Mark Sinclair v Spotless Management Services Pty Lts T/A WA Laundries

[2015] FWC 4228

[2015] FWC 4228

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Mark Sinclair
v
Spotless Management Services Pty Lts T/A WA Laundries
(U2015/4988)

COMMISSIONER ROE MELBOURNE, 23 JUNE 2015

Application for relief from unfair dismissal.

[1] Mr Sinclair has made an unfair dismissal application and Spotless Management Services (Spotless) argues that there is no jurisdiction to hear the application because Mr Sinclair earned more than the high income threshold of $133,000.

[2] It is not disputed that Mr Sinclair’s earnings are as follows:

a. Fixed annual remuneration of $143,280.65. This includes a compulsory superannuation; the amount excluding compulsory superannuation is $131,101.79 per annum. 1

b. Tool of Trade -Vehicle Allowance $15,500 per annum. 2

[3] Mr Sinclair earns less than the high income threshold if the vehicle allowance is not included. He earns more than the high income threshold if more than $1898.21 or 12.65% of the vehicle allowance is included. The parties agree, and I am satisfied that, the employment of Mr Sinclair is not covered by an Award or collective agreement approved by Fair Work Commission (FWC) or its predecessors.

[4] The contract of employment states under the heading “Tool of trade - vehicle allowance”

“You will be provided a vehicle allowance for the purpose of compensation for using your own vehicle in connection with official business related purposes. The amount of the allowance is $15,500 per annum payable in equal instalments in each pay period. The Vehicle Allowance is provided to you as an expense allowance and as such does not form part of your ordinary pay when calculating the value of other employment related entitlements. Further in the event your position or employment conditions change and as a consequence of this change the Company considers that regular use of your own vehicle is no longer required for you to perform your duties, then the allowance will cease.” 3

[5] Mr Coelho gave evidence for Spotless that the contract of employment was in a standard format used by the company but that it was not common for the engineering managers to receive a vehicle allowance and that it was paid following representations by Mr Sinclair about the costs of travelling long distances from his home to work. Mr Coelho gave evidence that most of the time Mr Sinclair used his private vehicle for private purposes and he estimated that only about 10% of the vehicle’s usage would have been for private purposes.

[6] Mr Sinclair said that he owned three vehicles and he used two of them to travel to and from work and on some occasions for work purposes. He accepted that the majority of the time the vehicles were being used for private purposes. The travel to and from work was significant.

[7] It was not suggested that there was any rate per kilometre or proportion of work usage which was agreed either formally or informally to apply to the vehicle allowance. It was not suggested that the vehicle allowance was sufficient to or was intended to fully compensate for the full cost of both private and business use of a vehicle.

[8] Section 382(b)(iii) of the Fair Work Act 2009 (Cth) (the Act) provides that a person is only protected from unfair dismissal where:

“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.” 4

[9] Earnings are 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 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.”

[10] Both parties agree that the vehicle allowance is a monetary payment. Mr Sinclair argues that it is a reimbursement and therefore cannot be included as earnings. Essentially, Spotless argues that part of the vehicle allowance should be regarded as reimbursement but part of it is a private benefit which must be regarded as part of earnings. Neither party argues that the payment is a “non-monetary” benefit.

[11] The 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 the employee’s behalf 5. There is no relevant regulation in respect to s.332 of the Act. Therefore the vehicle allowance can only be regarded as part of earnings if it is wages and it does not come within the exclusion for reimbursements or the exclusion that it is payment the amount of which cannot be determined in advance.6

[12] If it is not earnings then it can only be considered if it is an amount or benefit prescribed by the Fair Work Regulations 2009 (the Regulations). The relevant regulation is reg.3.05(6). The regulation for the purposes of s.382 of the Act provides as follows:

“(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.”

[13] The allowance is an entitlement to the payment of money and, as discussed earlier, it is not a non-monetary benefit within the meaning of s.332(3) of the Act so the regulation does not apply.

[14] It is therefore necessary to consider if the vehicle allowance or part of it is wages and if it is wages if it is excluded because it is a reimbursement or because it is not an amount which can be determined in advance. The amount of $15,500 is specified and determined in advance.

[15] On its face the employment contract makes it clear that the amount is intended to be a reimbursement in compensation for using the employee’s own vehicle at least in part for work purposes. It is specifically stated that it is not an amount which is guaranteed and it is specifically stated that it is not an amount which is part of ordinary pay when calculating the value of other employment related entitlements. This does not suggest that it should be considered to be wages. Furthermore it is stated to be an expense allowance for the purpose of compensation for using your own vehicle in connection with official business related purposes. I am satisfied that the contract provides that the vehicle allowance is a reimbursement for the use of the employee’s own vehicle for business related purposes. On its face the contract excludes the vehicle allowance from “earnings” as defined by the s.332 of the Act.

[16] If part of the vehicle allowance should be regarded as earnings then the amount which should be included in earnings cannot be determined with any precision as the amount of business usage cannot be determined in advance which is precisely why an allowance for the eventuality is paid.

[17] In any case, I doubt that it is appropriate in the circumstances of this case for the employer to get the benefit of an argument that it was not acting consistently with the contract of employment.

[18] I accept that a significant amount of the travel Mr Sinclair undertook in his private vehicle, including travel to and from work, was for private purposes. I accept that the actual historical business use of the vehicle calculated using a reasonable or common per kilometre reimbursement method would not be likely to total a value of $15,500. However, the circumstance in which FWC is entitled to make an estimate of the value of a benefit where it considers it appropriate is defined in reg.3.05 of the Regulations and as discussed earlier this case does not fall within those circumstances. In this case the amount must be excluded because it is a reimbursement. There may well be circumstances where something which is described as a reimbursement allowance is not in fact a reimbursement allowance and there is a reasonable basis for including the amount or a defined part of it as earnings. However, I am not satisfied based upon the evidence that there is a proper basis for such a conclusion in this case.

[19] The parties referred to a number of decisions of FWC. Spotless referred to the Full Bench decision of Francesco Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia 7 The relevant conclusion was as follows:

“ [10] There are two issues in relation to the matter of the provision of the motor vehicle. The first is whether the provision of a fully maintained company car constituted a non-monetary benefit within the meaning of that expression as defined by section 332(5)(a) of the Act. If it did constitute such a benefit, the second is, whether Fair Work Australia is satisfied:

● that it should consider the benefit in assessing whether the high income threshold applies;

● a reasonable money value of the benefit has not been agreed; and

● it can estimate a real or notional money value of the benefit.

[11] In our respectful view, his Honour correctly found at [15] that the motor vehicle was used primarily for private purposes and that its provision constituted a significant part of the appellant’s remuneration. Accordingly its provision constituted a non-monetary benefit. His Honour was also correct in holding at [17] that an employee’s travel between home and normal place of employment is personal rather than work related travel and in his satisfaction that he should consider the benefit for assessing whether the high income threshold applied.
[12] A reasonable money value of the benefit not having been agreed upon, his Honour, pursuant to regulation 3.05(6) of the Fair Work Regulations 2009, was satisfied that he could estimate the real or notional value of the benefit. He did so by adopting a method that has oft been used by Fair Work Australia and its predecessor. His Honour did not err in so doing, nor did he fall into error in the manner of coming to his estimate of its real or notional value.
[13] Finally, his Honour was correct in taking into account the value of the tolls paid by the respondent in respect of the private portion of the appellant’s travel. It matters not that this was by way of reimbursement, rather than by direct payment. The payment of the tolls was a benefit other than payment of money for the purposes of regulation 3.05(6). In the event that it was not, applying a purposive approach to the interpretation of the word “reimbursements” in section 332(2)(b) of the Act, the word does not contemplate reimbursements of outlays incurred for private, as approved by business, purposes. The payment by an employer for an employee’s private outgoings, whether directly or by way of reimbursement, clearly constitutes part of that employee’s remuneration.” 8

[20] This decision illustrates how private use of a company supplied vehicle is completely different for the purposes of considering the high income threshold from a vehicle allowance to compensate for private use of a personal vehicle. Regulation 3.05(6) applies in the former case but not in the later. The qualification in the second part of the final paragraph quoted above relates to taking into account tolls paid for by the employer when the trip was for private purposes. The Full Bench found that this could not be regarded as a reimbursement and therefore these payments should be included as income. The primary position of the Full Bench was that the estimated value of these amounts was being calculated pursuant to the process under reg.3.05(6) of the Regulations.

[21] This part of the decision should be read in the context of the decision below of Senior Deputy President Hamberger. 9 His decision is based upon the following premise which was endorsed by the Full Bench.10

“The wording of r. 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 r.3.05 (6) (a) and (b), FWA must consider whether it is satisfied, having regard to the circumstances, that each of r.3.05(6) (c) (i), (ii) and (iii) apply.

...

While the personal value of the company car does not form part of the applicant’s earnings as defined by s.332 (because there has been no agreement as to the monetary value of this benefit) the tribunal has the discretion to estimate the real or notional money value of the benefit in accordance with r.3.05(6). In all the circumstances, I consider that I am able to, and should, make such an estimate.” 11

[22] The conclusion regarding toll fees must be read in that context. The conclusion reached by the Senior Deputy President is as follows:

“The applicant incurred toll fees while travelling between his home and place of work. I have already determined that these trips are private rather than work-related. These fees were reimbursed by the respondent, to the tune of $664.92 in the 12 months prior to his dismissal. This is a personal benefit for which the tribunal can estimate a real money value in accordance with r.3.05(6).” 12

[23] It is clear that the amounts reimbursed were identified and quantified. The circumstances of this case are distinguishable in that reg.3.05(6) is not applicable and in that the amount of any private payment is not able to be identified and quantified.

[24] In the circumstances of this case there has been no clear and quantifiable reimbursement for private as opposed to business purposes. It is not possible to identify an amount which is not a reimbursement.

[25] Deputy President Smith in Mr Sean Venning v McConnell Dowell Constructors (Aust) Pty Ltd found that a site allowance should not be included because it was not payable “if there is no longer a requirement for the Employee to work at the site or where he or she is no longer subject to the conditions that warrant the payment of the Site Allowance.” 13 The contract in this case is in similar terms and provides that “the Company considers that regular use of your own vehicle is no longer required for you to perform your duties, then the allowance will cease”.14

[26] Mr Sinclair referred to the decision of Deputy President Sams in Andrew Fitzhenry v Linde Material Handling Pty Ltd. 15 Mr Sinclair particularly referred to the following:

“ [11] The applicant submitted that the annual sum of his earnings was below the ‘high income threshold’ set out under s 382(b)(iii) of the Act. The applicant identified three components of his remuneration. The relevant submission by the applicant is set out as follows:

‘At the time of termination the Applicant’s base salary was $89,000.00 per annum plus superannuation. He also received $20,600.00 for reimbursement of the costs associated with his work use of his private vehicle, and use of a company Blackberry. He was also entitled to participate in the respondent’s commission plans.’

[12] The applicant submitted that his base salary of $89,000.00 was the only form of remuneration which was relevant for the purposes of assessing the ‘high income threshold’. The applicant contended that reimbursement for costs associated with the use of his private vehicle was excluded from this consideration. I accept that submission. The authorities make clear that remuneration received by an employee for the use of his/her private vehicle, for work purposes, constitutes a reimbursement, and therefore, cannot be included as earnings for the purposes of s 332 of the Act.
[13] In Davidson v Adecco Australia [2012] FWA 8393, Booth C said at para [27]:

‘[that] allowance is not wages, because it was paid in contemplation of offsetting the employee’s expenses in providing, running and maintaining his own motor vehicle for the purposes of Adecco’s business. The allowance compensated him for these business related costs, and cannot be fairly categorised as a payment for the applicant’s work or services.’

…..
[17] Given the respondent’s own Policy terms and the relevant terms of the applicant’s contract of employment, I consider the car allowance is calculated on the basis of the costs of providing a Company car, rather than the more limited costs of only running and maintaining the car. When viewed in this light, it is immaterial that the applicant should have provided receipts to account for expenditure if this was truly a reimbursement for expenditure. Nor is it relevant that there was no requirement to calculate the proportion of business and private use of the vehicle. If the respondent had wished to make this distinction, the allowance would have provided for such an arrangement.
[18] For these reasons, I find that the car allowance was a reimbursement of the costs of purchasing, running and maintaining a Company approved vehicle and should not be included in the applicant’s total earnings for the purposes of s 332 of the Act.” 16

[27] The circumstances of this case are not the same as those considered by Deputy President Sams. However, the approach taken is relevant.

[28] I am satisfied that in the circumstances of this case the payment of $15,500 is a reimbursement. The clear terms of the employment contract make this clear. The evidence does not provide a sufficiently reliable basis upon which to conclude that it is not a bona fide reimbursement and or to determine that a specific proportion of that allowance should be regarded as earnings.

[29] I am satisfied that Mr Sinclair is earning less than the high income threshold.

[30] Mr Sinclair is protected from unfair dismissal and his application will now be listed for hearing.

COMMISSIONER

Appearances:

Mr. R Lewis appeared on behalf of the Applicant

Mr. M Addison appeared on behalf of the Respondent.

Hearing details:

2015

Melbourne

June 22

 1   Exhibit S2.

 2   Ibid.

 3   Ibid.

 4 Section 382(b)(iii) of the Fair Work Act 2009 (Cth).

 5 Section 332(1) of the Fair Work Act 2009 (Cth).

 6 Section 332(2)(b) of the Fair Work Act 2009 (Cth).

 7   [2012] FWAFB 6108.

 8   Ibid at para 10 to para 13.

 9   [2012] FWA 3208.

 10   [2012] FWAFB 6108 at para 8 and para 16.

 11   [2012] FWA 3208 at para 8 and para 16.

 12   Ibid at para 25.

 13   [2013] FWC 7838.

 14   Ibid.

 15   [2015] FWC 1094.

 16   Ibid at para 11 to para 18.

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