Joanna Smith v JGC Oceania Pty Ltd

[2018] FWC 1444

[2018] FWC 1444

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Joanna Smith
v
JGC Oceania Pty Ltd
(U2017/13268)

COMMISSIONER MCKINNON MELBOURNE, 9 MARCH 2018

Application for an unfair dismissal remedy - high income threshold – contract of employment for a specified task.

Introduction

[1] Ms Joanna Smith (Smith) has applied to the Fair Work Commission (the Commission) under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy in relation to her former employment with JGC Oceania Pty Ltd (JGC).

[2] It is not in dispute that Ms Smith was employed as a Cost Engineer on a fly-in, fly-out basis from 22 April 2014 until her employment was terminated on 23 November 2017.

[3] JGC objected to the application on the basis that:

•  Ms Smith’s annual earnings exceeded the high income threshold;

•  Ms Smith’s contract was for a specified task which came to an end.

[4] The matter was listed for hearing by telephone on 9 March 2018. Ms Smith gave evidence on her own behalf 1 and Ms Rebecca Cooper, Operations Manager, gave evidence for JGC2.

Legislation

[5] Section 396(b) of the Act requires that before the merits of an application under section 394 are considered, the Commission must first determine whether the applicant was protected from unfair dismissal. To this end, section 382 of the Act provides as follows:

“382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”

[6] The term “earnings” is defined in s.332 of the Act 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

(c) the employee directs; and

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

(e) 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.”

[7] Regulations 3.05(1) and 3.05 (6) of the Fair Work Regulations 2009 further provide as follows:

“3.05 When a person is protected from unfair dismissal — high income threshold

(1) For subparagraph 382 (b) (iii) of the Act, this regulation explains how to work out amounts for the purpose of assessing whether the high income threshold applies in relation to the dismissal of a person at a particular time.

Note   Under section 382 of the Act, a person is protected from unfair dismissal if specified circumstances apply. One of the circumstances is that 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.

…

Benefits other than payment of money

(6) If:

(a) the person is entitled to receive, or has received, a benefit in accordance with an agreement between the person and the person’s employer; and

(b) the benefit is not an entitlement to a payment of money and is not a non-monetary benefit within the meaning of subsection 332 (3) of the Act; and

(c) 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.”

[8] Finally, under section 386(2) of the Act, a person has not been “dismissed” if they were employed under a contract of employment for a specified period of time, for a specified task, or for the duration of a specified season, and the employment has terminated at the end of the period, on completion of the task, or at the end of the season.

High income threshold

[9] The parties agree that Ms Smith’s period of employment with JGC was more than the minimum employment period for the purposes of section 382(a) of the Act.

[10] No party submits, and nor is it apparent on the material before me, that Ms Smith was covered by a modern award or enterprise agreement in relation to her employment with JGC for the purposes of section 382(b)(i) of the Act.

[11] The question to be determined in relation to section 382 is whether Ms Smith’s annual rate of earnings at the time of dismissal was less than the high income threshold for the purposes of section 382(b)(iii) of the Act. At the relevant time, the high income threshold was $142,000.

[12] Clause 5 of Ms Smith’s employment contract 3 detailed her entitlement to “remuneration and benefits” while employed as an employee of JGC. In summary, these included:

1. A total annual remuneration package as follows:

Base salary $111,000

Extended work week allowance $35,000

Gross salary $146,000

Daily Meal Allowance (approximately) $14,000

Total annual remuneration $160,000

2. Compulsory superannuation of 9.5%.

3. Economy class airfares to and from Perth to Darwin at commencement and termination of employment and for the purposes of “home leave travel”. Home leave travel is not defined in the contract, but the parties agree this referred to travel to and from home for the purposes of rest and recreation. Ms Smith a 3 week on, 1 week off work cycle. Accordingly, she was entitled to a return airfare to Perth after each three weeks of work.

4. Accommodation in Darwin for the period of her employment, which Ms Cooper estimated at a value of $160 per night.

5. Two taxi fares for travel to and from Darwin to work and two taxi fares for travel to and from Perth airport within a 15 km radius.

6. Reimbursement of any public transport cost for travel to and from Perth airport.

[13] An increase in Ms Smith’s salary was applied from 1 June 2017. The increase was 1.5% paid on the combined value of the base salary and extended work week allowance, leading to a total of $148,190. 4

[14] The extended work week allowance was paid for completion of scheduled additional working hours of 58 hours per week. The payment was made in lieu of any overtime, additional annual leave and other benefits that might arise in connection with the working of 58 hours per week over the roster cycle. The parties agreed that the allowance was an entitlement for which Ms Smith was paid during each month of her employment. Ms Cooper described the allowance as effectively part of Ms Smith’s base salary. Ms Smith agreed she was always paid the allowance according to the number of days she worked, including up to the time of dismissal. It was a guaranteed payment. I am satisfied that it is an amount that should be included in calculating Ms Smith’s earnings for the purposes of section 332.

[15] The parties also agreed that Ms Smith was entitled to, and paid for, daily meal allowance for each day she worked in Darwin, including at the time of dismissal. This payment was in the nature of a reimbursement and I am not satisfied it should be included in the calculation of Ms Smith’s earnings for the purposes of section 332.

[16] It was agreed that Ms Smith’s entitlement to superannuation was in accordance with compulsory superannuation legislation. Accordingly, it is not relevant to the calculation of Ms Smith’s earnings for the purposes of section 332.

[17] Ms Smith was entitled to the benefit of serviced apartment accommodation in Darwin, regular return airfares for home leave travel, an airfare home on termination of employment and taxis between work and home. At least some of these travel benefits were necessary incidents of the nature of her fly-in, fly out role although in my view the provision of accommodation was a non-monetary benefit to Ms Smith. The value attributed to accommodation was not in dispute and I have no reason to doubt Ms Cooper’s evidence on the question, although I propose to adopt a cautious approach in the absence of any supporting evidence.

[18] Disregarding the value of Ms Smith’s travel benefits as a whole, it is apparent from the above that at the time of dismissal, Ms Smith earned a gross salary (comprised of base salary and extended work week allowance) of $148,190 plus daily meal allowance of approximately $14,000 per year). It follows that her annual rate of earnings at the time of dismissal exceeded the high income threshold.

Employment for a specified task

[19] The second question for determination is whether Ms Smith was employed under a contract of employment for a specified task, and if so whether her employment terminated on completion of the task for the purposes of section 386(2) of the Act.

[20] JGC contends that Ms Smith was employed for a specified task which came to an end on completion of her role on the Project. It is not in dispute that at the time of dismissal, the Project was still underway.

[21] Clause 1.7 of Ms Smith’s contract of employment provides as follows:

“1.7 The Employee’s employment will end on completion of the Project or on conclusion of the Employee’s role on the Project, whichever is earliest (which will be on the date notified to the Employee by the Company), unless the Employee’s employment is terminated earlier in accordance with clause 16.

1.7.1 For the purpose of this clause 1.7, “Project” means the work of the JKC Joint Venture in respect of the construction phase of the Ichthys Project”.

1.7.2 For the purpose of this clause 1.7, “the Employee’s role on the Project” means the performance by the Employee of the Employee’s duties as Cost Engineer under this Agreement in respect of the Project.”

[22] Clause 16.4 of the contract provides as follows:

“16.4 The parties agree that this employment Agreement may be terminated, without reason or cause by either party providing written notice to the other party with a one (1) month notice period. The Company may elect to terminate this Agreement during the one (1) month notice period by paying the Employee the equivalent base salary or part thereof in lieu of written notice.”

[23] It is not in dispute that Ms Smith was paid one month’s wages in lieu of notice of termination on dismissal.

[24] A Full Bench of the Commission recently considered section 386(2) in relation to the meaning of “contract of employment for a specified period of time”. 5 The Commission found that where such a contract provided for an unqualified right for either party to terminate the contract on notice or payment in lieu of notice, the contract was not a contract of employment for a specified period, and the exclusion in section 386(2)(a) did not apply. In my view, the same reasoning applies to a contract of employment for a specified task and, on the authority of the Full Bench, Ms Smith’s contract was not a contract of employment for a specified task. If I am wrong about that, I would still find that section 386(2)(a) does not apply in this case, for the reasons that follow.

[25] Ms Smith disputes the contention that her contract came to an end because her role on the Project had finished. The only evidence in support of that proposition was the oral evidence of Ms Cooper. There was no evidence, for example, in relation to the various stages of the Project, the role of the Cost Engineer in connection with the Project, or any communications indicating that the role was coming to an end.

[26] According to Ms Cooper, an email was sent by the Commercial Manager on 4 November 2017 advising that Ms Smith’s role would come to an end in December 2017 and this was copied to Keiji Fujiwara, who Ms Smith described as “her boss”. Ms Cooper noted that Ms Smith’s direct supervisor was Fiona Dick, but did not dispute that Mr Fujiwara had managerial functions in relation to Ms Smith.

[27] The Approved Manning Worksheet 6 tendered by Ms Smith indicates planning within JGC for the role of Cost Engineer to continue until April 2018. The Worksheet is dated 14 November 2017 and describes Mr Fujiwara as the “Cost Control Manager”.

[28] I accept, as Ms Cooper submits, that plans are often fluid and can change. However, that does not explain why if by 4 November 2017, Ms Smith’s role was forecast to end in December 2017, the Worksheet was prepared ten days later forecasting Ms Smith’s role as continuing well into 2018. Nor does it explain why Ms Smith’s employment was terminated at least one week earlier than December 2017.

[29] The fact that Ms Smith was paid one month’s notice of termination under clause 16.4 of the contract also runs counter to the proposition that the contract simply came to an end when the role on the Project ceased. Had that been the case, no notice of termination under clause 16.4 would have been required as the contract would have come to an end as a matter of law, arising from the genuine agreement of the parties when the contract was formed. 7 That being said, I accept that it is at least possible having regard to the evidence of Ms Cooper that JGC has adopted a practice of paying notice of termination when fixed term contracts expire, notwithstanding the absence of any formal legal obligation. Accordingly, I have not given this issue much weight.

[30] On balance, I am not satisfied that Ms Smith’s employment came to an end because her role on the Project concluded. The available evidence suggests that the more likely outcome is that Ms Smith’s role as Cost Engineer on the Project had not concluded at the time of her dismissal.

Conclusion

[31] Ms Smith’s contract of employment was not for a specified task, and her employment was not terminated on completion of a specified task for the purposes of section 386(2)(a) of the Act.

[32] However, the sum of Ms Smith’s annual rate of earnings was more than the high income threshold at the time of dismissal. Accordingly Ms Smith was not protected from unfair dismissal. The application is dismissed.

COMMISSIONER

Appearances:

J Smith on her own behalf

R Cooper for the JGC Oceania Pty Ltd

Hearing details:

2018.

Melbourne and Perth by telephone:

March 9.

<PR601061>

 1   Exhibit 1

 2   Exhibit 4

 3   Exhibit 2

 4   Audio recording of Hearing, 9 March 2018

 5   Khayamv Navitas English Pty Ltd[2017] FWCFB 5162

 6   Exhibit 3

 7   [2017] FWCFB 5162

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