Leanne Lawson v Novetec Building Products
[2012] FWA 10503
•27 DECEMBER 2012
[2012] FWA 10503 |
|
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Leanne Lawson
v
Novetec Building Products
(U2012/9852)
COMMISSIONER JONES | MELBOURNE, 27 DECEMBER 2012 |
Application for unfair dismissal remedy - jurisdictional objection - high income threshold.
Introduction
[1] Ms Leanne Lawson (the Applicant) has applied for an unfair dismissal remedy pursuant to s.394 of the Fair Work Act 2009 (the Act). Her employer, Novetec Building Products (the Respondent) objects to the application. The Respondent argues the Applicant is not a person protected from unfair dismissal as she was not covered by a modern award, an enterprise agreement did not apply to her employment, and the sum of her annual rate of earnings determined in accordance with the Act was above the high income threshold.
[2] The matter was referred to me for determination. Written submissions were filed and a hearing was held on 21 December 2012. At the hearing, the Respondent was represented by Mr Graham McCorry. Mr Flanagan, General Manager, Sales Marketing and Operations, provided a witness statement but was not called for cross examination. Mr Annall, Chief Financial Officer, gave sworn evidence.
[3] The Applicant represented herself and gave sworn evidence.
The Statutory Framework
[4] 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.’
[5] At the time of the Applicant’s dismissal (19 September 2012) the high income threshold was $123,300 per annum.
[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] With regard to benefits other than the payment of money, regulation 3.05(6) of the Fair Work Regulations 2009 (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.
Issue to be determined
[8] It is not in dispute, and I am satisfied, that the Applicant was not covered by an enterprise agreement or a modern award. The question to be determined is whether the Applicant is prevented from being protected from unfair dismissal by virtue of s.382(b)(iii).
Background
[9] At the time of her dismissal, the Applicant was employed in the position of State Sales Manager, having commenced in this position in July 2011. 1
[10] The Applicant’s Contract of Employment relevantly provided:
21. Company Vehicle
21.2. You will be provided with a fully serviced motor vehicle.
21.2. You may use the vehicle for private use but only in accordance with Novetec’s policies on motor vehicle use. 2
[11] The Respondent’s Motor Vehicle Policy provided for various categories of vehicles allocated within the organisation. These were tool of trade vehicles, package entitlement vehicles, salary sacrifice and pool vehicles. 3 The undisputed evidence is that the motor vehicle provided to the Applicant was a Holden Calais under the tool of trade category of the Respondent’s policy.4
[12] The Applicant commenced employment with the Respondent on 1 June 2011 in the position of Business Development Manager. The remuneration package offered and accepted by the Applicant on 11 May 2011 was expressed to comprise the following:
The remuneration package offered comprises the following:
● Salary: $100,000
● Superannuation: $9,000
● Motor vehicle benefit: $18,000 approx.
Total: $127,000
Subject to the satisfactory completion of a probationary period this increases to the following:
● Salary: $108,000
● Superannuation: $9,720
● Motor vehicle benefit: $18,000 approx.
Total: $135,720 5
[13] There is no dispute that the Applicant had completed her probationary period and that she held the position of State Sales Manager from 20 July 2011 until her dismissal on 19 September 2012.
[14] The Respondent submits that, as the agreed value of the private use of the motor vehicle in the Applicant’s contract of employment was ‘$18,000 approx’, this amount should be included in the calculations. When included the Applicant’s earnings amount to $126,300 which exceeds the relevant high income threshold. The Respondent submits that as the Applicant agreed to the figure of ‘$18,000 approx’, and it forms part of her contract of employment, she is bound by that amount as being an estimate of the private use of the motor vehicle provided to her by the Respondent in the course of her employment. 6
[15] The Applicant submits that the amount of $18,000 overstates her private use. Her argument is:
In my opinion the true benefit of the motor vehicle provided by Novetec Building Products to me would be 1/3 of the $18,000 which equates to $6,000 therefore bringing my total earnings to $114,000 which falls well under the high income threshold.
This is calculate[d] based on the $18,000 divided by 365 days in the year multiplied by 238 working days in the year leaving 127 days for private use which is clearly overstated based on my point 2 above. 7
Evidence
[16] Mr Annall’s evidence was that the amount of $18,000 is a standard level for the Respondent’s state managers. 8 He expressed the method or formula for calculating the amount as follows:
The estimated 168 hours in a week, 24 hours by seven days, of which the working week is 38 hours, which leaves a balance of 130 hours of private use available for private use. The lease payments alone, the lease and insurance and registration alone on that vehicle would equate to approximately $16,000. That $16,000 available for private use equates to $12,000 and then of course with gross staff value, i.e. the gross earnings that would be required which could be required by the employee to be able to pay for those lease payments and registration and insurance – grossing that out not taking into account the initial 10 percent that would be payable for GST, that amount comes to $19,000. So it approximates the $18,000. 9
[17] Mr Annall stated that the Fringe Benefit Tax payable by the Respondent was calculated based on the actual private use by the Applicant of the motor vehicle. To ascertain this actual use, the employee was required to keep a log book for 12 weeks. The amount of the Applicant’s actual private use of the vehicle based on these records was 5% of the total $20,000 annualised running costs, equivalent to about $1,000. 10 The log book was not in evidence.
[18] The Applicant’s evidence was that when she signed the offer she understood that the vehicle was a tool of trade vehicle to be used by her predominantly for calling on customers. She recalls filling out the log book and her recollection is that 97% of the kilometres recorded were for work related purposes and 3% for private use. She stated that although she managed a team of sales staff, they shared the responsibility in meeting clients off the work site. She stated that she lived 35 kilometres from the Respondent’s premises where she worked, but often she would drive the vehicle from home to meet with a client. 11
Consideration
[19] The Respondent bears the evidentiary onus to support its objection that the Applicant is not a person protected from unfair dismissal. 12
[20] An issue arises as to the proper construction of the relevant statutory provisions and regulations.
[21] S.332(1)(c) provides that an employees’ earnings for the purpose of s.382(b) includes an agreed money value of non-monetary benefits (my emphasis). S.332(3) defines non-monetary amounts as benefits to which an employee is entitled to in return for the performance of work and for which ‘a reasonable money value has been agreed by the employee and employer’ (my emphasis).
[22] S.382(b)(iii) requires that earnings and such other amounts are worked out in accordance with the regulations.
[23] Regulation 3.05(6) sets out the steps to be taken by FWA in satisfying itself as to the money value of a non-monetary benefit. The wording of reg. 3.05(6)(c) implies that FWA has a degree of discretion in deciding whether it should consider a benefit for the purposes of assessing whether the high income threshold applies to a person at the time of dismissal. Once it has been determined that a benefit meets the criteria contained in reg.3.05(6)(a) and (b), FWA must consider whether it is satisfied, having regard to the circumstances, that each of reg.3.05(6) (c) (i), (ii) and (iii) apply.
[24] Regulation 3.05(6)(c)(i) requires FWA to be satisfied that the non-monetary benefit is a benefit that it should consider for the purpose of assessing whether the high income threshold applies. Second, FWA must be satisfied ‘a reasonable money value has not been agreed’ by the Applicant and Respondent. Third, FWA must be satisfied it can estimate the real or notional value. Having so satisfied itself the real or notional value of the benefit estimated by FWA is an amount for the purpose of s.382(b)(iii).
[25] Properly construed and in context, s.332 and regulation 3.05(6)(c)(ii) necessitate satisfaction by FWA that:
(a) A monetary value of a non-monetary benefit has been agreed to; and
(b) The money value so agreed is reasonable.
[26] The Respondent submits FWA is not required to make an assessment as to whether or not the money value of a benefit which has been agreed to is reasonable. It is sufficient that the Applicant agreed to the amount and the Applicant is bound by her contract of employment. 13
[27] I am unable to accept the Respondent’s submission. It must be assumed, as a general principle of statutory construction, that the word ‘reasonable’ was intentionally inserted by Parliament before ‘money value’ in s.332(3) and regulation 3.05(6)(c)(iii) and, therefore has some work to do. 14 Were it intended that any money amount which had been agreed to by an employer and employee sufficed for the purpose of s.382(b)(iii), Parliament would not have inserted the adjective ‘reasonable’.
[28] Turning to the provisions of regulation 3.05(6)(a) and (b), I am satisfied that the Applicant received a benefit in accordance with clause 21 of her contract of employment: reg.3.05(6)(a). I am satisfied the benefit was not an entitlement in return for the performance of work: reg.3.05(6)(b). The question is whether the agreed money value is reasonable is dealt with below.
[29] Regulation 3.05(6)(c)(i) requires that FWA be satisfied that it should consider the benefit for the purpose of assessing whether the high income threshold applies to the person at the time of the dismissal. It is not disputed that the motor vehicle provided to the Applicant under the Respondent’s policy was allocated as a tool of trade vehicle, rather than as part of the Applicant’s salary package. The tool of trade vehicle is described in the policy as:
For high kilometre (business purpose) users. This applies to most staff employed in (External) Sales who are required to visit customers. These users will be issued with a company owned or leased vehicle and will not be required to salary sacrifice.
[30] In Rofin Australia Pty Ltd v Newton, 15 a Full Bench of the Australian Industrial Relations Commission was required to determine whether the provision of a motor vehicle should be included in the calculation of an employees’ remuneration for the purpose of the high income threshold then applying under the Workplace Relations Act 1996. The Full Bench was satisfied that the motor vehicle was paid as part of a salary package and not a salary sacrifice. The Full Bench referred to distinctions properly made by courts and tribunals 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 Full Bench 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. 16
[31] I am satisfied, having regard to the evidence that, whilst the motor vehicle was allocated to the Applicant under the Respondent’s policy as a tool of trade, the Applicant was entitled to private use of the vehicle and, consequently, the vehicle is properly to be considered as part of the Applicant’s salary package 17 and a benefit for the purpose of assessing whether the high income threshold applied to the Applicant at the time of her dismissal.
[32] Turning to regulation 3.05(6)(c)(ii), I am satisfied a benefit has been agreed by the employee and the employer. I am not, however, satisfied that the money value of the benefit so agreed is reasonable for the following reasons:
(a) The Respondent’s evidence is that the money value is calculated by a standard formula of 77 per cent being 130 hours available for private use over a week; 18
(b) It is evident that this method or formula does not have regard to the benefit derived by the Applicant from the actual private use of the motor vehicle;
(c) By contrast with the method used for the purpose of the Applicant’s salary package, the Respondent calculates the actual private usage of the vehicle by the Applicant for the purpose of Fringe Benefit Tax payable on the motor vehicle;
(d) The available private use is determined by the Respondent at 77% and the actual private use was calculated at 5%. 19
(e) The Applicant estimates her actual private use was 3%.
[33] In Fewings v Kunbarllanjnja Community Government Council 20(Fewings),a Full Bench set out a preferred approach to the calculation of the non-monetary benefit of the provision of a motor vehicle.
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. 21
[34] It must be noted that this decision was made under previous statutory framework absent the provision of 3.05(6) of the Regulations. The decision has however been applied as the correct approach for estimating the personal benefit of the use of a motor vehicle under the Act. 22
[35] The approach developed in Fewings is clearly directed towards calculating actual private usage, not some notion of available private usage in a working week. I am satisfied that a ‘reasonable’ money value of a motor vehicle provided as part of an employee’s salary package ought reflect actual private usage.
[36] I have considered, in circumstances where I am not satisfied that the agreed money value of the provision of the motor vehicle is reasonable, whether I should dismiss the Respondent’s objection.
[37] However, I have decided that, in circumstances where on the evidence, it appears there is available data and calculations of the actual private usage by the Applicant of the motor vehicle provided to her under her contract of employment, I should direct the Respondent to produce that material for the purpose of working out in accordance with the regulations a reasonable money value of the non-monetary benefit in question.
[38] Directions will be issued for the production by the Respondent of the data (including the log book) and calculations, as well as any submissions the Respondent and Applicant may wish to make regarding this material.
COMMISSIONER
Appearances:
Ms L Lawson, representing herself.
Mr G McCorry, representing the Respondent.
Hearing details:
Melbourne
2012
21 December
1 Witness Statement of Ben Flanagan, Annexure B.
2 Witness Statement of Leanne Lawson, Annexure B.
3 Witness Statement of Ben Flanagan, Annexure C.
4 Transcript of Hearing, 21 December 2012 at PN [66].
5 Witness Statement of Leanne Lawson, Annexure A.
6 L’ Estrange v F Graucob Ltd [1934] 2 KB 394; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52.
7 Applicant’s Outline of Submission at [3]-[4].
8 Transcript of Hearing, 21 December 2012 at PN [68].
9 Ibid at PN [70].
10 Ibid at PN [73]-[75], PN [82].
11 Ibid at PN [100], PN[105]-[106], PN[116]-[118].
12 [2012] FWAFB 6108.
13 See authorities cited in footnote 6.
14 See authorities cited in Pearce DC and Geddes RS, Statutory Interpretation in Australia (7th Ed) at [2.26], p.49-50.
15 [1997] IR 78.
16 Ibid at [82]-[83].
17 See Hitchcock v Beverage Industry Environment Council (FB) PR 943380 at [27].
18 Transcript of Hearing, 21 December 2012 at PN [75].
19 Ibid at PN[77], PN[79].
20 Q0675.
21 Ibid at p.5.
22 McIlwraith v Toowong Mitsubishi Pty Ltd [2012] FWA 3614 at [33] to [34]; Zappia v Universal Music Australia Pty Ltd T/A Universal Music Australia [2012] 3208 at [19], approved on appeal at [2012] FWAFB 6108 at [12].
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