (although the actual payment had increased to $327.87 per month at the time of the Applicant’s dismissal). Whilst it is true that much more than this can be paid for health insurance this was the value agreed by the Applicant and Respondent to place on the health insurance. Further, the Applicant was the recipient of the benefit. For this reason, I am satisfied that the amount reimbursed for health insurance was the monetary value of a non-monetary benefit. The amount is therefore captured by s.332(1)(c).
[54] For these reasons I am satisfied that the private health insurance of $327.87 per month ($3,934.44 per annum) should be included in earnings.
[55] The second matter is the car allowance. The Applicant says the “allowance” was, in fact, a reimbursement and hence should be excluded from earnings. The Respondent says it was an additional amount paid to the Applicant, it was subject to taxation and superannuation, and should be considered as earnings.
[56] I accept that when the Applicant was a representative of the Respondent in Australia (prior to being employed by it) he was entitled to reimbursement for the cost of a lease car up to the value of $13,000 per annum. When he became an employee of the business the arrangements with respect to a vehicle changed. This is evident from the different wording found in the contract of employment. As a representative of the Respondent the Applicant was entitled to reimbursement for a lease car. Had it been intended that this arrangement remain in place the change in wording in the contract of employment is inexplicable. This suggests that the parties put their collective minds to the motor vehicle issue and put in place different arrangements.
[57] The wording in the contract of employment supports this conclusion. The Applicant entered into an arrangement whereby he would receive a car allowance of $13,000 per year that could be used for “any other arrangement” (other than a novated lease or salary packaging) cost efficient to both the Applicant and Respondent.
[58] That the Applicant chose to purchase a motor vehicle with the allowance amount cannot alter the words of the contract which provided him with a range of options as to what he could do with the money. There is nothing in the contract that suggests he was required or expected to purchase a motor vehicle.
[59] I am not convinced that the email from Mr Martel, of the Respondent to the Applicant, on 3 October 2016 evidences an intention that the $13,000 was to be paid as a reimbursement for the expense of the requirement to purchase a car. Rather the email seems to suggest that the Respondent was “helping out” the Applicant by providing an allowance payment up front so he could do as he, the Applicant, wished with the money (which was, in this case, to purchase a motor vehicle).
[60] The payment of superannuation and taxation on the car allowance (which was $21,311.48 pre-tax) goes against any finding that the car allowance was a reimbursement of expenses. Taxation is not payable on reimbursements and superannuation is not required to be paid on reimbursement. (I note that there is nothing in the Applicant’s contract of employment that suggests superannuation will be paid on any amount over and above that required by legislation.) In any event the documentary evidence suggests that superannuation was not paid on any other legitimate business reimbursements. This weighs against finding that the payment of the car allowance was a reimbursement.
[61] The applicant was entitled under his contract of employment to “Flights/Taxi/Train for Business related travel” and this was paid as reimbursement for costs incurred. There is nothing here or elsewhere in the contract of employment that suggest, as the Applicant does, that “for the avoidance of doubt” there was a requirement that he only use taxis or other forms of travel where he could not use his car and there certainly is no evidence before me that he had to use a car for his business related travel.
[62] I am therefore satisfied that the amount paid to the Applicant by way of a car allowance was an amount which he could use as he wished and is therefore earnings for the purpose of s.332(1) of the FW Act. The Applicant was not required to purchase or own a car of a particular standard. The Respondent put no constraints on the use of the money.
[63] There was some debate as to whether the allowance was $21,311.48 per annum (the pre-tax amount) or $13,000 per annum (the post-tax amount). I consider that the pre-tax amount should be used. It makes no sense that an amount that is to be treated as part of the income of an employee would only have the post-tax amount taken into account when all other aspects of earnings (e.g. salary) consider the pre-tax amount.”
The Appeal
The issue before the Commissioner was whether Mr Monteiro’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.[8]
Submissions
In outlining his grounds for appeal, Mr Monteiro contends that the Commissioner erred by accepting the calculation of the vehicle allowance being a gross amount. It is submitted that the Commissioner incorrectly determined that the car allowance could not be considered a ‘reimbursement’ because superannuation was paid on top of the car allowance.
Further, Mr Monteiro submitted that the Commissioner erred when determining that the Valco Group had “no control over how a vehicle allowance is spent.” It is contended that the Valco Group did have clear control over how the vehicle allowance was spent.
Mr Monteiro submitted that he was required to use the vehicle for work purposes and that this was not taken into consideration by the Commissioner.
It was submitted that relevant to the private health insurance payment, the Commissioner omitted to consider relevant evidence of Mr Monteiro.
Mr Monteiro referred to the Full Bench decision in Sam Technology Engineers Pty Ltd v Bernadou[2018] FWCFB 1767 (Sam Technology) and submitted that the car allowance should be considered, in his case, to be a reimbursement.
In the alternative, Mr Monteiro seeks an opportunity to be able to demonstrate his business versus personal use of the car, as he is confident the amount to be attributed to the personal use of the car will not result in him having earned an amount greater than the high income threshold.
The Valco Group submitted that Mr Monteiro is now overstating his use of the vehicle for business use in an attempt to overcome the high income threshold. Further, in the event Mr Monterio is permitted to adduce further evidence, the Valco Group nominated a number of other payments which it states should be calculated as earnings. Some of these items include car parking, airline tickets for Mr Monteiro’s family and other expenses to do with a trip taken by Mr Monteiro and his family.
Relevant legislative provisions
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.”
Section 332 of the Act defines “earnings” as follows:
“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.” (our emphasis)
No regulations have been made for the purposes of s.332(1)(d) or s.332(2)(d) of the Act. However, r.3.05(6) of the Fair Work Regulations 2009 (the Regulations), which has been made for the purpose of s.382(b)(iii) of the Act to ascertain whether a person is protected from unfair dismissal, requires the inclusion of particular types of non-monetary benefits. Regulation 3.05(6) provides as follows:
“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) the FWC 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)the FWC can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by the FWC is an amount for subparagraph 382(b)(iii) of the Act.” (Emphasis added).
Consideration
It is noted that prior to the Full Bench decision in Sam Technology there had been a disparity of approaches in decisions of individual members of the Commission relevant to the value, if any, a car allowance should have towards an applicant’s earnings for the purposes of s.332 of the Act. The decision in Sam Technology was issued shortly after the Commissioner issued her Decision. Accordingly, the Commissioner did not have the benefit of Sam Technology and we therefore imply no criticism of the Commissioner for not having regard to that decision.
We consider, however, that regard should have been had by the Commissioner to the Full Bench decision in Kunbarllanjnja Community Government Council v Fewings[9] (Fewings), where it was held:
“In our view the most appropriate method of calculating the value of the motor vehicle component of an applicant's remuneration is as follows:
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.”
The decision in Sam Technology has given further precision as to the examination required in Fewings, but is based on the same principle of examining the business versus private use of the vehicle. In failing to have regard to those matters and without relevant examination of the same, we are of the view that the Commissioner erred in finding that all of the car allowance paid to Mr Monteiro should have been treated as ‘earnings’ for the purpose of s.332(1) of the Act.
Relevant to the second reason for granting permission to appeal, we note that it does not appear to have been before the Commissioner that the employer paid to Mr Monteiro, in addition to the car allowance, fuel reimbursement. This will be a consideration which will likely weigh against Mr Monteiro in the subsequent rehearing of the jurisdictional matter concerning Mr Monteiro’s earnings.
In respect of the Commissioner’s determination of the private health insurance expenses as ‘earnings’ for the purpose of s.332(1) of the Act, we do not find any error. We consider this to be an appropriate conclusion despite the contract entered into between the parties labelling it as a ‘reimbursement’. It is not a reimbursement. The payment by an employer for an employee’s private health insurance is a benefit to an employee, and is not, unless agreed, an entitlement of employment for which an employee would need to reimburse an employee.
Conclusion
For the reasons given we:
(a) Grant permission to appeal;
(b) Uphold the appeal;
(c) Quash the Decision in ([2018] FWC 1520); and
(d) Remit the matter to Commissioner Hunt for rehearing concerning the question of “whether, at the time of his dismissal, Mr Monteiro’s annual rate of earnings, and such other sums (if any) worked out in relation to him in accordance with the regulations is less than the high income threshold?”.
VICE PRESIDENT
Appearances:
J. Monteiro, Appellant.
N. Burmeister, counsel for the Respondent (permission to appeal only), S. Galichet, Respondent (appeal only).
Hearing details:
Permission to appeal
2018
Sydney with video link to Perth and Melbourne:
2 May.
Appeal
2018.
Sydney with telephone link to Paris:
5 June.
<PR607843>
[1] Monteiro v Valco Group Australia Pty Ltd[2018] FWC 1520 at [2].
[2] This is so because on appeal the Commission has power to receive further evidence, pursuant to s.607(2); see Coal and Allied v AIRC (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ.
[3] (2011) 192 FCR 78 at [43].
[4] O’Sullivan v Farrer (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others (2011) 192 FCR 78 at [44] -[46].
[5] [2010] FWAFB 5343, 197 IR 266 at [27].
[6] Wan v AIRC (2001) 116 FCR 481 at [30].
[7] GlaxoSmithKline Australia Pty Ltd v Makin[2010] FWAFB 5343 at [26]-[27], 197 IR 266; Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/Warkworth[2010] FWAFB 10089 at [28], 202 IR 388, affirmed on judicial review in Coal & Allied Mining Services Pty Ltd v Lawler (2011) 192 FCR 78; NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663 at [28].
[8] Fair Work Act 2009 (Cth), s.382(b)(iii).
[9] Kunbarllanjnja Community Government Council v H.W Fewings [Print no. Q0675] (7 May 1998).
Printed by authority of the Commonwealth Government Printer
1
0