Leanne Lawson v Novetec Building Products

[2013] FWC 300

[2013] FWC 300

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Leanne Lawson
v
Novetec Building Products
(U2012/9852)

COMMISSIONER JONES MELBOURNE, 25 JANUARY 2013

Application for unfair dismissal remedy - jurisdictional objection - high income threshold.

Background

[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] A hearing was held on 21 December 2012 and a decision issued on 27 December 2012 which, inter alia, directed the Respondent to file further information and provided for written submissions by both parties in relation to this information. 1

Background

[3] It is useful to briefly repeat the background facts to this matter. 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. 2

[4] The Applicant’s Contract of Employment relevantly provided:

21. Company Vehicle

21.1 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. 3

[5] 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. 4 The undisputed evidence is that the motor vehicle provided to the Applicant was a Holden Calais provided under the tool of trade category of the Respondent’s policy.5

[6] 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 6

[1] 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.

[2] 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 $126,000 which exceeds the relevant high income threshold (which at the time of the Applicant’s dismissal was $123,300). 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. 7

[3] The Applicant submits that the amount of $18,000 overstates her private use.

The Statutory Framework

[4] S.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] In relation to earnings, s.332 of the Act relevantly provides:

(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.

[6] I agree with the Respondent’s Further Submissions 8 that it is unnecessary to consider the Regulations in this matter. S.332 of the Act, nevertheless, requires on its proper construction that the Fair Work Commission (FWC) be satisfied that a money value has been agreed and that money value is reasonable. S.332(1)(c) of the Act 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)(b) of the Act 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).

[7] Properly construed and in context, s.332 of the Act necessitates satisfaction by FWC that:

(a) A monetary value of a non-monetary benefit has been agreed to; and

(b) The money value so agreed is reasonable.

[1] It is apparent from the Respondent’s Further Submissions that it agrees that these are the issues to be determined. 9 However, the Respondent maintains that the Applicant’s entitlement to private use of the vehicle was a contractual right and the value agreed to by the Applicant as part of her salary package was reasonable. The Respondent submits that the fact that the Applicant exercised her private use rights sparingly does not render the valuation unreasonable:

11. The agreed monetary value of the vehicle provided to the applicant by the respondent was $18,000 approximately. There is nothing inherently unreasonable about the figure nor the manner in which it was derived. The applicant has not suggested that the agreed value was unreasonable or that there was anything improper done in order to have her agree to that figure in her contract. 10

Evidence

[2] At the hearing, Mr Annall gave general evidence regarding the calculation of the amount of $18,000 which is a standard level for the Respondent’s state managers. 11

[3] Mr Annall also gave general evidence regarding the Fringe Benefit Tax (FBT) payable by the Respondent which 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. 12 The log book was not in evidence.

[4] 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. 13

[5] In the first decision I stated that I was not 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% being 130 hours available for private use over a week; 14

(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 FBT 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%. 15

(e) The Applicant estimates her actual private use was 3%.

[1] I noted in the first decision that in Fewings v Kunbarllanjnja Community Government Council 16(Fewings),a Full Bench set out a preferred approach to the calculation of the non-monetary benefit of the provision of a motor vehicle which is directed towards calculating actual private usage, not some notion of available private usage in a working week.

[2] As noted, Directions were issued to the Respondent which, inter alia, required the production of an explanation in affidavit form from Mr Annall regarding the calculation of the Respondent’s FBT liability for the Applicant’s entitlement to the motor vehicle and the calculation of the non-monetary benefit expressed in the Applicant’s employment contract. The Respondent was also directed to produce a copy of the log book completed by the Applicant.

[3] Mr Annall set out in his affidavit the Respondent’s calculation of the value of the vehicle provided to the Applicant specified in her contract of employment as follows:

a) Lease payments per year = $1442.00pm x 12 =$17,304 (for Holden Calais)

b) Fuel (Based on 40,000km travel p.a) = $8400.00

c) Insurance = $1175.00

d) Repairs & Maintenance = $1,000.00

e) Total Operating Costs = $27,879.00

f) Private Usage = 2 days per week ₊ 4 weeks annual leave = 124/365 days = 34%

g) Private usage value = 0.34 x $27,890 = $9,482.60

h) FBT liability on private usage using stationary calculation method = 46.5% x 20% of purchase ($48,000) x 2.0647 = $9,217.00

i) Net value to employee = $9,482.60 + $9217.00 = $18,699.60 = $18,000 approximately 17

[4] The Respondent produced a copy of the log book completed by the Applicant over the period 1 September 2011 to 30 November 2011 for the purpose of calculation the Respondent’s liability for FBT in relation to the motor vehicle provided to the Applicant. The record is derived from the odometer readings for the period.

[5] The log book records the total kilometres travelled in the period as 6,724km with 342km travelled for private usage. The Applicant’s evidence at the hearing is that she resides around 35km from the Respondent’s premises but that she often visited stores (clients of the Respondent) on her trip from home. The record in the log book shows no private use during the weekdays worked by the Applicant, which were 63 days in total. Rather kilometres travelled for each of those days is referred to as “store visits”. That is, the inference to be drawn from this record is that the Applicant did not travel from her home to the Respondent’s premises or from the Respondent’s premises to her home during the 63 days in the relevant period.

Consideration

[6] I first deal with the money value of the non-monetary benefit specified in the Applicant’s contract of employment. There can be no question that this value was an agreed value. The issue to be determined is whether the money value was reasonable. It is clear from Mr Annall’s affidavit that the calculation of the money value of the provision of the vehicle specified in the Applicant’s contract of employment is the total of an estimate of the private usage value to the Applicant and the FBT paid by the Respondent in respect of the provision of that vehicle.

[7] I am not satisfied that a money value of the non monetary benefit of the provision of a vehicle to an employee, other than under a salary sacrificing arrangement, which includes the cost of FBT paid by an employer for the provision of the vehicle, is reasonable.

[8] The inclusion of FBT in the calculation of the remuneration of an employee for the purpose of the high income threshold test applicable to applications for relief from unfair dismissal under the Workplace Relations Act 1996 was considered by a Full Bench in Rofin Australia Pty Ltd v Newton (Rofin). 18 The Full Bench held that the amount of FBT paid by an employer for the provision of a vehicle, other than under a salary sacrificing arrangement, would not fall within the ordinary meaning of the word remuneration. Its reasoning was as follows:

Fringe benefit tax is, however, a tax imposed upon an employer and is payable by an employer, not by the employee. It is imposed upon a fringe benefit provided by an employer to an employee. The employer is free to choose whether or not to provide a particular fringe benefit to an employee. If it does so, it incurs tax liability. Such liability is to pay an amount other than to the employee. Generally, where an amount is paid by an employer other than to an employee and other than on behalf of or at the direction of the employee, such an amount would not fall within the ordinary meaning of the word “remuneration”. 19

[9] I am satisfied that the decision of the Full Bench in Rofin remains good law in considering whether the money value of a non-monetary benefit provided by an employer, which includes the amount of FBT paid by an employer for the provision of that benefit, is reasonable.

[10] Consequently I find that the money value of “18,000 approx” specified in the Applicant’s contract of employment is not reasonable.

[11] In these circumstances, I am satisfied that should I consider whether it is possible to estimate a money value based on the actual private usage by the Applicant of the motor vehicle provided by the Respondent. I am satisfied, having regard to the evidence now before me that an estimate can be made.

[12] Mr Annall states in his affidavit that the log book cannot be a true representation of the Applicants private use during the relevant period. Mr Annall correctly points out that for each day in the log, only one trip is recorded and marked as a store visit. His argument is put as follows:

f) It is more probable that the store visits included a visit to the respondent’s premises on such days as each of the “store visits” entries above 70 kilometres should have a personal use component at least equivalent to 35 kilometres.

g) The personal use component of the “store visits” (excluding those under 70 kilometres) amounts to 1855 kilometres.

h) The total personal use component amounts to 2197 kilometres or 32.7 percent of the total kilometres. 20

[13] Mr Annall notes that the proportion of private usage for comparable managers of the Respondent in Western Australia and Queensland recorded by them in log books (presumably for the calculation of FBT taxation liability) is 31 percent and 43 percent respectively. He attests to true copies of log book summary pages being attached to his affidavit. 21 I note the record of total kilometres travelled in the period is not disputed.

[14] The Applicant in her further submission submits that the log book is an accurate record and that she, did not visit the respondent’s office every working day; some days were out on the road all day.” She submits that the true benefit of the motor vehicle provided to her by the Respondent, “would be 1/3 of the $18,000.” 22

[15] I agree with Mr Annall’s proposition that the log book completed by the Applicant considerably understates the private usage by the Applicant of her motor vehicle in the relevant period. I do not accept that, at the commencement and end of each of the 63 work days, the Applicant did not have trips from her home to the Respondent’s premises or from the Respondent’s premises to her home. I note that, both in evidence and in her Further Submissions, the Applicant did not assert that she always made trips from her home to a customer’s place of business or from a customer’s place of business to home; rather she stated did this “often” or on “some” trips.

[16] I am satisfied that Mr Annall’s logic in ascertaining a true picture of private usage is sound. An alternative approach is to assume that on each of the 63 days worked one of the trips involved travel from the Applicant’s home to the Respondent’s premises or from the Respondent’s premises to her home. This approach would result in 2,547km (35km x 63 days + 342) of private usage compared to the Respondent’s estimate of 2,197km.

[17] Adopting the Fewing’s method for the calculation of private usage and assuming that on each of the 63 days worked one of the trips involved travel from the Applicant’s home to the Respondent’s premises or from the Respondent’s premises to her home, results in a calculations as follows:

(a) The proportion of private usage by the Applicant in the 12 week period is 37.9;

(b) The RACV’s 2012 Vehicle Operating Costs estimate for a Holden Commodore Omega (4D Sedan, 3.0L 6 SP Automatic) is utilised as a comparable cost estimate for the Holden Calais provided to the Applicant; 23

(c) Multiply the RACV estimate of fixed costs for the Holden Commodore of $247.40 per week by 52 results in $12,864.80. 37.9% of this amount is $4,875.80

(d) Multiply the RACV estimate of running costs per kilometre of 85.77 cents/km by 10,188km results in $8,738.20;

(e) Consequently, the money benefit of total private usage by the Applicant is $13,614.

[18] I am satisfied that the estimate of $13,614 of the Applicant’s actual private usage, based on the Fewings method, is a reasonable money value of the non-monetary benefit of the provision of the motor vehicle to the Applicant during her employment with the Respondent and should be included in the calculation of her earnings. Consequently I find that the sum of the Applicant’s annual rate of earnings is $121,614.

[19] As the Applicant’s annual rate of earnings is below the high income threshold applicable at the relevant time, I find that the Applicant is a person who is protected from unfair dismissal. Consequently the Respondent’s objection is dismissed. An order to this effect will be issued with this decision.

COMMISSIONER

Appearances:

Ms L Lawson - Applicant

Mr G McCorry - Representative the Respondent

Hearing details:

2012

Melbourne

December 21

Final written submissions:

Further Written Submissions for the Respondent - 14 January 2013

Further Written Submissions for the Applicant - 23 January 2013

 1   [2012] FWA 10503

 2   Witness Statement of Ben Flanagan, Annexure B.

 3   Witness Statement of Leanne Lawson, Attachment: Contract of Employment

 4   Witness Statement of Ben Flanagan, Annexure C.

 5   Transcript of Hearing, 21 December 2012 at PN66

 6   Witness Statement of Leanne Lawson, Attachment: Offer of Employment

 7   L’ Estrange v F Graucob Ltd [1934] 2 KB 394; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52.

 8   Filed on 14 January 2013.

 9   Respondent’s Further Submissions at [7]

 10   Ibid at [11]

 11   Transcript of Hearing, 21 December 2012 at PN68.

 12   Ibid at PN73 - PN75 and PN82.

 13   Ibid at PN100, PN105 - PN106, PN116 - PN118.

 14   [2012] FWA 10503 at [32] and Transcript of Hearing, 21 December 2012 at PN75

 15   Ibid at PN77, PN79.

 16   Q0675.

 17   Affidavit of Alisdair Annall at [10]

 18 [1997] 78IR 78

 19   Ibid at page 82

 20   Affidavit of Alisdair Annal at [4]

 21   Ibid at [5]

 22   Applicant’s Further Submissions

 23   My Chambers contacted the RACV who advised operating costs for this type of vehicle most closely approximated the operating costs for a Holden Calais

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